Document:

Third Amendment to the Manufacturing and Supply Agreement between Genentech
      and Lonza Biologics PLC, dated as of November 6, 2006

    
      

    

     

    EXHIBIT
      10.33

     

    THIRD
      AMENDMENT

     

    TO
      THE

     

    MANUFACTURING
      AND SUPPLY AGREEMENT OF DECEMBER 7 2003

     

    THIS
      THIRD AMENDMENT TO THE MANUFACTURING AND SUPPLY AGREEMENT DATED DECEMBER 7
      2003
      ("3rd Amendment")
      is dated as of 06 November 2006, by and between Lonza Biologics PLC, having
      its
      principal place of business at 228 Bath Road, Slough, Berkshire SL1 4DX, England
      ("LB"),
      Lonza Biologics, Inc. having its principal place of business at 101
      International Drive Portsmouth, New Hampshire 03801 ("Lonza
      Inc")
      (collectively LB and Lonza Inc, hereinafter "Lonza"),
      and Genentech, Inc., a Delaware corporation, having its principal place of
      business at One DNA Way, South San Francisco, California 94080 ("Genentech").

     

    BACKGROUND

     

    The
      Parties have executed that certain Manufacturing and Supply Agreement by and
      between the Parties dated December 7, 2003, as amended 14 March 2005 (the
“1st
      Amendment”),
      (collectively, the “Agreement”),
      as amended 19 May 2006 (the “2nd
      Amendment”)
      and wish now to further amend said Agreement.

     

    Lonza
      and Genentech desire to (i) re-schedule certain Campaigns to be conducted by
      Lonza, (ii) amend the non-competition provisions, and (iii) remove Genentech’s
[*]
      right to extend the Term of the Agreement in exchange for Lonza providing
      Genentech regular forecasts with respect to capacity at the Lonza Facility
      in
      the years [*].

     

    NOW,
      THEREFORE, IN CONSIDERATION OF the mutual covenants set forth in this Agreement,
      and for other good and valuable consideration, the receipt and sufficiency
      of
      which are hereby acknowledged, the Parties hereby agree as follows:

     

    
      	
              1.

            	
              Condition
                Precedent. This
                3rd
                Amendment shall only become effective upon the closing of the purchase
                and
                sale of the issued and outstanding units of Genentech España S.L.,
                pursuant to the terms of the Sale
                Agreement (the
                “3rd
                Amendment Effective Date”).
                As of the signing of this 3rd
                Amendment, the expected closing date of the Sale Agreement is 08
                December
                06. As used herein, the “Sale
                Agreement”
                means that
                certain Stock Purchase Agreement by
                and among Lonza
                Europe B.V.,
                a Dutch company incorporated in the Netherlands, having its principal
                place of business at Breda, Netherlands and Genentech,
                of even date herewith, pursuant to which Genentech has agreed to
                sell the
                “Shares” (as defined in the Sale Agreement) to Lonza, and Lonza has agreed
                to purchase the Shares from Genentech, as the same may be amended
                from
                time to time.

            

    

     

    
      	
              2.

            	
              Rescheduling
                of Campaigns.
                Notwithstanding
                the Campaign, Campaign Minimum and Campaign Minimum Run schedule
                listed on
                Exhibit A of the Agreement (including any amendments thereof in the
                1st
                Amendment and/or 2nd
                Amendment):

            

    

     

    (a) the
      combined [*]
      Campaigns
      scheduled to commence on [*],
      shall be rescheduled to commence on [*],
      and shall continue for a Campaign Minimum of [*]
      during which time Lonza shall be obligated to perform [*]
      Campaign Minimum Runs; and

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

     

    (b) the
      [*]
      Campaigns shall each commence as currently scheduled; provided, the Parties
      shall discuss in good faith a rescheduling of such Campaigns in order to
      accommodate each Party’s requirements; provided further, with respect to such
      Campaigns, the Campaign Minimum Runs are amended as follows:

     

    Campaign        Campaign
      Minimum Runs

     

    [*]
      Campaign             [*]

     

    [*]
      Campaign             [*]

     

    [*]
      Campaign             [*]

     

    
      	
              3.

            	
              Competitive
                Products.
                A new Section 5.7.7 is hereby added to the Agreement as
                follows:

            

    

     

    
      	 	
              5.7.7

            	
              Competitive
                Products.
                Notwithstanding the non-compete provisions of Section 5.7.6, if
                any existing or new capacity becomes available at the Lonza Facility
                at
                any time [*],
                Lonza shall have the right to use such capacity to manufacture,
                either for commercial supply or clinical supply, an Existing Lonza
                Customer Product (including without limitation those Existing Lonza
                Customer Product that are Competing Products). Each
                Party agrees that the provisions of this Section 5.7.7 shall be binding
                upon the licensees, successors and/or assignees of a Party. As
                used herein this Section 5.7.7:

            

    

     

    (i) [*],
      “Singapore
      Facility”
      and “Competing
      Product”,
      respectively, means as defined in that certain Exclusive Option Agreement
      (“Singapore Facility”) between Genentech and Lonza Group Ltd. and Lonza Holding
      Singapore PTE Ltd. of even date herewith; and 

     

    (ii) “Existing
      Lonza Customer Product” means
      [*]

     

    
      	
              4.

            	
              Term.
                Section 20.1 of the Agreement is amended in its entirety to read
                as
                follows:

            

    

     

    
      	 	
              20.1

            	
              Term.
                Unless sooner terminated pursuant to the terms of this Agreement,
                the term
                of this Agreement (the "Term") shall commence on the Effective Date
                and
                shall continue until December 31,
                2008.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    
      	
              5.

            	
              Capacity
                at the Lonza Facility in the [*].
                A new Section 5.10 is hereby added to the Agreement as
                follows:

            

    

     

    
      	 	
              5.10

            	
              Capacity
                at
                the Lonza Facility in [*].
                Lonza hereby agrees to provide to Genentech notice of any capacity
                (new or
                existing) at the Lonza Facility (and not already committed under
                written
                agreement with a Third Party as of the date of such notice), for
                so long
                as such capacity is available for production during [*].
                This
                Section 5.10 shall survive the termination or expiration of this
                Agreement.

            

    

     

    
      	 	
              5.10.1

            	
              Forecast
                Notice.
                Commencing on [*],
                and continuing every six (6) months thereafter until [*],
                Lonza shall provide Genentech with a forecast of available capacity
                (including without limitation that portion of capacity, if any, under
                discussion by Lonza with a Third Party) at the Lonza Facility in
                [*].
                Lonza shall offer such capacity to Genentech [*].
                Genentech shall have [*]
                (as may be extended by mutual agreement) following its receipt of
                each
                such forecast to provide written notification to Lonza regarding
                its
                decision [*]
                with
                respect to any of such capacity.

            

    

     

    
      	 	
              5.10.2

            	
              Exercise.
                If written notice is given by Genentech to Lonza within such [*]
                period that Genentech may desire to obtain some or all of such capacity,
                Lonza shall provide Genentech with all information reasonably useful
                for
                Genentech to make a decision regarding such capacity. Following
                Genentech’s receipt of all such information, [*].

            

    

     

    
      	 	
              5.10.3

            	
              Failure
                to Exercise; Election to Not Exercise.
                If written notice is given that Genentech does not want to accept
                some or
                all of such capacity, or written notice is not given by Genentech
                within
                [*]
                (as may be extended by mutual agreement), Genentech will have waived
                its
                right to [*]
                capacity (or, as applicable, that portion thereof that it specifies
                in
                such written notice that it does not want [*])
                unless and until Lonza notifies Genentech in a subsequent forecast
                that
                such capacity is available.

            

    

     

    
      	 	
              5.10.4

            	
              Additional
                Rights/Obligations.
                

            

    

     

    (a) With
      respect to capacity subject to this Section 5.10 and under written proposal
      by
      Lonza with a Third Party prior to the date of Lonza’s notice Genentech under
      Section 5.10.1 above, during said [*],
      

     

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

     

    Lonza
      shall be free to talk with and enter into an agreement to sell such capacity
      to
      such Third Party; 

     

    (b) With
      respect to all other capacity subject to this Section 5.10 and under a written
      proposal by Lonza with Genentech, during [*],
      Lonza shall be free to talk to any Third Party; provided Lonza does not
[*].

     

    
      	
              6.

            	
              Milestone
                Payment for Calendar Year 2006.
                Section 6.4.3(d)(ii) is amended in entirety as
                follows:

            

    

     

    (ii) a
      one-time additional payment of [*]
      upon Lonza quality release by [*]
      of
      a total number of Successful Commercial Batches greater than or equal to
[*]
      of the total Commercial Runs commenced by Lonza during the [*]
      Campaign and [*]
      Campaign (it being understood that the [*]
      Campaign consists of the [*]
      of the [*]
      Campaign). For the avoidance of doubt, no Successful Commercial Batches
      resulting from the [*]
      Campaign shall count toward such milestone. Such additional amount shall be
      payable upon Genentech’s final release of such Commercial Batches.

     

    
      	
              7.

            	
              All
                terms and conditions of the Agreement not modified by this 3rd
                Amendment shall continue in full force and effect in accordance with
                their
                terms. All capitalized terms not otherwise defined herein shall have
                the
                same definition as in the
                Agreement.

            

    

     

    [the
      remainder of this page intentionally blank]

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

     

    IN
      WITNESS WHEREOF, the Parties have caused this 3rd
      Amendment to be executed as of the Effective Date.

     

    
      	
              GENENTECH,
                INC.

            	 
	 	 	 
	
              By:

            	
              /s/  MARKUS
                GEMUEND

            	 
	 	 	 
	
              Name:

            	
              Markus
                Gemuend

            	 
	 	 	 
	
              Title:

            	
              Vice
                President, Manufacturing
                Collaborations

            	 
	 	 	 
	 	 	 
	
              LONZA
                BIOLOGICS, INC.

            	 
	 	 	 
	
              By:

            	
              /s/  STEPHAN
                KUTZER

            	 
	 	 	 
	
              Name:

            	
              Stephan
                Kutzer

            	 
	 	 	 
	
              Title:

            	
              Chief
                Operating Officer

            	 
	 	 	 
	 	 	 
	
              LONZA
                BIOLOGICS, PLC

            	 
	 	 	 
	
              By:

            	
              /s/  STEPHAN
                KUTZER

            	 
	 	 	 
	
              Name:

            	
              Stephan
                Kutzer

            	 
	 	 	 
	
              Title:

            	
              Chief
                Operating Officer

            	 

    

    

     

    
      
        
        

      

      
        5Agreement and Plan of Merger by and among Genentech, Inc., Green Acquisition
      Corporation and Tanox, Inc., dated as of November 9, 2006

    
      

    

    EXHIBIT
      10.38

     

     

    AGREEMENT
      AND PLAN OF MERGER 

     

    BY
      AND AMONG 

     

    GENENTECH,
      INC. 

     

    GREEN
      ACQUISITION CORPORATION 

     

    and
      

     

    TANOX,
      INC. 

     

    Dated
      as of November 9, 2006 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

       

      TABLE
        OF CONTENTS 

       

      
        

        
          	 	
                  Page

                
	
                  ARTICLE
                    I THE MERGER

                	
                  1

                
	 
	
                      1.1

                	
                  The
                    Merger

                	
                  1

                
	
                      1.2

                	
                  Effective
                    Time; Closing

                	
                  1

                
	
                      1.3

                	
                  Effect
                    of the Merger

                	
                  2

                
	
                      1.4

                	
                  Certificate
                    of Incorporation and Bylaws of Surviving Corporation

                	
                  2

                
	
                      1.5

                	
                  Directors
                    and Officers of Surviving Corporation

                	
                  2

                
	
                      1.6

                	
                  Effect
                    on Capital Stock

                	
                  2

                
	
                      1.7

                	
                  Dissenting
                    Shares

                	
                  3

                
	
                      1.8

                	
                  Surrender
                    of Certificates

                	
                  4

                
	
                      1.9

                	
                  No
                    Further Ownership Rights in Company Common Stock

                	
                  5

                
	
                      1.10

                	
                  Lost,
                    Stolen or Destroyed Certificates

                	
                  5

                
	
                      1.11

                	
                  Adjustments

                	
                  5

                
	
                      1.12

                	
                  Taking
                    of Necessary Action; Further Action

                	
                  5

                
	 
	
                  ARTICLE
                    II REPRESENTATIONS AND WARRANTIES OF COMPANY

                	
                  5

                
	 
	
                      2.1

                	
                  Organization
                    and Qualification; Subsidiaries

                	
                  6

                
	
                      2.2

                	
                  Certificate
                    of Incorporation and Bylaws; Minutes

                	
                  6

                
	
                      2.3

                	
                  Capitalization

                	
                  7

                
	
                      2.4

                	
                  Authority
                    Relative to this Agreement

                	
                  8

                
	
                      2.5

                	
                  No
                    Conflict; Required Filings and Consents

                	
                  8

                
	
                      2.6

                	
                  Compliance
                    with Health Care Laws

                	
                  9

                
	
                      2.7

                	
                  Permits

                	
                  10

                
	
                      2.8

                	
                  FDA;
                    Global Regulation Compliance; Company Products and Company Research
                    Programs

                	
                  10

                
	
                      2.9

                	
                  SEC
                    Filings; Financial Statements

                	
                  12

                
	
                      2.10

                	
                  No
                    Undisclosed Liabilities

                	
                  15

                
	
                      2.11

                	
                  Absence
                    of Certain Changes or Events

                	
                  15

                
	
                      2.12

                	
                  Absence
                    of Litigation

                	
                  16

                
	
                      2.13

                	
                  Employee
                    Benefit Plans

                	
                  16

                
	
                      2.14

                	
                  Proxy
                    Statement

                	
                  21

                
	
                      2.15

                	
                  Title
                    to Property

                	
                  21

                
	
                      2.16

                	
                  Taxes

                	
                  23

                
	
                      2.17

                	
                  Environmental
                    Matters

                	
                  25

                
	
                      2.18

                	
                  Brokers;
                    Third Party Expenses

                	
                  26

                
	
                      2.19

                	
                  Intellectual
                    Property

                	
                  26

                
	
                      2.20

                	
                  Contracts

                	
                  32

                
	
                      2.21

                	
                  Product
                    Liability Claims

                	
                  34

                
	
                      2.22

                	
                  Insurance

                	
                  34

                
	
                      2.23

                	
                  Opinion
                    of Financial Advisor

                	
                  35

                
	
                      2.24

                	
                  Board
                    Approval

                	
                  35

                
	
                      2.25

                	
                  Rights
                    Agreement

                	
                  35

                
	
                      2.26

                	
                  State
                    Takeover Statutes

                	
                  35

                
	
                      2.27

                	
                  Interested
                    Party Transactions

                	
                  35

                
	 
	
                  ARTICLE
                    III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
                    SUB

                	
                  36

                
	 
	
                      3.1

                	
                  Corporate
                    Organization

                	
                  36

                
	
                      3.2

                	
                  Authority
                    Relative to this Agreement

                	
                  36

                
	
                      3.3

                	
                  No
                    Conflict; Required Filings and Consents

                	
                  36

                
	
                      3.4

                	
                  Proxy
                    Statement

                	
                  37

                
	
                      3.5

                	
                  Sufficient
                    Funds

                	
                  37

                

        

         

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

        
 

        
          	 	 	
                  Page

                
	
                      3.6

                	
                  No
                    Prior Merger Sub Operations

                	
                  37

                
	 	 	 
	
                  ARTICLE
                    IV CONDUCT PRIOR TO THE EFFECTIVE TIME

                	
                  37

                
	 	 	 
	
                      4.1

                	
                  Conduct
                    of Business by Company

                	
                  37

                
	 	 	 
	
                  ARTICLE
                    V ADDITIONAL AGREEMENTS

                	 
	 	 	 
	
                      5.1

                	
                  Proxy
                    Statement

                	
                  41

                
	
                      5.2

                	
                  Meeting
                    of Company Stockholders

                	
                  42

                
	
                      5.3

                	
                  Confidentiality;
                    Access to Information

                	
                  43

                
	
                      5.4

                	
                  No
                    Solicitation

                	
                  43

                
	
                      5.5

                	
                  Public
                    Disclosure

                	
                  46

                
	
                      5.6

                	
                  Reasonable
                    Efforts; Regulatory Matters

                	
                  47

                
	
                      5.7

                	
                  Notification

                	
                  48

                
	
                      5.8

                	
                  Third
                    Party Consents and Notices

                	
                  48

                
	
                      5.9

                	
                  Indemnification

                	
                  49

                
	
                      5.10

                	
                  Termination
                    of Certain Benefit Plans

                	
                  49

                
	
                      5.11

                	
                  Section
                    16 Matters

                	
                  50

                
	
                      5.12

                	
                  Disqualified
                    Individuals

                	
                  50

                
	
                      5.13

                	
                  Company
                    Rights Agreement

                	
                  50

                
	
                      5.14

                	
                  Takeover
                    Statutes

                	
                  50

                
	
                      5.15

                	
                  FIRPTA
                    Compliance

                	
                  50

                
	 	 	 
	
                  ARTICLE
                    VI CONDITIONS TO THE MERGER

                	
                  51

                
	 	 	 
	
                      6.1

                	
                  Conditions
                    to Obligations of Each Party to Effect the Merger

                	
                  51

                
	
                      6.2

                	
                  Additional
                    Conditions to Obligations of the Company

                	
                  51

                
	
                      6.3

                	
                  Additional
                    Conditions to the Obligations of Parent and Merger Sub

                	
                  51

                
	 	 	 
	
                  ARTICLE
                    VII TERMINATION, AMENDMENT AND WAIVER

                	
                  52

                
	 	 	 
	
                      7.1

                	
                  Termination

                	
                  52

                
	
                      7.2

                	
                  Notice
                    of Termination; Effect of Termination

                	
                  54

                
	
                      7.3

                	
                  Fees
                    and Expenses

                	
                  54

                
	
                      7.4

                	
                  Amendment

                	
                  56

                
	
                      7.5

                	
                  Extension;
                    Waiver

                	
                  56

                
	 	 	 
	
                  ARTICLE
                    VIII GENERAL PROVISIONS

                	
                  56

                
	 	 	 
	
                      8.1

                	
                  Non-Survival
                    of Representations and Warranties

                	
                  56

                
	
                      8.2

                	
                  Notices

                	
                  56

                
	
                      8.3

                	
                  Interpretation;
                    Knowledge

                	
                  57

                
	
                      8.4

                	
                  Counterparts

                	
                  58

                
	
                      8.5

                	
                  Entire
                    Agreement; Third Party Beneficiaries

                	
                  58

                
	
                      8.6

                	
                  Severability

                	
                  59

                
	
                      8.7

                	
                  Other
                    Remedies; Specific Performance

                	
                  59

                
	
                      8.8

                	
                  Governing
                    Law; Jurisdiction

                	
                  59

                
	
                      8.9

                	
                  Rules
                    of Construction

                	
                  59

                
	
                      8.10

                	
                  Assignment

                	
                  59

                
	
                      8.11

                	
                  Waiver
                    of Jury Trial

                	
                  60

                

        

        

        INDEX
          OF EXHIBITS

        

        
          	
                  Exhibit A

                	
                  Form
                    of Company Voting Agreement

                

        

        

        
          
            
            

          

          
            ii

            
              

            

          

          
            
            

          

        

    

    

    AGREEMENT
      AND PLAN OF MERGER

     

    THIS
      AGREEMENT AND PLAN OF MERGER is made and entered into as of November 9,
      2006 (the “Agreement”),
      by and among Genentech, Inc., a Delaware corporation (“Parent”),
      Green Acquisition Corporation, a Delaware corporation and a wholly-owned
      subsidiary of Parent (“Merger
      Sub”),
      and Tanox, Inc., a Delaware corporation (the “Company”).
      

     

    RECITALS
      

     

    WHEREAS,
      the Boards of Directors of Parent, Merger Sub and the Company have each
      determined that it is in the best interests of their respective stockholders
      for
      Parent to acquire the Company upon the terms and subject to the conditions
      set
      forth herein. 

     

    WHEREAS,
      the Board of Directors of the Company (the “Board”)
      has unanimously (i) determined that the Merger (as defined in Section 1.1)
      is advisable and fair to, and in the best interests of, the Company and its
      stockholders, (ii) approved this Agreement and the other transactions
      contemplated by this Agreement, including the Merger and the transactions
      contemplated by the Company Voting Agreements, and (iii) determined to
      recommend that the stockholders of the Company adopt this Agreement.

     

    WHEREAS,
      the Board of Directors of Parent has (i) determined that the Merger is
      advisable and fair to, and in the best interest of, Parent and its stockholders,
      and (ii) approved this Agreement. 

     

    WHEREAS,
      concurrently with the execution of this Agreement, as a condition and inducement
      to Parent’s willingness to enter into this Agreement, certain stockholders of
      the Company are entering into Voting Agreements, dated as of the date hereof,
      in
      substantially the form attached hereto as Exhibit A
      (the “Company
      Voting Agreements”).
      

     

    WHEREAS,
      Parent, Merger Sub and the Company desire to make certain representations,
      warranties, covenants and agreements in connection with the Merger and also
      to
      prescribe certain conditions to the Merger. 

     

    NOW,
      THEREFORE, in consideration of the covenants, promises and representations
      set
      forth herein, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto agree as
      follows: 

     

    ARTICLE I
      

    THE
      MERGER 

     

    1.1
      The
      Merger.
      At the Effective Time (as defined in Section 1.2)
      and subject to and upon the terms and conditions of this Agreement and the
      applicable provisions of the Delaware General Corporation Law (“Delaware
      Law”),
      Merger Sub shall be merged with and into the Company (the “Merger”),
      the separate corporate existence of Merger Sub shall cease and the Company
      shall
      continue as the surviving corporation. The Company, as the surviving corporation
      after the Merger, is hereinafter sometimes referred to as the “Surviving
      Corporation.”
      

     

    1.2
      Effective
      Time; Closing.
      Upon the terms and subject to the conditions of this Agreement, the parties
      hereto shall cause the Merger to be consummated by filing with the Secretary
      of
      State of the State of Delaware a certificate of merger (the “Certificate
      of Merger”)
      executed in accordance with the relevant provisions of Delaware Law (the time
      of
      such filing, or such later time as may be agreed in writing by the Company
      and
      Parent and specified in the Certificate of Merger, being the “Effective
      Time”)
      on, or as soon as practicable after, the Closing Date (as herein defined).
      The
      closing of the Merger (the “Closing”)
      shall take place at the offices of Wilson Sonsini Goodrich & Rosati,
      Professional Corporation, 650 Page Mill Road, Palo Alto, California, at a time
      and date to be specified by the parties hereto, which shall be no later than
      the
      second business day after the satisfaction or waiver of the conditions set
      forth
      in Article
      VI
      (other than those conditions which, by their terms,

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    

    are
      to be satisfied or waived on the Closing Date, but subject to the satisfaction
      or waiver thereof), or at such other time, date and location as the parties
      hereto agree in writing. The date on which the Closing occurs is referred to
      in
      this Agreement as the “Closing
      Date”.
      

     

    1.3
      Effect
      of the Merger.
      At the Effective Time, the effect of the Merger shall be as provided in this
      Agreement and the applicable provisions of Delaware Law. Without limiting the
      generality of the foregoing, and subject thereto, at the Effective Time, all
      of
      the assets, properties, rights, privileges, powers and franchises of the Company
      and Merger Sub shall vest in the Surviving Corporation, and all of the debts,
      liabilities, obligations, restrictions and duties of the Company and Merger
      Sub
      shall become the debts, liabilities, obligations, restrictions and duties of
      the
      Surviving Corporation. 

     

    1.4
      Certificate
      of Incorporation and Bylaws of Surviving Corporation.
      

     

    (a)
      Certificate of Incorporation. As of the Effective Time, by virtue of the Merger
      and without any action on the part of Merger Sub or the Company, the Certificate
      of Incorporation of the Surviving Corporation shall be amended and restated
      to
      read the same as the Certificate of Incorporation of Merger Sub, as in effect
      immediately prior to the Effective Time, subject to Section 5.9(a),
      until thereafter amended in accordance with Delaware Law and such Certificate
      of
      Incorporation; provided,
      however,
      that as of the Effective Time the Certificate of Incorporation shall provide
      that the name of the Surviving Corporation is “Tanox, Inc.” 

     

    (b)
      Bylaws.
      As of the Effective Time, by virtue of the Merger and without any action on
      the
      part of Merger Sub or the Company, the Bylaws of the Surviving Corporation
      shall
      be amended and restated to read the same as the Bylaws of Merger Sub, as in
      effect immediately prior to the Effective Time, subject to Section 5.9(a),
      until thereafter amended in accordance with Delaware Law, the Certificate of
      Incorporation of the Surviving Corporation and such Bylaws; provided,
      however,
      that all references in such Bylaws to Merger Sub shall be amended to refer
      to
“Tanox, Inc.” 

     

    1.5
      Directors
      and Officers of Surviving Corporation.
      

     

    (a)
      Directors.
      The initial directors of the Surviving Corporation shall be the directors of
      Merger Sub as of immediately prior to the Effective Time, until their respective
      successors are duly elected or appointed and qualified or until their earlier
      death, resignation or removal in accordance with the Certificate of
      Incorporation and the Bylaws of the Surviving Corporation. 

     

    (b)
      Officers.
      The initial officers of the Surviving Corporation shall be the officers of
      Merger Sub as of immediately prior to the Effective Time, until their respective
      successors are duly appointed and qualified or until their earlier death,
      resignation or removal in accordance with the Certificate of Incorporation
      and
      the Bylaws of the Surviving Corporation. 

     

    1.6
      Effect
      on Capital Stock.
      Upon the terms and subject to the conditions of this Agreement, at the Effective
      Time, by virtue of the Merger and without any action on the part of Merger
      Sub,
      the Company or the holders of any of the following securities, the following
      shall occur: 

     

    (a)
      Conversion
      of Shares.
      Each share of common stock, par value $0.01 per share, of the Company
      (“Company
      Common Stock”)
      issued and outstanding immediately prior to the Effective Time (other than
      any
      shares of Company Common Stock to be canceled pursuant to Section 1.6(b)
      and any Dissenting Shares, as defined in Section 1.7),
      will be canceled and extinguished and automatically converted into the right
      to
      receive, upon surrender of the certificate(s) representing such Company Common
      Stock in the manner provided in Section 1.8
      (or in the case of a lost, stolen or destroyed certificate, upon delivery of
      an
      affidavit, and bond, if required, in the manner provided in Section 1.10),
      cash in an amount equal to $20.00 per share, without interest (the “Per
      Share Merger Consideration”
      and the aggregate of all Per Share Merger Consideration, the “Merger
      Consideration”).
      

     

    
      
        
        

      

      
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    (b)
      Cancellation
      of Treasury and Parent-Owned Shares.
      All Company Common Stock held by the Company or owned by Merger Sub, Parent
      or
      any direct or indirect wholly-owned subsidiary of the Company or of Parent
      immediately prior to the Effective Time shall be canceled and extinguished
      without any conversion thereof. 

     

    (c)
      Capital
      Stock of Merger Sub.
      Each share of common stock, par value $0.01 per share, of Merger Sub (the
“Merger
      Sub Common Stock”)
      issued and outstanding immediately prior to the Effective Time shall be
      converted into one validly issued, fully paid and nonassessable share of common
      stock, par value $0.01 per share, of the Surviving Corporation. Each certificate
      evidencing ownership of shares of Merger Sub Common Stock outstanding
      immediately prior to the Effective Time shall evidence ownership of such shares
      of capital stock of the Surviving Corporation. 

     

    (d)
      Stock
      Options.
      Except as set forth on Section 1.6(d)
      of the Company Disclosure Letter (as defined in Article
      II),
      each option to purchase Company Common Stock (the “Company
      Stock Options”),
      whether vested or unvested, and all stock option plans or other equity-related
      plans of the Company (the “Company
      Stock Plans”),
      that are unexpired, unexercised and outstanding as of the Effective Time shall
      on the terms and subject to the conditions set forth in this Agreement, be
      cancelled in its entirety at the Effective Time, and the holder of each shall
      be
      fully vested in such Company Stock Options, and the Parent shall pay or cause
      to
      be paid, as soon as reasonably practicable after the Effective Time, to each
      such holder of Company Stock Options an amount of cash equal to the product
      of
      (i) the number of shares of Company Common Stock as to which such Company
      Stock Option remains unexercised immediately prior to the Effective Time,
      multiplied by (ii) the Per Share Merger Consideration minus the exercise
      price of such Company Stock Option immediately prior to the Effective Time
      (the
“Option
      Merger Consideration”);
      provided,
      however,
      that if the Per Share Merger Consideration does not exceed the exercise price
      of
      such Company Stock Option immediately prior to the Effective Time, the Option
      Merger Consideration for such Company Stock Option shall be zero; and
provided
      further,
      that nothing in this Section 1.6(d)
      shall prohibit the holder of a Company Stock Option from exercising such Company
      Stock Option prior to the Effective Time in accordance with its terms and
      applicable Legal Requirements. Prior to the Effective Time, the Company shall
      timely deliver any notices to holders of Company Stock Options as may be
      required by the terms of the Company Stock Plans and take any and all actions
      necessary or appropriate to effectuate the foregoing, including, without
      limitation, using all reasonable efforts to obtain any applicable consents
      or
      waivers from holders of Company Stock Options that were granted under the
      Company’s 2000 Non-Employee Directors’ Stock Option Plan. The payment of the
      Option Merger Consideration to the holder of a Company Stock Option shall be
      reduced by any income, employment or other Tax withholding required under the
      Code (as defined in Section 2.13(a)(ii))
      or any provision of state, local or foreign Tax law. 

     

    1.7
      Dissenting
      Shares.
      

     

    (a)
      Notwithstanding any provision of this Agreement to the contrary, shares of
      Company Common Stock that are outstanding immediately prior to the Effective
      Time and that are held by stockholders who shall have not voted in favor of
      the
      Merger and who shall have demanded properly in writing appraisal for such
      Company Common Stock in accordance with Section 262 of Delaware Law
      (collectively, the “Dissenting
      Shares”)
      shall not be converted into, or represent the right to receive, the Per Share
      Merger Consideration payable for each such share of Company Common Stock. Such
      stockholders shall be entitled to receive payment of the appraised value of
      such
      Company Common Stock held by them in accordance with the provisions of such
      Section 262, except that all Dissenting Shares held by stockholders who
      shall have failed to perfect or who effectively shall have withdrawn or lost
      their rights to appraisal of such Company Common Stock under such
      Section 262 shall thereupon be deemed to have been converted into, and to
      have become exchangeable for, as of the Effective Time, the right to receive
      the
      Per Share Merger Consideration payable for each such share of Company Common
      Stock, without any interest thereon, upon surrender, in the manner provided
      in
Section 1.8,
      of the certificate or certificates that formerly evidenced such Company Common
      Stock. 

     

    
      
        
        

      

      
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    (b)
      The Company shall give Parent (i) prompt notice of any demands for
      appraisal received by the Company, withdrawals of such demands, and any other
      instruments served pursuant to Delaware Law and received by the Company and
      (ii) the opportunity to direct all negotiations and proceedings with
      respect to demands for appraisal under Delaware Law. The Company shall not,
      except with the prior written consent of Parent, make any payment with respect
      to any demands for appraisal or offer to settle or settle any such demands.
      

