Document:

EXHIBIT 10.7

AMENDMENT
NO. 1

THIS AMENDMENT NO. 1, dated as of October 10,
2006 (“Amendment No. 1”) by and among ADESA, INC., a Delaware
corporation (the “Borrower”), certain subsidiaries of the Borrower, as
guarantors (collectively, the “Subsidiary Guarantors”), the lenders from time to time parties thereto
(collectively, the “Lenders”), BANK OF AMERICA, N.A., as
administrative agent (in such capacity, the “Administrative Agent”), the
Swing Line Lender and the L/C Issuer to
the Amended and Restated Credit Agreement, dated as of July 25, 2005, as
supplemented, amended and modified (the “Credit Agreement”) among the
Borrower, the Subsidiary Guarantors, the Lenders, the Administrative Agent,
Swing Line Lender, L/C Issuer and Collateral Agent and certain other agents
parties thereto.  Capitalized terms used
and not otherwise defined herein shall have the meanings assigned to such terms
in the Credit Agreement (the Credit Agreement, as amended by, and together
with, this Amendment No. 1, and as hereinafter amended, modified, extended or
restated from time to time, being called the “Amended Agreement”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested certain
amendments to its existing covenants under the Credit Agreement; and

WHEREAS, the parties hereto have agreed, subject to
the terms and conditions hereof, to amend and modify the Credit Agreement as
provided herein;

NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

ARTICLE I

AMENDMENTS

Effective as of the Agreement Effective Date
(defined below), the Credit Agreement is hereby amended as follows:

1.01        Amendments to Section
1.01.  (a)  Section 1.01 is hereby amended by adding the
following definitions in the appropriate alphabetical order:

““Excluded
Subsidiary” means any Subsidiary of the Borrower which has assets with book
value of less than $5,000,000 as of the date on which the Borrower delivers the
certificate required pursuant to Section 5.01(f) or has revenues of less
than $5,000,000 as of the date on which the Borrower delivers the certificate
required pursuant to Section 5.01(f); provided, however,
the aggregate book value of assets for all Excluded Subsidiaries shall not exceed
$30,000,000 as of any date on which the Borrower delivers the certificate
required pursuant to Section 5.01(f) and the aggregate amount of
revenues for all Excluded Subsidiaries shall not exceed $30,000,000 as of any date
on which the Borrower delivers the certificate required pursuant to Section
5.01(f).”

““First
Amendment Effective Date” means July 3, 2006.”

 

 

 

1.02        Amendments to Affirmative
Covenants in Article V.  (a) Section
5.01 is hereby amended by changing subsection “(f)” to subsection “(g)” and by
adding a new subsection (f) immediately after subsection (e) of Section 5.01 to
read as follows:

“(f)          Certificate Concerning Excluded
Subsidiaries.  (i) Concurrently with
any delivery of financial statements under Section 5.01(a) or (b)
above and (ii) within 15 days of the creation or acquisition of any Subsidiary
of any Loan Party, a certificate of a Financial Officer of the Borrower
certifying as of such date (A) the name and jurisdiction of organization of
such Subsidiary, (B) certification of such Subsidiary as an Excluded Subsidiary
or a Subsidiary subject to the requirements of Section 5.11, and (C)
that no Default has occurred and is continuing or has resulted by reason of
such designation, including pursuant to Section 6.04, together with a
schedule demonstrating in reasonable detail the calculations used to determine
compliance.”

(b)           Section 5.11 is hereby amended by adding,
immediately following “With respect to any person that is or becomes a
Wholly-Owned Subsidiary of any Loan Party after the Closing Date,” “if such
person is not an Excluded Subsidiary,” so that Section 5.11 reads as follows:

Section 5.11   Additional Collateral;
Additional Subsidiary Guarantors.  With respect
to any person that is or becomes a Wholly-Owned Subsidiary of any Loan Party
after the Closing Date, if such person is not an Excluded Subsidiary, promptly
(and in any event within 30 days after such person becomes a Subsidiary) (a)
execute and deliver to the Administrative Agent and the Collateral Agent such
amendments or supplements to the relevant Pledge Agreements or such other
documents as the Administrative Agent or the Collateral Agent shall deem
necessary or advisable to grant to the Collateral Agent, for its benefit and
for the benefit of the other Secured Parties, a Lien on the Equity Interests of
such new Subsidiary (or, in the case of any Foreign Subsidiary, Equity
Interests representing 65% of the total voting power of all outstanding Voting
Stock of such Subsidiary) subject to no Liens other than Permitted Liens, (b)
take all actions necessary to cause such Lien to be duly perfected to the
extent required by such Pledge Agreement in accordance with all applicable
Requirements of Law, including (i) the delivery to the Collateral Agent of the
certificates, if any, representing all of the Equity Interests of such
Subsidiary owned by a Loan Party (or, in the case of any Foreign Subsidiary,
Equity Interests representing 65% of the total voting power of all outstanding
Voting Stock of such Subsidiary), together with undated stock powers or other
appropriate instruments of transfer executed and delivered in blank by a duly
authorized officer of the holder(s) of such Equity Interests, and (ii) the
filing of financing statements in such jurisdictions as may be reasonably
requested by the Administrative Agent, (c) cause each new Subsidiary that is a
Domestic Subsidiary to execute a Joinder Agreement or such comparable
documentation to become a Subsidiary Guarantor, (d) in the event such new
Subsidiary is a Domestic Subsidiary and owns any Equity Interests of another
Subsidiary (or at such time as such new Subsidiary that is a Domestic
Subsidiary acquires any Equity Interests of another Subsidiary), cause such new
Subsidiary to (A) execute a joinder agreement to the applicable Pledge Agreement,
substantially in the form annexed thereto or, in the case of a Foreign
Subsidiary, execute a pledge agreement compatible with the laws of such Foreign
Subsidiary’s jurisdiction in form and substance reasonably satisfactory to the
Administrative Agent, and (B) take all actions necessary or advisable in the
opinion of the Administrative Agent or the Collateral Agent to cause the Lien
created by the applicable Pledge Agreement to be duly perfected to the extent
required by such agreement in accordance with all applicable Requirements of
Law, including the filing of financing statements in such jurisdictions as may
be reasonably requested by the 

 

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Administrative
Agent or the Collateral Agent, in each case, subject to the limitations set
forth in clause (a) with respect to Foreign Subsidiaries and (e) deliver or
cause to be delivered to the Administrative Agent and the Collateral Agent
opinions of counsel in form and substance reasonably satisfactory to the
Administrative Agent and the Collateral Agent as the Administrative Agent and
the Collateral Agent shall request regarding the validity, perfection and
priority of the Liens on Collateral pursuant to this sentence; provided
that Sections 5.11(c) and (d) shall not apply to any new
Subsidiary that is an SPE, so long as any such new SPE shall not guarantee any
other Indebtedness of the Company or its Subsidiaries.  Nothwithstanding anything to the contrary
contained in this Agreement, if, at any time, Adesa Mexico, LLC shall have a
net worth equal to or greater than $10.0 million it shall be subject to the
requirements of this Section 5.11 as if it had become a new Subsidiary
that is a Foreign Subsidiary.

1.03        Amendment to Negative
Covenant in Article VI.  Section 6.04(f)
is hereby amended by adding at the end of clause (iv) thereto the following:

“;provided that
for purposes of this Section 6.04(f) that the applicable Company
complies with Section 5.11.”

1.04        Retroactive
Effectiveness.  The parties
hereto hereby agree that upon the Agreement Effective Date, this Amended
Agreement shall be retroactively effective to July 3, 2006.