     

    1.8
      Surrender
      of Certificates.
      

     

    (a)
      Paying
      Agent.
      At the Effective Time, Parent shall deposit or cause to be deposited with a
      bank
      or trust company reasonably acceptable to the Company to act as agent (the
      “Paying
      Agent”),
      for the benefit of the holders of Company Common Stock to receive the funds
      to
      which holders of Company Common Stock shall become entitled pursuant to
Section 1.6(a),
      a cash amount sufficient to pay the Merger Consideration. Such funds shall
      be
      invested by the Paying Agent as directed by Parent; earnings from such
      investments shall be the sole and exclusive property of Parent and the Surviving
      Corporation, and no part of such earnings shall accrue to the benefit of holders
      of the shares of Company Common Stock. 

     

    (b)
      Payment
      Procedures.
      As soon as reasonably practicable after the Effective Time, Parent shall cause
      the Paying Agent to mail to each holder of record (as of the Effective Time)
      of
      a certificate or certificates (the “Certificates”),
      which immediately prior to the Effective Time represented the outstanding shares
      of Company Common Stock, (i) a letter of transmittal in customary form
      (which shall specify that delivery shall be effected, and risk of loss and
      title
      to the Certificates shall pass, only upon delivery of the Certificates to the
      Paying Agent and shall contain such other provisions as Parent shall reasonably
      specify) and (ii) instructions for use in effecting the surrender of the
      Certificates in exchange for the portion of the Merger Consideration payable
      upon surrender of said Certificates. Upon surrender of Certificates for
      cancellation to the Paying Agent or to such other agent or agents as may be
      appointed by Parent, together with such letter of transmittal, duly completed
      and validly executed in accordance with the instructions thereto, and such
      other
      documents as may be required pursuant to those instructions, the holders of
      such
      Certificates formerly representing the Company Common Stock shall be entitled
      to
      receive in exchange therefor the portion of the Merger Consideration payable
      for
      such shares of Company Common Stock, and the Certificates so surrendered shall
      forthwith be canceled. Until so surrendered, outstanding Certificates shall
      be
      deemed from and after the Effective Time, for all corporate purposes, to
      evidence only the ownership of the respective portion of the Merger
      Consideration to which the record holder of such Certificate is entitled by
      virtue thereof. Promptly following surrender of any such Certificates and the
      duly executed letters of transmittal, the Paying Agent shall deliver to the
      record holders thereof, without interest, the portion of the Merger
      Consideration to which such holder is entitled upon surrender of said
      Certificates, subject to the restrictions set forth herein. 

     

    (c)
      Payments
      with respect to Unsurrendered Company Common Stock; No
      Liability.
      At any time following the 180th day after the Effective Time, the Surviving
      Corporation shall be entitled to require the Paying Agent to deliver to it
      any
      funds which had been made available to the Paying Agent and not disbursed to
      holders of Company Common Stock (including all interest and other income
      received by the Paying Agent in respect of all funds made available to it),
      and,
      thereafter, such holders shall be entitled to look to Parent (subject to
      abandoned property, escheat and other similar laws) only as general creditors
      thereof with respect to any portion of the Merger Consideration that may be
      payable upon due surrender of the Certificates held by them. Notwithstanding
      the
      foregoing, none of Parent, the Surviving Corporation nor the Paying Agent shall
      be liable to any former holder of Company Common Stock for any portion of the
      Merger Consideration delivered in respect of such Company Common Stock to a
      public official pursuant to any abandoned property, escheat or other similar
      Legal Requirement. 

     

    (d)
      Transfers
      of Ownership.
      If the payment of the portion of the Merger Consideration to which such holder
      is entitled is to be paid to a person other than the person in whose name the
      Certificates surrendered in exchange therefor are registered, it will be a
      condition of payment that the Certificates so surrendered be properly endorsed
      and otherwise in proper form for transfer (including, if requested by Parent
      or
      the Paying 

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    Agent,
      a medallion guarantee), and that the persons requesting such payment will have
      paid to Parent or any agent designated by it any transfer or other Taxes
      required by reason of the payment of a portion of the Merger Consideration
      to a
      person other than the registered holder of the Certificates surrendered, or
      established to the satisfaction of Parent or any agent designated by it that
      such Tax has been paid or is not applicable. 

     

    (e)
      Required
      Withholding.
      Each of the Paying Agent, Parent and the Surviving Corporation shall be entitled
      to deduct and withhold from any consideration payable or otherwise deliverable
      pursuant to this Agreement to any holder or former holder of the Company Common
      Stock such amounts as may be required to be deducted or withheld therefrom
      under
      the Code or under any provision of state, local or foreign Tax law or under
      any
      other applicable Legal Requirement. To the extent such amounts are so deducted
      or withheld, such amounts shall be treated for all purposes under this Agreement
      as having been paid to the person to whom such amounts would otherwise have
      been
      paid. 

     

    1.9
      No
      Further Ownership Rights in Company Common Stock.
      Payment of the Merger Consideration shall constitute payment in full
      satisfaction of all rights pertaining to the Company Common Stock. From and
      after the Effective Time, there shall be no further registration of transfers
      on
      the records of the Surviving Corporation of shares of the Company Common 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 I.
      

     

    1.10
      Lost,
      Stolen or Destroyed Certificates.
      In the event that any Certificates shall have been lost, stolen or destroyed,
      the Paying Agent shall pay in exchange for such lost, stolen or destroyed
      Certificates, upon the making of an affidavit of that fact by the holder
      thereof, the portion of the Merger Consideration payable with respect thereto;
      provided,
      however,
      that Parent or the Paying Agent may, in its discretion and as a condition
      precedent to the payment of such portion of the Merger Consideration, require
      the owner of such lost, stolen or destroyed Certificates to deliver a bond
      (at
      the sole expense of the holder of such Certificate) in such reasonable and
      customary amount as it may direct as indemnity against any claim that may be
      made against Parent, the Surviving Corporation or the Paying Agent with respect
      to the Certificates alleged to have been lost, stolen or destroyed.

     

    1.11
      Adjustments.
      In the event of any stock split, reverse stock split, stock dividend (including
      any dividend or distribution of securities convertible into Company Common
      Stock, whether directly or indirectly), reorganization, reclassification,
      combination, recapitalization or other like change with respect to the Company
      Common Stock occurring after the date of this Agreement and prior to the
      Effective Time, all references in this Agreement to specified numbers of shares
      of any class or series affected thereby, and all calculations provided for
      that
      are based upon numbers of shares of any class or series (or trading prices
      therefor) affected thereby, shall be equitably adjusted to the extent necessary
      to provide the parties the same economic effect as contemplated by this
      Agreement prior to such stock split, reverse stock split, stock dividend,
      reorganization, reclassification, combination, recapitalization or other like
      change. 

     

    1.12
      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 the Company and Merger Sub, the
      officers and directors of the Company and Merger Sub will take all such lawful
      and necessary action. 

     

    ARTICLE II
      

    REPRESENTATIONS
      AND WARRANTIES OF COMPANY 

     

    The
      Company hereby represents and warrants to Parent and Merger Sub, except as
      are
      specifically disclosed in writing in the disclosure schedule supplied by the
      Company to Parent (which such exceptions shall reference 

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    the
      specific section and, if applicable, subsection number of this Article II
      to which it applies, and, if applicable, any information disclosed in any such
      section or subsection shall also be deemed to be disclosed with respect to
      each
      other such section or subsection to the extent that it is reasonably apparent
      on
      its face that such disclosure should also apply to such other section or
      subsection), dated as of the date hereof and certified by a duly authorized
      officer of the Company (the “Company
      Disclosure Letter”),
      as follows: 

     

    2.1
      Organization
      and Qualification; Subsidiaries.
      

     

    (a)
      Each of the Company and its subsidiaries is a corporation duly organized,
      validly existing and in good standing (with respect to jurisdictions that
      recognize the concept of good standing) under the laws of its respective
      jurisdiction of organization and has the requisite corporate power and authority
      to own, lease and operate its assets and properties and to carry on its business
      as it is now being conducted, except for such failures to be so organized,
      existing and in good standing (with respect to such jurisdictions that recognize
      the concept of good standing) or to have such power and authority that,
      individually or in the aggregate, would not reasonably be expected to have
      a
      Material Adverse Effect on the Company. 

     

    (b)
      The Company has no subsidiaries except for the persons identified in
Section 2.1(b)
      of the Company Disclosure Letter. Section 2.1(b)
      of the Company Disclosure Letter also sets forth the form of ownership and
      percentage voting and/or equity interest of the Company in its subsidiaries
      and,
      to the extent that a subsidiary set forth thereon is not wholly owned by the
      Company, lists the other persons that have an ownership interest in such
      subsidiary and sets forth the percentage of each such ownership interest.
      Neither the Company nor any of its subsidiaries has agreed to make nor is
      obligated to make nor is bound by any written, oral, express or implied
      agreement, contract, subcontract, lease, mortgage, indenture, understanding,
      arrangement, instrument, note, bond, warranty, purchase order, license,
      sublicense, benefit plan, franchise or other instrument, obligation, commitment
      or undertaking that is legally binding and with respect to which there are
      continuing obligations, rights, or liabilities, including any amendments thereto
      (a “Contract”)
      or Legal Requirement (as defined in Section 2.3(a)
      below), in effect as of the date hereof, to make any future investment in or
      capital contribution to any other person or any sale or other disposition of
      the
      capital stock or any of the assets or operations of any such person.

     

    (c)
      Other than the subsidiaries set forth in Section 2.1(b)
      of the Company Disclosure Letter, neither the Company nor any of its
      subsidiaries directly or indirectly owns any equity or similar interest in
      or
      any interest convertible, exchangeable or exercisable for, any equity or similar
      interest in, any person. 

     

    (d)
      The Company and each of its subsidiaries is duly qualified to do business as
      a
      foreign corporation, and is in good standing (with respect to jurisdictions
      that
      recognize the concept of good standing), under the laws of all jurisdictions
      where the character of the properties owned, leased or operated by it or the
      nature of its activities makes such qualification necessary, except where the
      failure to be so qualified and in good standing has not had, and would not
      reasonably be expected to have, either individually or in the aggregate, a
      Material Adverse Effect on the Company. Section 2.1(d)
      of the Company Disclosure Letter sets forth a true and complete list of each
      state and other jurisdiction which the Company and each of its subsidiaries
      is
      qualified to do business as a foreign corporation. 

     

    2.2
      Certificate
      of Incorporation and Bylaws; Minutes.
      

     

    (a)
      The Company has previously furnished to Parent (i) a complete and correct
      copy of its Certificate of Incorporation and Bylaws as amended to date
      (together, the “Company
      Charter Documents”)
      and (ii) the equivalent organizational documents for each subsidiary of the
      Company, each as amended to date. The Company Charter Documents and equivalent
      organizational documents of each subsidiary of the Company are in full force
      and
      effect. The Company is not in violation of any of the provisions of the Company
      Charter Documents, and no subsidiary of the Company is in violation of its
      equivalent organizational documents. 

     

    (b)
      The Company has delivered to Parent and its representatives true and complete
      copies of the minutes (or, in the case of minutes that have not yet been
      finalized, the most recent drafts thereof) of all meetings of the stockholders,
      the Board of Directors and each committee of such Board of Directors of the
      Company and each of its subsidiaries held since January 1, 2000.

    

    
      
        
        

      

      
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    2.3
      Capitalization.
      

     

    (a)
      The authorized capital stock of the Company consists of 120,000,000 shares
      of
      Company Common Stock and 10,000,000 shares of Preferred Stock, par value of
      $0.01 per share (“Company
      Preferred Stock”).
      At the close of business on the date of this Agreement (i) 45,258,927
      shares of Company Common Stock were issued and outstanding, all of which are
      validly issued, fully paid and nonassessable; (ii) no shares of Company
      Common Stock were held by subsidiaries of the Company; (iii) 554,700 shares
      of Company Common Stock were held in treasury by the Company;
      (iv) 2,677,418 shares of Company Common Stock were reserved for issuance
      upon the exercise of outstanding options to purchase Company Common Stock under
      the Company Stock Plans and (v) 5,248,185 additional shares of Company
      Common Stock were reserved for future issuance pursuant to the Company Stock
      Plans. The Company does not have any employee stock purchase plan, as such
      term
      is defined in Section 423 of the Code. As of the date hereof, no shares of
      Company Preferred Stock were issued or outstanding and there are no outstanding
      shares of Company Common Stock that are subject to risk of forfeiture. All
      shares of Company Common Stock subject to issuance upon exercise of such Company
      Stock 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 set forth in Section 2.3(a)
      of the Company Disclosure Letter, there are no Contracts to which the Company
      is
      bound obligating the Company to accelerate the vesting of any Company Stock
      Option as a result of the transactions contemplated hereby (the “Transactions”)
      or upon termination of employment or service with the Company or with any of
      its
      subsidiaries following the Merger (whether alone or in combination with any
      other events) or otherwise. All outstanding shares of Company Common Stock,
      all
      outstanding Company Stock Options and all outstanding shares of capital stock
      of
      each subsidiary of the Company have been issued and granted in compliance with
      all applicable securities laws and other applicable Legal Requirements (as
      defined below). The exercise price of each Company Stock Option is no less
      than
      the fair market value of a share of Company Common Stock as determined on the
      date of grant of such Company Stock Option. All grants of Company Stock Options
      were properly approved by the Board or a duly and validly appointed committee
      of
      the Board in compliance with all applicable Legal Requirements and recorded
      on
      the Financial Statements (as defined in Section 2.9(b))
      in accordance with GAAP, and no such grants involved any inappropriate “back
      dating,” “forward dating” or similar practices with respect to the effective
      date of grant. All repurchases of Company securities have been made in
      compliance with all applicable Legal Requirements. For the purposes of this
      Agreement, “Legal
      Requirements”
      means any federal, state, local, municipal, foreign or other law, statute,
      legislation, constitution, principle of common law, binding resolution,
      ordinance, code, edict, order, injunction, judgment, decree, rule, regulation,
      ruling or requirement issued, enacted, adopted, promulgated, implemented or
      otherwise put into effect by or under the authority of any Governmental Entity
      (as defined in Section 2.5(b))
      hereof. There are no declared or accrued but unpaid dividends with respect
      to
      any shares of Company Common Stock. 

     

    (b)
      Section 2.3(b)
      of the Company Disclosure Letter sets forth, as of the date of this Agreement
      the following information with respect to each Company Stock Option outstanding
      as of the date of this Agreement: (i) the name and address of the optionee;
      (ii) the particular plan pursuant to which such Company Stock Option was
      granted; (iii) the number of shares of Company Common Stock subject to such
      Company Stock Option; (iv) the exercise price of such Company Stock Option;
      (v) the date on which such Company Stock Option was granted; (vi) the
      applicable vesting schedule; (vii) the date on which such Company Stock
      Option expires; (viii) whether the exercisability of such Company Stock
      Option will be accelerated in any way by the transactions contemplated by this
      Agreement, and indicates the extent of acceleration; and (ix) whether such
      Company Stock Option is intended to qualify as an incentive stock option within
      the meaning of Section 422 of the Code. 

     

    (c)
      Except for the Company Stock Options and the rights designated in connection
      with the Rights Agreement, dated July 27, 2001 between the Company and
      American Stock Transfer & Trust Company as rights agent (the
“Rights
      Agreement”),
      there are no subscriptions, options, warrants, equity securities, partnership
      interests or similar ownership interests, calls, rights (including preemptive
      rights), Contracts to 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    

    which
      the Company or any of its subsidiaries is a party or by which the Company or
      any
      of its subsidiaries is bound obligating the Company or any of its subsidiaries
      to issue, deliver or sell, or cause to be issued, delivered or sold, or
      repurchase, redeem or otherwise acquire, or cause the repurchase, redemption
      or
      acquisition of, any shares of capital stock, partnership interests or similar
      ownership interests of the Company or any of its subsidiaries or obligating
      the
      Company or any of its subsidiaries to grant, extend, accelerate the vesting
      of
      or enter into any such subscription, option, warrant, equity security, call,
      right, commitment or agreement. There are no outstanding or authorized stock
      appreciation, phantom stock, profit participation, or other similar rights,
      contingent or accrued, to receive shares of Company Common Stock or benefits
      measured in whole or part by the value of a number of shares of Company Common
      Stock with respect to the Company or any of its subsidiaries. Except for the
      Company Stock Options, the Company Voting Agreements and the Rights Agreement,
      there are no voting trusts, proxies, rights plans, anti-takeover plans or
      Contracts to which the Company or any of its subsidiaries is a party or by
      which
      the Company or any of its subsidiaries is bound with respect to the voting,
      acquisition, disposition of or imposition of any Encumbrance on (i) any
      class of equity security of the Company or (ii) any equity security,
      partnership interest or similar ownership interest of any of its subsidiaries.
      

     

    (d)
      True, correct and complete copies of (i) each of the Company Stock Plans,
      (ii) the standard form of all Contracts and instruments relating to or
      issued under the Company Stock Plans or Company Stock Option, (iii) each
      Contract or instrument relating to or issued under the Company Stock Plans
      or
      Company Stock Option where the terms of such grant differ in any material
      respect from such standard form agreements, and (iv) Contracts relating to
      unvested shares, have been made available to Parent, and such Contracts and
      instruments have not been amended, modified or supplemented since being made
      available to Parent, and, except as contemplated by this Agreement, there are
      no
      Contracts to amend, modify or supplement such agreements or instruments in
      any
      case from those made available to Parent. 

     

    2.4
      Authority
      Relative to this Agreement.
      The Company has all necessary corporate power and authority to execute and
      deliver this Agreement, to perform its obligations hereunder and to consummate
      the Transactions, subject, with respect to the Merger, to the Company
      Stockholder Approval (as defined below). The execution and delivery of this
      Agreement by the Company and the consummation by the Company of the Transactions
      have been duly and validly authorized by all necessary corporate action on
      the
      part of the Company and no other corporate proceedings on the part of the
      Company are necessary to authorize this Agreement or to consummate the
      Transactions other than (i) with respect to the Merger, the filing with the
      Securities and Exchange Commission (the “SEC”)
      of a proxy statement with respect to, and the receipt of, the Company
      Stockholder Approval and (ii) the filing of the Certificate of Merger as
      required by Delaware Law, subject, in each case, to the receipt of the Required
      Consents. The affirmative vote of the holders of a majority of the shares of
      Company Common Stock issued and outstanding on the record date set for the
      meeting of the Company’s stockholders to adopt this Agreement is the only vote
      of the holders of capital stock of the Company necessary to adopt this Agreement
      and approve and adopt the Merger under applicable Legal Requirements and the
      Company Charter Documents (the “Company
      Stockholder Approval”).
      This Agreement has been duly and validly executed and delivered by the Company
      and, assuming the due authorization, execution and delivery by Parent and Merger
      Sub, constitutes a legal and binding obligation of the Company, enforceable
      against the Company in accordance with its terms, subject to bankruptcy,
      insolvency, fraudulent transfer, moratorium, reorganization or similar Legal
      Requirements affecting the rights of creditors generally and the availability
      of
      equitable remedies (regardless of whether such enforceability is considered
      in a
      proceeding in equity or at law). 

     

    2.5
      No
      Conflict; Required Filings and Consents.
      

     

    (a)
      The execution and delivery of this Agreement by the Company does not, and the
      performance of this Agreement by the Company will not, (i) result in the
      creation of any material Encumbrance (as defined below) on any of the material
      properties or assets of the Company or any of its subsidiaries,
      (ii) conflict with or violate the Company Charter Documents or the
      equivalent organizational documents of any of the Company’s subsidiaries,
      (iii) subject, (A) with respect to the Merger, to the Company
      Stockholder Approval and (B) to compliance with the requirements set forth
      in Section 2.5(b),
      conflict with or violate in any 

    

    
      
        
        

      

      
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    material
      respect any Legal Requirements applicable to the Company or any of its
      subsidiaries or by which its or any of their respective properties is bound
      or
      affected, (iv) conflict with or violate, or result in any breach,
      impermissible assignment or non-transferability of or constitute a default
      (or
      an event that with notice or lapse of time or both would become a default)
      under, or materially impair the Company’s or any of its subsidiaries’ rights or
      alter the rights or obligations of any third party under, or give to others
      any
      rights of termination, amendment, acceleration or cancellation of any Company
      Contract (as defined in Section 2.20(a))
      or (v) except to the extent that such conflicts, violations, breaches,
      defaults, impairments, rights of termination, cancellation, acceleration,
      Encumbrance or other effects would not in the aggregate have a material negative
      impact on the Company, conflict with or violate, or result in any breach,
      impermissible assignment or non-transferability of or constitute a default
      (or
      an event that with notice or lapse of time or both would become a default)
      under, or impair the Company’s or any of its subsidiaries’ rights or alter the
      rights or obligations of any third party under, or give to others any rights
      of
      termination, amendment, acceleration or cancellation of any Contract (other
      than
      a Company Contract) to which the Company or any of its subsidiaries is a party
      or by which the Company or any of its subsidiaries or its or any of their
      respective properties are bound or affected. “Encumbrance”
      means, with respect to any asset, mortgage, deed of trust, lien, pledge, charge,
      security interest, title retention device, conditional sale or other security
      arrangement, collateral assignment, claim, charge, adverse claim of title,
      third
      person ownership or right to use, restriction or other encumbrance of any kind
      in respect of such asset (including any restriction on (1) the voting of
      any security or the transfer of any security or other asset, (2) the
      receipt of any income derived from any asset, (3) the use of any asset, and
      (4) the possession, exercise or transfer of any other attribute of
      ownership of any asset, but excluding current Taxes not yet due and payable).
      

     

    (b)
      The execution and delivery of this Agreement by the Company does not, and the
      performance of this Agreement by the Company shall not, require any consent,
      approval, authorization or permit of, or filing with or notification to, any
      supranational, national, state, municipal, local or foreign government, any
      instrumentality, subdivision, court, administrative agency or commission or
      other governmental authority or instrumentality, or any quasi-governmental
      or
      private body exercising any regulatory, taxing, importing or other governmental
      or quasi-governmental authority (a “Governmental
      Entity”),
      except (i) for applicable requirements, if any, of the Securities Exchange
      Act of 1934, as amended (the “Exchange
      Act”),
      state securities laws (“Blue
      Sky Laws”)
      and state takeover laws, such filings as may be required under, and compliance
      with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
      “HSR
      Act”)
      and any other applicable Antitrust Law (as defined herein), the rules and
      regulations of Nasdaq, and the filing and recordation of the Certificate of
      Merger as required by Delaware Law, (ii) as set forth in Section 2.5(b)
      of the Company Disclosure Letter and (iii) where the failure to obtain such
      consents, approvals, authorizations or permits, or to make such filings or
      notifications, could not, individually or in the aggregate, be material to
      the
      Company or its subsidiaries or prevent or materially delay consummation of
      the
      Transactions or otherwise prevent the Company from performing its obligations
      under this Agreement (collectively, the “Required
      Consents”).
      

     

    2.6
      Compliance
      with Health Care Laws.
      

     

    (a)
      Neither the Company nor any of its subsidiaries has been the subject of any
      investigation by a Governmental Entity as a result of or in connection with
      the
      Company’s or any of its subsidiaries’ research, development, clinical
      activities, production or distribution activities related to the Company
      Products. 

     

    (b)
      The Company and each of its subsidiaries are in material compliance and, except
      for any non-compliance that occurred prior to January 1, 2003 which,
      individually or in the aggregate, would not reasonably be expected to have
      a
      Material Adverse Effect on the Company, have at all times been in material
      compliance with all relevant federal and other Legal Requirements applicable
      to
      the Company and its subsidiaries, including the federal Anti-kickback and Fraud
      and Abuse Prohibition Statutes (42 U.S.C. § 1320a-7b) and all
      other Legal Requirements prohibiting false statements and improper remuneration
      for purchasing products or services, the civil False Claims Act (31 U.S.C.
§§
3729 et
      seq.),
      the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Health
      Insurance Portability and 

    

    
      
        
        

      

      
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    Accountability
      Act of 1996 (42 U.S.C. § 1301 et
      seq.
      and implementing regulations), the exclusion laws, SSA § 1128 (42 U.S.C.
      1320a-7) and the regulations promulgated pursuant to such laws and regulations,
      relating to the regulation of the Company and its subsidiaries (including the
      pertinent requirements of Good Laboratory Practices, Good Clinical Practices,
      Good Manufacturing Practices and the U.S. Food, Drug and Cosmetic Act and its
      implementing regulations, including 21 CFR Parts 50, 54, 56, 58, 210, and
      211 and the respective counterparts thereof promulgated by Governmental Entities
      in countries outside the United States) (collectively, “Health
      Care Laws”).
      To its knowledge, the Company and each of its subsidiaries are in material
      compliance and have at all times been in material compliance with all Health
      Care Laws. Since January 1, 2003, neither the Company nor any of its
      subsidiaries has received any written notice or communication and, to the
      knowledge of the Company, prior to January 1, 2003, neither the Company nor
      any of its subsidiaries received a written notice or communication, in each
      case, from any Governmental Entity with respect to the Company regarding, and,
      to the knowledge of the Company, there are no facts or circumstances that would
      reasonably be expected to give rise to, any material violation of applicable
      Health Care Laws or any other applicable Legal Requirement. To the knowledge
      of
      the Company, no change in the current conduct of the Company or its
      subsidiaries, or their internal procedures or processes, is required in order
      to
      materially comply with Health Care Laws. 

     

    2.7
      Permits.
      The Company and each of its subsidiaries have obtained all federal, state,
      county, local or foreign permits, authorizations, licenses, grants, variances
      certifications, clearances, consents, franchises, exemptions, orders and
      approvals (a) that are required by the Federal Food and Drug Administration
      (the “FDA”),
      any other Governmental Entity engaged in the regulation of the Company Research
      Programs, Company Products or the Company’s or its subsidiaries’ manufacturing
      and quality system or that are required by Health Care Laws or (b) that are
      otherwise material to the Company and its subsidiaries (other than those
      specified in Section 2.7(a)
      above) and that are required for operating the Company or its subsidiaries
      in
      the manner currently conducted in any location in which they currently operate
      (including those required to be obtained under Environmental and Safety Laws
      (as
      defined in Section 2.17(a))
      (each, a “Company
      Permit”
      and collectively, the “Company
      Permits”).
      All such Company Permits are valid and in full force and effect. Section 2.7
      of the Company Disclosure Letter lists all Company Permits. The Company and
      its
      subsidiaries are in compliance in all material respects with all covenants,
      terms and conditions of such Company Permits. Neither the Company nor any of
      its
      subsidiaries has received any written notice or communication with respect
      to
      the Company from any Governmental Entity regarding, and, to the knowledge of
      the
      Company, there are no facts or circumstances that could give rise to,
      (i) any violation of any Company Permit or (ii) any revocation,
      non-renewal, withdrawal, suspension, cancellation, limitation, termination
      or
      adverse modification of any Company Permit. No such Company Permit will be
      terminated or impaired, or will become terminable, in whole or in part, as
      a
      result of the consummation of the Transactions. 

     

    2.8
      FDA;
      Global Regulation Compliance; Company Products and Company Research
      Programs.
      

     

    (a)
      The operation of the Company and the operation of its subsidiaries, including
      the research, manufacture, import, export, testing, development, processing,
      packaging, labeling, storage and distribution of all Company Products, is in
      material compliance and, except for non-compliance prior to January 1, 2003
      which, individually or in the aggregate, would not reasonably be expected to
      have a Material Adverse Effect, have at all times been in material compliance
      with all applicable Health Care Laws and other applicable Legal Requirements,
      including to the extent applicable (1) those administered by the FDA and
      (2) those administered by Governmental Entities in countries outside the
      United States (including requirements for the manufacture of Company Products
      for administration in human subjects). To the Company’s knowledge, the operation
      of the Company and the operation of its subsidiaries are in material compliance
      and have at all times been in material compliance with all applicable Health
      Care Laws and other applicable Legal Requirements, including to the extent
      applicable (1) those administered by the FDA and (2) those
      administered by Governmental Entities in countries outside the United States
      (including requirements for the manufacture of Company Products for
      administration in human subjects). There is no pending or, to the knowledge
      of
      the Company, threatened Action in respect of the Company or Company Products
      by
      the FDA or any other Governmental Entity which has jurisdiction over the Company
      Products 

    

    
      
        
        

      

      
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    or
      the operations, properties or processes of the Company or the Company’s
      subsidiaries, or, to the knowledge of the Company, in respect of any third
      person’s activities on behalf of the Company or its subsidiaries (excluding
      Parent and Parent’s subsidiaries). The Company has no knowledge of any facts or
      circumstances that are likely to give rise to any such Action. 

     

    (b)
      (A) Except for non-compliance prior to January 1, 2003 which, individually
      or in the aggregate, would not reasonably be expected to have a Material Adverse
      Effect on the Company, and (B) at all times to the Company’s knowledge,
      neither the Company nor any of its subsidiaries has had any Company owned or
      leased manufacturing site (nor, to the knowledge of the Company, has any third
      person (other than Parent and Parent’s subsidiaries) had any manufacturing site
      that produces Company Products) subject to a Governmental Entity (including
      FDA)
      shutdown or import or export prohibition, nor received any FDA Form 483 notice
      or similar notification from a Governmental Entity, “warning letters,” “untitled
      letter” or, to the knowledge of the Company, requests or requirements to make
      changes to the operations of the Company, a Company Research Program or the
      Company Products that have not been complied with and, if not complied with,
      would reasonably be expected to result in a material effect that is adverse
      to
      the Company’s or any of its subsidiaries’ ability to continue with the planned
      activities at that manufacturing site, and, to the knowledge of the Company,
      neither the FDA nor any Governmental Entity is considering such action. To
      the
      knowledge of the Company, no vigilance report or adverse event report is under
      investigation by any Governmental Entity with respect to any Company Products,
      the Company or its subsidiaries. 

     

    (c)
      All activities (including, without limitation, clinical trials and any
      studies, tests, and other preclinical activities the results of which have
      been or will be submitted to a Governmental Entity (such as the FDA or its
      counterparts worldwide), but excluding clinical trials conducted or being
      conducted by Parent or Parent’s subsidiaries) conducted by the Company in
      connection with any Company Product or Company Research Program, and, to the
      Company’s knowledge, all such activities conducted by third persons on behalf of
      the Company, which activities are required or purported to be conducted under
      statutory or regulatory “good practices” applicable to biopharmaceutical
      companies (e.g.,
      Good
      Laboratory Practices, Good Clinical Practices and Good Manufacturing Practices),
      have been conducted in compliance in all material respects with the required
      experimental protocols required by applicable Institutional Review Boards,
      applicable Health Care Laws, and other applicable Legal
      Requirements.

     

    (d)
      Neither the Company nor any of its subsidiaries has received any notices,
      correspondence or other communication in respect of the Company, any subsidiary,
      or any Company Product from the FDA or any other Governmental Entity requiring
      the termination or suspension of any clinical trials of any Company Product,
      or
      any clinical trials conducted by, or on behalf of, the Company or any of its
      subsidiaries and, to the knowledge of the Company, neither the FDA nor any
      other
      Governmental Entity is considering such action. Neither the Company nor any
      of
      its subsidiaries has received notification from a Governmental Entity of the
      rejection of data obtained from any clinical trials conducted by, or at the
      request of, the Company with respect to any Company Products, which data was
      submitted to the Governmental Entity and which was necessary to obtain
      regulatory approval of a particular Company Product or to move such Company
      Product to the next phase of clinical development. 

     

    (e)
      The manufacture of the Company Products by or, to the knowledge of the Company,
      on behalf of, the Company or any of its subsidiaries (other than by Parent
      or
      Parent’s subsidiaries) is being conducted in compliance in all material respects
      with all applicable Health Care Laws and other applicable Legal Requirements,
      including the FDA’s Good Manufacturing Practices at 21 CFR §§210-211 and
      applicable guidelines for products sold or used for clinical trials in the
      United States, and the respective counterparts thereof promulgated by
      Governmental Entities in countries outside the United States. 