ARTICLE
II

REPESENTATIONS AND WARRANTIES

2.01        Representations and Warranties.  Each
Loan Party represents and warrants to the Administrative Agent, the Swing Line
Lender, the L/C Issuer and each of the Lenders, as follows:

(a)           The representations and warranties of
each Loan Party contained in Article III of the Amended Agreement, and in each
of the Loan Documents or which are contained in any document furnished at any
time under or in connection therewith, are true and correct in all material
respects on and as of the date hereof and on and as of the Agreement Effective
Date with the same effect as if made on and as of the date hereof or the Agreement
Effective Date, except to the extent such representations and warranties
specifically refer to an earlier date, in which case they are true and correct
in all material respects as of such earlier date.

(b)           After giving effect to this Amendment
No. 1, no Default or Event of Default has occurred or is continuing under the
Amended Agreement.

(c)           The execution, delivery and
performance by each Loan Party of this Amendment No. 1 have been duly
authorized by all necessary corporate or other organizational action of each Loan
Party, respectively.

(d)           The execution, delivery, performance
and compliance with the terms and provisions, by each Loan Party, of this
Amendment No. 1, and the consummation of the transactions contemplated hereby
with respect to each Loan Party, (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental
Authority, (b) will not violate the Organizational Documents of any Loan Party or
any judgment, decree or order of any Governmental Authority applicable to any Loan
Party, (c) will not violate or result in a default or require any consent or
approval under any indenture, material agreement, Organizational Document or
other material instrument binding upon any Loan Party or its property, or give
rise to a right thereunder to require any payment to be made 

 

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by any Loan Party and (d) will not result in the
creation or imposition of any Lien on any property of any Loan Party.

(e)           This Amendment No. 1 constitutes the
legal, valid and binding obligation of each Loan Party, enforceable against each
Loan Party in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

ARTICLE
III

CONDITIONS PRECEDENT

3.01        Conditions to
Effectiveness.  This Amendment
No. 1 shall become effective only upon satisfaction of the following conditions
precedent (the first date upon which each such condition has been satisfied
being herein called the “Agreement Effective Date”):

(a)           the Administrative Agent shall have
received duly executed counterparts of this Amendment No. 1 which, when taken
together, bear the authorized signatures of each Loan Party, the Required
Lenders and the Administrative Agent; and

(b)           the representations and warranties
set forth in Section 2.01 hereof are true and correct in all material
respects on and as of the Agreement Effective Date.

ARTICLE
IV

MISCELLANEOUS

4.01        Lender Consent.  For purposes of determining compliance with
the conditions specified in Section 3.01, each Lender that has signed
this Amendment No. 1 shall be deemed to have consented to, approved or accepted
or to be satisfied with, each document or other matter required thereunder to
be consented to or approved by or acceptable or satisfactory to a Lender unless
the Administrative Agent shall have received notice from such Lender prior to
the Agreement Effective Date specifying its objection thereto.

4.02        APPLICABLE LAW.  THIS AMENDMENT NO. 1 SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

4.03        Counterparts.  This Amendment No. 1 may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement. Delivery by
facsimile by any of the parties hereto of an executed counterpart of this Amendment
No. 1 shall be as effective as an original executed counterpart hereof and
shall be deemed a representation that an original executed counterpart hereof
will be delivered, but the failure to deliver a manually executed counterpart
shall not affect the validity, enforceability or binding effect of this Amendment
No. 1.

4.04        Credit Agreement.  Except as expressly set forth herein, the
amendments provided herein shall not by implication or otherwise limit,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders or the Administrative Agent under the Amended Agreement or any other
Loan Document, nor shall they constitute a waiver of any Default or Event of
Default, nor shall they alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the
Amended Agreement or any other Loan Document. 
Each of the amendments provided herein shall apply and be effective only
with respect to the provisions of the Amended Agreement specifically referred
to by amendment.  Except as expressly
amended herein, the Amended Agreement 

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shall continue in full force and effect in accordance
with the provisions thereof.  As used in
the Amended Agreement, the terms “Agreement”, “herein”, “hereinafter”, “hereunder”,
“hereto” and words of similar import shall mean, from and after the date hereof,
the Amended Agreement.

4.05        Costs and Expenses.  On the Agreement Effective Date, the Borrower agrees
to pay all reasonable costs and expenses of the Administrative Agent in
connection with the preparation, execution and delivery of this Amendment No. 1
and the instruments and documents to be delivered hereunder and the reasonable
fees, charges and expenses of counsel for the Administrative Agent outstanding
on the Agreement Effective Date.

4.06        Section Captions.  Section captions used in this Amendment No. 1
are for convenience of reference only and shall not affect this construction of
this Amendment No. 1.

[Signature
Pages Follow]

 

 

 5

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly
executed by their duly authorized officers, all as of the date first above
written.

	
  

  	
   

  	
  ADESA, INC.,

  
	
   

  	
   

  	
  as Borrower

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  	
   

  

 

 

 

 

A.D.E. OF ARK-LA-TEX,
INC.

ADESA NEW JERSEY, INC.

ADESA PENNSYLVANIA, INC.

ADESA PROPERTIES CANADA,
INC.

ADESA PROPERTIES, INC.

ADESA TEXAS, INC.

AUTO BANC CORPORATION

AUTOMOTIVE FINANCE
CORPORATION

AUTOMOTIVE RECOVERY
SERVICES, INC.

AUTOVIN, INC.

COMSEARCH, INC.

IRT RECEIVABLES CORP.

PAR, INC.

ADESA ARK-LA-TEX,LLC

A.D.E. OF KNOXVILLE, LLC

ADESA ARKANSAS, LLC

ADESA BIRMINGHAM, LLC

ADESA CALIFORNIA, LLC

ADESA CHARLOTTE, LLC

ADESA COLORADO, LLC

ADESA DES MOINES, LLC

ADESA FLORIDA, LLC

ADESA INDIANAPOLIS, LLC

ADESA LANSING, LLC

ADESA LEXINGTON, LLC

ADESA MISSOURI, LLC

ADESA NEW YORK, LLC

ADESA OHIO, LLC

ADESA OKLAHOMA, LLC

ADESA SOUTHERN INDIANA,
LLC

ADESA WASHINGTON, LLC

ADESA WISCONSIN, LLC

AUTO DEALERS EXCHANGE OF
CONCORD, LLC

AUTO DEALERS EXCHANGE OF
MEMPHIS, LLC

ADESA ATLANTA, LLC

ADESA PHOENIX, LLC

ADESA-SOUTH FLORIDA, LLC

ADESA CORPORATION, LLC,

ASSET HOLDINGS III, L.P.

ADESA VIRGINIA, LLC

Each as a Subsidiary Guarantor

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President and Treasurer

  	
   

  

 

 

 

 

	
  

  	
   

  	
  ADESA, PROPERTIES CANADA, INC

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ John J Thomas

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John J Thomas

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  

 

	
  

  	
   

  	
  AUTO BANC CORPORATION

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  

 

	
  

  	
   

  	
  AUTOMOTIVE FINANCE CORPORATION

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  

 

	
  

  	
   

  	
  IRT RECEIVABLES CORP.

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cameron C. Hitchcock

  	
   

  
	
   

  	
   

  	
  Title:

  	
  President

  	
   

  

 

 

 

	
  

  	
   

  	
  ADESA CORPORATION, LLC

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  	
   

  

 

	
  

  	
   

  	
  ADESA HOLDINGS III, L.P.