     

    (f)
      Neither the Company nor any of its subsidiaries is the subject of any pending
      or, to the knowledge of the Company, threatened investigation in respect of
      the
      Company by the FDA pursuant to its “Fraud, Untrue Statements of Material Facts,
      Bribery, and Illegal Gratuities” Final Policy set forth in 56 Fed. Reg. 46191
      (September 10, 1991) and any amendments thereto. Neither the Company nor any
      of
      its subsidiaries has 

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    committed
      any act, made any statement, or failed to make any statement, in each case
      in
      respect of the Company or a subsidiary and that would provide a basis for the
      FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material
      Facts, Bribery and Illegal Gratuities” and any amendments thereto. Neither the
      Company nor any of its subsidiaries nor any of their respective officers or,
      to
      the knowledge of the Company after reasonable inquiry by the Company of its
      Employees (other than Consultants) on or about the date of hire for each such
      Employee, its Employees (other than Consultants) has been convicted of any
      crime
      or engaged in any conduct that could result in a debarment or exclusion
      (i) under 21 U.S.C. Section 335a, or (ii) similar applicable
      Legal Requirement. The Company and its subsidiaries have implemented
      reasonable practices (consistent with prevailing industry standards) to
      determine whether any of its Employees (other than Consultants who are not
      Significant Consultants) have been convicted of any crime or engaged in any
      conduct that could result in a debarment or exclusion (i) under 21 U.S.C.
      Section 335a, or (ii) similar applicable Legal Requirement. To
      the knowledge of the Company, no debarment or exclusionary claims, actions,
      proceedings or investigations in respect of the Company or any of its
      subsidiaries is pending or threatened against the Company, any of its
      subsidiaries or any of their respective officers, employees or agents. For
      purposes of this Agreement, a “Significant
      Consultant”
      is a Consultant (as defined in Section 2.13(a)(iv))
      who (i) has responsibility for a function that is regulated by Health Care
      Laws (as opposed to advising a regular Company employee who has such
      responsibility) or (ii) devotes more than eighty (80) hours per
      month for three or more months, in each case performing functions for the
      Company or its subsidiaries. 

     

    (g)
      The Company has delivered or made available to Parent true and complete copies
      of all data, studies, results, and other information set forth in Section 2.8(g)
      of the Company Disclosure Letter. Such information provided or made
      available by the Company fairly represents all of the material ongoing research
      and development of the Company Products and Company Research Programs (as
      defined in Section 2.19), and, to the knowledge of the Company, there is no
      scientific information, data or results in the Company’s possession or control
      that have not been provided to Parent that a reasonable scientist would conclude
      is necessary to accurately assess or value such program or project.

     

    (h)
      As of the date of this Agreement, the Company has in its control the amounts
      of
      each Company Product set forth in Section 2.8(g)
      of the Company Disclosure Letter (including TNX 355, TNX 650, TNX 234, and
      any other anti-CD4 product), in the form described therein (whether filled
      containers, drug product, bulk drug substance or otherwise) (“Product
      Inventory”).
      All such Product Inventory has stability sufficient (and, where applicable,
      approved by applicable Governmental Entities) such that it will not expire
      prior
      to use in the study or research for which it was manufactured, and all such
      Product Inventory has been manufactured and stored in accordance with Good
      Manufacturing Practices and applicable Health Care Laws. 

     

    (i)
      Where data with respect to a particular Company Product or a product
      candidate being studied in a Company Research Program has been provided to
      Parent (a) the underlying Company Product or product candidate is in
      Company’s possession and control as of the date hereof, along with any cell
      lines, reagents or other materials necessary to produce that Company Product
      or
      product candidate in its current form, and (b) the Company has in its
      possession and control the reagents and other materials required to reproduce
      the experiments that generated the data provided to Parent, except to the extent
      such reagents or other materials are readily commercially available and are
      identified as such.

     

    2.9
      SEC
      Filings; Financial Statements.
      

     

    (a)
      Since January 1, 2004, the Company has filed or furnished each form,
      report, document, schedule, registration statement and definitive proxy
      statement with the SEC required to be filed or furnished by the Company with
      the
      SEC under the Securities Act of 1933, as amended (the “Securities
      Act”)
      or the Exchange Act, as then in effect (the “Company
      SEC Reports”).
      The Company SEC Reports (i) were filed or furnished on a timely basis,
      (ii) were prepared in accordance with the requirements of the Securities
      Act or the Exchange Act and the rules and regulations of the SEC then in effect,
      as the case may be, and (iii) did not at the time they were filed or
      furnished (and if amended or superseded by a filing prior to the date of this
      Agreement, then on the date of such amended or superseding filing) contain
      any
      untrue statement of a 

    

    
      
        
        

      

      
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    material
      fact or omit to state a material fact required to be stated therein or necessary
      in order to make the statements therein, in light of the circumstances under
      which they were made, not misleading. None of the Company’s subsidiaries is
      required to file or furnish any reports or other documents with the SEC.

     

    (b)
      Each set of consolidated financial statements (including, in each case, any
      related notes thereto) contained in the Company SEC Reports (the “Financial
      Statements”)
      (including any Company SEC Report filed after the date of this Agreement):
      (i) complied and will comply as to form in all material respects with the
      published rules and regulations of the SEC with respect thereto in effect at
      the
      time of such filing; (ii) was and will be prepared in accordance with
      United States generally accepted accounting principles (“GAAP”)
      applied on a consistent basis throughout the periods involved (except as may
      be
      indicated in the notes thereto or, in the case of unaudited statements, may
      not
      contain footnotes as permitted by Form 10-Q or Form 8-K) and fairly
      presented and will fairly present in all material respects the consolidated
      financial position of the Company and its consolidated subsidiaries at the
      respective dates thereof and the consolidated results of the Company’s and its
      subsidiaries’ operations and cash flows for the periods indicated. Except as
      reflected in the Financial Statements, neither the Company nor any of its
      subsidiaries is a party to any material off-balance sheet arrangement (as
      defined in Item 303 of Regulation S-K promulgated under the Securities
      Act (“Regulation S-K”)).
      All reserves that are set forth in or reflected in the Interim Balance Sheet
      (as
      defined below) have been established in accordance with GAAP consistently
      applied. At June 30, 2006 (the “Interim
      Balance Sheet Date”),
      there were no material loss contingencies (as such term is used in Statement
      of
      Financial Accounting Standards No. 5 (“Statement
      No. 5”)
      issued by the Financial Accounting Standards Board in March 1975) that are
      not
      adequately provided for in the balance sheet as of the Interim Balance Sheet
      Date (the “Interim
      Balance Sheet”)
      as required by Statement No. 5. The Company has not had any dispute with
      any of its auditors regarding accounting matters or policies during any of
      its
      past three full fiscal years or during the current fiscal year-to-date. The
      books and records of the Company and each of its subsidiaries have been, and
      are
      being maintained in all material respects in accordance with applicable legal
      and accounting requirements. 

     

    (c)
      To the Company’s knowledge, no fact, event or circumstance currently exists that
      will prevent any material amount of the cash, investments or securities
      represented by the line items “Cash and cash equivalents” and “Short-term
      investments” on the face of the Company’s Condensed Consolidated Balance Sheet
      included in the Company’s Quarterly Report on Form 10-Q for the period ended
      June 30, 2006 (collectively, the “Closing
      Cash Items”)
      from being available as cash in the United States and the repatriation to the
      Company of any such cash held outside of the United States will not result
      in
      the imposition of any material United States or foreign Tax Liability.

     

    (d)
      Section 2.9(d)
      of the Company Disclosure Letter sets forth the Company’s forecasted expenses
      for Tanox West for the Company’s fiscal year 2006 as of the date hereof (the
“Forecast”).
      The Company prepared the Forecast in good faith. 

     

    (e)
      The Company has previously furnished to Parent a complete and correct copy
      of
      any amendments or modifications, which have not yet been filed with the SEC
      but
      which are required to be filed, to agreements, documents or other instruments
      which previously had been filed by the Company with the SEC pursuant to the
      Securities Act or the Exchange Act. 

     

    (f)
      The Company has established and maintains “disclosure controls and procedures”
(as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange
      Act) that are reasonably designed to ensure that material information (both
      financial and non-financial) relating to the Company and its subsidiaries
      required to be disclosed by the Company in the reports that it files or submits
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in the rules and forms of the SEC, and that such
      information is accumulated and communicated to the Company’s principal executive
      officer and principal financial officer, or persons performing similar
      functions, as appropriate to allow timely decisions regarding required
      disclosure and to make the certifications of the principal executive officer
      and
      the principal financial officer of the Company required by Section 302 of
      the Sarbanes-Oxley Act of 2002 (“SOX”)
      with respect to such reports. For purposes of this Agreement, “principal
      executive officer” and “principal financial officer” shall have the meanings
      given to such terms in SOX. 

     

    
      
        
        

      

      
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    (g)
      The Company and each of its subsidiaries has established and maintains, adheres
      to and enforces a system of internal control over financial reporting (as
      defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange
      Act) which is effective in providing reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      in accordance with GAAP and SEC rules and regulations (including the Financial
      Statements), including policies and procedures that (i) require the
      maintenance of records that in reasonable detail accurately and fairly reflect
      the transactions and dispositions of the assets of the Company and its
      subsidiaries, (ii) provide reasonable assurance that material information
      relating to the Company and its subsidiaries is promptly made known to the
      officers responsible for establishing and maintaining the system of internal
      controls; (iii) provide reasonable assurance that transactions are recorded
      as necessary to permit preparation of financial statements in accordance with
      GAAP, and that receipts and expenditures of the Company and its subsidiaries
      are
      being made only in accordance with appropriate authorizations of management
      and
      the Board; (iv) provide reasonable assurance that access to assets is
      permitted only in accordance with management’s general or specific
      authorization; (v) provide reasonable assurance that the reporting of
      assets is compared with existing assets at regular intervals and appropriate
      action is taken with respect to any differences; (vi) provide reasonable
      assurance regarding prevention or timely detection of unauthorized acquisition,
      use or disposition of the assets of the Company and its subsidiaries; and
      (vii) provide reasonable assurance that any “significant deficiencies” or
“material weaknesses” (as such terms are defined in Auditing Standard
      No. 2, promulgated by the Public Company Accounting Oversight Board,
      (“AS-2”)
      in the design or operation of internal controls which are reasonably likely
      to
      materially and adversely affect the ability to record, process, summarize and
      report financial information, and any fraud, whether or not material, that
      involves the Company’s management or other Employees (other than Consultants who
      are not Significant Consultants) who have a role in the preparation of financial
      statements or the internal controls used by the Company and its subsidiaries,
      are adequately and promptly disclosed to the Company’s independent auditors and
      the audit committee of the Board. There (i) are no significant deficiencies
      or material weaknesses in the system of internal control over financial
      reporting used by the Company and its subsidiaries, (ii) is no fraud,
      whether or not material, that involves the Company’s management or other
      Employees (other than Consultants who are not Significant Consultants) who
      have
      a role in the preparation of financial statements or the internal control over
      financial reporting used by the Company and its subsidiaries or (iii) is no
      claim or allegation regarding any of the foregoing. Section 2.9(g)
      of the Company Disclosure Letter summarizes each “control deficiency” (as
      defined in AS-2) identified by the Company’s independent auditors since
      January 1, 2004 through the date of this Agreement and not disclosed in the
      Company SEC Reports. 

     

    (h)
      Each of the principal executive officer of the Company and the principal
      financial officer of the Company (or each former principal executive officer
      of
      the Company and each former principal financial officer of the Company, as
      applicable) has made all certifications required by Sections 302 and 906 of
      SOX and the rules and regulations promulgated thereunder with respect to the
      Company SEC Reports. The Company’s management has completed an assessment of the
      effectiveness of the Company’s system of internal control over financial
      reporting in compliance with the requirements of Section 404 of SOX for the
      fiscal year ended December 31, 2005, and such assessment concluded that
      such controls were effective and the Company’s independent registered accountant
      has issued (and not subsequently withdrawn or qualified) and attestation report
      concluding the Company maintained effective internal control over financial
      reporting as of December 31, 2005. Since December 31, 2005 and through
      the date hereof, to the knowledge of the Company, no events, facts or
      circumstances have occurred, or exist, such that management would not be able
      to
      complete its assessment of the effectiveness of the Company’s system of internal
      control over financial reporting in compliance with the requirements of
      Section 404 of SOX for the fiscal year ended December 31, 2006, and
      conclude, after such assessment, that such controls were effective.

     

    (i)
      To the Company’s knowledge, Ernst & Young LLP, which has expressed its
      opinion with respect to the financial statements of the Company and its
      subsidiaries as of December 31, 2005, December 31, 2004 and
      December 31, 2003 and for each of the fiscal years in the three fiscal year
      period ended December 31, 2005 included in the Company SEC Reports
      (including the related notes), is “independent” with respect to the Company and
      each of its subsidiaries within the meaning of Regulation S-X since the
      appointment of 

    

    
      
        
        

      

      
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    Ernst &
      Young LLP in that capacity. The Company is in compliance with the applicable
      criteria for continued listing of the Company Common Stock on Nasdaq and has
      not
      since January 1, 2004 received any written notice from Nasdaq asserting any
      non-compliance with such rules and regulations. 

     

    (j)
      The Company has timely responded to all comment letters of the staff of the
      SEC
      relating to the Company SEC Reports, and the SEC has not advised the Company
      that any final responses are inadequate, insufficient or otherwise
      non-responsive. The Company has made available to Parent true, correct and
      complete copies of all correspondence between the SEC, on the one hand, and
      the
      Company and any of its subsidiaries, on the other, since January 1, 2004,
      including all SEC comment letters and responses to such comment letters by
      or on
      behalf of the Company. To the Company’s knowledge, none of the Company SEC
      Reports is the subject of ongoing SEC review or outstanding SEC comment.

     

    (k)
      No attorney representing the Company or any of its subsidiaries, whether or
      not
      employed by the Company or any of its subsidiaries, or Employee has reported
      to
      the Board or any committee thereof or to any director or officer of the Company
      evidence of a material violation of securities laws, breach of fiduciary duty,
      fraudulent conduct (whether or not material) or similar violation by an Employee
      or agent (while acting in that capacity). 

     

    2.10
      No
      Undisclosed Liabilities.
      Neither the Company nor any of its subsidiaries has any liability, indebtedness,
      obligation, deficiency, guaranty or endorsement of any type (whether absolute,
      accrued, contingent, direct, indirect, or otherwise) (collectively,
“Liabilities”)
      of a nature required to be disclosed on a balance sheet or in the related notes
      to the consolidated financial statements prepared in accordance with GAAP and
      which are, individually or in the aggregate with such other items, material
      to
      the business, assets, financial condition, results of operations or cash flows
      of the Company and its subsidiaries taken as a whole, except
      (i) Liabilities reflected or reserved in the Interim Balance Sheet,
      (ii) Liabilities incurred since the Interim Balance Sheet Date in the
      ordinary course of business consistent with past practices,
      (iii) Liabilities incurred since the Interim Balance Sheet date which,
      individually or in the aggregate, would not reasonably be expected to have
      a
      Material Adverse Effect on the Company, or (iii) Liabilities permitted
      under Section 4.1
      hereof or otherwise reasonably incurred in connection with the Company’s
      performance of its obligations hereunder. 

     

    2.11
      Absence
      of Certain Changes or Events.
      From the Interim Balance Sheet Date through the date hereof, there has not
      been,
      occurred or arisen: (a) any event or condition of any character that has
      had or would be reasonably expected to have a Material Adverse Effect on the
      Company; (b) any declaration, setting aside or payment of any dividend on,
      or other distribution (whether in cash, stock or property) in respect of, any
      of
      the Company’s or any of its subsidiaries’ capital stock, or any purchase,
      redemption or other acquisition by the Company of any of the Company’s capital
      stock or any other securities of the Company or its subsidiaries or any options,
      warrants, calls or rights to acquire any such shares or other securities, except
      for repurchases from Employees following their termination pursuant to the
      terms
      of stock option or purchase agreements existing as of the Interim Balance Sheet
      Date; (c) any split, combination or reclassification of any of the
      Company’s or any of its subsidiaries’ capital stock; (d) any granting by
      the Company or any of its subsidiaries of any increase in compensation or fringe
      benefits to any Employee (other than Consultants who are not Significant
      Consultants) or any payment by the Company or any of its subsidiaries of any
      bonus or any entry by the Company or one of its subsidiaries into any Contract
      (or amendment of an existing Contract) to grant or provide severance,
      acceleration of vesting, termination pay or other similar benefits; (e) the
      execution of any employment Contract or service Contract, the extension of
      the
      term of any existing employment Contract or service Contract with any Employee,
      or any entry or other modification by the Company or any of its subsidiaries
      of
      any employment, severance, termination or indemnification Contract or any
      Contract the benefits of which are contingent, or the terms of which are
      materially altered, upon the occurrence of a transaction involving the Company
      of the nature contemplated hereby; (f) entry by the Company or any of its
      subsidiaries into (i) any licensing or other Contract providing for the
      use, acquisition or disposition of any Intellectual Property (as defined in
      Section 2.19
      hereof) other than (A) licenses of commercially available third party
      software applications for internal use by the Company or otherwise in the
      Company’s ordinary course of business consistent with past practice and
      (B) confidentiality agreements in the ordinary course of business
      consistent with past practice, or (ii) any 

    

    
      
        
        

      

      
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    amendment
      or consent with respect to any material licensing or other Contract providing
      for the use, acquisition or disposition of any Intellectual Property, other
      than
      confidentiality agreements in the ordinary course of business consistent with
      past practice; (g) any change by the Company in its accounting methods,
      principles or practices (including any change in depreciation or amortization
      policies or rates or revenue recognition policies), except as required by
      concurrent changes in GAAP; (h) any revaluation by the Company of any of
      its assets, including writing off promissory notes or accounts receivable,
      or
      any sale of assets of the Company; (i) entry by the Company or any of its
      subsidiaries into any Contract (other than the Voting Agreements) filed or
      required to be filed by the Company with the SEC; (j) the incurrence,
      creation or assumption of any material Encumbrance (other than a Permitted
      Encumbrance) or any discharge of any material Encumbrance, any material
      Liability for borrowed money or any material Liability or obligation as guaranty
      or surety with respect to the obligations of others who are not wholly-owned
      subsidiaries of the Company, (k) any purchase, offer to purchase, sale,
      offer to sell, option to purchase or sell, agreement to transfer any interest
      in, or any lease, right to use, sublease or other occupancy, of any Company
      Real
      Estate (as defined in Section 2.15(a))
      by the Company or its subsidiaries; and (l) any announcement of or any
      agreement by the Company, any of its subsidiaries, or any Employee on behalf
      of
      the Company, to do any of the things described in the preceding clauses (a)
      through (k) (other than negotiations or agreements with Parent and Merger
      Sub regarding the Transactions). 

     

    2.12
      Absence
      of Litigation.
      Except as would not result in a material Liability, there are no claims,
      actions, charges, investigations or other proceedings pending or, to the
      knowledge of the Company, threatened against the Company or any of its
      subsidiaries, or any of their respective properties or any of the executive
      officers or directors of the Company or any of its subsidiaries before any
      Governmental Entity or otherwise (each, an “Action”).
      No investigation or review by any Governmental Entity is pending or, to the
      knowledge of the Company, threatened against the Company or any of its
      subsidiaries, or any of their respective properties or any of the executive
      officers or directors of the Company or any of its subsidiaries, nor has any
      Governmental Entity indicated to the Company an intention to conduct the same.
      The Company has provided or made available to Parent true, correct and complete
      copies of all complaints regarding the litigation referred to in Section 2.12
      of the Company Disclosure Letter and has made available to Parent true, correct
      and complete copies of all pleadings, motions and non-privileged written
      correspondence regarding the litigation referred to in Section 2.12
      of the Company Disclosure Letter. There has not been since January 1, 2000,
      nor are there currently any internal investigations being conducted by the
      Company, the Board (or any committee thereof) or any third party at the request
      of any of the foregoing concerning any financial, accounting, auditing, Tax,
      conflict of interest, illegal activity, fraudulent or deceptive conduct or
      other
      misfeasance or malfeasance issues with respect to the Company or any of its
      subsidiaries. 

     

    2.13
      Employee
      Benefit Plans.
      

     

    (a)
      Definitions.
      Except as otherwise provided for herein, for purposes of this Agreement, the
      following terms shall have the meanings set forth below: 

     

    (i)
      “COBRA”
      shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
      amended and as codified in Section 4980B of the Code and Section 601
      et. seq. of ERISA; 

     

    (ii)
      “Code”
      shall mean the Internal Revenue Code of 1986, as amended; 

     

    (iii)
      “Company
      Employee Plan”
      shall mean any Employee Plan, including all International Employee Plans;

     

    (iv)
      “Consultant”
      shall mean any current or former independent contractor or leased employee
      who
      is (i) a natural person or (ii) a staffing agency or other entity that
      leases or otherwise supplies employees to third persons on a consulting,
      contract or project basis; 

     

    (v)
      “DOL”
      shall mean the U.S. Department of Labor; 

     

    (vi)
      “Employee”
      shall mean any current or former or retired employee, officer, Consultant or
      director of the Company or any ERISA Affiliate; 

     

    
      
        
        

      

      
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    (vii)
      “Employment
      Agreement”
      shall mean each management, employment, severance, change of control, retention,
      consulting (with a Consultant), relocation, repatriation, expatriation, visas,
      work permit or other agreement, contract or understanding, written or otherwise,
      between the Company or any ERISA Affiliate and any Employee under which the
      Company has current or future obligations; 

     

    (viii)
      “Employee
      Plan”
      shall mean any plan, program, policy, practice, Contract or other arrangement,
      providing for compensation, severance, termination pay, deferred compensation,
      performance awards, bonuses, stock or stock-related awards or purchases, fringe
      benefits, loans, or other employee benefits or remuneration of any kind, whether
      written or unwritten, funded or unfunded, including each “employee benefit
      plan,” within the meaning of Section 3(3) of ERISA which is or has been
      maintained, contributed to, or required to be contributed to, by the Company
      or
      any ERISA Affiliate for the benefit of any Employee, and with respect to which
      the Company or any ERISA Affiliate has or may have any Liability, including
      all
      International Employee Plans; 

     

    (ix)
      “ERISA”
      shall mean the Employee Retirement Income Security Act of 1974, as amended;
      

     

    (x)
      “ERISA
      Affiliate”
      shall mean any other person or entity under common control with the Company
      within the meaning of Section 414(b), (c), (m) or (o) of the Code
      and the regulations issued thereunder; 

     

    (xi)
      “FMLA”
      shall mean the Family and Medical Leave Act of 1993, as amended; 

     

    (xii)
      International
      Employee Plan”
      shall mean each Employee Plan that has been adopted or maintained by the Company
      or any ERISA Affiliate pursuant to the laws of any country outside the United
      States, whether informally or formally, or with respect to which the Company
      or
      any ERISA Affiliate will or may have any Liability, for the benefit of Employees
      who perform services outside the United States; 

     

    (xiii)
      “IRS”
      shall mean the U.S. Internal Revenue Service; 

     

    (xiv)
      “Multiemployer
      Plan”
      shall mean any “Pension Plan” (as defined below) which is a “multiemployer
      plan,” as defined in Section 3(37) of ERISA; 

     

    (xv)
      “Pension
      Plan”
      shall mean each Company Employee Plan which is an “employee pension benefit
      plan,” within the meaning of Section 3(2) of ERISA. 

     

    (b)
      Schedule.
      Section 2.13(b)
      of the Company Disclosure Letter contains an accurate and complete list of
      each
      Company Employee Plan, and each Employment Agreement existing as of the date
      of
      this Agreement. Neither the Company nor any ERISA Affiliate has any plan or
      commitment to establish any new Company Employee Plan or Employment Agreement,
      to modify any Company Employee Plan or Employment Agreement (except to the
      extent required by applicable Legal Requirements, in each case as previously
      disclosed to Parent in writing, or as required by this Agreement), or to adopt
      or enter into any Company Employee Plan or Employment Agreement. 

     

    (c)
      Documents.
      The Company has provided or made available to Parent correct and complete copies
      of: (i) all material documents embodying each Company Employee Plan and
      each Employment Agreement including all amendments thereto and all related
      trust
      documents; (ii) the most recent annual actuarial valuations and annual and
      periodic accounting, if any, prepared for each Company Employee Plan;
      (iii) the three (3) most recent annual reports (Form Series 5500 and
      all schedules and financial statements attached thereto), if any, required
      under
      ERISA or the Code in connection with each Company Employee Plan; (iv) the
      most recent summary plan description together with the summary(ies) of material
      modifications thereto, if any, required under ERISA with respect to each Company
      Employee Plan; (v) the most recent IRS determination or opinion letter
      issued with respect to each Company Employee Plan, if applicable, and all
      applications and correspondence to or from the IRS or the DOL with respect
      to
      any such application or letter; (vi) all communications material to any
      Employee or Employees relating to any Company Employee Plan and any proposed
      Company Employee Plans, in each case, relating to any amendments, terminations,
      establishments, increases or decreases in benefits, acceleration of payments
      or
      vesting schedules or other 

    

    
      
        
        

      

      
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    events
      which would result in any material Liability to the Company; (vii) all
      correspondence to or from any Governmental Entity relating to any Company
      Employee Plan; (viii) all COBRA forms and related notices (or such forms
      and notices as required under comparable law); (ix) the three (3) most
      recent plan years discrimination tests for each Company Employee Plan, where
      applicable; (x) all material written agreements and contracts relating to
      each Company Employee Plan, including administrative service agreements and
      group insurance contracts and group annuity contracts; and (xi) all
      registration statements, annual reports (Form 11-K and all attachments
      thereto, if applicable to be filed) and prospectuses prepared in connection
      with
      each Company Employee Plan, as applicable. 

     

    (d)
      Employee
      Plan Compliance.
      Company and its ERISA Affiliates have performed, in all material respects,
      all
      obligations required to be performed by them under, are not in material default
      or violation of, and neither Company nor its ERISA Affiliates have any knowledge
      of any material default or violation by any other party to, any Company Employee
      Plan, and each Company Employee Plan has been established and maintained in
      all
      material respects (i) in accordance with its terms and (ii) in
      compliance with all applicable laws, statutes, orders, rules and regulations,
      including but not limited to ERISA and the Code. Any Company Employee Plan
      intended to be qualified under Section 401(a) of the Code and each trust
      intended to qualify under Section 501(a) of the Code (i) has either
      applied for, prior to the expiration of the requisite period under applicable
      U.S. Department of the Treasury (“Treasury”)
      Regulations or IRS pronouncements, or obtained a favorable determination,
      notification, advisory and/or opinion letter, as applicable, as to its qualified
      status from the IRS, and (ii) incorporates or has been amended to
      incorporate all provisions required to comply with the Tax Reform Act of 1986
      and subsequent legislation. For each Company Employee Plan that is intended
      to
      be qualified under Section 401(a) of the Code, there has been no event,
      condition or circumstance that has adversely affected or would reasonably be
      expected to adversely affect the qualified status of such Company Employee
      Plan.
      No “prohibited transaction,” within the meaning of Section 4975 of the Code
      or Sections 406 and 407 of ERISA, and not otherwise exempt under
      Section 408 of ERISA, has occurred with respect to any Company Employee
      Plan. There are no Actions pending or, to Company’s or any ERISA Affiliates’
knowledge, threatened (other than routine claims for benefits) against any
      Company Employee Plan or against the assets of any Company Employee Plan. Each
      Company Employee Plan can be amended, terminated or otherwise discontinued
      after
      the Effective Time in accordance with its terms, and the act of amending,
      terminating or discontinuing any Company Employee Plan will not result in any
      Liability to Parent, Company or any of its ERISA Affiliates (other than routine
      administration expenses incurred with respect to any such amendment, termination
      or discontinuance). There are no audits, inquiries or proceedings pending or
      to
      Company’s or any of its ERISA Affiliates’ knowledge threatened by the IRS, DOL,
      or any other Governmental Entity with respect to any Company Employee Plan.
      Neither Company nor any ERISA Affiliate is subject to any penalty or Tax with
      respect to any Company Employee Plan under Section 502(i) of ERISA or
      Sections 4975 through 4980 of the Code. The Company and its ERISA
      Affiliates have, in all material respects, each timely made all contributions
      and other payments required by and due under the terms of each Company Employee
      Plan. 

     

    (e)
      No
      Pension or Funded Welfare Plans.
      Neither the Company nor any ERISA Affiliate has ever maintained, established,
      sponsored, participated in, or contributed to, or could have any obligation
      to,
      any (i) Pension Plan which is subject to Title IV of ERISA or
      Section 412 of the Code, or (ii) “funded welfare plan” within the
      meaning of Section 419 of the Code. Neither the Company nor any Company
      subsidiary or ERISA Affiliate has incurred or expects to incur any Liability
      under Title IV of ERISA or Section 412 of the Code. No Company
      Employee Plan provides health benefits that are not fully insured through an
      insurance contract. 

     

    (f)
      Collectively
      Bargained, Multiemployer and Multiple Employer Plans.
      At no time has the Company or any ERISA Affiliate contributed to or been
      obligated to contribute to any Multiemployer Plan. Neither the Company, nor
      any
      affiliate has at any time ever maintained, established, sponsored, participated
      in, or contributed to any multiple employer plan, or to any plan described
      in
      Section 413 of the Code. 

     

    (g)
      Deferred
      Compensation Compliance.
      The Company does not have a Company Benefit Plan that is a “nonqualified
      deferred compensation plan” (as defined in Section 409A(d)(1) of the Code).

     

    
      
        
        

      

      
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    (h)
      Executive
      Loans.
      Neither the Company nor any ERISA Affiliate has violated the provisions of
      Section 402 of SOX applicable to loans to key executives, and the execution
      of this Agreement and the consummation of the transactions contemplated hereby
      will not, to the knowledge of the Company, cause such a violation of such
      provisions of Section 402 of SOX. 

     

    (i)
      Fair
      Market Value.
      No Company Stock Option or other right to acquire Company Common Stock or other
      equity of the Company (i) has an exercise price that has been or may be
      determined to be less than the fair market value of the underlying equity as
      of
      the date such Company Stock Option or other equity right was granted,
      (ii) has any feature for the deferral of compensation other than the
      deferral of recognition of income until the later of exercise or disposition
      of
      such Company Stock Options or other equity rights, or (iii) has been
      granted after December 31, 2004, with respect to any class of stock of the
      Company that is not “service recipient stock” (within the meaning of applicable
      regulations under Section 409A). 

     

    (j)
      Plan
      Contributions.
      With respect to the Company Employee Plans, there are no benefit or funding
      obligations for which contributions have not been made or properly accrued
      to
      the extent required by GAAP or will not be offset by insurance. The assets
      of
      each Company Employee Plan which is fully funded are reported at their fair
      market value in the books and records of such Company Plan, the applicable
      related trust as indicated on the Financial Statements and, if applicable,
      on
      Forms 5500, and/or the Company and its subsidiaries. 

     

    (k)
      No
      Post-Employment Obligations.
      No Company Employee Plan provides, or reflects or represents any Liability
      to
      provide retiree insurance or other retiree benefits to any person for any
      reason, except as may be required by COBRA or other applicable statute, and
      the
      Company has never represented, promised or contracted (whether in oral or
      written form) to any Employee (either individually or to Employees as a group)
      or any other person that such Employee(s) or other person would be provided
      with
      retiree insurance or other benefits, except to the extent required by applicable
      Legal Requirements. 

     

    (l)
      Effect
      of Transaction.
      

     

    (i)
      The execution of this Agreement and the consummation of the Transactions or
      any
      termination of employment or service in connection therewith will not (either
      alone or upon the occurrence of any additional or subsequent events) constitute
      an event under any Company Employee Plan, Employment Agreement, trust or loan
      that will or may result in any payment (whether of severance pay or otherwise),
      acceleration, forgiveness of indebtedness, vesting, distribution, increase
      in
      benefits or obligation to fund benefits with respect to any Employee other
      than
      accrued payments. 

     

    (ii)
      No payment or benefit could give rise, directly or indirectly, to the payment
      of
      any amount that could reasonably be expected to be (i) non-deductible to
      Company under Section 280G of the Code, (ii) characterized as a
“parachute payment” within the meaning of Section 280G of the Code or
      (iii) subject to the excise Tax under Section 4999 of the Code. The
      Company is not a party to or bound by any Tax indemnity agreement or any other
      agreement that will require Parent or the Surviving Corporation to “gross-up” or
      otherwise compensate any Employee because of the imposition of any excise Tax.
      Section 2.13(l)(ii)
      of the Company Disclosure Letter lists as of the date of this Agreement each
      person who the Company reasonably believes is, with respect to the Company,
      any
      Company subsidiary and/or any ERISA affiliate, a “disqualified individual”
(within the meaning of Section 280G of the Code and the regulations
      promulgated thereunder). 

     

    (m)
      Employment
      Matters.
      The Company: (i) is in compliance in all material respects with all
      applicable foreign, federal, state and local laws, rules, regulations and
      ordinances respecting employment, employment practices, terms and conditions
      of
      employment, discrimination in employment, worker classification, wages,
      benefits, hours, working conditions and occupational safety and health and
      employment practices, in each case, with respect to Employees; (ii) has, in
      all material respects, withheld and reported all amounts required by Legal
      Requirements or by agreement to be withheld and reported with respect to wages,
      benefits, salaries and other payments to Employees (excluding Consultants);
      (iii) is not liable for any material arrears of wages, salaries,
      commissions, bonuses, benefits or other compensation due or any Taxes or any
      penalty for 

    

    
      
        
        

      

      
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    failure
      to comply with any of the foregoing; and (iv) is not liable for any payment
      to any trust or other fund governed by or maintained by or on behalf of any
      governmental authority, with respect to unemployment compensation benefits,
      social security or other retiree benefits, or other benefits or obligations
      for
      Employees (excluding Consultants) (other than routine payments to be made in
      the
      normal course of business and consistent with past practice). There are no
      pending or reasonably anticipated or, to the knowledge of the Company,
      threatened Actions, audits or administrative matters against the Company or
      any
      ERISA Affiliate relating to any Employee, Employee Agreement, or Company
      Employee Plan, or under any workers’ compensation policy or long-term disability
      policy. The employment or services of each of the Employees located in the
      United States is terminable at the will of the Company or its ERISA Affiliates
      and any such termination would result in no Liability to the Company or to
      any
      ERISA Affiliate. Neither the Company nor any ERISA Affiliate has direct or
      indirect material Liability with respect to any misclassification of any person
      as an independent contractor rather than as an employee, or with respect to
      any
      worker leased from another employer. 

     

    (n)
      Labor.
      No work stoppage or labor strike against the Company is pending or reasonably
      anticipated or, to the knowledge of the Company, threatened. The Company does
      not know of any current activities or proceedings of any labor union to organize
      any Employees (excluding Consultants) or of any such activities or proceedings
      within the preceding three (3) years. There are no Actions, audits,
      administrative matters, labor disputes or grievances pending, or, to the
      knowledge of the Company, threatened or reasonably anticipated relating to
      any
      wage, benefit, medical or family leave, labor, safety or discrimination matters
      involving any Employee, including charges of wage and/or hour violations, unfair
      labor practices, discrimination, or wrongful termination complaints. Neither
      the
      Company nor any ERISA Affiliate is party to a current conciliation agreement,
      consent decree, or other agreement or order with any federal, state, or local
      agency or Governmental Entity with regard to employment practices. Neither
      the
      Company nor any ERISA Affiliate has engaged in any unfair labor practices within
      the meaning of the National Labor Relations Act. The Company is not presently,
      nor has it been in the past, a party to, or bound by, any collective bargaining
      agreement or union contract with respect to Employees, no collective bargaining
      agreement is being negotiated by the Company or any of its subsidiaries and
      neither the Company or any of its subsidiaries has any duty to bargain with
      any
      labor organization. 

     

    (o)
      International
      Employee Plan.
      Each International Employee Plan has been established, maintained and
      administered in compliance with its terms and conditions and with the
      requirements prescribed by any and all statutory or regulatory laws that are
      applicable to such International Employee Plan. Furthermore, no International
      Employee Plan has unfunded liabilities, that as of the Effective Time, will
      not
      be offset by insurance or fully accrued. Except as required by applicable Legal
      Requirements, no condition exists that would prevent the Company or Parent
      from
      terminating or amending any International Employee Plan at any time for any
      reason without Liability to the Company or its affiliates (other than ordinary
      administration expenses or routine claims for benefits). Each International
      Employee Plan has obtained from the Governmental Entity having jurisdiction
      with
      respect to such International Employee Plan any required determinations, if
      any,
      that such International Employee Plan is in compliance with the laws of the
      relevant jurisdiction if such determinations are required in order to give
      effect to such International Employee Plan. 

     

    (p)
      WARN
      Act.
      The Company and any ERISA Affiliate have complied with the Workers Adjustment
      and Retraining Notification Act of 1988, as amended (“WARN
      Act”)
      and all similar state or local laws, including applicable provisions of state
      or
      local law. All Liabilities relating to the employment, termination or employee
      benefits of any former Employees (excluding Consultants) previously terminated
      by the Company or an affiliate including all termination pay, severance pay
      or
      other amounts in connection with the WARN Act and all similar state laws, have
      been paid, and no terminations prior to the Closing Date shall result in
      unsatisfied Liability under WARN or any similar state or local law.

     

    (q)
      Employee
      Information.
      The Company and each of its subsidiaries has made available to Parent a true,
      correct and complete list of the names of all current officers, directors,
      and
      employees of the Company and each subsidiary showing each such person’s name,
      position, date of hire, work location, and each such person’s annualized salary
      and target commission (as applicable), status as exempt/non-exempt, status
      as

    

    
      
        
        

      

      
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    full-/part-time,
      target bonus(es) and fringe benefits for the current fiscal year and the most
      recently completed fiscal year. The Company and each of its subsidiaries has
      made available to Parent the following additional information for each of its
      current international employees: city/country of employment; citizenship; date
      of hire; manager’s name and work location; date of birth; any material special
      circumstances; and whether the employee was recruited from a previous employer.
      

     

    (r)
      True
      and Correct Copies.
      In addition to the documents referred to in Section 2.13(c)
      above, the Company and each of its subsidiaries has made available to Parent
      true, correct and complete copies of each of the following: (i) all
      affirmative action plans; (ii) all forms of offer letters currently in use;
      (iii) all forms of employment agreements and severance agreements for
      current Employees (excluding Consultants); (iv) all forms of consultant
      and/or independent contractor agreements currently in effect, (v) all forms
      of confidentiality, non-disclosure, non-solicitation, non-competition or
      inventions agreements between Employees and the Company or any of its
      subsidiaries currently in use for such matters (and a true, correct and complete
      list of current Employees not subject thereto); (vi) any agreements that
      deviate in any material respect from forms described in (i) through
      (v) above; (vi) all current management organization chart(s);
      (vii) all current, in force agreements and/or insurance policies providing
      for the indemnification of any officers or directors of the Company or any
      of
      its subsidiaries; (viii) summary of the Company’s current standard
      severance policy and any policy in existence or effect during the immediately
      preceding twelve (12) months; (ix) summary of outstanding Liability
      for termination payments and benefits to Employees; and (x) a schedule of
      bonus commitments made to Employees. 

     

    2.14
      Proxy
      Statement.
      The proxy statement to be sent to the stockholders of the Company in connection
      with the Stockholders’ Meeting (as hereinafter defined) (such proxy statement,
      as amended or supplemented, being referred to herein as the “Proxy
      Statement”),
      shall not, at the date the Proxy Statement (or any amendment or supplement
      thereto) is first mailed to stockholders of the Company, at the time of the
      Stockholders’ Meeting and at the Effective Time, contain any statement which, at
      such time and in light of the circumstances under which it was made, is false
      or
      misleading with respect to any material fact, or which omits to state any
      material fact necessary in order to make the statements therein not false or
      misleading or necessary to correct any statement in any earlier communication
      with respect to the solicitation of proxies, if any, for the Stockholders’
Meeting which shall have become false or misleading. Notwithstanding the
      foregoing, the Company makes no representation or warranty with respect to
      any
      information supplied by Parent, Merger Sub or any of Parent’s or Merger Sub’s
      representatives in writing for inclusion in the Proxy Statement. The Proxy
      Statement shall comply in all material respects as to form with the requirements
      of the Exchange Act and the rules and regulations thereunder. 

     

    2.15
      Title
      to Property.
      

     

    (a)
      Section 2.15(a)
      of the Company Disclosure Letter sets forth a complete and accurate list as
      of
      the date of this Agreement of all real property owned by the Company or any
      of
      its subsidiaries, or in which the Company or any of its subsidiaries has an
      ownership interest, including, without limitation, any rights, contracts or
      options to acquire real property other than the Leased Real Estate defined
      below
      (the “Owned
      Real Estate”).
      

     

    (b)
      Section 2.15(b)
      of the Company Disclosure Letter sets forth a list of all real property
      currently leased, subleased by or from the Company or any of its subsidiaries
      or
      otherwise used or occupied by the Company or any of its subsidiaries (the
“Leased
      Real Estate”
      and together with the Owned Real Estate, the “Company
      Real Estate”),
      the name of the lessor, sublessor, master lessor and/or lessee, the date and
      term of the lease, sublease or other occupancy right and each amendment thereto,
      the aggregate annual rental payable thereunder, the size of the Leased Real
      Estate and a description of renewal options contained in such lease. The Company
      has provided or made available to Parent true, correct and complete copies
      of
      all leases, lease guaranties, subleases, agreements for the leasing, use or
      occupancy of, or otherwise granting a right in or relating to the Leased Real
      Estate, including all amendments, terminations and modifications thereof (the
      “Real
      Estate Leases”).
      All such Real Estate Leases are in full force and effect, are valid and
      enforceable in accordance with their respective terms, subject to bankruptcy,
      insolvency, reorganization, 

    

    
      
        
        

      

      
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    moratorium
      and similar state and federal laws affecting the rights of creditors generally
      and equitable limitations, and there is not, under any such leases, any existing
      material breach, default or event of default (or event which with notice or
      lapse of time, or both, would constitute a material default) of the Company
      or
      any of its subsidiaries, or to the Company’s knowledge, of any other party
      thereto. 

     

    (c)
      To the knowledge of the Company, neither the operations of the Company nor
      any
      of its subsidiaries on the Company Real Estate nor such Company Real Estate,
      violate in any material respect any Legal Requirement or Company Permit relating
      to the particular property or such operations. The Company or its subsidiaries
      currently occupies all of the Company Real Estate for the operation of its
      business and there are no other parties occupying, or with a right to occupy,
      the Company Real Estate. Section 2.15(c)(i)
      of
      the Company Disclosure Letter sets forth a list of all leasehold improvements
      to
      real property and improvements and other capital equipment used or held for
      use
      by the Company and its subsidiaries in their business operations as of
      September 30, 2006. Such list includes pertinent information related to
      property, plant and equipment (including leasehold improvements) such as asset
      identification, location, acquisition date, original cost, accumulated
      depreciation and net book value. 

     

    (d)
      To the knowledge of the Company, the covenants, conditions, rights-of-way,
      easements and similar restrictions affecting all or any portion of the Company
      Real Estate (the “Exceptions
      to Title”)
      do not, in each case, materially impair the ability to use any such Company
      Real
      Estate in the operation of the businesses of the Company or its subsidiaries
      as
      presently conducted, and no material default or breach exists thereunder by
      the
      Company or any of its subsidiaries. 

     

    (e)
      To the knowledge of the Company, there are no requirements (including any Legal
      Requirements) imposed on the Owned Real Estate that require the Company or
      any
      of its subsidiaries to construct or pay for the cost of construction of any
      off-site improvements or pay any other impact fee. 

     

    (f)
      Neither the Company, nor any subsidiary of the Company has received any written
      notice from any insurance company of any material defects or inadequacies in
      any
      Company Real Estate or any part thereof which could materially and adversely
      affect the insurability of such property or the premiums for the insurance
      thereof, nor has any written notice been given by any insurer of any such
      property requesting the performance of any repairs, alterations or other work
      with which substantial compliance has not been made. 

     

    (g)
      The Company has received no written notice with respect to pending, and, to
      the
      knowledge of the Company, there are no threatened, condemnation or eminent
      domain actions or proceedings, or any special assessments or other activities
      of
      any public or quasi-public body that would materially adversely affect the
      Company Real Estate for use in the operations of its business as currently
      conducted. 

     

    (h)
      The Company and each of its subsidiaries has good and indefeasible title to
      all
      Owned Real Estate, or, in the case of leased properties and assets, valid
      leasehold interests in or other valid contractual rights of use with respect
      to,
      all of its other properties and assets, used or held for use in its business,
      free and clear of all Encumbrances except for the Exceptions to Title and
      indebtedness that is reflected on the Interim Balance Sheet and
      (i) Encumbrances for Taxes (as herein defined) not yet due and payable,
      (ii) statutory Encumbrances which arise in the ordinary course of business,
      are not material in amount and do not materially impair the Company’s or its
      subsidiaries’ ownership or use of such properties and assets, (iii) liens
      securing indebtedness that are reflected on the Interim Balance Sheet or
      (iv) with respect to Owned Real Estate, minor imperfections of title, if
      any, and land use laws which do not materially impair the use, occupancy or
      value of the Company’s or its subsidiaries’ ownership of the Owned Real Estate
      for its current purpose (each of (i) through (iv), a “Permitted
      Encumbrance”).
      

     

    (i)
      To the knowledge of the Company, all the Company Real Estate and material
      equipment of the Company and its subsidiaries, are in good operating condition
      and repair, in all material respects (subject to ordinary wear and tear), free
      from material defects which would adversely affect their use in the conduct
      of
      the business as currently conducted, and are otherwise suitable for the conduct
      of business as currently conducted. 

     

    
      
        
        

      

      
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    2.16
      Taxes.
      

     

    (a)
      Definition
      of Taxes.
      For the purposes of this Agreement, “Tax”
      or “Taxes,”
      means (i) any and all federal, state, local and foreign taxes, assessments
      and other governmental charges, duties and impositions, including taxes based
      upon or measured by gross receipts, income, profits, sales, use and occupation,
      and value added, ad valorem, transfer, franchise, withholding, payroll,
      recapture, employment, excise and property taxes, together with all interest,
      penalties and additions imposed with respect to such amounts; (ii) any
      Liability for the payment of any amounts of the type described in
      clause (i) as a result of being a member of an affiliated, consolidated,
      combined or unitary group for any period; and (iii) any Liability for the
      payment of any amounts of the type described in clause (i) or (ii) as
      a result of any express or implied obligation to indemnify any other person
      or
      as a result of any obligations under any agreements or arrangements with any
      other person with respect to such amounts and including any Liability for taxes
      of a predecessor entity. 

     

    (b)
      Tax
      Returns and Audits. 

     

    (i)
      The Company and each of its subsidiaries have timely filed all federal, state,
      local and foreign returns, forms, estimates, information statements and reports
      (“Returns”)
      relating to Taxes required to be filed by the Company and each of its
      subsidiaries with any Tax authority, except such Returns which are not,
      individually or in the aggregate, material to the Company (“Company
      Returns”).
      The Company and each of its subsidiaries have paid all Taxes shown to be due
      on
      such Company Returns. All Company Returns were complete and accurate in all
      material respects and have been prepared in substantial compliance with all
      applicable Legal Requirements. The Company’s net operating losses and other Tax
      attributes are accurately reflected on the Company Returns and, to the knowledge
      of the Company, are not currently subject to any limitation under Sections
      382
      or 383 of the Code. The Company has made available to Parent correct and
      complete copies of all Company Returns, examination reports, closing agreements
      and statements of deficiencies assessed against or agreed to by the Company
      or
      any of its subsidiaries. 

     

    (ii)
      Neither the Company nor any of its subsidiaries is delinquent in the payment
      of
      any material Tax nor is there any material Tax deficiency outstanding, proposed
      or assessed against the Company or any of its subsidiaries, nor has the Company
      or any of its subsidiaries executed any unexpired waiver of any statute of
      limitations on or extension of any the period for the assessment or collection
      of any Tax. 

     

    (iii)
      No audit, or pending audit of, or other examination of any Company Return by
      any
      Tax authority is presently in progress, nor has the Company or any of its
      subsidiaries been notified of any request for such an audit or other
      examination. 

     

    (iv)
      No adjustment relating to any Company Returns has been proposed in writing,
      formally or informally, by any Tax authority to the Company or any of its
      subsidiaries or any representative thereof. 

     

    (v)
      Neither the Company nor any of its subsidiaries has any Liability for any
      material unpaid Taxes (whether or not shown to be due on any Company Return)
      which has not been accrued for or reserved on the Company’s Interim Balance
      Sheet in accordance with GAAP, whether asserted or unasserted, whether or not
      shown on any Company Return, contingent or otherwise, other than any Liability
      for unpaid Taxes that may have accrued since the Interim Balance Sheet Date
      in
      connection with the operation of the business of the Company and its
      subsidiaries in the ordinary course. There are no claims for Taxes being
      asserted against the Company or any of its subsidiaries that have resulted
      in,
      and there are no, Encumbrances with respect to Taxes on any of the assets of
      the
      Company or any of its subsidiaries, other than Encumbrances which are not,
      individually or in the aggregate, material, or customary Encumbrances for Taxes
      not yet due and payable. 

    
      
        
        

      

      
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    (vi)
      There is no Contract, plan or arrangement to which the Company or any of its
      subsidiaries is a party as of the date of this Agreement, including but not
      limited to the provisions of this Agreement, covering any Employee (other than
      a
      Consultant who is not a Significant Consultant) that, individually or
      collectively, would reasonably be expected to give rise to the payment of any
      amount that would not be deductible pursuant to Sections 280G, 404 or
      162(m) of the Code or that would give rise to a penalty under Section 409A
      of the Code. There is no Contract, plan or arrangement to which the Company
      or
      any of its subsidiaries is a party or by which it is bound to compensate any
      individual for excise Taxes paid pursuant to Section 4999 of the Code.

     

    (vii)
      Neither the Company nor any of its subsidiaries is party to or has any
      obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement
      or
      arrangement, nor does the Company or any of its subsidiaries have any Liability
      or potential Liability to another party under any such agreement or arrangement.
      Neither the Company nor any of its subsidiaries has ever been a member of a
      group filing a consolidated, unitary, combined or similar Return (other than
      such Company Returns which include only the Company and any of its subsidiaries)
      under any federal, state, local or foreign law. Neither the Company nor any
      of
      its subsidiaries is party to any joint venture, partnership or other arrangement
      that could be treated as a partnership for federal and applicable state, local
      or foreign Tax purposes. 

     

    (viii)
      None of the Company’s or its subsidiaries’ assets are Tax exempt use property
      within the meaning of Section 168(h) of the Code. 

     

    (ix)
      Neither the Company nor any of its subsidiaries has constituted either a
“distributing corporation” or a “controlled corporation” in a distribution of
      stock intended to qualify for tax-free treatment under Section 355 of the
      Code (x) in the two years prior to the date of this Agreement or
      (y) in a distribution which could otherwise constitute part of a “plan” or
“series of related transactions” (within the meaning of Section 355(e) of
      the Code) in conjunction with the Transactions. 

     

    (x)
      Neither the Company nor any of its subsidiaries has consummated, has
      participated in, or is currently participating in any transaction which was
      or
      is a “Tax shelter,” “listed transaction” or “reportable transaction” as defined
      in Sections 6662, 6662A, 6011, 6012, 6111 or 6707A of the Code or the
      Treasury Regulations promulgated thereunder, including, but not limited to,
      transactions identified by the IRS by notice, regulation or other form of
      published guidance as set forth in Treasury Regulation
      Section 1.6011-4(b)(2). 

     

    (xi)
      Each of the Company and each of its subsidiaries has in its possession official
      foreign government receipts for any Taxes paid by it to any foreign Tax
      authorities. 

     

    (xii)
      The Company has made available to the Parent all documentation relating to
      any
      Tax holidays or incentives applicable to itself or its subsidiaries. The Company
      and its subsidiaries are in compliance with the requirements for any such Tax
      holidays or incentives. 

     

    (xiii)
      Neither the Company nor any of its subsidiaries is or has ever been a “United
      States real property holding corporation” within the meaning of Section 897
      of the Code. 

     

    (xiv)
      The Company and each of its subsidiaries has complied (and until the Effective
      Time will comply) in all material respects with all applicable Legal
      Requirements relating to the payment and withholding of Taxes (including
      withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the
      Code or similar provisions under any foreign law), has, in all material respects
      within the time and in the manner prescribed by law, withheld from the wages
      or
      compensation of Employees (other than Consultants) and paid over to the proper
      Governmental Entities (or is properly holding for such timely payment) all
      amounts required to be so withheld and paid over under all applicable Legal
      Requirements, including federal and state income Taxes, Federal Insurance
      Contribution Act, Medicare Federal Unemployment Tax Act, relevant state income
      and employment Tax withholding laws, and has in all material respects timely
      filed all withholding Returns required to be filed. 

    

    
      
        
        

      

      
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    2.17
      Environmental
      Matters.
      

     

    (a)
      Hazardous
      Material.
      No underground storage tanks, nor to the knowledge of the Company, any sumps,
      vaults, clarifiers, wells or septic systems are present, in, on, under or about
      any property, including the land and the improvements, ground water and surface
      water thereof, that the Company or any of its subsidiaries has at any time
      owned, nor to the Company’s knowledge, on any property leased by the Company or
      any of its subsidiaries (all owned and leased facilities collectively referred
      to as the “Company
      Business Facilities”).
      Except as would not be reasonably expected to result in material Liability
      to
      the Company or its subsidiaries, no Hazardous Materials (as defined below)
      are
      present, in, on, under or about any property, including the land and the
      improvements, ground water and surface water thereof, that the Company or any
      of
      its subsidiaries has at any time owned or on any property leased by the Company
      or any of its subsidiaries. For purposes of this Section 2.17,
      “Environmental
      and Safety Laws”
      shall mean any applicable foreign, federal, state or local laws, ordinances,
      codes, regulations, rules, policies, directives, requirements, treaties, and
      orders and all other permits, approvals, clearances, consents and conditions
      associated therewith, which prohibit, regulate or control any Hazardous Material
      or that are intended to assure the protection of the environment, health or
      safety of Employees, workers or other persons, including the public. For the
      purposes of this Agreement, “Hazardous
      Materials”
      shall mean any material or substance that is prohibited or regulated by
      Environmental and Safety Laws or that has been designated by any Governmental
      Entity to be radioactive, toxic, hazardous, or otherwise a danger to health,
      reproduction or the environment, including PCBs, asbestos, petroleum, mold,
      and
      urea formaldehyde. 

     

    (b)
      Hazardous
      Materials Activities.
      Except in compliance in all material respects with all Environmental and Safety
      Laws and in a manner that would not reasonably be expected to result in a
      material Liability to the Company, neither the Company nor any of its
      subsidiaries has transported, transferred, recycled, treated, manufactured,
      distributed, stored, used, disposed of, released or exposed its Employees or
      others to Hazardous Materials or, to the knowledge of the Company, any product
      containing a Hazardous Material or any product manufactured with Ozone depleting
      substances (collectively “Hazardous
      Materials Activities”).
      The Hazardous Materials Activities of the Company prior to the Closing have
      not
      resulted in the exposure of any person to a Hazardous Material in a manner
      which
      has caused or could reasonably be expected to cause an adverse health effect
      to
      any such person. 

     

    (c)
      Environmental
      Liabilities; Compliance with Environmental and Safety Laws.
      No action, proceeding, revocation proceeding, amendment procedure, writ or
      injunction is pending, nor, to the Company’s knowledge, threatened by any
      Governmental Entity against the Company or any of its subsidiaries concerning
      any Company Environmental Permit, Hazardous Material or any Hazardous Materials
      Activity of the Company or any of its subsidiaries. The Company has no knowledge
      of any fact or circumstance which could reasonably be expected to involve the
      Company or any of its subsidiaries in any environmental litigation or impose
      upon the Company any material environmental Liability. Except as would not
      reasonably be expected to result in a material Liability to the Company,
      (i) neither the Company nor any of its subsidiaries has received any notice
      (verbal or written) of any past or present noncompliance of its operations,
      facilities, buildings or improvements located on any Company Business Facility
      with Environmental and Safety Laws, (ii) no notices, administrative actions
      or suits are pending or, to the knowledge of the Company, threatened against
      the
      Company or any of its subsidiaries or any such property relating to an actual
      or
      alleged violation of any Environmental and Safety Laws, (iii) neither the
      Company nor any of its subsidiaries is a potentially responsible party under
      the
      Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
      Section 9601 et seq.
      (“CERCLA”),
      or any analogous state, local or foreign laws arising out of events occurring
      prior to the Closing Date, and (iv) the operations, facilities, buildings
      or improvements located on any Company Business Facility have complied in all
      material respects with all Environmental and Safety Laws. 

     

    (d)
      Environmental
      Indemnities.
      Neither the Company nor any of its subsidiaries have entered into any agreement
      that may require it to guarantee, reimburse, pledge, defend, hold harmless
      or
      indemnify any other party with respect to liabilities arising out of
      Environmental and Safety Laws, or the Hazardous Materials Activities of the
      Company, any of its subsidiaries or any other individual or entity.

    

    
      
        
        

      

      
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    (e)
      Decommissioning.
      The Company does not have any material Liabilities with respect to
      decommissioning associated with any use of or equipment using radioactive
      materials. 

     

    (f)
      Reports
      and Records.
      The Company has delivered or made available to Parent all environmental audits
      and environmental assessments of any facility that is in the possession or
      control of the Company or any of its subsidiaries. 

     

    2.18
      Brokers;
      Third Party Expenses.
      Except for fees payable to Credit Suisse Securities (USA) LLC pursuant to an
      engagement letter between the Company and Credit Suisse Securities (USA) LLC
      dated as of January 31, 2006, a correct and complete copy of which has been
      provided to Parent, neither the Company nor any of its subsidiaries or
      affiliates has incurred, nor will it incur, directly or indirectly, any
      Liability for brokerage or finders fees or agent’s commissions or any similar
      charges in connection with this Agreement or the Transactions, and Parent will
      not incur any such Liability, either directly or indirectly, as a result of
      this
      Agreement or the Merger as a result of any Contract entered by the Company,
      any
      of its subsidiaries or affiliates or any of their respective directors,
      officers, employees, stockholders or agents. An itemized good faith estimate
      as
      of the date of this Agreement of the fees and expenses that may be payable
      to
      any investment banker, broker, advisor or similar party, and any accountant,
      legal counsel or other person retained by the Company in connection with this
      Agreement or the Transactions contemplated hereby, including the expenses of
      investment bank referenced above, is set forth on Section 2.18
      of the Company Disclosure Letter, including a list of all Contracts with such
      persons that involve the payment by the Company or any of its subsidiaries
      of
      fees that are based on anything other than “time and materials” (which shall
      include a summary of the terms under which such fees are earned and become
      payable). 

     

    2.19
      Intellectual
      Property.
      

     

    (a)
      Definitions.
      For all purposes of this Agreement, the following terms shall have the following
      respective meanings: 

     

    “Company
      Intellectual Property”
      shall mean (i) any and all Company-Owned Intellectual Property and/or
      (ii) any and all Company-Controlled Intellectual Property used or otherwise
      exploited by the Company or any of its subsidiaries in the Conduct of the
      Business of the Company, including in either of the foregoing (i) or
      (ii) any Intellectual Property covering anti-IgE products. 

     

    For
      purposes of this Section 2.19
      and Section 2.20,
      “Conduct
      of the Business of the Company”
      shall mean (i) the conduct of the Company Research Programs and/or
      (ii) the research, discovery, development, manufacture or use of Company
      Products and/or (iii) the grant of license rights (including any option or
      other contingent right to obtain such rights) under Intellectual Property to
      third persons, in the case of clauses (i) and (ii), (a) as conducted
      on or before the date of this Agreement and/or (b) as conducted during from
      the date hereof to immediately prior to the Closing. 

     

    “Company-Controlled
      Intellectual Property”
      shall mean any and all Intellectual Property to which the Company or any of
      its
      subsidiaries has valid rights granted by a third person to use or otherwise
      exploit for the application(s) for which such Intellectual Property is used
      or
      otherwise exploited in the Conduct of the Business of the Company, in each
      case
      other than Company-Owned Intellectual Property. 

     

    “Company-Owned
      Intellectual Property”
      shall mean any and all Intellectual Property that is owned by the Company or
      any
      of its subsidiaries (whether solely or jointly with any third person).

     

    “Company
      Products”
      shall mean any and all products or service offerings of the Company or any
      of
      its subsidiaries that are the subject of the any of the following (whether
      by
      the Company or any of its subsidiaries or third person on behalf or under
      authority of or in cooperation with the Company or any of its subsidiaries)
      (A) an IND (as defined in 21 C.F.R. §312.3) filed with the United States
      FDA (or counterpart thereof filed with any ex-U.S. regulatory authority), or
      (B) other testing in human subjects in clinical studies anywhere in the
      world. 

    

    
      
        
        

      

      
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    Company
      Research Programs”
      shall mean any and all of the Company’s or its subsidiaries’ research programs
      ongoing immediately prior to the date of this Agreement in one or more specific
      therapeutic areas (i.e.,
      immune-mediated
      diseases, infectious disease, inflammation and cancer) or one or more specific
      biological pathways or targets (regardless of whether the expected product
      is an
      agonist, antagonist or otherwise modulates the pathway or target which have
      been
      identified by Company to Parent (specifically, such programs that are related
      or
      directed to IL13, CD4, Tissue Factor, Factor D or Complement C5a)).

     

    “Company
      Registered Intellectual Property”
      shall mean all Registered Intellectual Property owned (in whole or part) by
      the
      Company or any of its subsidiaries. 

     

    “Intellectual
      Property”
      shall mean any or all of the following and all rights (whether common law,
      statutory or otherwise) in, arising out of, or associated therewith existing
      anywhere in the world: (1) United States and foreign patents, inventor’s
      certificates and utility models (including any substitutions, extensions,
      confirmations, reissues, divisions, re-examinations, renewals and extensions
      thereof) and any and all applications (including any utility, continuation,
      divisional, substitution, continuations-in-part, provisional, reissue, or
      reexamination application) and registrations therefor, and equivalent or similar
      rights anywhere in the world in inventions and discoveries (“Patents”);
      (2) copyrights and any and all applications and registrations therefor;
      (3) domain names, uniform resource locators and other names and locators
      associated with the Internet, and any and all applications or registrations
      therefor (“Domain
      Names”);
      (4) trade names, logos, business symbols, trade dress, assumed names,
      fictitious names, corporate names, certification marks, collective marks,
      d/b/a’s, trademarks and service marks, (in each case together with any and all
      related goodwill) and any and all applications and registrations therefor
      (“Trademarks”);
      (5) all rights in databases and data collections; (6) all inventions
      (whether or not patentable), trade secrets, and other confidential information
      including technology, know how, data, processes, schematics, business methods,
      formulae, drawings, prototypes, models, designs, compositions of matter,
      techniques, improvements, methods (including manufacturing methods), clinical
      and regulatory strategies, formulations, manufacturing data and processes
      specifications, manuals, research and development/clinical proposals and
      customer and supplier lists and other industry information, and all
      documentation relating to any of the foregoing (“Trade
      Secrets and Confidential Information”),
      in each case to the extent recognized as intellectual property under applicable
      law. 