  
	
   

  	
   

  	
  As Subsidiary Guarantor

  	
   

  
	
   

  	
   

  	
  By:

  	
  ADESA, Inc., as General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Jonathan Peisner

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  	
   

  

 

	
  

  	
   

  	
  BANK OF AMERICA, N.A., as Administrative Agent and 

  
	
   

  	
   

  	
  Collateral Agent.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Suzanne M. Paul

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Suzanne M. Paul

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  BANK OF AMERICA, N.A., as a lender, Swing Line

  
	
   

  	
   

  	
  Lender and L/C Issuer

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Craig W. McGuire

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Craig W. McGuire

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  

 

 

 

	
  

  	
   

  	
  BANK OF NOVA SCOTIA, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ V. Gibson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  V. Gibson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Assistant Agent

  	
   

  

 

	
  

  	
   

  	
  SCOTIABANC 
  INC., as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ W. Zarrett

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  W. Zarrett

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  	
   

  

 

	
  

  	
   

  	
  The Bank of Tokyo-Mitsubishi UFJ, Ltd., Chicago
  Branch

  
	
   

  	
   

  	
  f/k/a The Bank of Tokyo-Mitsubishi, Ltd., Chicago 

  	
   

  
	
   

  	
   

  	
  Branch, as Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Tsuguyuki Umene

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Tsuguyuki Umene

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Deputy General Manager

  	
   

  

 

	
  

  	
   

  	
  BNP PARIBAS, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Andrew Strait

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew Strait

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  	
   

  

 

	
  

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Christopher Grumboski

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Christopher Grumboski

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Director

  	
   

  

 

 

 

	
  

  	
   

  	
  COMERICA BANK, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Steven J. McCormack

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Steven J. McCormack

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  FIFTH THIRD BANK (Central Indiana), as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Erik C. Miner

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Erik C. Miner

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  

 

	
  

  	
   

  	
  FIFTH INDIANA BANK, N.A.,as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ William Bower

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  William Bower

  	
   

  
	
   

  	
   

  	
  Title:

  	
  First Vice President

  	
   

  

 

	
  

  	
   

  	
  FIRST TENNESSEE BANK NATIONAL 

  
	
   

  	
   

  	
  ASSOCIATION, as a Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Philip E. Stevenson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Philip E. Stevenson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  

 

	
  

  	
   

  	
  HARRIS N.A., as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ William Thomson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  William Thomson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

 

	
  

  	
   

  	
  JP MORGAN CHASE BANK, NA, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ John C. Otteson

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  John C. Otteson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  KEYBANK NATIONAL ASSOCIATION, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Frank J. Jancar

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Frank J. Jancar

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  LaSALLE BANK NATIONAL ASSOCIATION, as 

  
	
   

  	
   

  	
  Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Matthew R. Doye

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Matthew R. Doye

  	
   

  
	
   

  	
   

  	
  Title:

  	
  First Vice President

  	
   

  

 

	
  

  	
   

  	
  NATIONAL CITY BANK, successor by merger to

  
	
   

  	
   

  	
  National City Bank of Indiana, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Tracy J. Venable

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Tracy J. Venable

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  

 

	
  

  	
   

  	
  THE NORTHERN TRUST CO., as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Jared T. Hall

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Jared T. Hall

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

 

 

	
  

  	
   

  	
  REGIONS BANK, as Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Scott A. Dvornik

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Scott A. Dvornik

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  SUNTRUST BANK, as a Syndication Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ William Humphries

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  William Humphries

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  	
   

  

 

	
  

  	
   

  	
  U.S. BANK NATIONAL ASSOCATION, as a Managing

  
	
   

  	
   

  	
  Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Karen Meyer

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Karen Meyer

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  

 

	
  

  	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  as a Documentation Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  /s/ Peter Martinets

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Peter Martinets

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice PresidentExhibit 10.1

Execution Copy

Novartis
Pharma AG

AND

Momenta
Pharmaceuticals, Inc.

STOCK
PURCHASE AGREEMENT

TABLE OF
CONTENTS

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Purchase and Sale of Common Stock

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Closing Date; Deliveries

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Closing Date

  	
   

  	
  1

  
	
   

  	
  2.2

  	
  Deliveries

  	
   

  	
  1

  
	
   

  	
  2.3

  	
  Further Assurances

  	
   

  	
  2

  
	
   

  	
  2.4

  	
  Effects of Closing

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Representations and Warranties of the Company

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Organization, Good Standing and Qualification

  	
   

  	
  3

  
	
   

  	
  3.2

  	
  Capitalization and Voting Rights

  	
   

  	
  3

  
	
   

  	
  3.3

  	
  Subsidiaries

  	
   

  	
  5

  
	
   

  	
  3.4

  	
  Authorization

  	
   

  	
  5

  
	
   

  	
  3.5

  	
  No Conflict

  	
   

  	
  6

  
	
   

  	
  3.6

  	
  Valid Issuance of Common Stock

  	
   

  	
  6

  
	
   

  	
  3.7

  	
  Governmental Consents

  	
   

  	
  6

  
	
   

  	
  3.8

  	
  Litigation

  	
   

  	
  7

  
	
   

  	
  3.9

  	
  Proprietary Rights

  	
   

  	
  7

  
	
   

  	
  3.10

  	
  Agreements; Action

  	
   

  	
  7

  
	
   

  	
  3.11

  	
  Registration Rights

  	
   

  	
  8

  
	
   

  	
  3.12

  	
  Title to Property and Assets

  	
   

  	
  8

  
	
   

  	
  3.13

  	
  Financial Statements and SEC Filings

  	
   

  	
  8

  
	
   

  	
  3.14

  	
  Employee Benefit Plans

  	
   

  	
  9

  
	
   

  	
  3.15

  	
  Tax Returns, Payments and Elections

  	
   

  	
  10

  
	
   

  	
  3.16

  	
  Insurance

  	
   

  	
  10

  
	
   

  	
  3.17

  	
  Labor Agreements and Actions

  	
   

  	
  10

  
	
   

  	
  3.18

  	
  Offering

  	
   

  	
  11

  
	
   

  	
  3.19

  	
  Environmental Matters

  	
   

  	
  11

  
	
   

  	
  3.20

  	
  Licenses and Other Rights; Compliance with Laws

  	
   

  	
  11

  
	
   

  	
  3.21

  	
  Broker or Finders

  	
   

  	
  11

  
	
   

  	
  3.22

  	
  Market Listing

  	
   

  	
  11

  
	
   

  	
  3.23

  	
  Related Party Transactions

  	
   

  	
  12

  
	
   

  	
  3.24

  	
  Takeover Statues; Shareholders Rights Plan

  	
   

  	
  12

  
	
   

  	
  3.25

  	
  Reliance

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Representations and Warranties of the Investor

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Authorization, Governmental Consents and Compliance
  with Other Instruments

  	
   

  	
  12

  
	
   

  	
  4.2

  	
  Purchase Entirely for Own Account

  	
   

  	
  13

  
	
   

  	
  4.3

  	
  Disclosure of Information

  	
   

  	
  13

  
	
   

  	
  4.4

  	
  Investment Experience and Accredited Investor Status

  	
   

  	
  13

  
	
   

  	
  4.5

  	
  Restricted Securities

  	
   

  	
  13

  
						

 

 

 

	
  

  	
  4.6

  	
  Legends

  	
   

  	
  13

  
	
   

  	
  4.7

  	
  Acquiring Person

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Conditions to Closing of Investor

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Representations and Warranties Correct

  	
   

  	
  14

  
	
   

  	
  5.2

  	
  Covenants

  	
   

  	
  14

  
	
   