     

    “IP
      Contracts”
      shall mean all Contracts to which the Company or any of its subsidiaries is
      a
      party and pursuant to which (1) Company-Owned Intellectual Property or
      Company-Controlled Intellectual Property is licensed (including by way of any
      sublicense, grant of an option or other future contingent right, covenant of
      non-assertion or covenant not to sue) or otherwise transferred (including as
      a
      result of assignment, novation or otherwise, provided that a non-disclosure
      or
      confidentiality agreement, without more, shall not be considered a “transfer”)
      to any third person, (2) any third person has licensed (including any
      sublicense) or otherwise transferred to the Company any rights under
      Intellectual Property used or otherwise exploited in the Conduct of the Business
      of the Company or (3) Company has an option or right to obtain a
      non-exclusive or exclusive license to or other transfer of Intellectual Property
      of a third person, or a third person has an option or right to obtain a
      non-exclusive or exclusive license to or other transfer of Company Intellectual
      Property. 

     

    “Registered
      Intellectual Property”
      shall mean Intellectual Property that is duly registered with or issued by
      an
      appropriate Governmental Entity of which the rights conveyed by the registration
      or issuance are in effect as of the date hereof, and any application filed
      with
      an appropriate Governmental Entity for registration or issuance. 

     

    (b)
      Representations.
      

     

    (i)
      Company
      Intellectual Property.
      

     

    (1)
      Company
      Products and Company Research Programs.
      Section 2.19(b)(i)(1)
      of the Company Disclosure Letter contains a complete and accurate list of all
      Company Products and all Company Research Programs. 

    

    
      
        
        

      

      
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    (2)
      Company
      Registered Intellectual Property. 

     

    a)
      Section 2.19(b)(i)(2)
      of the Company Disclosure Letter contains a complete and accurate list of all
      Company Registered Intellectual Property and lists, where applicable,
      (I) the jurisdictions in which each such item of Company Registered
      Intellectual Property has been issued or registered, or in which an application
      for registration or issuance is pending, (II) whether such Registered
      Intellectual Property is owned solely by Company or jointly with third persons,
      and (III) current actions for each Company Registered Intellectual Property
      that, to the knowledge of the Company, must be taken within ten (10) months
      after October 1, 2006 for the purposes of obtaining, maintaining,
      perfecting, preserving or renewing any Company Registered Intellectual Property
      to the maximum extent legally available, including the payment of any
      registration, maintenance, annuity or renewal fees, or the filing of any
      responses to formality requirements or office actions to avoid any derogation
      of
      rights under the Company Registered Intellectual Property, including preserving
      maximal patent term adjustment rights. 

     

    b)
      Section 2.19(b)(i)(2)
      of the Company Disclosure Letter contains a complete and accurate list by
      jurisdiction of any litigation, opposition, reexamination, interference
      proceeding, nullity action, reissue proceeding, cancellation, objection, claim
      or other equivalent proceeding or action pending, asserted or threatened against
      the Company or its subsidiaries with respect to the ownership, validity,
      registerability, enforceability, infringement or use of, or right to license,
      any Company Registered Intellectual Property. To the knowledge of the Company,
      no valid basis for any such litigation, opposition, reexamination, interference
      proceeding, nullity action, reissue proceeding, cancellation, objection, claim
      or other equivalent proceeding or action exists. 

     

    (3)
      IP
      Contracts.
      Neither the Company nor any of its subsidiaries is a party to or is bound by
      any
      IP Contracts that meet any of the following descriptions, except to the extent
      those IP Contracts are listed in Section 2.19(b)(i)(3)
      of the Company Disclosure Letter and are identified thereon using the categories
      below, in each case listing (i) the person(s) with whom such IP Contract is
      made, (ii) the date thereof, and (iii) the Company Product or Company
      Research Program to which such IP Contract applies, if applicable: 

     

    a)
      material transfer agreements under which the Company or any of its subsidiaries
      has received or has a right to receive information or materials related to
      actual or potential pharmaceutical products, biological pathways, disease
      states, research tools, or other scientific or medical information;

     

    b)
      pursuant to which the Company or any of its subsidiaries has granted a third
      person the right to practice any Company Intellectual Property, except for
      rights to conduct internal research for a limited period of time or rights
      under
      a material transfer agreement where the Company owns any resulting inventions
      or
      intellectual property; 

     

    c)
      pursuant to which the Company or any of its subsidiaries has obtained any
      Intellectual Property (or has obtained any option to obtain any Intellectual
      Property or license thereto) required or used for research, discovery,
      development, manufacture, use, import, sale, offer for sale or other
      exploitation of any Company Product or for engaging in any Company Research
      Program; 

     

    d)
      pursuant to which the Company or any of its subsidiaries has granted any
      exclusive rights (or an option to obtain exclusive rights) to any third person
      under any Company Intellectual Property; 

     

    e)
      pursuant to which the Company or any of its subsidiaries is engaging in
      scientific research or other activities that are likely to create Intellectual
      Property, where that Intellectual Property is not solely owned by the Company
      or
      any of its subsidiaries, except 

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    

    where
      the research or other activities have been completed and, to the knowledge
      of
      the Company, no Intellectual Property was created; 

     

    f)
      pursuant to which the Company or any of its subsidiaries is obligated to pay
      any
      royalty, milestones, or other similar payments, including but not limited to
      profit sharing, manufacturing or similar payments (i) that are contingent
      on the occurrence of future events or (ii) that vary with the amount of any
      Company Product produced, sold or otherwise exploited; 

     

    g)
      pursuant to which a third person is obligated to pay to the Company or any
      of
      its subsidiaries any royalty, milestones, or make any other payments that are
      contingent on the occurrence of future events or that vary with the amount
      of
      product produced, sold or otherwise exploited (including sharing of profits).
      

     

    In
      addition, Section 2.19(b)(i)(3)
      of the Company Disclosure Letter contains the Company’s and its subsidiaries’
current forms of the following (where “current” includes any of the following
      used by the Company or any of its subsidiaries during the 12-month period prior
      to the date of this Agreement): employment agreement, nondisclosure agreement,
      assignment of invention agreement or similar Contracts relating to the
      protection, ownership, development, use or transfer of Company Intellectual
      Property (collectively, “IPR
      Form Agreements”).
      

     

    (ii)
      Validity.
      To the knowledge of the Company, the Company has materially complied with all
      the requirements of each applicable Governmental Entity (including the United
      States Patent and Trademark Office and foreign counterparts thereof) with
      respect to the filing and prosecution of the Company Registered Intellectual
      Property, including timely payment of all required fees and filing of all
      documents, recordations and certificates to such Governmental Entity. Neither
      the Company nor any of its subsidiaries has received written notice from a
      third
      person of or has obtained an opinion of counsel addressing and the Company
      has
      no knowledge of any (i) prior art or prior public uses, sales, offers for
      sale or disclosures which would invalidate any Company Registered Intellectual
      Property (in whole or in part) or (ii) conduct the result of which would
      render the Company Registered Intellectual Property (in whole or in part)
      invalid or unenforceable. 

     

    (iii)
      Ownership.
      

     

    (1)
      To the knowledge of the Company no Company Intellectual Property, Company
      Research Program or Company Product is subject to, and the Company and its
      subsidiaries are not a party to, any proceeding or outstanding decree, order,
      judgment or settlement agreement or stipulation that (i) restricts or may
      restrict in any manner the use, transfer or licensing thereof by the Company
      or
      any of its subsidiaries or may adversely affect the validity, use or
      enforceability of such Company Intellectual Property, or (ii) restricts or
      may restrict the Conduct of the Business of the Company in order to accommodate
      Intellectual Property rights of any third person. 

     

    (2)
      To the knowledge of the Company (I) all Company-Owned Intellectual Property
      is fully transferable, alienable or licensable by Surviving Corporation without
      restriction and without payment of any kind to any person and (II) except as
      otherwise set forth in the respective IP Contract, all of the Company’s rights
      in Company-Controlled Intellectual Property are fully transferable, alienable
      or
      licensable by Surviving Corporation without restriction and without payment
      of
      any kind to any person. 

     

    (3)
      To the knowledge of the Company, the Company or its subsidiaries owns, and
      has
      good and exclusive title to, each item of Company-Owned Intellectual Property
      free and clear of any Encumbrance, except for any Encumbrance which would not
      reasonably be expected to have a material negative impact on (A) the
      Conduct of the Business of the Company, (B) the value or use of any
      material Company Intellectual Property or (C) the sale, offer for sale,
      importation or other commercial exploitation of any Company Product anywhere
      in
      the world. Without limiting the 

    

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    foregoing,
      to the knowledge of the Company: (i) the Company or a subsidiary of the
      Company is the exclusive owner of all registrations obtained by the Company
      for
      Trademarks that are used to designate the source or origin of the Company
      Products; and (ii) the Company or a subsidiary of the Company owns
      exclusively, and has good title to, or has the right to use, all copyrighted
      works that are embodied in any Company Product. 

     

    (4)
      To the knowledge of the Company, no person other than the Company or its
      subsidiaries has ownership rights or license rights granted by the Company
      or
      its subsidiaries to improvements made by or for the Company or its subsidiaries
      to any Company Intellectual Property, Company Product, or subject of any Company
      Research Program. 

     

    (5)
      To the knowledge of the Company, except where Patents claiming or covering
      the
      composition of matter of any pharmaceutically or biologically active ingredient
      incorporated into any Company Product is licensed or acquired from a third
      person, the Company or its subsidiaries has filed applications for one or more
      Patents claiming or covering patentable compositions of matter, in each case
      with respect to Company Products that are as of the date of this Agreement,
      the
      subject of an IND (or equivalent), or the subject of a clinical trial or other
      study involving human subjects. 

     

    (6)
      To the knowledge of the Company, within the twelve (12) months immediately
      prior to the date hereof, neither the Company nor any of its subsidiaries has
      (i) transferred ownership of, or granted any exclusive license of or
      exclusive right to use, Company Intellectual Property, to any third person,
      or
      (ii) permitted the Company’s rights in any Company Intellectual Property to
      lapse or enter the public domain, except to the extent such failure would not
      adversely affect the Conduct of the Business of the Company. 

     

    (7)
      To the knowledge of the Company, in each case in which the Company or any of
      its
      subsidiaries has acquired sole ownership of any Intellectual Property from
      any
      person, the Company or such subsidiary has obtained a valid and enforceable
      assignment sufficient to irrevocably transfer all rights in and to all such
      Intellectual Property and the associated rights therein (including the right
      to
      seek future damages with respect thereto) and has recorded each assignment
      of
      Registered Intellectual Property assigned to the Company or such subsidiary
      with
      the relevant Governmental Entity. 

     

    (8)
      To the knowledge of the Company, no employee, independent contractor or agent
      of
      the Company or any of its subsidiaries, past or present, is in material default
      or breach of any term relating to the protection, ownership, development, use
      or
      transfer of Company-Owned Intellectual Property in any Employment Agreement,
      nondisclosure agreement, assignment of invention agreement or similar
      Contracts. To the knowledge of the Company, all employees of, consultants
      to or vendors of the Company or any of its subsidiaries with permitted access
      to
      Trade Secrets and Confidential Information of the Company or any of its
      subsidiaries that are used in Conduct of the Business of the Company are a
      party
      to written Contracts under which, among other things, each such employee,
      consultant or vendor is obligated to maintain the confidentiality of such Trade
      Secrets and Confidential Information and, in the case of employees and
      consultants of the Company or any of its subsidiaries, assign to the Company
      or
      its subsidiary all Intellectual Property created by such employee or consultant
      in the scope of employment or consultancy with the Company or its
      subsidiaries. To the knowledge of the Company, none of the Company’s nor
      its subsidiaries’ current employees is the owner of any Patent for any device,
      process, design or invention of any kind that is now used or needed by the
      Company or any of its subsidiaries in the Conduct of the Business of the Company
      and was conceived during the course of his or her employment with the Company,
      which Patent has not been assigned or licensed to the Company or its
      subsidiary. To the knowledge of the Company, all Company-Owned Intellectual
      Property developed under Contract to the Company or its subsidiaries have been
      assigned to the Company or its subsidiary or are contractually obligated to
      be
      assigned. To the knowledge of the Company, 

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

    

    the
      Company’s and its subsidiaries’ employees’ performance of their employment
      activities does not violate such employees’ contractual obligations to any third
      person. 

     

    (iv)
      Non-Infringement. 

     

    (1)
      Neither the Company nor its subsidiaries has received a written notice from
      any
      third person alleging, or an opinion of counsel directed to, and the Company
      has
      no knowledge that, the Conduct of the Business of the Company or the
      manufacture, use, sale, offer for sale importation or other commercial
      exploitation, if occurring as of the date hereof, of any Company Product in
      its
      current form, infringes, without reference to any research or development
      exemption therefrom or misappropriates any Intellectual Property of any third
      person or constitutes unfair competition or trade practices under the laws
      of
      any jurisdiction. 

     

    (2)
      To the knowledge of the Company, all Intellectual Property incorporated into
      or
      embodied in any Company Product was developed solely by either
      (A) employees of the Company acting within the scope of their employment or
      (B) by third persons who have licensed to the Company or validly assigned
      or are under an obligation to assign all of their rights in or to such
      Intellectual Property to the Company. To the extent any such Intellectual
      Property comprises Company Registered Intellectual Property, the Company or
      its
      subsidiaries, to the knowledge of the Company, has recorded each such assignment
      with the relevant Governmental Entity. 

     

    (3)
      Neither the Company nor any of its subsidiaries have entered into any Contract
      that may require it to reimburse, defend, hold harmless or indemnify any third
      person with respect to Liabilities arising out of the infringement or
      misappropriation of any Intellectual Property, except to the extent those
      Contracts are listed in Section 2.19(b)(iv)(3)
      of the Company Disclosure Letter. 

     

    (v)
      IP
      Contracts.
      

     

    (1)
      To the knowledge of the Company, all of the IP Contracts listed in Section 2.19(b)(i)(3)
      of the Company Disclosure Letter are in full force and effect. 

     

    (2)
      To the knowledge of the Company, the consummation of the transactions
      contemplated by this Agreement will neither violate nor result in the breach,
      modification, cancellation, termination or suspension of any IP Contract.
      Following the Effective Time, Surviving Corporation will be permitted to
      exercise all of the Company’s rights under all IP Contracts (including, without
      limitation, the right to receive royalties), to the same extent the Company
      would have been able to had the transactions contemplated by this Agreement
      not
      occurred and without being required to pay any additional amounts or
      consideration other than fees, royalties or payments which the Company would
      otherwise be required to pay had such transactions contemplated hereby not
      occurred. 

     

    (3)
      Neither this Agreement nor the transactions contemplated by this Agreement,
      will
      result in (A) Surviving Corporation granting to any third person any right
      in any Intellectual Property, or (B) Surviving Corporation being obligated
      to pay any royalties or other amounts to any third person in excess of those
      payable by Company prior to the Closing. 

     

    (vi)
      Sufficiency
      of Intellectual Property.
      To the knowledge of the Company as of the date hereof, the Company Intellectual
      Property constitutes (A) the Intellectual Property that is currently used
      or otherwise exploited by the Company in the Conduct of the Business of the
      Company and (B) the Intellectual Property that would be necessary for the
      manufacture, use, sale, offer for sale, importation or other commercial
      exploitation of any Company Product in its current form, if such manufacture,
      use, sale, offer for sale, importation or other commercial exploitation were
      occurring as of the date hereof. 

     

    (vii)
      Government
      Rights.
      To the knowledge of the Company, no government funding, facilities of a
      university, college, other educational institution or research center or funding
      from third persons was used in the development of any Company-Owned Intellectual
      Property that is material to the Conduct 

    

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    

    of
      the Business of the Company and would result in any march-in rights, ownership
      rights or any future obligation by the Company to make any payment or grant
      any
      license. 

     

    (viii)
      Third-Party
      Infringement.
      To the knowledge of the Company, no person has infringed or misappropriated,
      or
      is infringing or misappropriating, any Company-Owned Intellectual Property
      in a
      manner that would be expected to adversely affect the Conduct of the Business
      of
      the Company or the sale, offer for sale, importation or other commercial
      exploitation of any Company Product. 

     

    (ix)
      Trade
      Secret Protection.
      To the knowledge of the Company, the Company and its subsidiaries have taken
      all
      reasonable and customary steps to protect the rights of the Company and its
      subsidiaries in their Trade Secrets and Confidential Information, and any Trade
      Secrets and Confidential Information of third persons provided to the Company
      under an obligation of confidentiality. 

     

    (x)
      Maintenance
      of Invention Materials.
      To the knowledge of the Company, the Company and its subsidiaries have
      maintained and secured (or cause to be maintained and secured) all documentation
      and other materials (including signed, dated and witnessed laboratory notebooks)
      necessary or appropriate to establish conception, reduction to practice or
      other
      matters of inventorship (including timing thereof) or ownership with respect
      to
      Company-Owned Intellectual Property in accordance with practices standard and
      customary in the biopharmaceutical industry. 

     

    2.20
      Contracts.
      

     

    (a)
      Except for Contracts between the Company or its subsidiaries on the one hand
      and
      Parent or a subsidiary of Parent on the other hand, neither the Company nor
      any
      of its subsidiaries is a party to or is bound by any of the following Contracts
      as of the date of this Agreement, except to the extent those Contracts are
      listed in Section 2.20(a)
      of the Company Disclosure Letter and are identified thereon using the numbering
      below, in each case listing (i) the person(s) with whom such Contract is
      made and (ii) the date thereof: 

     

    (i)
      any employment or consulting Contract with any officer or director, or any
      Employee (excluding offer letters for “at-will” Employees) or any other type of
      Contract (whether or not such Contract is an Employment Agreement, as defined
      in
Section 2.13(a)(vi))
      with any Employee that is not terminable within thirty (30) days by the
      Company without Liability to the Company or Parent, including any Contract
      requiring it to make or accelerate a payment to any Employee on account of
      the
      Merger, any Transaction or any Contract that is entered into in connection
      with
      this Agreement; 

     

    (ii)
      any Contract or plan, including any stock option plan, stock appreciation right
      plan or stock purchase plan (A) relating to the sale, issuance, grant,
      exercise, award, purchase, repurchase or redemption of any shares of Company
      Common Stock or any other securities of the Company or any of its subsidiaries
      or any options, warrants, convertible notes or other rights to purchase or
      otherwise acquire any such shares of stock, other securities or options,
      warrants or other rights therefor, except for the Company Stock Plans, or
      (B) any of the benefits of which will be increased, or the vesting of
      benefits of which will be accelerated, by the occurrence of any of the
      Transactions or the value of any of the benefits of which will be calculated
      on
      the basis of any of the Transactions; 

     

    (iii)
      any Contract requiring the Company to engage in ongoing research or development,
      which obligations extend beyond January 1, 2007 and are not terminable by
      the Company (with or without penalty) on less than ninety (90) days prior
      notice; 

     

    (iv)
      any Contract (whether non-compete or otherwise) containing provisions which
      have
      or would reasonably be expected to have the effect of prohibiting or impairing
      any business practice of the Company or any of its subsidiaries (including
      engaging in research and development or the development or commercialization
      of
      any Company Product), any acquisition of property (tangible or intangible)
      by
      the Company or any of its subsidiaries, any other conduct of business by the
      Company or any of its subsidiaries, or otherwise limiting the freedom of the
      Company or any of its subsidiaries to engage in any line of business in any
      geographical area or to compete with any person. Without 

    

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    

    limiting
      the generality of the foregoing, neither the Company nor any of its subsidiaries
      has entered into any Contract under which the Company or any of its subsidiaries
      is prohibited or impaired from engaging in any areas of research or development
      or from the licensing, manufacturing, selling or distributing any Company
      Intellectual Property or exploiting any Technology of the Company; 

     

    (v)
      any Contract under which the Company has granted or is obligated to grant any
      person any “opt-in” rights, exclusive rights, rights of refusal or similar
      rights; 

     

    (vi)
      any Contract under which the Company is obliged to enter into any further
      agreement or license, under which the Company is obligated to accept or use
      manufacturing (including cell culture, bulk manufacturing or fill and finish)
      capacity or to pay for manufacturing capacity not used or accepted, or under
      which the Company has any material “take or pay” commitment; 

     

    (vii)
      any Contract relating to the disposition by the Company or any of its
      subsidiaries of a material amount of assets not in the ordinary course of
      business, or pursuant to which the Company or its subsidiaries has acquired
      a
      business or entity, or material assets of a person (other than purchases in
      the
      ordinary course of business that are customarily effected on a purchase order
      basis), whether by way of merger, consolidation, purchase of stock, purchase
      of
      assets, exclusive license or otherwise, or any Contract pursuant to which the
      Company or any of its subsidiaries has any material ownership interest in any
      person other than the Company’s subsidiaries; 

     

    (viii)
      any Contract currently in force under which the Company or any of its
      subsidiaries has continuing obligations to provide to a third person information
      about any Company Research Program or any other scientific or clinical data
      produced by the Company, including research, characterization, manufacturing,
      clinical, pre-clinical or other information and including information regarding
      the Company’s planned research and development activities; 

     

    (ix)
      any joint venture Contract, collaboration Contract or any other Contract that
      involves a sharing of revenues, profits, cash flows, expenses (including
      development expenses) or losses with other persons; 

     

    (x)
      any Contract requiring the Company or any of its subsidiaries to undertake
      a
      clinical trial (or to have a third person undertake a clinical trial on the
      Company’s or its subsidiaries’ behalf) of an existing Company Product or the
      subject of a Company Research Program; 

     

    (xi)
      any Contract that authorizes any third person to sell, offer for sale, market
      or
      otherwise distribute any Company Products or results of any Company Research
      Programs; 

     

    (xii)
      any mortgages, indentures, guarantees, promissory notes, loans or credit
      agreements, security Contracts or other Contracts or instruments relating to
      the
      borrowing of money or extension of credit, or any currency exchange, commodities
      or other hedging arrangement or any leasing transaction of the type required
      to
      be capitalized in accordance with GAAP; 

     

    (xiii)
      any settlement or litigation “standstill” Contract; 

     

    (xiv)
      any Contract of guarantee, support, assumption or endorsement of, or any similar
      commitment with respect to, the obligations, liabilities (whether accrued,
      absolute, contingent or otherwise) or indebtedness of any other person;

     

    (xv)
      any Contract (including open purchase orders) under which the Company has a
      commitment to purchase goods, capital equipment, services or other items in
      excess of $50,000 for any Contract or series of Contracts; 

     

    (xvi)
      any Contract (i) pursuant to which any third person is required to make
      payments to the Company in excess of $20,000 per annum, (ii) pursuant to
      which the Company or any of its subsidiaries is obligated to pay any royalty
      or
      similar payments, including but not limited to profit sharing or similar
      payments, or (iii) pursuant to which the Company or any of its subsidiaries
      is obligated to pay any milestone payment or similar payment, including any
      payment of a 

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    

    pre-determined
      amount in excess of $100,000, which payment is contingent on the occurrence
      of a
      future event, but excluding any fee-for-service Contract; 

     

    (xvii)
      any Contract pursuant to which the Company or any of its subsidiaries is a
      lessor or lessee of any equipment or other fixed assets, including machinery,
      equipment, motor vehicles, office furniture, fixtures or other personal property
      involving payments in excess of $20,000 per annum or involving any manufacturing
      equipment with a value in excess of $10,000; 

     

    (xviii)
      any Contract with any person with whom the Company or any of its subsidiaries
      does not deal at arm’s length; 

     

    (xix)
      any Contract with any investment banker, broker, advisor or similar party,
      or
      any accountant, legal counsel or other person retained by the Company, in
      connection with this Agreement and the Transactions; 

     

    (xx)
      any Contract with any Governmental Entity (a “Government
      Contract”)
      or any material federal, state, county, local or foreign governmental consent,
      license, permit, grant, or other authorization of a Governmental Entity
      (excluding Company Permits) that is required for the operation in all material
      respects of the Company’s or any of its subsidiaries’ businesses; 

     

    (xxi)
      any Contract entitling a third person (other than an Employee) to a commission
      or “finder’s fee” payable by the Company or any of its subsidiaries; or

     

    (xxii)
      any Contract not otherwise disclosed in Section 2.20
      of the Company Disclosure Letter (i) under which the consequences of a
      default could reasonably be expected to be material to the Company,
      (ii) that is of the nature required to be filed by Company as an exhibit to
      an Annual Report on Form 10-K under the Exchange Act; (iii) involving
      in excess of $100,000 being paid by or to the Company over the term thereof,
      or
      (iv) that is otherwise material to the Company or any of its subsidiaries
      or their respective businesses, operations, properties, assets, financial
      condition, results of operations or cash flows; any such Contract listed or
      required to be listed in Section 2.19(b)(iii)
      or Section 2.20(a)
      of the Company Disclosure Letter being a “Company
      Contract”.
      

     

    (b)
      Neither the Company nor any of its subsidiaries, nor, to the Company’s
      knowledge, any other person that is a party to a Company Contract, is in breach,
      violation or default under, and neither the Company nor any of its subsidiaries
      has received notice that it has breached, violated or defaulted under, any
      of
      the material terms or conditions of any Company Contract. The Company or the
      applicable Company subsidiary is entitled to all benefits under any Company
      Contract. Each of the Company Contracts is in full force and effect, and has
      not
      been amended in any material respect, except to the extent that such amendment
      is described in Section 2.20(a)
      of the Company Disclosure Letter. Except as noted in Section 2.20(b),
      the Company has delivered or made available to Parent or its representatives
      true, correct and complete copies of each of the Company Contracts required
      to
      be listed in Section 2.20(a)
      of the Company Disclosure Letter; provided
      that, to the extent that third party confidentiality restrictions expressly
      prohibit disclosure of such Company Contract to Parent, Section 2.20(b)
      of the Company Disclosure Letter sets forth a description of the subject matter
      of each such Company Contract and a general indication of the nature of the
      rights and obligations granted thereunder. The Company is not a party to any
      Government Contract (other than Company Permits). 

     

    2.21
      Product
      Liability.
      The Company has made available to Parent a true and correct list of all serious
      adverse events reported to the Company in connection with clinical trials of
      any
      Company Product (other than Xolair). The Company has never made payments in
      respect of a product liability matter that relates to the administration of
      substances to humans. There is no current product liability claim made against
      the Company or its subsidiaries. 

     

    2.22
      Insurance.
      Section 2.22
      of the Company Disclosure Letter lists all insurance policies (including fire
      and casualty, general liability, director & officer liability, business
      interruption, product liability and sprinkler and water damage insurance
      policies) and/or fidelity bonds covering the assets, business, equipment,
      properties, 

    

    
      
        
        

      

      
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    operations,
      and Employees of the Company (collectively, the “Insurance
      Policies”)
      and includes for each such Insurance Policy, the amount of the annual premium
      and the maximum coverage amounts per incident and per year. The Company and
      each
      of its subsidiaries have made available to Parent true, correct and complete
      copies of all Insurance Policies. There is no claim by the Company or any of
      its
      subsidiaries pending under any of the Insurance Policies 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 Insurance Policies have
      been
      paid, and the Company and each of its subsidiaries, as the case may be, is
      otherwise in material compliance with the terms of such Insurance Policies.
      The
      Company has not made any untrue statement about itself or its business in any
      application for insurance. All Insurance Policies remain in full force and
      effect, and neither the Company nor any of its subsidiaries has knowledge of
      any
      threatened termination of, or premium increase with respect to, any such
      Insurance Policies. 

     

    2.23
      Opinion
      of Financial Advisor.
      The Board has received the opinion of Credit Suisse Securities (USA) LLC, to
      the
      effect that, as of the date of this Agreement, the Per Share Merger
      Consideration is fair, from a financial point of view, to the stockholders
      of
      Company Common Stock. A copy of the written opinion delivered by Credit Suisse
      Securities (USA) LLC shall be delivered to Parent following the signing of
      this
      Agreement. 

     

    2.24
      Board
      Approval.
      The full Board, by resolutions duly adopted (and not thereafter modified or
      rescinded) as of the date of this Agreement, has unanimously (a) approved
      this Agreement and the Merger and determined that this Agreement and the Merger
      are advisable and fair to, and in the best interests of, the Company and its
      stockholders, (b) approved, subject to stockholder approval of this
      Agreement, the Transactions, and (c) directed that adoption of this
      Agreement be submitted to the Company stockholders for consideration and
      recommended that the stockholders of the Company adopt this Agreement.

     

    2.25
      Rights
      Agreement.
      The Company has taken all action so that (i) Parent shall not be an
“Acquiring Person” under the Rights Agreement for so long as this Agreement is
      in effect and (ii) the entering into of this Agreement and the Merger and
      the other transactions contemplated hereby will not result in the grant of
      any
      rights to any person under the Rights Agreement or enable or require the Rights
      (as defined therein) to be exercised, distributed or triggered as a result
      thereof. The Rights Agreement shall terminate in accordance with its terms
      and
      be of no further force or effect at the Effective Time. 

     

    2.26
      State
      Takeover Statutes.
      The Board has approved the Merger, this Agreement and the Company Voting
      Agreements and taken all actions sufficient to render inapplicable to the
      Merger, the execution, delivery and performance of this Agreement and the
      Company Voting Agreements and the Transactions and the transactions contemplated
      by the Company Voting Agreements, the provisions of Section 203 of Delaware
      Law applicable to a “business combination” (as defined in such
      Section 203). No other state takeover statute or similar statute or
      regulation or anti-takeover provision in the Company Charter Documents applies
      to, purports to apply or at the Effective Time will be applicable to the Merger,
      this Agreement and the Company Voting Agreements or the Transactions and the
      transactions contemplated by the Company Voting Agreements. 

     

    2.27
      Interested
      Party Transactions.
      Except as set forth in the Company SEC Reports, since the date of the Company’s
      last proxy statement filed with the SEC, no event has occurred that would be
      required to be reported by the Company pursuant to Item 404 of
      Regulation S-K promulgated by the SEC. Section 2.27
      of the Company Disclosure Letter identifies each person who is an “affiliate”
(as that term is used in Rule 145 promulgated under the Securities Act) of
      the Company as of the date hereof. 

    

    
      
        
        

      

      
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    ARTICLE III
      

    REPRESENTATIONS
      AND WARRANTIES OF PARENT 

    AND
      MERGER SUB 

     

    Parent
      and Merger Sub hereby jointly and severally represent and warrant to the
      Company, as follows: 

     

    3.1
      Corporate
      Organization.
      Each of Parent and Merger Sub is a corporation duly organized, validly existing
      and in good standing under the laws of the State of Delaware and has the
      requisite corporate power and authority and all necessary governmental approvals
      to own, lease and operate its properties and to carry on its business as it
      is
      now being conducted, except where the failure to be so organized, existing
      or in
      good standing or to have such power, authority and governmental approvals would
      not prevent or materially delay consummation of the Transactions, or otherwise
      prevent Parent or Merger Sub from performing their respective material
      obligations under this Agreement. 