  	
  5.3

  	
  No Material Adverse Effect

  	
   

  	
  14

  
	
   

  	
  5.4

  	
  Collaboration and License Agreement

  	
   

  	
  14

  
	
   

  	
  5.5

  	
  Investor Rights Agreement

  	
   

  	
  14

  
	
   

  	
  5.6

  	
  Market Listing

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Conditions to Closing of the Company

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Representations and Warranties Correct

  	
   

  	
  15

  
	
   

  	
  6.2

  	
  Covenants

  	
   

  	
  15

  
	
   

  	
  6.3

  	
  Collaboration and License Agreement

  	
   

  	
  15

  
	
   

  	
  6.4

  	
  Investor Rights Agreement

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Mutual Conditions to Closing

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  HSR Act and Other Qualifications

  	
   

  	
  15

  
	
   

  	
  7.2

  	
  Absence of Litigation

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Additional Covenants and Agreements

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Market Listing

  	
   

  	
  15

  
	
   

  	
  8.2

  	
  Share Legend Removal

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Miscellaneous

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Survival of Warranties

  	
   

  	
  16

  
	
   

  	
  9.2

  	
  Remedies

  	
   

  	
  16

  
	
   

  	
  9.3

  	
  Successors and Assigns

  	
   

  	
  16

  
	
   

  	
  9.4

  	
  Entire Agreement

  	
   

  	
  16

  
	
   

  	
  9.5

  	
  Governing Law, Consent to Jurisdiction and Waiver of
  Trial by Jury

  	
   

  	
  17

  
	
   

  	
  9.6

  	
  Counterparts

  	
   

  	
  17

  
	
   

  	
  9.7

  	
  Titles and Subtitles

  	
   

  	
  17

  
	
   

  	
  9.8

  	
  Terms Generally

  	
   

  	
  18

  
	
   

  	
  9.9

  	
  Notices

  	
   

  	
  18

  
	
   

  	
  9.10

  	
  Finder’s Fee

  	
   

  	
  19

  
	
   

  	
  9.11

  	
  Expenses

  	
   

  	
  19

  
	
   

  	
  9.12

  	
  Amendments and Waivers

  	
   

  	
  19

  
	
   

  	
  9.13

  	
  Severability

  	
   

  	
  19

  
	
   

  	
  9.14

  	
  Confidentiality and Publicity

  	
   

  	
  19

  
	
   

  	
  9.15

  	
  Disclosure Schedule

  	
   

  	
  20

  
	
   

  	
  9.16

  	
  Definitions

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Exhibit A – Form of Cross Receipt

  	
   

  	
   

  

 

 ii

STOCK
PURCHASE AGREEMENT

THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of July 25, 2006,
by and between Novartis Pharma AG (the “Investor”), a corporation
organized under the laws of Switzerland, with its principal place of business
at Lichtstraße 35, CH 4058 Basel BS, and Momenta Pharmaceuticals, Inc.
(the “Company”), a Delaware corporation with its principal place of
business at 675 West Kendall Street,
Cambridge, Massachusetts 02142.

THE PARTIES HEREBY
AGREE AS FOLLOWS:

1.                                      Purchase
and Sale of Common Stock.

Subject to the terms and conditions of this Agreement,
at the Closing (as defined in Section 2.1 below), the Company shall issue and
sell to the Investor and the Investor hereby irrevocably agrees to purchase
from the Company 4,708,679 shares (the “Shares”) of
common stock, par value $0.0001 per share of the Company (the “Common Stock”),
for an aggregate purchase price (the “Aggregate Purchase Price”) equal
to $75,000,000; provided, however, that in the event (a) of any
stock dividend, stock split, combination of shares, reclassification,
recapitalization, exchange of shares or other similar change in the capital
structure of the Company after the date hereof and on or prior to the Closing
which affects or relates to the Common Stock, the number of Shares shall be
adjusted proportionately or (b) any “Distribution Date” or “Stock Acquisition
Date” (as each such term is defined in the Shareholder Rights Plan) occurs
under the Shareholders Rights Plan at any time during the period from the date
of this Agreement to the Closing Date, the Company and the Investor shall make
such adjustment to this Section 1 as the Company and the Investor shall
mutually agree so as to ensure that the Investor receives, in addition to the
Shares, the benefits received by any stockholder of the Company on the “Distribution
Date” or the “Stock Acquisition Date” (or benefits of an equivalent economic
value) under the Shareholder Rights Plan as a result of the consummation of the
transactions contemplated hereby.

2.                                      Closing
Date; Deliveries.

2.1          Closing
Date.  The
closing of the purchase and sale of the Shares (the “Closing”) shall be
held as soon as reasonably practicable (but in any event, no later than the
second business day) after the day of satisfaction or valid waiver of the
conditions to the Closing set forth in Sections 5, 6 and 7 hereof (other than
those conditions that by their nature cannot be satisfied until the Closing
Date, but subject to the satisfaction or valid waiver of such conditions) (provided,
that if all the conditions set forth in Sections 5, 6 and 7 hereof shall not
have been satisfied or validly waived on such day, then the Closing shall take
place on the first business day on which all such conditions shall have been or
can be satisfied or shall have been validly waived) or such other date as the
Company and the Investor may agree upon at 10:00 a.m. at the offices of Wilmer
Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, MA 02109.  The date of the Closing is hereinafter
referred to as the “Closing Date.”

2.2          Deliveries.

(a)           Deliveries by the Company.  At the Closing, the Company shall deliver to
the Investor the stock certificate(s), registered in the Investor’s name or of
such broker-dealers as 

 

may be designated by the Investor as its nominee at least two business
days prior to the Closing Date, representing the Shares being purchased by the
Investor at the Closing.  The Company
will also make the following deliveries in connection with the Closing: (i) a
certificate of the Secretary or Assistant Secretary of the Company, dated the
Closing Date, certifying as to (A) the resolutions of the Company’s Board of
Directors authorizing the execution and delivery of this Agreement, the
Investor Rights Agreement, the MOU and the Collaboration and License Agreement,
the issuance of the Shares to the Investor, the execution and delivery of such
other documents and instruments as may be required by this Agreement, the
Investor Rights Agreement, the MOU or the Collaboration and License Agreement and
the consummation of the transactions contemplated hereby and thereby and
certifying that such resolutions were duly adopted and have not been rescinded
or amended or superceded as of such date, and (B) the name and the signature of
the officers of the Company authorized to sign, as appropriate, this Agreement,
the Investor Rights Agreement, the MOU, the Collaboration and License Agreement
and the other documents and certificates to be delivered pursuant to this
Agreement, the Investor Rights Agreement, the MOU or the Collaboration and
License Agreement by either the Company or any of its officers; (ii) copies of
(A) the Company’s Third Amended and Restated Certificate of Incorporation (the “Amended
and Restated Certificate”), certified by the Secretary of State of Delaware
as of a date not earlier than two (2) business days prior to the Closing Date
and accompanied by a certificate of the Secretary or Assistant Secretary of the
Company, dated as of the Closing Date, stating that no amendments have been made
to the Amended and Restated Certificate since such date, and (B) the Company’s
Second Amended and Restated By-laws (the “By-laws”), certified by the
Secretary or Assistant Secretary of the Company; (iii) a good standing
certificate dated as of a date not earlier than two (2) business days prior to
the Closing Date issued with respect to the Company by the Secretary of State
of Delaware (which good standing shall be confirmed orally by such Secretary of
State as of the Closing); and (iv) a duly executed Cross Receipt setting forth
the Shares being purchased at the Closing and the Aggregate Purchase Price,
substantially in the form of Exhibit A attached hereto.

(b)           Deliveries by the Investor.  At the Closing, the Investor shall deliver
the Aggregate Purchase Price by wire transfer of same day funds per the Company’s
wiring instructions (which shall have been delivered to the Investor not less
than two business days before the Closing Date).  The Investor will also deliver a duly
executed Cross Receipt setting forth the Shares being purchased at the Closing
and the Aggregate Purchase Price, substantially in the form of Exhibit A
attached hereto.

2.3          Further
Assurances.  The
Company and the Investor hereby covenant and agree without the necessity of any
further consideration, to execute, acknowledge and deliver any and all such
other documents, obtain waivers and consents and take any such other action and
corporate and other proceedings as may be reasonably necessary to carry out the
intent and purposes of this Agreement and to provide to the other party copies
(executed or certified, as may be appropriate) of all documents which they or
their counsel may reasonably have requested in connection with the transactions
contemplated by this Agreement.

2.4          Effects
of Closing.  All
the actions required to be performed at Closing shall be deemed to have
occurred simultaneously, and none of such actions shall be considered
performed, until and unless all such actions have been performed, or the
requirement thereof has been validly waived by the relevant party. Closing
shall not, in and of itself, constitute a waiver 

 2
 

 

by either party of any of its rights in relation to any breach by the
other party prior to Closing of any representation or warranty or any
undertaking made by such other party in this Agreement.

3.             Representations and Warranties of the Company.The
Company hereby represents and warrants to the Investor that the statements
contained in this Section 3 are true and correct, except as expressly set forth
herein or in the disclosure schedule delivered by the Company to the Investor
dated as of the date of this Agreement (the “Disclosure Schedule”):

3.1          Organization,
Good Standing and Qualification.  The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. 
The Company has all requisite corporate power and corporate authority to
own and operate its properties and assets, to carry on its business as now
conducted and as proposed to be conducted, to enter into this Agreement, the
Investor Rights Agreement, the MOU and the Collaboration and License Agreement,
to sell the Shares and to carry out the other transactions contemplated
hereunder and thereunder.  The Company is
qualified to transact business and is in good standing in each jurisdiction in
which the failure to qualify could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. 
For purposes of this Agreement, the term “Material Adverse Effect”
means a material adverse effect on (i) the business, properties, tangible and
intangible assets, condition (financial or otherwise) or results of operations
of the Company and its Subsidiaries, taken as a whole or (ii) the Company’s
ability to  consummate the transactions
contemplated by this Agreement, the Investor Rights Agreement or the MOU (if
later executed, the Collaboration and License Agreement); provided, however,
that none of the following shall constitute, or shall be considered in
determining whether there has occurred, a Material Adverse Effect: (a) changes
that are the result of general economic or political factors affecting the
national or world economy or acts of war or terrorism in each case, except to
the extent the Company is, or could reasonably be expected to be, materially
and disproportionately affected; (b) changes that are the result of factors
generally affecting the industries or markets in which the Company operates
except to the extent the Company is, or could reasonably be expected to be, materially
and disproportionately affected; (c) any adverse change, effect of circumstance
arising out of the announcement of the transactions contemplated by this
Agreement; (d) any decline in the stock price or trading volume of the Common
Stock (but not the underlying reason for such decline); (e) any action,
proceeding, litigation or settlement that would, directly or indirectly,
materially affect the Company’s U.S. enoxaparin program, or the taking of any
regulatory action by the United States Food and Drug Administration or any
other Governmental Authority that would, directly or indirectly, materially
affect the Company’s U.S. enoxaparin program; and (f) any action taken at the
request of the Investor.  The
Company has made available to the Investor true, correct and complete copies of
the Amended and Restated Certificate and the By-laws.

3.2          Capitalization
and Voting Rights.

(a)           As
of July 21, 2006, the authorized capital of the Company consists of:

(i)            Preferred Stock.
5,000,000 shares of Preferred Stock, par value $0.01 per share (the “Preferred
Stock”), of which 100,000 shares have been designated Series A Junior
Participating Preferred Stock (the “Series A Preferred Stock”), none of
which are issued and outstanding; and

 3
 

 

(ii)           Common Stock.  100,000,000 shares of Common Stock, of which
31,171,140 shares are issued and
outstanding (including 630,000 shares of Common Stock subject to vesting or
other forfeiture restrictions or repurchase conditions) .

(b)           Except
as set forth in Section 3.2(a) or Section 3.2(c), as of July 21, 2006, there
are not issued, reserved for issuance or outstanding, and since such date there
have been no issuances or deliveries by the Company or any of its Subsidiaries
(other than the issuance of shares of Common Stock pursuant to the exercise of
Company Stock Options outstanding as of July 21, 2006, in accordance with their
terms as in effect on July 21, 2006) of, any (i) shares of capital stock or other voting
securities or equity interests of the Company, (ii) options, warrants, rights
(including conversion or preemptive rights, stock appreciation rights, “phantom”
stock rights, performance units, rights to receive shares of Common Stock on a
deferred basis or other rights that are linked to the value of Common Stock or
the value of the Company or any of its Subsidiaries or any part thereof granted
under the Company Stock Plans or otherwise), convertible or exchangeable
securities, commitments, contracts, agreements or undertakings, in each case,
pursuant to which the Company or any of its Subsidiaries is or may become
obligated to (A) issue, deliver, sell or repurchase, or cause to be issued,
delivered, sold or repurchased, any shares of its capital stock or other voting
securities or equity interests of, or any security convertible or exercisable
for or exchangeable into any capital stock or other voting securities or equity
interests of, the Company or any of its Subsidiaries or (B) issue, grant,
extend or enter into any such option, warrant, right, convertible or
exchangeable security, commitment, contract, agreement or undertaking; or (iii)
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote issued,
reserved for issuance or outstanding. There are no restrictions on the transfer
of capital stock of the Company imposed by the Amended and Restated
Certificate, the By-laws, any agreement to which the Company is a party, or any
order of any court or any Governmental Authorities to which the Company is
subject.  There are no obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock, other voting securities or equity interests of the
Company or any of its Subsidiaries.

(c)           As
of July 21, 2006, 4,566,268 shares of Common Stock were reserved and
available for issuance pursuant to the Company’s Amended and Restated 2002
Stock Incentive Plan, 2004 Stock Incentive Plan, as amended, and 2004 Employee
Stock Purchase Plan (the “ESPP”) (such plans, collectively, the “Company
Stock Plans”), of which 2,523,927 shares of Common Stock were subject
to outstanding options to purchase shares of Common Stock from the Company
pursuant to the Company Stock Plans or otherwise (other than rights under the
ESPP) (together with any other stock options granted after July 21, 2006, the “Company
Stock Options”).  Other than as set
forth in the preceding sentence, there are no other shares of Common Stock
reserved and available for issuance. 
There is no capital stock of the Company held by the Company or any of
its Subsidiaries.  All of the Series A
Preferred Stock is reserved for issuance under the Shareholder Rights Plan and
is the only Preferred Stock reserved or available for issuance.

(d)           Except as
reflected in the Company’s audited financial statements as set forth in the
Company SEC Documents, the per share exercise price of each Company Stock
Option was not less than the fair market value of a share of Common Stock on
the applicable grant date.

 4
 

 

(e)           Except
as set forth in the Company’s Public Filings, the Company’s Schedule 14A filed
by the Registrant on April 28, 2006 (as amended on May 5, 2006), and the
Company’s Schedule 14A filed by the Registrant on April 20, 2005 (in each case
including the exhibits thereto), the Company is not a party to or subject to
any agreement or understanding relating to, and to the Company’s knowledge
there is no agreement or understanding between any Persons which relates to,
the voting of shares of capital stock of the Company or the giving of written
consents by a stockholder or director of the Company.