     

    3.2
      Authority
      Relative to this Agreement.
      Each of Parent and Merger Sub has all necessary corporate power and authority
      to
      execute and deliver this Agreement, and to perform its obligations hereunder
      and
      to consummate the Transactions. The execution and delivery of this Agreement
      by
      Parent and Merger Sub and the consummation by Parent and Merger Sub of the
      Transactions have been duly and validly authorized by all necessary corporate
      action on the part of Parent and Merger Sub, and no other corporate proceedings
      on the part of Parent or Merger Sub are necessary to authorize this Agreement,
      or to consummate the Transactions (other than, with respect to the Merger,
      the
      filing of the Certificate of Merger as required by Delaware Law). This Agreement
      has been duly and validly executed and delivered by Parent and Merger Sub and,
      assuming the due authorization, execution and delivery by the Company,
      constitutes a legal and binding obligation of Parent and Merger Sub, enforceable
      against Parent and Merger Sub in accordance with its terms, subject to
      bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or
      similar Legal Requirements affecting the rights of creditors generally and
      the
      availability of equitable remedies (regardless of whether such enforceability
      is
      considered in a proceeding in equity or at law). 

     

    3.3
      No
      Conflict; Required Filings and Consents. 

     

    (a)
      The execution and delivery of this Agreement by Parent and Merger Sub does
      not,
      and the performance of this Agreement by Parent and Merger Sub will not,
      (i) conflict with or violate the Parent’s or Merger Sub’s Certificate of
      Incorporation or Bylaws, each as amended to date, (ii) subject to
      compliance with the requirements set forth in Section 3.3(b)
      hereof, conflict with or violate any Legal Requirements applicable to Parent,
      or
      (iii) conflict with or violate, result in any breach of or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) under, or impair Parent’s rights under, or give to others any rights of
      termination, amendment, acceleration or cancellation of, or result in the
      creation of a Encumbrance on any of the properties or assets of Parent pursuant
      to any Contract to which Parent is a party or by which Parent or its properties
      are bound or affected, except to the extent such conflict, violation, breach,
      default, impairment or other effect could not in the case of clause (ii) or
      (iii) individually or in the aggregate, prevent or materially delay
      consummation of the Transactions or otherwise prevent Parent or Merger Sub
      from
      performing their respective material obligations under this Agreement.

     

    (b)
      The execution and delivery of this Agreement by Parent and Merger Sub does
      not,
      and the performance of this Agreement by Parent and Merger Sub shall not,
      require any consent, approval, authorization or permit of, or filing with or
      notification to, any Governmental Entity except (i) for applicable
      requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover
      laws, the pre-merger notification requirements under the HSR Act and of foreign
      Governmental Entities, the rules and regulations of the NYSE, and the filing
      and
      recordation of the Certificate of Merger as required by Delaware Law and
      (ii) where the failure to obtain such consents, approvals, authorizations
      or permits, or to make such filings or notifications, could not, individually
      or
      in the aggregate, prevent or materially delay consummation of the Transactions
      or otherwise prevent Parent or Merger Sub from performing their respective
      material obligations under this Agreement. 

    

    
      
        
        

      

      
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    3.4
      Proxy
      Statement.
      The information supplied by Parent and Merger Sub for inclusion in the Proxy
      Statement shall not, at the date the Proxy Statement (or any amendment or
      supplement thereto) is first mailed to stockholders of the Company, at the
      time
      of the Stockholders’ Meeting or at the Effective Time, contain any untrue
      statement of a material fact, or omit to state any material fact required to
      be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances under which they were made, not false or misleading, or
      necessary to correct any statement in any earlier communication with respect
      to
      the solicitation of proxies for the Stockholders’ Meeting which shall have
      become false or misleading. Notwithstanding the foregoing, Parent and Merger
      Sub
      make no representation or warranty with respect to any information supplied
      by
      the Company or any of its representatives for inclusion in the Proxy Statement.
      

     

    3.5
      Sufficient
      Funds.
      Parent will have at the Effective Time sufficient cash or cash-equivalent funds
      to consummate the Transactions, including acquiring all of the outstanding
      shares of Company Common Stock in the Merger. 

     

    3.6
      No
      Prior Merger Sub Operations.
      Merger Sub was formed solely for the purpose of effecting the Merger and has
      not
      engaged in any business activities or conducted any operations other than in
      connection with the transactions contemplated hereby. 

     

    ARTICLE IV
      

    CONDUCT
      PRIOR TO THE EFFECTIVE TIME 

     

    4.1
      Conduct
      of Business by Company.
      During the period from the date of this Agreement and continuing until the
      earlier of the termination of this Agreement pursuant to its terms or the
      Effective Time, the Company and each of its subsidiaries shall, except to the
      extent that Parent shall otherwise consent in writing or as otherwise required
      by this Agreement or by applicable Legal Requirements, (i) carry on its
      business in the ordinary course in substantially the same manner as heretofore
      conducted and in compliance with all applicable Legal Requirements,
      (ii) pay its Liabilities and Taxes when due in the ordinary course in
      substantially the same manner as heretofore conducted and in compliance with
      all
      applicable Legal Requirements, (iii) pay or perform other obligations when
      due, (iv) use all reasonable efforts to assure that each such Contract entered
      into after the date hereof will not require the procurement of any consent,
      waiver or novation or provide for any material change in the obligations of
      any
      party hereto in connection with, or terminate as a result of the consummation
      of, the Merger, and shall give reasonable advance notice to Parent prior to
      allowing any Company Contract, IP Contract or material right thereunder to
      lapse
      or terminate by its terms (it being understood that, after the date of this
      Agreement, the Company may only enter into an IP Contract if the entry into
      such
      IP Contract is not otherwise prohibited by this Section 4.1,
      including Section 4.1(f)
      below), (v) maintain each of its leased premises in accordance with the
      terms of the applicable lease in all material respects, (vi) use all
      reasonable efforts to maintain in good condition, consistent with standard
      industry practices, Company’s procedures and Good Laboratory Practices, Good
      Clinical Practices and Good Manufacturing Practices, any and all Product
      Inventory (as defined in Section 2.8)
      not used in the ordinary course of business for clinical trials or compassionate
      use, (vii) use all reasonable efforts to maintain in accordance with
      standard industry practices and the Company’s procedures and pursuant to Company
      Contracts in effect as of the date of this Agreement, any DNA, protein,
      expression product, cell line, reagent, know-how or other material that
      constitutes a Company Product or product candidate, or that is necessary to
      produce any Company Product or product candidate or perform research or clinical
      trials with regard to any product candidate being pursued as of the date of
      this
      Agreement; (ix) notify and give Parent the opportunity to participate in
      the defense or settlement of any litigation to which the Company is a party,
      and
      (x) use all reasonable efforts to (A) preserve intact its present
      business organization, (B) keep available the services of any Employees
      identified in writing by Parent to the Company as a “key employee”, and
      (C) preserve its relationships with customers, suppliers, distributors,
      consultants, licensors, licensees and others with which it has business
      dealings. 

    

    
      
        
        

      

      
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    In
      addition, without the prior written consent of Parent, except as required by
      this Agreement or Legal Requirements and except as disclosed in Section 4.1
      of the Company Disclosure Letter, during the period from the date of this
      Agreement and continuing until the earlier of the termination of this Agreement
      pursuant to its terms or the Effective Time, the Company shall not do any of
      the
      following and shall not permit its subsidiaries to do any of the following:
      

     

    (a)
      Waive any stock repurchase rights, accelerate, amend or change the period of
      exercisability or vesting of any Company Stock Options or other rights granted
      under any Company Stock Plan or the vesting of the securities purchased or
      purchasable under such Company Stock Options or other rights or the vesting
      schedule or repurchase rights applicable to any unvested shares; 

     

    (b)
      Amend or change any other terms of Company Stock Options or other rights granted
      under the Company Stock Plans; 

     

    (c)
      Authorize cash payments in exchange for any Company Stock Options or other
      rights granted under Company Stock Plans or the securities purchased or
      purchasable under those Company Stock Options or rights; 

     

    (d)
      Grant or pay, or enter into any Contract or amendment to an existing Contract
      providing for the granting of, any severance or termination pay (whether in
      cash, stock, equity securities, or property) or the acceleration of vesting
      or
      other benefits to any Employee, except pursuant to written agreements
      outstanding on the date hereof and as identified in Section 4.1(d)
      of the Company Disclosure Letter, or adopt any new severance or termination
      plan, program or arrangement, or amend or modify or alter in any manner any
      severance or termination plan or Contract existing on the date hereof (including
      any retention, change of control or similar agreement), or grant any
      equity-based compensation, whether payable in cash or stock; 

     

    (e)
      Transfer or make available to a third person any research materials or product
      candidates owned by the Company except, with respect only to materials and
      product candidates that are not Company Products or necessary for manufacturing
      or use of Company Products, Company may distribute such research materials
      or
      product candidates under a material transfer agreement on the form provided
      to
      Parent; 

     

    (f)
      (i) sell, lease, license or transfer any right in or to any Company Intellectual
      Property (including by way of option) or take any action or enter into any
      option that would have the same effect, or otherwise take actions which would
      reasonably be expected to materially impair the value of any Company
      Intellectual Property, (ii) modify or amend any IP Contract existing as of
      the date of this Agreement (including any financial provision thereof) or enter
      into any IP Contract with any person which would have been required to be
      included on any schedule set forth in Section 2.19
      of the Company Disclosure Letter, (iii) purchase, license or otherwise
      acquire any rights to any Intellectual Property of a third person (including
      through exercise of any option) or (iv) exercise any option to obtain a
      license to the Intellectual Property of a third person to the extent the
      exercise of such option would create a future payment obligation or other
      Liability on the part of Parent after the Closing; 

     

    (g)
      Except for non-capital purchases in the ordinary course of business that are
      customarily effected on a purchase order basis, enter into any Contract or
      series of Contracts involving commitments by the Company and its subsidiaries
      in
      excess of $250,000 over the life of such Contract or series of Contracts;

     

    (h)
      Enter into any Contract requiring the Company to provide to any person any
      Intellectual Property, Company Product or a product candidate being studied
      in a
      Company Research Program (in any form, including antibodies, proteins, fragments
      or drug substances); 

     

    (i)
      Conduct the Company’s business such that its operating cash expenditures
      (excluding capital expenditures permitted under Section 4.1(bb)
      and expenditures for toxicology studies) exceed $4.5 million on a monthly basis;
      

     

    (j)
      Declare, set aside or pay any dividends on or make any other distributions
      (whether in cash, stock, equity securities or property) in respect of any
      capital stock or split, combine or reclassify any capital stock or issue or
      authorize the issuance of any other securities in respect of, in lieu of or
      in
      substitution for any capital stock; 

    

    
      
        
        

      

      
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    (k)
      Purchase, redeem or otherwise acquire, directly or indirectly, any shares of
      capital stock of the Company or its subsidiaries, except repurchases of unvested
      shares at or below cost in connection with the termination of the employment
      relationship with any Employee pursuant to stock option or purchase Contracts
      in
      effect on the date of this Agreement, provided
      that no such repurchase shall be permitted in the event the per share repurchase
      price is greater than the Per Share Merger Consideration; 

     

    (l)
      Issue, deliver, sell, purchase, authorize, grant or designate (including by
      certificate of designation) or pledge or otherwise encumber, or propose any
      of
      the foregoing with respect to any shares of capital stock or any securities
      convertible into shares of capital stock, or subscriptions, rights, warrants
      or
      options to acquire any shares of capital stock or any securities convertible
      into shares of capital stock, or enter into other Contracts of any character
      obligating it to issue any such shares or convertible securities, other than
      the
      issuance, delivery and/or sale of Company Common Stock pursuant to the exercise
      of Company Stock Options outstanding as of the date of this Agreement;

     

    (m)
      Cause, permit or submit to a vote of the Company’s stockholders any amendments
      to the Company Charter Documents (or similar governing instruments of any of
      its
      subsidiaries); 

     

    (n)
      Acquire or agree to acquire by merging or consolidating with, or by purchasing
      any equity interest in or a portion of the assets of, or by any other manner,
      any person or division thereof, or otherwise acquire or agree to enter into
      any
      joint ventures, strategic partnerships or similar alliances; 

     

    (o)(i) Sell
      or otherwise dispose of any physical properties or physical assets, except
      in
      the ordinary course of business and at no less than the fair market value of
      such physical assets or physical properties, (ii) lease, license or
      encumber any Company-owned or controlled physical properties or physical assets,
      or (iii) enter into any Contract for the purchase or sale of any interest
      in real property, grant any security interest in any real property, enter into
      any lease, sublease, license or other occupancy Contract with respect to any
      real property or violate (in any material respect), alter, amend, modify, or
      terminate any of the terms of any Real Estate Leases; 

     

    (p)
      Make any loan, advance or capital contribution to or investment in any person,
      incur any indebtedness for borrowed money or guarantee any such indebtedness
      or
      the indebtedness of another person, issue or sell any debt securities or
      options, warrants, calls or other rights to acquire any debt securities of
      the
      Company, enter into any “keep well” or other Contract to maintain any financial
      statement condition, forgive or discharge in whole or in part any outstanding
      loans or advances, modify any loan previously granted, enter into any hedging
      agreement or other financial Contract designed to protect the Company or its
      subsidiaries against fluctuations in commodities prices or exchange rates,
      or
      enter into any arrangement having the economic effect of any of the foregoing;
      

     

    (q)(i)
      Adopt, terminate or amend any Company Employee Plan or enter into any Company
      Employee Plan, or amend any compensation, bonus, commission, insurance coverage
      (except (A) as contemplated by this Agreement and (B) for any Company
      Employee Plan with a Consultant, which shall be governed by Section 4.1(t)
      and any other applicable provisions of this Section 4.1),
      benefit, entitlement, grant or award provided or made under any Company Employee
      Plan; (ii) enter into any employment Contract or collective bargaining
      agreement; (iii) pay any special bonus, commission or special remuneration
      to any Employee (cash, equity or otherwise); (iv) increase the salaries,
      bonuses, commissions or wage rates or fringe benefits (including rights to
      severance or indemnification) of its Employees; (v) pay any benefit not
      provided for as of the date of this Agreement under any Company Employee Plan
      (provided
      that nothing herein is intended to preclude the accrual of benefits under the
      terms of such Company Employee Plans in effect as of the date of this
      Agreement); or (vi) add any new members to the Board or any scientific or
      other advisory board; (v) pay any benefit not provided for as of the date
      of this Agreement under any Company Employee Plan; or (vi) add any new
      members to the Board; 

     

    (r)
      discuss, announce or otherwise disseminate information to the Company’s
      employees regarding any severance plan or practice of the Company, whether
      or
      not the terms of such plan or practice would be triggered by the Closing, except
      for announcements or other communications regarding such matters as are provided
      by Parent; 

    

    
      
        
        

      

      
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    (s)
      (i) Pay, discharge, settle or satisfy any Liabilities, other than the
      payment, discharge, settlement or satisfaction of Liabilities
      (I) recognized or disclosed in the most recent financial statements (or the
      notes thereto) of the Company included in the Company SEC Reports, (II) incurred
      since the date of the Interim Balance Sheet in the ordinary course of business
      consistent with past practices or (III) incurred since the date of the Interim
      Balance Sheet pursuant to and in accordance with Contracts in effect as of
      the
      date hereof or permitted to be entered into pursuant to this Section 4.1;
      provided,
      however,
      that the payment, discharge, settlement or satisfaction of any Liability
      relating to or arising out of any Action shall be governed by Section 4.1(z));
      

     

    (t)
      (i) Enter into (unless otherwise permitted by this Section 4.1),
      modify or amend (unless such amendment, if it were a new Contract, would be
      otherwise permitted by this Section 4.1),
      or terminate any Contract (including an IP Contract) of a nature required to
      be
      listed as a Company Contract in Section 2.19
      or Section 2.20
      of the Company Disclosure Letter or waive, delay the exercise of, release or
      assign any material rights or claims thereunder or knowingly fail to enforce
      any
      Company Contract (including the confidentiality or nondisclosure provisions
      of
      any such Company Contract), or (ii) enter into or amend any Contract
      pursuant to which any other person is granted exclusive rights or “most favored
      party” rights of any type or scope with respect to any Company Research
      Programs, Company Products or Company Intellectual Property or containing any
      non-competition covenants or other material restrictions relating to the
      Company’s, any of its subsidiaries or Parent’s business activities or the effect
      of which would be to grant to a third person following the Merger the actual
      or
      potential right to license any Intellectual Property owned by Parent or its
      subsidiaries or otherwise would have the effect of prohibiting or impairing
      any
      business practice of the Company, any of its subsidiaries or Parent or limiting
      the freedom of the Company, any of its subsidiaries or Parent to engage in
      any
      line of business or to compete with any person or in any market or geography;
      

     

    (u)
      Except as required by GAAP or SEC rules and regulations as concurred with by
      its
      independent auditors and after notice to Parent, revalue any of its assets
      or
      make any change in accounting methods, principles or practices; 

     

    (v)
      (i) Enter into or materially modify any Contract relating to the distribution,
      sale, license, manufacture or marketing by third persons of the Company Products
      or any subject or product of a Company Research Program; or (ii) renew any
      Contract relating to the distribution, sale, license, manufacture or marketing
      by third persons of the Company Products or any subject or product of a Company
      Research Program, except to the extent that such renewals are on terms
      substantially similar to the terms of such Contracts in effect as of the date
      hereof; 

     

    (w)
      Make or change any material Tax election or accounting method, enter into any
      Tax sharing or similar agreement or closing agreement, settle or compromise
      any
      material Tax Liability or consent to any extension or waiver of any limitation
      period with respect to Taxes; 

     

    (x)
      (i) hire any officers or employees or enter into, or amend or extend the
      term of, any Employment Agreement with any officer or employee (except that,
      in
      the event an employee is terminated pursuant to clause (ii) hereof or
      voluntarily terminates, including by death or disability, his or her employment,
      a replacement may be engaged to fill such terminated employee’s position,
provided
      (A) any consideration payable for services rendered by such replacement is
      of a kind and amount not otherwise prohibited by this Section 4.1
      and substantially similar in kind and amount to the consideration paid for
      such
      terminated employee, and (B) any arrangement with any such replacement
      shall be terminable, at the sole option of Parent, without payment or penalty
      at
      the Effective Time, other than payment as may be required by applicable Legal
      Requirements or the Company’s employee handbook), (ii) terminate any
      Employee (other than Consultants who are not Significant Consultants) identified
      in writing by Parent to the Company as a “key employee” (except for termination
      for cause), or take any action that would allow any employee to claim a
      constructive termination or termination for “good reason”; or (iii) hire
      any consultants or independent contractors or enter into, or amend or extend
      the
      term of, any consulting Contract with any consultant or independent contractor
      unless any such Contract is on customary terms and rates and is either
      (A) scheduled to be completed within 90 days after the date of this
      Agreement or (B) terminable at the sole option of Parent, without payment
      or penalty at the Effective Time; 

    

    
      
        
        

      

      
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    (y)
      Make any individual or series of related payments outside of the ordinary course
      of business (including payments to legal, accounting or other professional
      service advisors) in excess of $100,000 in the aggregate, other than
      (i) pursuant to Contracts existing on the date hereof and made available to
      Parent prior to the date hereof and (ii) payment to legal counsel and other
      advisers as set forth in Section 2.18
      of the Company Disclosure Letter; 

     

    (z)
      Commence or settle any threatened or pending Action (including material
      litigation or any other material disputes), whether or not commenced prior
      to
      the date of this Agreement; 

     

    (aa)
      Adopt, implement or amend any stockholder rights plan (including the Rights
      Agreement), “poison pill” anti-takeover plan or other similar plan, device or
      arrangement that, in each case, is applicable to Parent or any of its affiliates
      or the transactions contemplated by this Agreement; 

     

    (bb)
      Make any capital expenditures, capital additions, capital improvements or other
      expenditures in excess of $200,000 in the aggregate; 

     

    (cc)
      Materially change the amount of any insurance coverage; 

     

    (dd)
      Fail to timely file any of the forms, reports or documents required to be filed
      with the SEC; 

     

    (ee)
      Enter into any Contract or transaction in which any officer, director or
      Employee of the Company or any of its subsidiaries (or, to the knowledge of
      the
      Company, any member of their families) has an interest under circumstances
      that,
      if entered immediately prior to the date of this Agreement, would require that
      such Contract be listed on Section 2.20(a)
      of the Company Disclosure Letter; or 

     

    (ff)
      Agree to take any of the actions described in Section 4.1(a)
      through Section 4.1(ee).
      

     

    ARTICLE V
      

    ADDITIONAL
      AGREEMENTS 

     

    5.1
      Proxy
      Statement.
      

     

    (a)
      As promptly as practicable after the execution of this Agreement, the Company
      shall prepare, and file with the SEC, preliminary proxy materials relating
      to
      the Company Stockholder Approval; provided
      that the parties acknowledge that the parties’ goal is that the Company file the
      Proxy Statement within 15 days after execution of this Agreement and that if
      the
      Company does not file the Proxy Statement within such period, the Company’s
      senior executives shall discuss the reasons for the failure to meet such goals
      with Parent’s duly appointed representatives. Parent shall provide promptly to
      the Company such information concerning Parent as, in the reasonable judgment
      of
      Parent or its counsel, may be required or appropriate for inclusion in the
      Proxy
      Statement, or in any amendments or supplements thereto. At the earliest
      practicable time following the later of (i) receipt and resolution of SEC
      comments thereon, or (ii) the expiration of the 10-day waiting period
      provided in Rule 14a-6(a) promulgated under the Exchange Act, the Company
      shall file definitive proxy materials with the SEC and cause the Proxy Statement
      to be mailed to its stockholders. The Company will cause the Proxy Statement
      to
      comply with all applicable Legal Requirements. Prior to filing the preliminary
      proxy materials, definitive proxy materials or any other filing with the SEC
      or
      any other Governmental Entity, the Company shall provide Parent (which term
      shall in all instances in this Section 5.1
      also include Parent’s counsel) with reasonable opportunity to review and comment
      on each such filing in advance and the Company shall in good faith consider
      including in such filings all comments reasonably proposed by Parent;
provided
      that Parent shall have provided to the Company its comments as promptly as
      practicable after the Proxy Statement has been transmitted to Parent for its
      review. 

     

    (b)
      The Company will notify Parent promptly of the receipt of any comments from
      the
      SEC or its staff (or of notice of the SEC’s intent to review the Proxy
      Statement) and of any request by the SEC or its staff or any other government
      officials for amendments or supplements to the Proxy Statement or any other
      filing or for additional/supplemental information, and will supply Parent with
      copies of all correspondence between 

    

    
      
        
        

      

      
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    the
      Company or any of its representatives, on the one hand, and the SEC, or its
      staff or any other government officials, on the other hand, with respect to
      the
      Proxy Statement or other filing. The Company and its outside counsel shall
      permit Parent and its outside counsel to participate in all planned
      communications with the SEC and its staff (including all meetings and telephone
      conferences) relating to the Proxy Statement, this Agreement or the Merger.
      The
      Company shall consult with Parent prior to responding to any comments or
      inquiries by the SEC or any other Governmental Entity with respect to the Proxy
      Statement and shall provide Parent with reasonable opportunity to review and
      comment on any such written response in advance and shall include in such
      response all comments reasonably proposed by Parent (provided that Parent shall
      have provided its comments to the Company as promptly as practicable after such
      written response has been transmitted to Parent for its review). Whenever any
      event occurs prior to the Effective Time (including events relating to the
      Company or any of its affiliates, directors or officers) that is required to
      be
      set forth in an amendment or supplement to the Proxy Statement or any other
      filing, the Company shall promptly inform Parent of such occurrence, provide
      Parent with reasonable opportunity to review and comment on any such amendment
      or supplement in advance, shall in good faith consider including in such
      amendment or supplement all comments reasonably proposed by Parent, and shall
      cooperate in filing with the SEC or its staff or any other government officials,
      and/or mailing to the stockholders of the Company, such amendment or supplement;
      provided
      that Parent shall have provided to the Company its comments as promptly as
      practicable after the Proxy Statement has been transmitted to Parent for its
      review. 

     

    (c)
      If at any time prior to the Effective Time Parent should discover any
      information relating to itself or to any of its affiliates, directors or
      officers which should be set forth in an amendment or supplement to the Proxy
      Statement, so that the Proxy Statement would not include any misstatement of
      a
      material fact or omit to state any material fact necessary to make the
      statements therein, in light of the circumstances under which they are made,
      not
      misleading, Parent shall promptly notify the Company and an appropriate
      amendment or supplement describing such information shall be promptly filed
      with
      the SEC and, to the extent required by Legal Requirements, disseminated to
      the
      stockholders of the Company. 

     

    5.2
      Meeting
      of Company Stockholders.
      

     

    (a)
      Promptly after the date hereof, the Company shall take all action necessary
      in
      accordance with Delaware Law, the rules of Nasdaq and the Company Charter
      Documents to convene a special meeting of its stockholders for the purpose
      of
      considering and taking action with respect to the Company Stockholder Approval
      (the “Stockholders’
      Meeting”),
      to be held as promptly as practicable after execution of this Agreement;
provided
      that the parties acknowledge that the Company’s goal is (to the extent
      permissible under applicable law) to convene such special meeting within 45
      days
      after the Proxy Statement is cleared by the SEC (or, if no SEC comments are
      received on or prior to the tenth day after the initial filing of the Proxy
      Statement, within 55 days after such initial filing), and that if the
      Stockholders’ Meeting is not convened within such period, the Company’s senior
      executives shall discuss the reasons for the failure to meet such goals with
      Parent’s duly appointed representatives. The Company shall use all reasonable
      efforts to solicit from its stockholders proxies in favor of the adoption of
      this Agreement and shall take all other action necessary or advisable to secure
      the vote or consent of its stockholders required by the rules of Nasdaq or
      Delaware Law to obtain such approvals. Notwithstanding anything to the contrary
      contained in this Agreement, the Company may adjourn or postpone the
      Stockholders’ Meeting to the extent necessary to ensure that any necessary
      supplement or amendment to the Proxy Statement is provided to the Company’s
      stockholders in advance of a vote on this Agreement or, if as of the time for
      which the Stockholders’ Meeting is originally scheduled (as set forth in the
      Proxy Statement) there are insufficient shares of Company Common Stock
      represented (either in person or by proxy) to constitute a quorum necessary
      to
      conduct the business of the Stockholders’ Meeting. The Company shall ensure that
      the Stockholders’ Meeting is called, noticed, convened, held and conducted, and
      that all proxies solicited by the Company in connection with the Stockholders’
Meeting are solicited, in compliance with Delaware Law, the Company Charter
      Documents, the rules of Nasdaq and all other applicable Legal Requirements.
      

     

    
      
        
        

      

      
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    (b)
      Subject to the terms of Section 5.4(d):
      (i) the Board shall unanimously recommend that the Company’s stockholders
      adopt this Agreement at the Stockholders’ Meeting; (ii) the Proxy Statement
      shall include (A) the fairness opinion referred to in Section 2.23
      and (B) a statement to the effect that the Board has unanimously
      recommended that the Company’s stockholders vote in favor of the Company
      Stockholder Approval at the Stockholders’ Meeting; and (iii) neither the
      Board nor any committee thereof shall withdraw, amend, change or modify, or
      propose or resolve to withdraw, amend, change or modify in any manner adverse
      to
      Parent, the unanimous recommendation of the Board that the Company’s
      stockholders vote in favor of the Company Stockholder Approval. For purposes
      of
      this Agreement, said recommendation of the Board shall be deemed to have been
      modified in a manner adverse to Parent if said recommendation shall no longer
      be
      unanimous. 

     

    5.3
      Confidentiality;
      Access to Information. 

     

    (a)
      The parties acknowledge that Parent and the Company have previously executed
      a
      mutual confidentiality agreement, dated as of June 22, 2006 (the
“Confidentiality
      Agreement”),
      which Confidentiality Agreement will continue in full force and effect in
      accordance with its terms, and each of Parent and the Company will hold, and
      will cause their respective directors, officers, employees, agents and advisors
      (including attorneys, accountants, consultants, bankers, and financial advisors)
      to hold any Information (as defined in the Confidentiality Agreement)
      confidential in accordance with the terms thereof. 

     

    (b)
      The Company shall: (i) afford Parent and its accountants, counsel, advisors
      and other representatives reasonable access, upon reasonable notice, to the
      properties (including for the purpose of performing such environmental tests
      and
      due diligence review as Parent may desire), books, records and personnel of
      the
      Company during the period prior to the Effective Time to obtain all information
      concerning the business, including the status of product development efforts,
      properties, financial positions, results of operations and personnel of the
      Company, as Parent may reasonably request (it being understood that Parent
      shall
      use all reasonable efforts to conduct such access during normal business hours),
      and (ii) furnish Parent on a timely basis with such financial and operating
      data and other information with respect to the business, operations and
      properties of the Company and its subsidiaries as Parent may from time to time
      reasonably request, except for information covered by attorney-client privilege
      or subject to confidentiality (which information shall be treated in accordance
      with the procedures put in place by Parent and the Company on or prior to the
      date hereof). Except for disclosures expressly permitted by the terms of the
      Confidentiality Agreement, Parent shall hold, and shall cause its
      representatives to hold, all information received from the Company, directly
      or
      indirectly, in confidence in accordance with the Confidentiality Agreement.
      

     

    (c)
      No information or knowledge obtained by Parent pursuant to this Section 5.3
      will affect or be deemed to modify any representation or warranty contained
      herein or the conditions to the obligations of the parties to consummate the
      Transactions. 

     

    5.4
      No
      Solicitation. 

     

    (a)
      No
      Solicitation.
      The Company and its subsidiaries shall not, nor shall they permit any of their
      respective officers and directors (or affiliates of any of such officers or
      directors), controlled affiliates, or employees or any investment banker,
      attorney, accountant or other advisor or representative retained by (or
      otherwise working on behalf of) the Company or any of its subsidiaries
      (collectively, “Representatives”)
      to directly or indirectly: (i) solicit, initiate, knowingly encourage,
      knowingly facilitate, or induce any inquiry with respect to, or the making,
      submission or announcement of, any Acquisition Proposal (as defined in
Section 5.4(g)(i)),
      (ii) participate or otherwise engage in any discussions or negotiations
      regarding, or furnish to any person any nonpublic information with respect
      to,
      or take any other action (including granting any person a waiver or release
      under any standstill or similar agreement with respect to any class of equity
      security of the Company or any of its subsidiaries or amending, waiving or
      terminating the Rights Agreement, other than as contemplated by this Agreement,
      or redeeming any rights under the Rights Agreement, other than as contemplated
      by this Agreement) to facilitate any inquiries or the making of any proposal
      that constitutes or may reasonably be expected to lead to, any Acquisition
      Proposal, (iii) engage in 

    

    
      
        
        

      

      
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    discussions
      with any person with respect to any Acquisition Proposal, except as to the
      existence of these provisions, (iv) approve, endorse or recommend any
      Acquisition Proposal (except to the extent specifically permitted pursuant
      to
Section 5.4(d)),
      or (v) enter into any letter of intent or similar document or any Contract
      relating to an Acquisition Proposal (other than a confidentiality agreement
      entered into with a party making an Acquisition Proposal as permitted by
Section 5.4(c)(i)
      below). The Company and its subsidiaries will immediately cease, and will cause
      its Representatives to immediately cease, any and all existing activities,
      discussions or negotiations with any third parties conducted heretofore with
      respect to any Acquisition Proposal. 

     

    (b)
      Notification
      of Unsolicited Acquisition Proposals. 

     

    (i)
      As promptly as practicable (but in no event more than 36 hours thereafter)
      after
      receipt of any Acquisition Proposal or any request for nonpublic information
      or
      inquiry which it reasonably believes would lead to an Acquisition Proposal,
      the
      Company shall provide to Parent written notice of the material terms and
      conditions of such Acquisition Proposal, request or inquiry, and the identity
      of
      the person or group making any such Acquisition Proposal, request or inquiry,
      a
      copy of all written materials provided in connection with such Acquisition
      Proposal, request or inquiry and a written summary of any such Acquisition
      Proposal, request or inquiry, if it is not in writing. After receipt of the
      Acquisition Proposal, request or inquiry, the Company shall continue to provide
      to Parent as promptly as practicable (but in no event more than 48 hours
      thereafter) written notice setting forth all such information as is reasonably
      necessary to keep Parent informed in all material respects of the status and
      material terms (including material amendments or proposed material amendments)
      of any such Acquisition Proposal, request or inquiry and shall promptly provide
      to Parent a copy of all written materials provided in connection with such
      Acquisition Proposal, request or inquiry. 

     

    (ii)
      The Company shall provide Parent with at least 48 hours prior notice (or such
      lesser prior notice as is provided to the members of the Board) of any meeting
      at which the Board is reasonably expected to consider any Acquisition Proposal.
      

     

    (c)
      Superior
      Offers.
      Notwithstanding anything to the contrary contained in Section 5.4,
      in the event that the Company or any of its subsidiaries receives a bona fide
      written Acquisition Proposal from a third party that is not solicited or
      otherwise procured in violation of Section 5.4(a)
      that the Board has in good faith concluded (following consultation with its
      outside legal counsel and its financial advisor) is, or is reasonably likely
      to
      be, a Superior Offer (as defined in Section
      5.4(g)(ii)),
      it may then take the following actions: 

     

    (i)
      Furnish nonpublic information to the third party making such Acquisition
      Proposal (and its Representatives), provided
      that (A) (1) concurrently with furnishing any such nonpublic
      information to such party, it gives Parent at least one business day prior
      written notice of its intention to furnish nonpublic information and (2) it
      receives from the third party an executed confidentiality and standstill
      agreement, the terms of which are at least as restrictive as the terms contained
      in the Confidentiality Agreement and (B) contemporaneously with furnishing
      any such nonpublic information to such third party, the Company furnishes such
      nonpublic information to Parent (to the extent such nonpublic information has
      not been previously so furnished); and 

     

    (ii)
      Engage in negotiations with the third party with respect to the Acquisition
      Proposal, provided
      that concurrently with entering into negotiations with such third party, the
      Company gives Parent at least one business day prior written notice of its
      intention to enter into negotiations with such third party. 

     

    (d)
      Changes
      of Recommendation.
      In response to the receipt of a Superior Offer, the Board may withhold,
      withdraw, amend or modify its unanimous recommendation in favor of the Merger,
      and, in the case of a Superior Offer that is a tender or exchange offer made
      directly to its stockholders, may recommend that its stockholders accept the
      tender or exchange offer (any of the foregoing actions, whether by the Board
      or
      a committee thereof, a “Change
      of Recommendation”)
      or terminate this Agreement pursuant to Section 7.1(h)
      of this Agreement (provided,
      however,
      that the Company shall not terminate this Agreement 

    

    
      
        
        

      

      
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    pursuant
      to Section 7.1(h)
      and any purported termination pursuant to Section 7.1(h)
      shall be void and of no further force or effect, unless prior to or concurrently
      with such termination, the Company pays the Termination Fee), only if all of
      the
      following conditions in clauses (i) through (v) are met: 

     

    (i)
      A Superior Offer with respect to the Company has been made and has not been
      withdrawn; 

     

    (ii)
      The Stockholders’ Meeting has not occurred; 

     

    (iii)
      The Company shall have (A) provided to Parent five business days prior
      written notice which shall state expressly (1) that the Company has
      received a Superior Offer, (2) the material terms and conditions of the
      Superior Offer and the identity of the person or group making the Superior
      Offer, and (3) that the Board intends to effect a Change of Recommendation
      and the manner in which it intends to do so or terminate this Agreement and
      enter into a definitive agreement with respect to such Superior Offer,
      (B) provided to Parent a copy of all written materials delivered to the
      person or group making the Superior Offer in connection with such Superior
      Offer
      that have not already been provided to Parent, (C) made available to Parent
      all materials and information made available to the person or group making
      the
      Superior Offer in connection with such Superior Offer and (D) during such
      five business day period, engaged in good faith negotiations to amend this
      Agreement in a manner as would enable the Company to proceed with the Board’s
      recommendation to the Company’s stockholders in favor of the Company Stockholder
      Approval with respect to this Agreement, as it may be amended (and the Company
      shall make its Chairman and senior executives available for discussions with
      Parent and otherwise negotiate in good faith with Parent with respect thereto
      during such five business day period); 

     

    (iv)
      The Board has concluded in good faith, following consultation with its outside
      legal counsel and financial adviser, that, in light of such Superior Offer
      and
      notwithstanding any adjustments or negotiations pursuant to Section 5.4(d)(iii)(D),
      the failure of the Board to effect a Change of Recommendation is reasonably
      likely to constitute a breach of its fiduciary duties to the Company’s
      stockholders under applicable law; and 

     

    (v)
      It shall not have materially breached Section 5.2.
      

     

    Provided
      however, that in the event of any material revisions to the Superior Offer,
      the
      Company shall deliver a new written notice to Parent and comply with the
      requirements of this Section 5.4(d),
      including the five-day good faith notice period provided for, with respect
      to
      such new written notice. 

     

    (e)
      Continuing
      Obligation to Call, Hold and Convene Stockholders’ Meeting; No Other
      Vote.
      Notwithstanding anything to the contrary contained in this Agreement, the
      obligation of the Company to call, give notice of, convene and hold the
      Stockholders’ Meeting shall not be limited or otherwise affected by the
      commencement, disclosure, announcement or submission to it of any Acquisition
      Proposal with respect to it, or by any Change of Recommendation. The Company
      shall not submit to the vote of its stockholders any Acquisition Proposal,
      or
      propose to do so. 

     

    (f)
      Compliance
      with Tender Offer Rules.
      Nothing contained in this Agreement shall prohibit the Board from taking and
      disclosing to its stockholders a position contemplated by Rules 14d-9 and
      14e-2(a) promulgated under the Exchange Act. Without limiting the foregoing
      proviso, the Company shall not effect a Change of Recommendation unless
      specifically permitted pursuant to the terms of Section 5.4(d).
      

     

    (g)
      Certain
      Definitions.
      For purposes of this Agreement, the following terms shall have the following
      meanings: 

     

    (i)
      “Acquisition
      Proposal”
      shall mean any offer or proposal (whether written, oral or otherwise), relating
      to any transaction or series of related transactions involving: (A) any
      purchase or acquisition by any person or “group” (as defined under
      Section 13(d) of the Exchange Act and the rules and regulations thereunder)
      of more than a fifteen percent (15%) interest in the total outstanding
      voting securities of the Company or any of its subsidiaries or any tender offer
      or exchange offer that if consummated would result in any person or group
      beneficially owning fifteen percent (15%) or more 

    

    
      
        
        

      

      
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    of
      the total outstanding voting securities of the Company or any of its
      subsidiaries or any merger, consolidation, business combination or similar
      transaction involving the Company or any of its subsidiaries, (B) any sale,
      lease (other than in the ordinary course of business), exchange, transfer,
      license (other than in the ordinary course of business) or disposition of more
      than fifteen percent (15%) of the assets of the Company (including its
      subsidiaries taken as a whole), or (C) any liquidation or dissolution of
      the Company, in each case other than the Transactions; and 

     

    (ii)
      “Superior
      Offer”
      shall mean a bona fide written offer that is made by a third party to acquire,
      directly or indirectly, pursuant to a tender offer, exchange offer, merger,
      consolidation or other business combination, all or substantially all of the
      assets of the Company or a majority of the total outstanding voting securities
      of the Company and as a result of which the stockholders of the Company
      immediately preceding such transaction would hold less than fifty percent
      (50%) of the equity interests in the surviving or resulting entity of such
      transaction or any direct or indirect parent or subsidiary thereof, on terms
      that the Board has in good faith concluded (following the receipt of advice
      of
      its outside legal counsel and its financial adviser), taking into account,
      among
      other things, all legal, financial, regulatory and other aspects of the offer
      and the person making the offer, to be more favorable, from a financial point
      of
      view, to the Company’s stockholders (in their capacities as stockholders) than
      the terms of the Merger (as they may be amended in accordance with Section 5.4(d)(iii)(D))
      and is reasonably capable of being consummated and for which financing, to
      the
      extent required, is then fully committed or reasonably determined by the Board
      to be available to consummate such a transaction. 

     

    (h)
      Without limiting the foregoing, it is understood that (i) any violation of
      the restrictions set forth above by any officer or director of the Company
      and
      (ii) any violation of the restrictions set forth above by any agent or
      representative of the Company of which the Company has knowledge (prior to
      such
      violation) shall be deemed to be a breach of this Agreement by the Company.
      The
      Company and its subsidiaries shall not (A) authorize, direct or permit any
      of the persons identified in clauses (i) and (ii) of this Section 5.4(h)
      or (B) authorize or direct any affiliate of the Company to violate the
      provisions of this Section 5.4
      and shall promptly inform all such Representatives of the restrictions set
      forth
      in this Section 5.4.
      

     

    5.5
      Public Disclosure. 

     

    (a)
      The initial press release with respect to the execution of this Agreement shall
      be a joint press release to be reasonably agreed upon by Parent and the Company.
      Thereafter, the Company shall not issue or cause the publication of any press
      release or other public announcement (to the extent not previously issued or
      made in accordance with this Agreement) with respect to the Merger, this
      Agreement or the other Transactions without the prior consent of Parent, except:
      (a) as may be required by applicable Legal Requirements or by the rules and
      regulations of Nasdaq, in which case the Company shall not issue or cause the
      publication of such press release or other public announcement without prior
      consultation with Parent, to the extent practicable and (b) as may be
      consistent with actions taken by the Company or the Board (or any committee
      thereof) pursuant to Section 5.4(d).
      

     

    (b)
      Subject to Parent’s compliance with applicable Legal Requirements or the rules
      and regulations of the New York Stock Exchange, from the date hereof until
      the
      earlier to occur of the Closing and the termination of this Agreement pursuant
      to Section 7.1
      hereof, Parent shall inform the Company prior to issuing or causing the
      publication of any press release or other public announcement with respect
      to
      the Merger, this Agreement or the other Transactions; provided,
      however,
      that nothing in this Section 5.5(b)
      shall prohibit Parent from responding to questions and inquiries from third
      parties regarding the Merger, this Agreement or the other Transactions.

     

    (c)
      The Company shall consult with Parent before issuing any press release or
      otherwise making any public statement with respect to the Company’s earnings or
      results of operations, and shall not issue any such press release or make any
      such public statement prior to such consultation. 

     

    
      
        
        

      

      
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    5.6
      Reasonable
      Efforts; Regulatory Matters. 

     

    (a)
      Other than taking any action permitted by Section 5.4(d)
      and subject to the limitations set forth in Section 5.6(d),
      upon the terms and subject to the conditions set forth in this Agreement, each
      of the parties agrees to use all reasonable efforts to take, or cause to be
      taken, all actions, and to do, or cause to be done, and to assist and cooperate
      with the other parties in doing, all things necessary, proper or advisable
      to
      consummate and make effective, in the most expeditious manner practicable,
      the
      Transactions, including using all reasonable efforts to accomplish the
      following: (i) the taking of all reasonable acts necessary to cause the
      conditions precedent set forth in Article
      VI
      to be satisfied, (ii) the obtaining of all necessary actions or
      non-actions, waivers, consents, approvals, orders and authorizations from
      Governmental Entities and the making of all necessary registrations,
      declarations and filings (including registrations, declarations and filings
      with
      Governmental Entities, if any) and the taking of all reasonable steps as may
      be
      necessary to avoid any suit, claim, action, investigation or proceeding by
      any
      Governmental Entity, (iii) the obtaining of all consents, approvals or
      waivers from third parties required as a result of the Transactions,
      (iv) responding to any investigations or proceedings related to this
      Agreement or the consummation of the Transactions, including a request for
      additional information or documents, and (v) the execution or delivery of
      any additional instruments reasonably necessary to consummate the Transactions,
      and to fully carry out the purposes of, this Agreement. In connection with
      and
      without limiting the foregoing, the Company and its Board shall, if any state
      takeover statute or similar statute or regulation is or becomes applicable
      to
      the Transactions or this Agreement, use all reasonable efforts to ensure that
      the Transactions may be consummated as promptly as practicable on the terms
      contemplated by this Agreement and otherwise to minimize the effect of such
      statute or regulation on the Transactions and this Agreement. 

     

    (b)
      Each of Parent and the Company shall, as soon as practicable, make any initial
      filings required under the HSR Act, and as promptly as practicable make any
      other additional filings required by any other applicable Antitrust Laws (as
      defined below). Subject to the limitations set forth in Section 5.6(d),
      each of Parent and the Company shall use all reasonable efforts to take such
      action as may be required to cause the expiration or early termination of the
      waiting or notice periods under the HSR Act or other Antitrust Laws with respect
      to the Transactions as promptly as possible after execution of this Agreement.
      To the extent permitted by applicable law, the parties shall consult and
      cooperate with one another, and consider in good faith the views of one another,
      in connection with any analyses, appearances, presentations, memoranda, briefs,
      arguments, opinions and proposals made or submitted by or on behalf of any
      party
      hereto in connection with proceedings under or relating to the HSR Act or any
      foreign or other Antitrust Law; provided,
      that with respect to any such analyses, appearances, presentations, memoranda,
      briefs, arguments, opinions or proposals, each of Parent and the Company need
      not supply the other (or its counsel) with copies (or in case of oral
      presentations, a summary) to the extent that any law, treaty, rule or regulation
      of any Governmental Entity applicable to such party or confidentiality agreement
      to which such party is bound (which shall be governed in accordance with the
      procedures put in place by Parent and the Company on or prior to the date
      hereof) requires such party or its subsidiaries to restrict or prohibit access
      to any such properties or information. For purposes of this Agreement,
“Antitrust
      Laws”
      shall mean the HSR Act and any other federal, state or foreign statutes, rules,
      regulations, orders or decrees that are designed to prohibit, restrict or
      regulate actions having the purpose or effect of monopolization or restraint
      of
      trade. 

     

    (c)
      Each party will notify the other promptly upon the receipt of: (i) any
      comments from any officials of any Governmental Entity in connection with any
      filings made pursuant to this Section 5.6,
      and (ii) any request by any officials of any Governmental Entity for
      amendments or supplements to any filings made pursuant to, or information
      provided to comply in all material respects with, any Legal Requirements.
      Whenever any event occurs that is required to be set forth in an amendment
      or
      supplement to any filing made pursuant to Section 5.6(b),
      each
      party will promptly inform the other of such occurrence and cooperate in filing
      with the applicable Governmental Entity such amendment or supplement. To the
      extent reasonably practicable, neither the Company nor Parent shall, nor shall
      they permit their respective representatives to, participate independently
      in
      any substantive meeting or discussion, either in person or by telephone, with
      any Governmental Entity in connection with the proposed Transactions unless
      it
      consults with the other party in advance and, to the extent not prohibited
      by
      such Governmental Entity, gives the other party the opportunity to attend and
      participate. 

     

    
      
        
        

      

      
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    (d)
      Notwithstanding anything in this Agreement to the contrary (including the other
      provisions of this Section 5.6),
      if any administrative or judicial action or proceeding is instituted (or
      threatened to be instituted) challenging any transaction contemplated by this
      Agreement as violative of any Antitrust Law, it is expressly understood and
      agreed that: (i) Parent shall not have any obligation to litigate or
      contest any administrative or judicial Action or any decree, judgment,
      injunction or other order, whether temporary, preliminary or permanent brought
      by or before an administrative tribunal, court or other similar tribunal or
      body; (ii) Parent shall be under no obligation to make proposals, execute
      or carry out agreements or submit to orders providing for a Divestiture and
      (iii) the Company may not conduct or agree to conduct a Divestiture without
      the prior written consent of Parent. “Divestiture”
      shall mean (1) the sale, license or other disposition or holding separate
      (through the establishment of a trust or otherwise) of any assets or categories
      of assets of Parent or any of its affiliates or the Company, (2) the
      imposition of any limitation or restriction on the ability of Parent or any
      of
      its affiliates to freely conduct their business or the Company’s business or own
      such assets, or (3) the holding separate of the shares of Company Common
      Stock or any limitation or regulation on the ability of Parent or any of its
      affiliates to exercise full rights of ownership of the shares of Company Common
      Stock. 

     

    5.7
      Notification.
      Each party shall give prompt notice to the other party upon becoming aware
      that
      any representation or warranty made by it contained in this Agreement has become
      untrue or inaccurate or of any failure to comply with or satisfy in any respect
      any covenant, condition or agreement to be complied with or satisfied by it
      under this Agreement, in each case such that the conditions set forth in
Section 6.2(a)
      or Section 6.2(b)
      (as it relates to knowledge acquired by Parent) or Section 6.3(a)
      or Section 6.3(b)
      (as it relates to knowledge acquired by the Company), as applicable, would
      not
      be satisfied; provided,
      however,
      that no such notification shall affect the representations, warranties,
      covenants or agreements of the parties or the conditions to the obligations
      of
      the parties under this Agreement. Each party shall promptly notify the other
      party of (i) any change, event, violation, inaccuracy, circumstance or
      effect that has had or would reasonably be expected to have a Material Adverse
      Effect on such party and (ii) any Actions commenced or, to such party’s
      knowledge, threatened against, relating to or involving or otherwise affecting
      such party or any of its subsidiaries that relate to the consummation of the
      Merger. 

     

    5.8
      Third
      Party Consents and Notices. 

     

    (a)
      As soon as practicable following the date hereof, the Company shall use all
      reasonable efforts to obtain any consents, waivers and approvals under any
      Company Contracts required to be obtained in connection with the consummation
      of
      the Transactions, as set forth on Section 5.8
      of the Company Disclosure Letter; provided
      that neither the Company nor any of its subsidiaries shall, without the prior
      written consent of Parent, expend any material amount, assume any material
      Liability or suffer or permit the loss of any material right or benefit in
      connection with obtaining any of the foregoing consents, waivers or approvals.
      

     

    (b)
      As soon as practicable following the date hereof, the Company shall deliver
      any
      notices required under any Company Contracts that are required to be provided
      in
      connection with the execution of this Agreement or prior to the effectiveness
      of
      the Merger. 

     

    (c)
      With respect to all Employees (other than Consultants), the Company and/or
      any
      of its subsidiaries shall be responsible for providing any notices required
      to
      be given and otherwise complying with WARN or similar statutes or regulations
      of
      any jurisdiction relating to any plant closing or mass layoff (or similar
      triggering event) caused by the Company or any of its subsidiaries, and Parent
      shall have no responsibility or Liability under WARN (or any other similar
      statute or regulation) with respect to such Employees. If Parent determines
      that an event would trigger WARN obligations (or obligations arising under
      similar statutes or regulations) within 60 days following the Effective Time,
      the Company or the Company’s subsidiaries shall, at Parent’s request, provide
      notices to all Employees (other than Consultants) as are required to be provided
      under WARN (or any similar statute or regulation), in a form approved by and
      as
      directed by Parent. 

    

    
      
        
        

      

      
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    5.9
      Indemnification. 

     

    (a)
      From and after the Effective Time, Parent shall, and shall cause the Surviving
      Corporation to fulfill and honor in all respects the obligations with respect
      to
      all rights to indemnification and exculpation from liabilities, including
      advancement of expenses, for acts or omissions occurring at or prior to the
      Effective Time now existing in favor of the current and former directors or
      officers of the Company pursuant to any indemnification agreements between
      the
      Company and its directors and officers (in each case, as in effect on the date
      hereof and listed on the Company Disclosure Letter), and any indemnification
      provisions under the Company Charter Documents as in effect on the date hereof
      in favor of the Company’s directors and officers and Employees (the
“Indemnified
      Parties”),
      and such obligations shall survive the Merger and shall continue in full force
      and effect in accordance with their terms. The Certificate of Incorporation
      and
      Bylaws of the Surviving Corporation will contain provisions with respect to
      exculpation and indemnification that are at least as favorable to the
      Indemnified Parties as those contained in the Company Charter Documents as
      in
      effect on the date hereof, which provisions will not be amended, repealed or
      otherwise modified for a period of six (6) years from the Effective Time in
      any manner that would adversely affect the rights thereunder of individuals
      who,
      immediately prior to the Effective Time, were Employees or agents of the
      Company, unless such modification is required by applicable law. 

     

    (b)
      At any time prior to the Closing, Company may purchase, for a price (which
      shall
      in no event exceed the Cap Amount regardless of any amounts credited against
      premium payments previously paid by the Company) not to exceed the amount set
      forth on Section 5.9(b)
      of the Company Disclosure Letter (the “Cap
      Amount”),
      directors’ and officers’ liability tail coverage (for a period of six
      (6) years following the Effective Time), covering those persons who are
      currently covered by the Company’s directors’ and officers’ liability insurance
      policy, on terms comparable to those applicable to the current directors and
      officers of the Company, and covering all periods prior to the Effective Time
      (the “Tail
      Coverage”).
      Following the Closing, in the event Company shall not have purchased the Tail
      Coverage, Parent shall (or shall cause the Surviving Corporation to) purchase
      the Tail Coverage, provided
      that in no event shall Parent or the Surviving Corporation be required to expend
      in the aggregate in connection with the purchase of such Tail Coverage an amount
      in excess of the Cap Amount and, in the event a comparable level of directors’
and officers’ liability Tail Coverage is not readily available for the Cap
      Amount without undue effort or expense, Parent (or the Surviving Corporation,
      as
      the case may be) shall only be obligated to purchase such Tail Coverage as
      may
      be purchased for the Cap Amount. 

     

    (c)
      If the Surviving Corporation or any of its successors or assigns
      (i) consolidates with or merges into any other person and is not the
      continuing or surviving corporation or entity of such consolidation or merger
      or
      (ii) transfers or conveys all or substantially all of its properties and
      other assets to any person, then, and in each such case, Parent shall cause
      proper provision to be made so that the successors and assigns of the Surviving
      Corporation shall expressly assume the obligations set forth in this
Section 5.9.
      If (A) the Surviving Corporation transfers any material portion of its
      assets, in a single transaction or in a series of transactions or
      (B) Parent takes any action to materially impair the financial ability of
      the Surviving Corporation to satisfy the obligations referred to in this
Section 5.9,
      Parent will either guarantee such obligations or take such other action to
      insure that the ability of the Surviving Corporation, legal and financial,
      to
      satisfy such obligations will not be diminished in any material respect.

     

    (d)
      This Section 5.9
      is (i) intended for the irrevocable benefit of, and to grant third party
      rights to, the Indemnified Parties and shall be binding on all successors and
      assigns of Parent, the Company and the Surviving Corporation and (ii) in
      addition to, and not in substitution for, any other rights to indemnification
      or
      contribution that any such person may have by Contract or otherwise. Each of
      the
      Indemnified Parties shall be entitled to enforce the covenants contained in
      this
Section 5.9.
      

     

    5.10
      Termination
      of Certain Benefit Plans.
      Except as set forth on Section 5.10
      of the Company Disclosure Letter, effective no later than the day immediately
      preceding the Closing Date, the Company and its ERISA Affiliates, as applicable,
      shall each terminate any and all group severance, separation or salary
      continuation plans, programs or arrangements and any and all plans intended
      to
      include a Code Section 401(k) arrangement 

    

    
      
        
        

      

      
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    (unless
      Parent provides written notice to the Company that such 401(k) plans shall
      not
      be terminated) (collectively, for purposes of this Section 5.10“Company
      Group Employee Plans”).
      Unless Parent provides such written notice to the Company, no later than five
      (5) business days prior to the Closing Date, the Company shall provide
      Parent with evidence that such Company Group Employee Plan(s) have been
      terminated (effective no later than the day immediately preceding the Closing
      Date) pursuant to resolutions of the Board. The form and substance of such
      resolutions shall be subject to advance review and approval of Parent. The
      Company also shall take such other actions in furtherance of terminating such
      Company Group Employee Plan(s) as Parent may reasonably require. 

     

    5.11
      Section 16
      Matters.
      The Company shall take all such steps as may be required (to the extent
      permitted under applicable law) to cause any disposition of Company Common
      Stock
      (including derivative securities with respect to Company Common Stock) resulting
      from the transactions contemplated by Article I
      of this Agreement by each Company Insider to be exempt under Rule 16b-3
      promulgated under the Exchange Act. “Company
      Insiders”
      shall mean those individuals who are subject to the reporting requirement of
      Section 16(b) of the Exchange Act with respect to the Company.

     

    5.12
      Disqualified
      Individuals.
      At least five (5) business days prior to the Closing Date, the Company
      shall, to the extent not already disclosed on Section 2.13(l)(ii)
      of the Company Disclosure Letter, deliver to Parent a schedule which sets forth
      each person who the Company reasonably believes is, with respect to the Company
      or any ERISA Affiliate, a “disqualified individual” within the meaning of
      Section 280G of the Code and the regulations promulgated thereunder, as of
      the date such schedule is delivered to Parent. 

     

    5.13
      Company
      Rights Agreement. The
      Company shall not redeem the Rights or amend or modify (including by delay
      of
      the “Distribution Date” thereunder) or terminate the Company Rights Agreement
      prior to the Effective Time unless, and only to the extent that: (i) it is
      required to do so by order of a court of competent jurisdiction or (ii) the
      Board has concluded in good faith, following consultation with its outside
      legal
      counsel, that the failure of the Board to effect such an amendment, modification
      or termination is reasonably likely to constitute a breach of its fiduciary
      duties to the Company’s stockholders under applicable law. 

     

    5.14
      Takeover
      Statutes. 

     

    (a)
      The Board shall take all actions sufficient to render inapplicable to the
      Merger, the execution, delivery and performance of this Agreement and the
      Company Voting Agreements and the Transactions and the transactions contemplated
      by the Company Voting Agreements, the provisions of Section 203 of Delaware
      Law applicable to a “business combination” (as defined in such Section 203
      and any other state takeover statue or similar statute or regulation).

     

    (b)
      If any “fair price”, “moratorium”, “control share acquisition” or other form of
      anti-takeover statute or regulation shall become applicable to the Transactions,
      the Company and the members of the Board shall grant such approvals and take
      such actions as are reasonably necessary so that the Transactions may be
      consummated as promptly as practicable on the terms contemplated hereby and
      otherwise act to eliminate or minimize the effects of such statute or regulation
      on the Transactions. 

     

    5.15
      FIRPTA
      Compliance.
      On the Closing Date, the Company shall deliver to Parent a properly executed
      statement prepared in accordance with the certification requirements set forth
      in Treasury Regulations Section 1.1445-2(c)(3) certifying that the shares
      of Company Common Stock are not U.S. real property interests. 

    

    
      
        
        

      

      
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    ARTICLE VI
      

    CONDITIONS
      TO THE MERGER 

     

    6.1
      Conditions
      to Obligations of Each Party to Effect the Merger.
      The respective obligations of each party to this Agreement to effect the Merger
      shall be subject to the satisfaction at or prior to the Closing Date of each
      of
      the following conditions. any and all of which may be waived in whole or in
      part
      by Parent, Merger Sub and the Company, as the case may be, to the extent
      permitted by applicable Legal Requirements: 

     

    (a)
      Company
      Stockholder Approval.
      The Company Stockholder Approval shall have been obtained. 

     

    (b)
      No
      Order.
      No Governmental Entity shall have enacted, issued, promulgated, enforced or
      entered any statute, rule, regulation, executive order, decree, injunction
      or
      other order (whether temporary, preliminary or permanent) which is in effect
      and
      which has the effect of making the Merger illegal or otherwise prohibiting
      consummation of the Merger; provided,
      however,
      that the right to assert this condition shall not be available to any party
      whose breach of any provision of this Agreement results in the imposition of
      any
      such statute, rule, regulation, executive order, decree, injunction or other
      order or the failure of any the foregoing to be resisted, resolved or lifted,
      as
      applicable. 

     

    (c)
      Governmental
      Approvals.
      All applicable waiting periods under the HSR Act shall have expired or been
      terminated and all other material regulatory consents, approvals, expiration
      of
      waiting periods, and clearances of Governmental Entities under any applicable
      material foreign or other Legal Requirements (including other Antitrust Laws)
      in
      connection with this Agreement and the transactions contemplated hereby
      (including the Merger) (other than the filing of the Certificate of Merger)
      shall have been obtained, and if the SEC shall have reviewed and/or provided
      comments to the Proxy Statement, such comments and any related issues or matters
      with the SEC shall have been resolved. 

     

    6.2
      Additional
      Conditions to Obligations of the Company.
      The obligation of the Company to consummate and effect the Merger shall be
      subject to the satisfaction at or prior to the Closing Date of each of the
      following conditions, any of which may be waived, in writing, exclusively by
      the
      Company: 

     

    (a)
      The representations and warranties of Parent and Merger Sub contained in this
      Agreement shall be (i) true and correct in all material respects at and as
      of the date of this Agreement (except for those representations and warranties
      that are qualified by the word “material”, “Material Adverse Effect” or a
      similar phrase, which shall be true and correct in all respects at and as of
      the
      date of this Agreement) and (ii) true and correct at and as of the Closing
      Date as though made at and as of the Closing Date, except for such failures
      to
      be true and correct at and as of the Closing Date as would not have, in each
      case or in the aggregate, a Material Adverse Effect on Parent (it being
      understood and agreed that, for purposes of this clause (ii), all materiality
      qualifications and other qualifications based on the word “material”, “Material
      Adverse Effect” or similar phrases contained in such representations and
      warranties shall be disregarded); provided,
      however,
      notwithstanding the foregoing, the representations and warranties that are
      made
      as of a particular date or period shall be true and correct only at and as
      of
      such date or period. The Company shall have received a certificate to such
      effect signed on behalf of Parent and Merger Sub by a duly authorized officer
      of
      Parent and Merger Sub. 

     

    (b)
      Agreements
      and Covenants.
      Parent and Merger Sub shall have performed or complied in all material respects
      with all agreements and covenants required by this Agreement to be performed
      or
      complied with by them on or prior to the Closing Date, and the Company shall
      have received a certificate to such effect signed on behalf of Parent and Merger
      Sub by an authorized officer of Parent and Merger Sub. 

     

    6.3
      Additional
      Conditions to the Obligations of Parent and Merger Sub.
      The obligations of Parent and Merger Sub to consummate and effect the Merger
      shall be subject to the satisfaction at or prior to the Closing Date of each
      of
      the following conditions, any of which may be waived, in writing, exclusively
      by
      Parent: 

     

    (a)
      Representations
      and Warranties.
      The representations and warranties of the Company contained in this Agreement
      shall be (i) true and correct in all material respects at and as of the
      date of this Agreement 

    

    
      
        
        

      

      
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    (except
      for those representations and warranties that are qualified by the word
“material”, “Material Adverse Effect” or a similar phrase, which shall be true
      and correct in all respects at and as of the date of this Agreement) and
      (ii) true and correct at and as of the Closing Date as though made at and
      as of the Closing Date, except for such failures to be true and correct at
      and
      as of the Closing Date as would not have, in each case or in the aggregate,
      a
      Material Adverse Effect on the Company (it being understood and agreed that,
      for
      purposes of this clause (ii), all materiality qualifications and other
      qualifications based on the word “material”, “Material Adverse Effect” or
      similar phrases contained in such representations and warranties shall be
      disregarded and any purported update of or modification to the Company
      Disclosure Letter made after the execution of this Agreement shall be
      disregarded); provided,
      however,
      notwithstanding the foregoing, (i) the representations and warranties that
      are made as of a particular date or period shall be true and correct only at
      and
      as of such date or period and (ii) the representations and warranties
      contained in Section 2.3(a),
      Section 2.4,
      Section 2.23
      and Section 2.25
      shall be true and correct in all material respects at and as of the date of
      this
      Agreement and at as of the Closing Date. Parent shall have received a
      certificate to such effect signed on behalf of the Company by the Chief
      Executive Officer and the Vice President of Finance of the Company.