3.3          Subsidiaries.  Except as set forth
in the Company’s Public Filings:

(a)           The
Company does not presently own or control, directly or indirectly, any other
corporation, partnership, joint venture, association or other business
entity.  Each Subsidiary is duly
organized and existing under the laws of its jurisdiction or organization, is
in good standing under such laws and is duly qualified to do business as a
foreign corporation in each jurisdiction in which a failure to so qualify would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

(b)           All
the outstanding shares of capital stock of each Subsidiary are validly issued,
fully paid and nonassessable, and are owned by the Company free and clear of
any Encumbrances, other than restrictions under securities laws.

(c)           There
are no options, warrants, convertible securities, or other rights, agreement,
arrangements or commitments of any character relating to the capital stock of
any Subsidiary.

(d)           No
Subsidiary is a member of (nor is any part of its business conducted through)
any partnership, nor is it a participant in any joint venture or similar
arrangement.

(e)           There
are no voting trust, stockholder agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any shares
of capital stock of or any other interests in any Subsidiary.

3.4          Authorization.  All corporate action
on the part of the Company necessary for the authorization, execution and
delivery of this Agreement, the Investor Rights Agreement, the MOU and the
Collaboration and License Agreement, the performance of all obligations of the
Company hereunder and thereunder and the authorization, issuance and delivery
of the Shares to be sold hereunder, including the approval by the Company’s
Board of Directors, has been taken or will be taken prior to the Closing.  This Agreement, the Investor Rights Agreement
and the MOU have been duly executed and delivered by the Company and
constitute, and upon execution and delivery thereof, the Collaboration and
License Agreement will constitute, valid and legally binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors rights and
subject to general equity principles.

 5
 

 

3.5          No
Conflict.  The
execution, delivery and performance of this Agreement, the Investor Rights
Agreement, the MOU and the Collaboration and License Agreement and compliance
with the provisions hereof and thereof by the Company, will not:

(a)           violate
any provision of law, statute, ordinance, rule or regulation or any ruling,
writ, injunction, order, judgment or decree of any court, administrative agency
or other governmental body, the violation of which could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;

(b)           conflict
with or result in any breach of any of the terms, conditions or provisions of,
or constitute (with due notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation or acceleration) under (i) any
agreement, document, instrument, contract, understanding, arrangement, note,
indenture, mortgage or lease to which the Company or any if its Subsidiaries is
a party or under which the Company, any of its Subsidiaries or any of its or
their respective assets is bound or affected, except for any such conflicts,
breaches, defaults, terminations, cancellations or accelerations that could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (ii) the Amended and Restated Certificate, (iii) the By-laws or
(iv) the certificate of incorporation, by-laws or similar governing documents
of any of the Company’s Subsidiaries; or

(c)           result
in the creation of any Encumbrance upon any of the Shares, other than
restrictions on resale pursuant to securities laws and the Investor Rights
Agreement, or on any of the properties or assets of the Company or any
Subsidiary.

3.6          Valid
Issuance of Common Stock.  When issued, sold and delivered in accordance
with the terms hereof for the consideration set forth herein, the Shares will
be duly authorized, validly issued, fully paid and nonassessable, and will not
be subject to any antidilution rights, rights of first refusal or other similar
rights or restrictions on transfer, other than under securities laws.  No further approval or authority of the stockholders
or the Board of Directors of the Company will be required for the consummation
of the transactions contemplated by this Agreement (including the issuance and
sale of the Shares as contemplated by this Agreement).

3.7          Governmental
Consents. 
Assuming the accuracy of the Investor’s representations contained in
Section 4 of this Agreement, no consent, approval, license, permit, order or
authorization of, or registration, qualification, designation, declaration,
notification or filing with, any federal, state, foreign or local Governmental Authority,
any national stock exchange or national quotation system on which the
securities issued by the Company or any of its Subsidiaries are listed or
quoted (including the National Association of Securities Dealers or the NASDAQ
Global Market), or any other person, on the part of the Company or any of its
Subsidiaries, is required in connection with the execution, delivery and
performance of this Agreement, the execution and delivery of the Investors
Rights Agreement, the execution and delivery of the MOU, the offer, sale, or
issuance of the Shares or the consummation of any other transactions
contemplated hereby or thereby, except (i) the qualification (or the taking of
such action as may be necessary to secure an exemption from qualification) of
the offer and sale of the Shares under applicable Blue Sky laws, which filings
and qualifications, if required, shall be accomplished prior to the Closing,
(ii) as may be required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act, as amended (“HSR Act”), if applicable, and (iii) a
notice of (A) 

 6
 

 

listing of additional shares with respect to the Shares and (B) a
change in the number of outstanding shares of the Company, each to the NASDAQ
Stock Market, Inc.

3.8          Litigation.  Except as set forth in the Company’s Public
Filings, there is no action, suit, proceeding or investigation pending or, to
the Company’s knowledge, currently threatened against the Company or any
Subsidiary which questions the validity of this Agreement, the Investor Rights
Agreement or the MOU or the right of the Company to enter into such agreements,
or to consummate the transactions contemplated hereby or thereby, or which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

3.9          Proprietary
Rights.  To the
Company’s knowledge, the Company owns or possesses the licenses or rights to
use all patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks, service names
and trade names and all other intellectual property rights, whether registered
or not, necessary to enable it to conduct its business as now operated (the “Intellectual
Property”).  Except as set forth in
the Company’s Public Filings, to the Company’s knowledge, there are no material
outstanding options, licenses or agreements relating to the Intellectual
Property, nor is the Company bound by or a party to any material options,
licenses or agreements relating to the Intellectual Property of any other
person or entity.  Except as disclosed in
the Company’s Public Filings, there is no claim or action or proceeding pending
or, to the Company’s knowledge, threatened that challenges the right of the
Company with respect to any Intellectual Property.  Except as set forth in the Company’s Public
Filings, to the Company’s knowledge, the Company’s Intellectual Property does
not infringe any Intellectual Property rights of any other person which, if the
subject of an unfavorable decision, ruling or finding could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

To the Company’s knowledge, confidential information
relating to the Company, the Subsidiaries and the underlying business of the
Company and its Subsidiaries has been kept confidential and has not been
disclosed to third parties except in the ordinary course of business and
subject to written confidentiality obligations from the third party which, to
the Company’s knowledge, have not been breached. To the Company’s knowledge,
none of the operations of the Company and the Subsidiaries involve the
unauthorized use of confidential information.

3.10        Agreements;
Action.

(a)           Except
as set forth in the Company’s Public Filings, since December 31, 2005, the
Company has not (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock
or other voting or equity securities of the Company, (ii) sold, exchanged or
otherwise disposed of any of its material assets or rights, other than in the
ordinary course of business, (iii) issued, sold, reclassified, combined or
split, or directly or indirectly purchased, redeemed or otherwise acquired, any
capital stock or other voting or equity securities of the Company (other than
in accordance with the Company Stock Plans), (iv) changed or amended the
Restated Certificate or the By-laws, (v) made any material change in the
financial accounting methods, principles or practices of the Company and its
Subsidiaries for financial accounting purposes, except as required by GAAP or
applicable law, or (vii) committed or agreed to do any of the foregoing.

 7
 

 

(b)           Since
December 31, 2005, the Company has not admitted in writing its inability to pay
its debts generally as they become due, filed or consented to the filing
against it of a petition in bankruptcy or a petition to take advantage of any
insolvency act, made an assignment for the benefit of creditors, consented to
the appointment of a receiver for itself or for the whole or any substantial
part of its property, or had a petition in bankruptcy filed against it, been
adjudicated a bankrupt, or filed a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other laws of the United
States or any other jurisdiction.

(c)           The
Company and its Subsidiaries are in compliance with all obligations, agreements
and conditions contained in any evidence of indebtedness or any loan agreement
to which the Company or any of its Subsidiaries is a party or is subject
(collectively, the “Obligations”), the lack of compliance with which
would afford to any Person the right to (i) accelerate any material
indebtedness or (ii) terminate any right or agreement of the Company or any of
its Subsidiaries, the termination of which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.  To the Company’s knowledge, all other parties
to such Obligations are in compliance with the terms and conditions of such
Obligations, except for any non-compliance that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.

3.11        Registration
Rights.  The
Company has not granted or agreed to grant any registration rights with respect
to shares of the Company’s capital stock or other voting or equity securities
of the Company under the Securities Act of 1933, as amended (the “Securities
Act”), including piggyback rights, to any Person.

3.12        Title
to Property and Assets.  Except as provided in the Company’s Public
Filings, the Company or one of its Subsidiaries has good title to, a valid
leasehold interest in, or a valid license to use, all of the material tangible
property and assets reflected on the Company’s balance sheet as of December 31,
2005, free and clear of all material liens, claims, restrictions or
Encumbrances, except those assets sold, consumed or otherwise disposed of since
the date of such balance sheet in the ordinary course of business, none of
which either alone or in the aggregate are material, either in nature or
amount, to the business of the Company and its Subsidiaries taken as a whole.

3.13        Financial
Statements and SEC Filings.

(a)           The
Company has made available to the Investor (i) the Company’s audited financial
statements for the year ended December 31, 2005 contained in the Company’s
annual report on Form 10-K (the “Audited Financial Statements”); and
(ii) the Company’s unaudited financial statements for the quarter ended March
31, 2006 (collectively with the Audited Financial Statements, the “Financial
Statements”).  The Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the periods indicated (except as may be indicated in notes or as
permitted by Form 10-Q) and fairly present in all material respects the
financial condition and operating results of the Company as of the dates, and
for the periods, indicated therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments).  Since December 31, 2005, the Company has
conducted its business in the ordinary course, and there has not been any 

 8
 

 

event or events that have had or could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  Except as disclosed in the Financial
Statements, neither the Company nor any of its Subsidiaries is a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation, or has
any liabilities or obligations (whether or not accrued, absolute, contingent,
liquidated or unliquidated, due or to become due and whether or not required by
GAAP to be set forth on the consolidated balance sheet of the Company) that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

(b)           Since
June 25, 2004, the Company has timely filed all required reports, schedules,
forms, statements and other documents required to be filed by it with the
Securities and Exchange Commission (the “SEC”) pursuant to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (including exhibits and all other
information incorporated therein) (the “Company SEC Documents”).  As of their respective dates, the Company SEC
Documents complied as to form in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents and, as of their respective dates, did not 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 misleading.  The financial
statements of the Company included in Company SEC Documents complied as to
form, as of their respective dates of filing with the SEC, in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. 
No Subsidiary of the Company is subject to the periodic reporting
requirements of the Exchange Act.

3.14        Employee
Benefit Plans.

(a)           Section
3.14(a) of the Disclosure Schedule contains a true and complete list of each
Employee Benefit Plan and Employee Benefit Agreement as of the date of this
Agreement, provided that such lists shall not include any Employee Benefit
Plans or Employee Benefit Agreements set forth in the Company’s Public Filings.  The Company has delivered or made available
to the Investor true, complete and correct copies of each Employee Benefit Plan
and Employee Benefit Agreement or, in the case of any unwritten arrangement, a
written summary thereof that is complete and correct in all material respects.

(b)           Except
as provided in Section 3.14(b) of the Disclosure Schedule, (i) no Employee
Benefit Plan or Employee Benefit Agreement (A) is subject to Title IV of ERISA
or Section 412 of the Code, (B) provides for defined benefit pension benefits
or nonqualified deferred compensation benefits, (C) provides any health or life
insurance benefits following termination of service or employment (other than
on a self-pay basis or as required under Section 4980B(f) of the Code), (D)
entitles any Participant to a tax gross-up from the Company or any Subsidiary
or (E) covers any Participant who resides or works outside the United States
and (ii) no Participant (A) has received any loan from the Company or any
Subsidiary that has an outstanding balance, or (B) is entitled to any payment,
benefit or right (or any increased or accelerated payment, benefit or right),
as a result of (1) such Participant’s termination of employment with, or
services to, the Company or any Subsidiary or (2) the execution of this
Agreement or the consummation of the transactions contemplated by this
Agreement.

 9
 

 

3.15        Tax
Returns, Payments and Elections.

(a)           The
Company has timely made or filed all federal, state and foreign income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject (all such returns being accurate and complete in all
material respects) and has timely paid all taxes and other governmental
assessments and charges required to be paid by the Company, except those being
contested in good faith in appropriate proceedings, and has set aside on its
books provisions adequate for the payment of all taxes for periods subsequent
to the periods to which such returns, reports or declarations apply.  To the Company’s knowledge, there are no
unpaid taxes claimed to be due by the taxing authority of any
jurisdiction.  The Company has not
executed a waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local tax.  None of the Company’s tax returns is
presently being audited by any taxing authority.  There are no liens for taxes on any assets of
the Company or its Subsidiaries except for liens with respect to taxes not yet
due and payable.  Neither the Company nor
any of its Subsidiaries is party to or is bound by any tax sharing, allocation
or indemnification agreement or arrangement (other than such an agreement or
arrangement between the Company and its Subsidiaries).

(b)           Neither
the Company nor any it its Subsidiaries has been a party to a transaction that,
as of the date of this Agreement, constitutes a “listed transaction” for
purposes of Section 6011 of the Internal Revenue Code of 1986, as amended, and
applicable Treasury Regulations thereunder (or a similar provision of state
law).  To the knowledge of the Company,
it has disclosed to the Investor all “reportable transactions” within the
meaning of Treasury Regulations Section 1.6011-4(b) (or similar provision of
state law) to which it or any of its Subsidiaries has been a party.

3.16        Insurance.  The Company is insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in
the businesses in which the Company is engaged.

3.17        Labor
Agreements and Actions.  Neither the Company nor any Subsidiary has
any collective bargaining agreements covering any of their respective
employees, nor is the Company or any Subsidiary bound by or subject to (and
none of their respective assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the Company’s
knowledge, has sought to represent any of the employees, representatives or
agents of the Company or any Subsidiary. 
There is no strike or other labor dispute involving the Company, any
Subsidiary or any of their respective employees pending, or to the Company’s
knowledge threatened, nor is the Company aware of any labor organization
activity involving its employees.  Each
of the Company and its Subsidiaries is, and since January 1, 2003, has
been, in compliance with all applicable laws relating to employment and
employment practices, occupational safety and health standards, employee
classification, terms and conditions of employment, wages and hours and
immigration, and is not, and since January 1, 2003, has not, engaged in
any unfair labor practice, in each case except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect.  As of the date of this
Agreement, no Key Employee has formally announced an intention to terminate his
or her relationship as an employee or director of the Company or any Subsidiary
and, to the Company’s 

 10
 

 

knowledge, no Key Employee intends to terminate his or her relationship
as an employee or director of the Company or any Subsidiary, nor does the
Company have a present intention to terminate the employment of any Key
Employee.  For purposes of this
Agreement, the term “Key Employee” shall mean Ram Sasisekharan and
Ganesh Venkataraman.