     

    (b)
      Agreements
      and Covenants.
      The Company shall have performed or complied in all material respects with
      all
      agreements and covenants required by this Agreement to be performed or complied
      with by it at or prior to the Closing Date, and Parent shall have received
      a
      certificate to such effect signed on behalf of the Company by the Chief
      Executive Officer and the Chief Financial Officer of the Company. 

     

    (c)
      Material
      Adverse Effect.
      No Material Adverse Effect with respect to the Company and its subsidiaries
      shall have occurred since the date of this Agreement and not been cured, and
      Parent shall have received a certificate to such effect signed on behalf of
      the
      Company by the Chief Executive Officer and the Vice President of Finance of
      the
      Company. 

     

    (d)
      No
      Governmental Restriction.
      There shall not be any pending or threatened Action by any Governmental Entity
      (i) challenging or seeking to restrain or prohibit the consummation of the
      Merger or any of the Transactions or (ii) seeking to require Parent or the
      Company, or any subsidiary or affiliate of either of them, to effect a
      Divestiture. 

     

    (e)
      Sarbanes-Oxley
      Certifications; No Restatement.
      With respect to any Company SEC Reports filed with the SEC after the date of
      this Agreement, neither the principal executive officer nor the principal
      financial officer of the Company shall have failed to provide the necessary
      certifications in the form required under Section 302 and Section 906
      of the SOX. There shall not have been any restatement of the Company’s
      consolidated financial statements, and the Company shall not be aware of any
      event that would reasonably be expected to result in any such restatement.
      The
      Company’s auditors shall not have resigned or threatened to resign.

     

    ARTICLE VII
      

    TERMINATION,
      AMENDMENT AND WAIVER 

     

    7.1
      Termination.
      This Agreement may be terminated at any time prior to the Effective Time, and
      the Merger may be abandoned, notwithstanding any requisite adoption of this
      Agreement by the stockholders of the Company: 

     

    (a)
      by mutual written consent of the Company and Parent; 

     

    (b)
      by either the Company or Parent if the Effective Time shall not have occurred
      on
      or before May 9, 2007 (the “Initial
      Termination Date”)
      for any reason; provided,
      however,
      that in the event that a condition to the Merger set forth in Section 6.1(b)
      (solely if such condition has not been satisfied as a result of an Action by
      a
      Governmental Entity to enforce Antitrust Laws), Section 6.1(c)
      or Section 6.3(d)
      (solely if such condition has not been satisfied as a result of an Action by
      a
      Governmental Entity to enforce Antitrust Laws) shall not have been satisfied
      on
      or prior to the Initial Termination Date and all of the other conditions

    

    
      
        
        

      

      
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    to
      the Merger set forth in Article
      VI
      (other than those conditions that are capable of being waived by the party
      seeking to terminate) shall have been satisfied on or prior to the Initial
      Termination Date, either Parent or the Company may elect to extend the Initial
      Termination Date, by written notice to the other prior to or on the Initial
      Termination Date, until August 9, 2007 (the “Extended
      Termination Date”);
      provided,
      further,
      that, in each case, the right to terminate this Agreement under this
Section 7.1(b)
      shall not be available to any party whose action or failure to act has been
      a
      principal cause of or resulted in the failure of the Effective Time to occur
      on
      or before such date and such action or failure to act constitutes a breach
      of
      this Agreement; 

     

    (c)
      by either the Company or Parent if any Legal Requirement makes consummation
      of
      the Merger illegal or if a Governmental Entity of competent jurisdiction shall
      have issued an order, decree or ruling or taken any other action, in any case
      having the effect of permanently restraining, enjoining or otherwise prohibiting
      the Merger, which order, decree, ruling or other action is final and
      nonappealable; 

     

    (d)
      by either the Company or Parent if the Company Stockholder Approval shall not
      have been obtained by reason of the failure to obtain the required vote at
      the
      Stockholders’ Meeting or at any adjournment or postponement thereof;
provided,
      however,
      that the right to terminate this Agreement under this Section 7.1(d)
      shall not be available to a party where the failure to obtain the Company
      Stockholder Approval shall have been caused by the action or failure to act
      of
      such party and such action or failure to act constitutes a breach by such party
      of this Agreement; 

     

    (e)
      by the Company, upon a breach of any representation, warranty, covenant or
      agreement on the part of Parent set forth in this Agreement, or if any
      representation or warranty of Parent shall have become untrue, in either case
      such that the conditions set forth in Section 6.2(a)
      or Section 6.2(b)
      would not be satisfied as of the time of such breach or as of the time such
      representation or warranty shall have become untrue; provided,
      however,
      that if such inaccuracy in Parent’s representations and warranties or breach by
      Parent is capable of being cured by Parent through the exercise of all
      reasonable efforts, then the Company may not terminate this Agreement under
      this
Section 7.1(e)
      until 30 days after delivery of written notice from the Company to Parent of
      such breach or inaccuracy, provided
      Parent continues to exercise all reasonable efforts to cure such breach or
      inaccuracy (it being understood that the Company may not terminate this
      Agreement pursuant to this Section 7.1(e)
      if it shall have materially breached this Agreement or if such breach or
      inaccuracy by Parent is cured during such 30-day period); 

     

    (f)
      by Parent, upon a breach of any representation, warranty, covenant or agreement
      on the part of the Company set forth in this Agreement, or if any representation
      or warranty of the Company shall have become untrue, in either case such that
      the conditions set forth in Section 6.3(a)
      or Section 6.3(b)
      would not be satisfied as of the time of such breach or as of the time such
      representation or warranty shall have become untrue; provided,
      however,
      that if such inaccuracy in the Company’s representations and warranties or
      breach by the Company is capable of being cured by the Company through the
      exercise of all reasonable efforts, then Parent may not terminate this Agreement
      under this Section 7.1(f)
      until 30 days after delivery of written notice from Parent to the Company of
      such breach or inaccuracy, provided
      the Company continues to exercise all reasonable efforts to cure such breach
      or
      inaccuracy (it being understood that Parent may not terminate this Agreement
      pursuant to this Section 7.1(f)
      if such breach or inaccuracy by the Company is cured during such 30-day period);
      

     

    (g)
      by Parent, if a Material Adverse Effect on the Company shall have occurred
      since
      the date hereof and shall not have been cured; 

     

    (h)
      by the Company, in accordance with Section 5.4(d)
      of this Agreement, provided, that, in order for the termination of this
      Agreement pursuant to this Section 7.1(h)
      to be deemed effective, the Company shall have complied with Section 5.4(d)
      of this Agreement and paid the Termination Fee referred to in Section 7.3(b)(i)
      of this Agreement concurrently with or prior to such termination; or

     

    (i)
      by Parent if a Triggering Event (as defined below) shall have occurred prior
      to
      obtaining the Company Stockholder Approval. For the purposes of this Agreement,
      a “Triggering
      Event”
      shall be deemed to have occurred if: (i) the Board or any committee thereof
      shall for any reason have withdrawn or 

    

    
      
        
        

      

      
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    withheld,
      or shall have amended, changed, qualified or modified in a manner adverse to
      Parent the Board’s or committee’s unanimous recommendation in favor of the
      adoption of this Agreement (it being understood that the taking of a neutral
      position or no position with respect to an Acquisition Proposal beyond the
      Acquisition Proposal Assessment Period, as defined below, shall be considered
      an
      adverse modification), except in connection with a material breach of this
      Agreement by Parent or Merger Sub; (ii) the Company shall have failed to
      include in the Proxy Statement the unanimous recommendation of the Board that
      holders of Company Common Stock vote in favor of the adoption of this Agreement;
      (iii) the Board or any committee thereof shall have approved or recommended
      any Acquisition Proposal; (iv) the Company shall have entered into any
      letter of intent or similar document or any Contract accepting any Acquisition
      Proposal; (v) a tender or exchange offer relating to securities of the
      Company shall have been commenced by a person unaffiliated with Parent and
      the
      Company shall not have sent to its securityholders pursuant to Rule 14e-2
      promulgated under the Securities Act, within ten (10) business days (such
      ten (10) business day period, the “Acquisition
      Proposal Assessment Period”)
      after such tender or exchange offer is first published sent or given, a
      statement disclosing that the Board recommends rejection of such tender or
      exchange offer; (vi) the Board shall have failed to reaffirm its approval
      or recommendation of this Agreement as promptly as practicable (but in any
      event
      within five (5) business days) after receipt of a written request to do so
      from Parent; or (vii) the Company shall have materially breached
Section 5.2
      or Section 5.4. 

     

    7.2
      Notice
      of Termination; Effect of Termination.
      Any termination of this Agreement under and in accordance with Section 7.1
      will be effective immediately upon (subject to, in the case of Section 7.1(e)
      or Section 7.1(f),
      if the proviso therein is applicable, prior delivery of notice of the breach
      30
      days prior to notice of termination) the delivery of written notice of the
      terminating party to the other parties hereto. In the event of the termination
      of this Agreement as provided in Section 7.1,
      this Agreement shall be of no further force or effect and there shall be no
      Liability to any party hereunder in connection with the Agreement or the
      Transactions, except (i) as set forth in Section 5.3(a),
      this Section 7.2,
      Section 7.3
      and Article
      VIII,
      each of which shall survive the termination of this Agreement, and
      (ii) nothing herein shall relieve any party from Liability for any
      intentional or willful breach of, or any intentional misrepresentation made
      in
      this Agreement. No termination of this Agreement shall affect the obligations
      of
      the parties contained in the Confidentiality Agreement, all of which obligations
      shall survive termination of this Agreement in accordance with their terms.
      

     

    7.3
      Fees
      and Expenses.
      

     

    (a)
      General.
      Except as set forth in this Section 7.3,
      all fees and expenses incurred in connection with this Agreement and the
      Transactions shall be paid by the party incurring such expenses whether or
      not
      the Merger is consummated; provided
      that Parent and the Company shall share equally the filing fees for the
      Notification and Report Forms filed with the FTC and DOJ under the HSR Act
      and
      premerger notification and report forms under similar applicable Legal
      Requirements of other jurisdictions. 

     

    (b)
      Company
      Payments. 

     

    (i)
      Provided no Termination Fee is payable pursuant to clauses (ii) or
      (iii) below, the Company shall pay to Parent in immediately available funds
      prior to or concurrently with such termination an amount equal to Thirty-Two
      Million Dollars ($32,000,000) (the “Termination
      Fee”)
      if this Agreement is terminated by the Company pursuant to Section 7.1(h).
      

     

    (ii)
      Provided no Termination Fee is payable pursuant to clause (i) above or
      (iii) below, the Company shall pay to Parent in immediately available
      funds, within one (1) business day thereafter the Termination Fee if this
      Agreement is terminated by Parent or the Company and prior to such termination
      a
      Triggering Event shall have occurred. 

     

    (iii)
      Provided no Termination Fee is payable pursuant to clauses (i) or
      (ii) above, the Company shall pay to Parent in immediately available funds,
      within two (2) business days thereafter, an amount equal to the Termination
      Fee, if this Agreement is terminated by Parent or the Company pursuant to

    

    
      
        
        

      

      
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    Section 7.1(b)
      or the Company Stockholder Approval shall not have been obtained at the
      Stockholders’ Meeting or any adjournment or postponement thereof and any of the
      following shall occur: 

     

    (1)
      if following the date hereof and prior to the termination of this Agreement,
      a
      third party has announced an Acquisition Proposal, and within 12 months
      following the termination of this Agreement, any Company Acquisition (as defined
      below) is consummated; or 

     

    (2)
      if following the date hereof and prior to the termination of this Agreement,
      a
      third party has announced an Acquisition Proposal, and within 12 months
      following the termination of this Agreement, the Company enters into a letter
      of
      intent or similar document or any Contract providing for any Company Acquisition
      and a Company Acquisition is ultimately consummated (whether prior to or after
      such twelve-month period). 

     

    (iv)
      The Company hereby acknowledges and agrees that the agreements set forth in
      this
Section 7.3(b)
      are an integral part of the transactions contemplated by this Agreement, and
      that, without these agreements, Parent would not enter into this Agreement.
      Accordingly, if the Company fails to pay in a timely manner the amounts due
      pursuant to this Section 7.3(b)
      and,
      in order to obtain such payment, Parent makes a claim that results in a judgment
      against the Company for the amounts set forth in this Section 7.3(b),
      the Company shall pay to Parent its reasonable costs and expenses (including
      reasonable attorneys’ fees and expenses) in connection with such suit, together
      with interest on the amounts set forth in this Section 7.3(b)
      at the prime rate of Citibank in effect on the date such payment was required
      to
      be made. Payment of the fees described in this Section 7.3(b)
      shall not be in lieu of damages incurred in the event of any intentional or
      willful breach of, or any intentional misrepresentation made in, this Agreement.
      

     

    (v)
      No payment under this Section 7.3
      shall limit in any respect any rights or remedies available to Parent and Merger
      Sub relating to any breach or failure to perform any representation, warranty,
      covenant or agreement set forth in this Agreement resulting, directly or
      indirectly, in the right to receive any payment under this Section 7.3.
      Notwithstanding any other provision of Section 7.3(b)
      (other than the immediately preceding sentence) to the contrary, in no event
      shall the Company be required to pay Parent any amounts under this Section 7.3(b)
      in excess of the Termination Fee. 

     

    (vi)
      For the purposes of this Agreement, “Company
      Acquisition”
      shall mean any of the following transactions (other than the transactions
      contemplated by this Agreement): (A) a merger, consolidation, business
      combination, recapitalization, liquidation, dissolution or similar transaction
      involving the Company pursuant to which the stockholders of the Company
      immediately preceding such transaction hold less than 80% of the aggregate
      equity interests in the surviving or resulting entity of such transaction or
      any
      direct or indirect parent thereof, (B) a sale or other disposition by the
      Company of assets representing in excess of 20% of the aggregate fair market
      value of the Company’s business immediately prior to such sale or (C) the
      acquisition by any person or group (including by way of a tender offer or an
      exchange offer or issuance by the Company), directly or indirectly, of
      beneficial ownership or a right to acquire beneficial ownership of shares
      representing in excess of 20% of the voting power of the then outstanding shares
      of capital stock of the Company. 

     

    (c)
      Parent
      Payment.
      In the event that (i) this Agreement is terminated by Parent or the Company
      pursuant to Section 7.1(b)
      or Section 7.1(c);
      provided,
      with respect to Section 7.1(c),
      solely to the extent such order, decree, ruling or other action is based on
      an
      Action brought by a Governmental Entity under Antitrust Laws and (ii) all
      of the conditions set forth in Section 6.1
      are satisfied (other than (A) Section 6.1(b)
      solely to the extent the existence of such statute, rule, regulation, executive
      order, decree, injunction or other order is based upon Antitrust Laws in an
      Action brought by a Governmental Entity and (B) Section 6.1(c)
      solely to the extent such Legal Requirements are Antitrust Laws) and
Section 6.3
      (other than Section
      6.3(d))
      are satisfied, Parent shall promptly, but in no event later than three
      (3) business days following the receipt by Parent of documentation (in
      detail) of such expenses in form and substance reasonably satisfactory to
      Parent, reimburse the Company for its out-of-pocket fees and expenses, up to
      an
      aggregate of five million dollars ($5,000,000), incurred by Company after the
      filing of Company’s initial HSR notification and in connection with or relating

    

    
      
        
        

      

      
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    to
      the review pursuant to the HSR Act of the Transactions contemplated hereby
      (including fees and expenses of all attorneys, consultants, economists and
      other
      experts retained by Company and all duplicating and travel and related
      expenses), provided
      that Company will consult in advance with Parent, and consider in good faith
      the
      advice of Parent, regarding the retention of any consultants, economists and
      other experts. 

     

    7.4
      Amendment.
      Subject to applicable law, this Agreement may be amended by the parties hereto
      at any time by execution of an instrument in writing signed on behalf of each
      of
      Parent and the Company. 

     

    7.5
      Extension;
      Waiver.
      At any time prior to the Effective Time, the Company, on the one hand, or Parent
      and Merger Sub, on the other hand, may, to the extent legally allowed,
      (i) extend the time for the performance of any of the obligations or other
      acts of the other parties hereto, (ii) waive any inaccuracies in the
      representations and warranties made to such party contained herein or in any
      document delivered pursuant hereto and (iii) waive compliance with any of
      the agreements or conditions for the benefit of such party contained herein;
      provided
      that any condition set forth in Section 6.1(a)
      may not be waived without the express written consent of Parent and the Company.
      Any agreement on the part of a party hereto to any such extension or waiver
      shall be valid only if set forth in an instrument in writing signed on behalf
      of
      such party. Delay in exercising any right under this Agreement shall not
      constitute a waiver of such right. 

     

    ARTICLE VIII
      

    GENERAL
      PROVISIONS 

     

    8.1
      Non-Survival
      of Representations and Warranties.
      The representations and warranties of the Company, Parent and Merger Sub
      contained in this Agreement and the other agreements, certificates and documents
      contemplated hereby shall terminate and be of no further force or effect at,
      and
      as of, the Effective Time. The covenants and agreements in this Agreement and
      the other agreements, certificates and documents contemplated hereby shall
      terminate at the Effective Time unless such covenants or agreements by its
      terms
      contemplated performance after the Effective Time, it being understood this
      Section 8.1
      shall not limit any covenant or agreement of the parties which by its terms
      contemplates performance after the Effective Time. 

     

    8.2
      Notices.
      All notices and other communications hereunder shall be in writing and shall
      be
      deemed given if delivered personally or by commercial delivery service, or
      sent
      via telecopy (receipt confirmed) to the parties at the following addresses
      or
      telecopy numbers (or at such other address or telecopy numbers for a party
      as
      shall be specified by like notice): 

     

    (a) if
      to Parent or Merger Sub, to: 

     

       Genentech,
      Inc. 

       1
      DNA Way 

       South
      San Francisco, California 94080 

       Attention:
      Corporate Secretary 

       Telephone
      No.: (650) 225-1000 

       Telecopy
      No.: (650) 467-9146 

     

      with a
      copy to: 

     

       Wilson
      Sonsini Goodrich & Rosati 

       Professional
      Corporation 

       650
      Page Mill Road 

       Palo
      Alto, California 94304 

       Attention:   Martin
      W. Korman, Esq. 

             Bradley
      L Finkelstein, Esq. 

       Telephone
      No.: (650) 493-9300 

       Telecopy
      No.: (650) 493-6811 

    

    
      
        
        

      

      
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    (b) if
      to the Company, to: 

     

       Tanox,
      Inc. 

       10555
      Stella Link 

       Houston,
      Texas 77025-5631 

       Attention:
      General Counsel 

       Telephone
      No.: (713) 578-4000 

       Telecopy
      No.: (713) 578-5000 

     

       with
      a copy to: 

     

       Winstead
      Sechrest & Minick 

       Professional
      Corporation 

       919
      Milam Street 

       Houston,
      TX 77002 

       Attention:
      Frank S. Wu, Esq. 

       Telephone
      No.: (713) 650-8400 

       Telecopy
      No.: (713) 650-2400 

     

    8.3
      Interpretation;
      Knowledge.
      

     

    (a)
      When a reference is made in this Agreement to Exhibits, such reference shall
      be
      to an Exhibit to this Agreement unless otherwise indicated. When a reference
      is
      made in this Agreement to Articles or Sections, such reference shall be to
      an
      Article or Section, respectively, of this Agreement unless otherwise indicated.
      Unless otherwise indicated the words “include,” “includes” and “including” when
      used herein shall be deemed in each case to be followed by the words “without
      limitation.” As used herein, an item shall be deemed to have been “furnished” to
      Parent if such item has been sent to Parent or its representatives, provided
      to
      Parent or its representatives or made available to Parent or its representatives
      for review, in a data room or otherwise. 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. When reference
      is
      made herein to “the business of” an entity, such reference shall be deemed to
      include the business of all direct and indirect subsidiaries of such entity.
      Reference to the subsidiaries of an entity shall be deemed to include all direct
      and indirect subsidiaries of such entity. Where a reference is made to a law,
      such reference is to such law, as amended, and all rules and regulations
      promulgated thereunder, unless the context requires otherwise. 

     

    (b)
      For purposes of this Agreement, the term “knowledge”
      means with respect to a party hereto, with respect to any matter in question,
      that any of the executive officers or directors of such party has actual
      knowledge of such matter; provided
      that with respect to any executive officer or director, such executive officer
      or director shall have made reasonable inquiry of the current Employees (other
      than Consultants who are not Significant Consultants) responsible for such
      matter in question. 

     

    (c)
      For purposes of this Agreement, the term “Material
      Adverse Effect”
      when used in connection with any entity, including the Company and its
      subsidiaries, means (1) any change, event, violation, inaccuracy,
      circumstance or effect, individually or when aggregated with other changes,
      events, violations, inaccuracies, circumstances or effects, that is or is
      reasonably expected to be materially adverse to (i) the business, assets
      (including intangible assets), liabilities, financial condition, or results
      of
      operations of such entity and its subsidiaries taken as a whole, (ii) the
      ability of such entity to perform its obligations under this Agreement and
      to
      timely consummate the Transactions, and (2) with respect to the Company or
      its subsidiaries, any event arising after the date of this Agreement relating
      to
      Omalizumab (Xolair) that would reasonably be expected to have a material adverse
      impact on the sales, future value or revenue of Omalizumab (Xolair);
provided,
      however,
      that, except otherwise provided below, none of the following shall be deemed
      either alone or in combination to constitute, and none of the following shall
      be
      taken into account in determining whether there has been or will be, a Material
      Adverse Effect: (A) changes in the financial markets generally in the
      United States or that are the result of acts of war or terrorism;
      (B) general national or international 

    

    
      
        
        

      

      
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    economic,
      financial, political or business conditions (including changes in Legal
      Requirements or GAAP or the interpretation thereof) in each case affecting
      generally the biopharmaceutical industry, which do not have a materially
      disproportionate effect (relative to other industry participants) on the Company
      and its subsidiaries taken as a whole; (C) the execution, announcement and
      performance of this Agreement by the Company or its subsidiaries, or any actions
      taken, delayed or omitted to be taken by the Company (and the results thereof)
      that are required or prohibited (but only in the event that the Company has
      sought a waiver from Parent, and Parent has failed to agree to such waiver
      within a reasonable period of time after such request), as the case may be,
      pursuant to this Agreement or at the specific request of Parent or Merger Sub
      (it being understood that the provision of consent contemplated under
Section 5.1
      hereof shall not be deemed to be at the specific request of Parent);
      (D) the failure of the applicable party to this Agreement to meet
      projections of earnings, cash burn rates, revenues or other financial measures
      (whether such projections were made by such party or independent third parties),
      in and of itself (it being understood that the facts or occurrences giving
      rise
      or contributing to such failure may be deemed to constitute, or be taken into
      account in determining whether there has been, or will be, a Material Adverse
      Effect); (E) any change in the stock price or trading volume of the
      applicable party to this Agreement, in and of itself (it being understood that
      the facts or occurrences giving rise or contributing to such failure may be
      deemed to constitute, or be taken into account in determining whether there
      has
      been, or will be, a Material Adverse Effect); (F) any item set forth on
Schedule
      8.3(F);
      (G) the results of any clinical trial (excluding Omalizumab (Xolair)); or
      (H) any change after the date hereof of Parent’s projections for the sale
      of Omalizumab (Xolair), in and of itself (it being understood that the facts
      or
      occurrences giving rise or contributing to such change may be deemed to
      constitute, or be taken into account in determining whether there has been,
      or
      will be, a Material Adverse Effect). 

     

    (d)
      For purposes of this Agreement, the term “person”
      shall mean any individual, corporation (including any non-profit corporation),
      general partnership, limited partnership, limited liability partnership, joint
      venture, estate, trust, company (including any limited liability company or
      joint stock company), firm or other enterprise, association, organization,
      entity or Governmental Entity. 

     

    (e)
      For purposes of this Agreement, the term “business
      day”
      shall mean each day that is not a Saturday, Sunday or other day on which banking
      institutions located in San Francisco, California are authorized or obligated
      by
      law or executive order to close, and the term “day” when not immediately
      preceded by the word “business” shall mean a calendar day. 

     

    (f)
      For purposes of this Agreement, the terms “subsidiary”
      and “subsidiaries”
      with respect to any party shall mean (i) solely with respect to the
      Company, Tanox Biotech (Shanghai) Co. Ltd. and (ii) any corporation,
      partnership, association, trust or other form of legal entity of which
      (A) more than 50% of the outstanding voting securities are directly or
      indirectly owned by such party, or (B) such party or any subsidiary of such
      party is a general partner (excluding partnerships in which such party or any
      subsidiary of such party does not have a majority of the voting interest of
      such
      partnership). 

     

    (g)
      Unless the context of this Agreement otherwise requires: (i) words of any
      gender include each other gender; (ii) words using the singular or plural
      number also include the plural or singular number, respectively; and
      (iii) the terms “hereof,”
      “herein,”
      “hereunder”
      and derivative or similar words refer to this entire Agreement. 

     

    8.4
      Counterparts.
      This Agreement may be executed in one or more counterparts, all of which shall
      be considered one and the same agreement and shall become effective when one
      or
      more counterparts have been signed by each of the parties and delivered to
      the
      other party, it being understood that all parties need not sign the same
      counterpart. 

     

    8.5
      Entire
      Agreement; Third Party Beneficiaries.
      This Agreement and the documents and instruments and other agreements among
      the
      parties hereto as contemplated by or referred to herein, including the Company
      Disclosure Letter, (a) constitute the entire agreement among the parties
      with respect to the subject matter hereof and supersede all prior agreements
      and
      understandings, both written and oral, among the parties with respect to

    

    
      
        
        

      

      
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    the
      subject matter hereof, it being understood that the Confidentiality Agreement
      shall continue in full force and effect and shall survive any termination of
      this Agreement as modified by Section 5.3(a)
      and Section 5.3(b) are
      not intended to confer, and shall not be construed as conferring, upon any
      other
      person any rights or remedies hereunder, except as specifically provided in
      Section 5.9(d).
      

     

    8.6
      Severability.
      In the event that any provision of this Agreement, or the application thereof,
      becomes or is declared by a court of competent jurisdiction to be illegal,
      void
      or unenforceable, the remainder of this Agreement will continue in full force
      and effect and the application of such provision to other persons or
      circumstances will be interpreted so as reasonably to effect the intent of
      the
      parties hereto. The parties further agree to replace such void or unenforceable
      provision of this Agreement with a valid and enforceable provision that will
      achieve, to the extent possible, the economic, business and other purposes
      of
      such void or unenforceable provision. 

     

    8.7
      Other
      Remedies; Specific Performance.
      Except as otherwise provided herein, any and all remedies herein expressly
      conferred upon a party will be deemed cumulative with and not exclusive of
      any
      other remedy conferred hereby, or by law or equity upon such party, and the
      exercise by a party of any one remedy will not preclude the exercise of any
      other remedy, and nothing in this Agreement shall be deemed a waiver by any
      party of any right to specific performance or injunctive relief. 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 seek an injunction or injunctions without the
      necessity of proving the inadequacy of money damages as a remedy and without
      the
      necessity of posting any bond or other security in order 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.
      

     

    8.8
      Governing
      Law; Jurisdiction.
      This Agreement shall be governed by and construed in accordance with the laws
      of
      the State of Delaware, regardless of the laws that might otherwise govern under
      applicable principles of conflicts of law thereof. The parties hereto hereby
      irrevocably submit to the exclusive jurisdiction of the Court of Chancery in
      Newcastle County in the state of Delaware (and any appellate courts therefrom),
      or if such jurisdiction shall be unavailable, any court in the State of Delaware
      and the Federal courts of the United States of America, each located within
      Newcastle County in the State of Delaware., solely in respect of the
      interpretation and enforcement of the provisions of this Agreement and of the
      documents referred to in this Agreement, and in respect of the transactions
      contemplated hereby and thereby, and hereby waive, and agree not to assert,
      as a
      defense in any action, suit or proceeding for the interpretation or enforcement
      hereof or thereof, that it is not subject thereto or that such action, suit
      or
      proceeding may not be brought or is not maintainable in said courts or that
      the
      venue thereof may not be appropriate or that this Agreement or any such document
      may not be enforced in or by such courts, and the parties hereto irrevocably
      agree that all claims with respect to such action or proceeding shall be heard
      and determined in the Court of Chancery in the State of Delaware or, if
      jurisdiction is not available in the Court of Chancery, any other Delaware
      state
      court or Federal court, each located in Newcastle, County Delaware. The parties
      hereby consent to and grant any such court jurisdiction over the person of
      such
      parties and over the subject matter of such dispute and agree that mailing
      of
      process or other papers in connection with any such action or proceeding in
      the
      manner provided in Section 8.2
      or in such other manner as may be permitted by applicable law, shall be valid
      and sufficient service thereof. With respect to any particular action, suit
      or
      proceeding, venue shall lie solely in Newcastle County, Delaware. 

     

    8.9
      Rules
      of Construction.
      The parties hereto agree that they have been represented by counsel during
      the
      negotiation and execution of this Agreement and, therefore, waive the
      application of any law, regulation, holding or rule of construction providing
      that ambiguities in an agreement or other document will be construed against
      the
      party drafting such agreement or document. 

     

    8.10
      Assignment.
      No party may assign or delegate, in whole or in part, by operation of law or
      otherwise, either this Agreement or any of the rights, interests, or obligations
      hereunder without the prior written approval of the other parties, and any
      such
      assignment without such prior written consent shall be null and void, except
      

    

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

    

    

    that
      Parent may assign its rights (but not its obligations) under this Agreement
      to
      any direct or indirect wholly-owned subsidiary of Parent without the prior
      written consent of the Company. Subject to the preceding sentence, this
      Agreement shall be binding upon and shall inure to the benefit of the parties
      hereto and their respective successors and permitted assigns. 

     

    8.11
      Waiver
      of Jury Trial.
      EACH OF PARENT, COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT
      TO
      TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
      CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
      THE
      ACTIONS OF PARENT, COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
      PERFORMANCE AND ENFORCEMENT HEREOF. 

     

    [Remainder
      of Page Intentionally Left Blank] 

    

    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of
      Merger to be executed by their duly authorized respective officers as of the
      date first written above. 

    

      

      
        	 	
                GENENTECH,
                  INC.

              
	 	 	 
	 	
                By:

              	
                /s/  ARTHUR
                  LEVINSON

              
	 	 	
                Arthur
                  Levinson, Chairman and

                Chief
                  Executive Officer

              
	 	 	 
	 	 	 
	 	
                GREEN
                  ACQUISITION CORPORATION

              
	 	 	 
	 	
                By:

              	
                /s/  STEPHEN
                  JUELSGAARD

              
	 	 	
                Stephen
                  Juelsgaard, President and

                Chief
                  Executive Officer

              
	 	 	 
	 	 	 
	 	
                TANOX,
                  INC.

              
	 	 	 
	 	
                By:

              	
                /s/  NANCY
                  T. CHANG

              
	 	 	
                Nancy
                  Chang,

                Chairman
                  of the Board of Directors

              

      

      

****Signature
      Page to Agreement and Plan of Merger**** 

    

    
      
        
        

      

      
        61

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