3.18        Offering.  None of the Company, its Subsidiaries or
their representatives has issued, sold or offered any security of the Company
to any person under circumstances that would cause the sale of the Shares, as
contemplated by this Agreement, to be subject to the registration requirements
of the Securities Act.  None of the
Company, its Subsidiaries or their representatives will, from and including the
date of this Agreement through and including the Closing Date, offer the Shares
or any part thereof or any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, anyone so as to make the issuance
and sale of the Shares subject to the registration requirements of the
Securities Act.  Subject to the accuracy
of the Investor’s representations set forth in Section 4 of this Agreement, the
offer, sale and issuance of the Shares to be issued in conformity with the
terms of this Agreement constitute transactions which are exempt from the
registration and prospectus delivery requirements of the Securities Act and
from all applicable state registration or qualification requirements, other
than those with which the Company has complied or will comply with prior to the
Closing.

3.19        Environmental
Matters.  Except
for any matters that could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (i) the Company and its
Subsidiaries (a) are in compliance with all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants (“Environmental Laws”), (b) have received all permits,
licenses or other approvals required under applicable Environmental Laws to
conduct their respective businesses  (c)
are in compliance with all terms and conditions of any such permits, licenses
or approvals, and (ii) to the Company’s knowledge, there are no facts,
circumstances or conditions that would reasonably be expected to result in any
claim or liability against the Company or any of its Subsidiaries under
Environmental Law

3.20        Licenses
and Other Rights; Compliance with Laws.  The Company has all franchises, permits,
licenses and other rights and privileges from Governmental Authorities
necessary to conduct its business as presently conducted and is in compliance
in all material respects thereunder.  The
Company and each Subsidiary are in compliance with all laws and governmental
rules and regulations applicable to its business, properties and assets,
including, without limitation, all such rules, laws and regulations relating to
fair employment practices, occupational safety and health and public safety,
except for any non-compliance that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

3.21        Broker
or Finders.  The
Company has not incurred, nor will incur, directly or indirectly, as a result
of any action taken by the Company, any liability for brokerage or finders’
fees or agents’ commissions or any similar charges in connection with this
Agreement, the Investor Rights Agreement, the MOU, the Collaboration and
License Agreement or any transaction contemplated hereby or thereby.

3.22        Market
Listing.  The
Common Stock is listed for trading on the NASDAQ Global Market and the Company
is in compliance in all material respects with the rules, 

 11
 

 

regulations and requirements of the NASDAQ Global Market relating to
the continued listing of the Common Stock.

3.23        Related
Party Transactions. 
Except as disclosed in the Company’s SEC Documents, neither the Company nor
any of its Subsidiaries has entered into any transaction that would be subject
to disclosure pursuant to Item 404 of Regulation S-K of the Securities Act.

3.24        Takeover
Statues; Shareholders Rights Plan.  The approval of this Agreement by the Company’s
Board of Directors referred to in Section 3.4 constitutes approval of the
acquisition of the Shares by the Investor for purposes of Section 203 of the
Delaware General Corporation Law. 
Assuming the accuracy of Section 4.7, the Shareholder Rights Plan is not
be triggered by the offer, sale, issuance and purchase of the Shares.

3.25        Reliance.  The Company understands that the foregoing
representations and warranties and the certificates to be delivered pursuant to
Sections 5.1 and 5.2 shall be deemed material and to have been relied upon by
the Investor.

4.                                      Representations
and Warranties of the Investor.

The Investor hereby represents and warrants to the
Company that the statements contained in Section 4 are true and correct as of
the date hereof and as of the Closing Date:

4.1          Authorization,
Governmental Consents and Compliance with Other Instruments.  All corporate action on the part of the
Investor necessary for the authorization, execution and delivery of this
Agreement and the Investors Rights Agreement and the performance of all
obligations of the Investor hereunder and thereunder has been taken or will be
taken prior to the Closing.  This
Agreement and the Investors Rights Agreement have been duly executed and
delivered by the Investor and constitute valid and legally binding obligations
of the Investor, enforceable against the Investor in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors rights and subject to general equity principles.  No consent, approval, order or authorization
of, or registration, qualification, designation, declaration, notification or
filing with, any federal, state or local Governmental Authority on the part of
the Investor is required in connection with the consummation of the
transactions contemplated by this Agreement and the Investors Rights Agreement,
except as may be required by the HSR Act. 
The execution, delivery and performance of this Agreement and the
Investors Rights Agreement and compliance with the provisions hereof and
thereof by the Investor, will not (a) violate any provision of law, statute,
ordinance, rule or regulation or any ruling, writ, injunction, order, judgment
or decree of any court, administrative agency or other governmental body or (b)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under any agreement, document, instrument, contract,
understanding, arrangement, note, indenture, mortgage or lease to which the
Investor is a party or under which the Investor or any of its assets is bound
or affected, except for any violations, conflicts, breaches or defaults which
would not reasonably be expected to have, individually or 

 12
 

 

in the aggregate, a material adverse effect on the ability of the
Investor to consummate the transactions contemplated by this Agreement.

4.2          Purchase
Entirely for Own Account.  The Investor is acquiring the Shares for
investment for the Investor’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and the Investor
has no present intention of selling, granting any participation, or otherwise
distributing the Shares.  The Investor
does not own of record or beneficially own (as defined in Rule 13d-3 of the
Exchange Act) any voting securities of the Company, or any securities
convertible into or exercisable for any such voting securities.

4.3          Disclosure
of Information.  The
Investor acknowledges that the Company has made available to the Investor
copies of the Company SEC Documents filed prior to the date of this Agreement
and that the Investor has had an opportunity to ask questions of, and receive
answers from, the Company regarding the terms and conditions of the offering of
the Shares.  The foregoing, however, does
not limit or modify the representations and warranties of the Company in
Section 3 of this Agreement.

4.4          Investment
Experience and Accredited Investor Status. 
The Investor either (i) is an accredited
investor  (as defined in Regulation D
promulgated under the Securities Act) or (ii) is not a United States Person as
that term is defined in Regulation S of the Securities Act and is not acquiring
the Shares for the account or benefit of any United States Person.  The Investor is an investor in securities of
companies in development stage and acknowledges that it is able to fend for
itself, and bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Shares hereunder.

4.5          Restricted
Securities.  The
Investor understands that the Shares, when issued, will be restricted
securities under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances.  In this connection, the
Investor represents that it is familiar with Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act.

4.6          Legends.  The Investor
understands and agrees that each certificate or other document evidencing any
of the Shares shall be endorsed with the legend in substantially the form set
forth below, as well as any other legends required by applicable law.  The Investor covenants that the Investor
shall not transfer the Shares represented by any such certificate without
complying with the restrictions on transfer described in the legends endorsed
on such certificates.  It is understood
that the certificates evidencing the Shares will bear the following legend
until such legend is removed in accordance with Section 8.2:

“These securities have not been registered under the
Securities Act of 1933, as amended.  They
may not be sold, offered for sale, pledged, hypothecated or otherwise
transferred in the absence of a registration statement in effect with respect
to the securities under 

 13
 

 

such Act or pursuant to an applicable exemption from
the registration requirements of such Act.”

4.7          Acquiring
Person. 
Investor, including its affiliates, after giving effect to the
transactions contemplated hereby, will not, either individually or with a group
(as defined in Section 13(d)(3) of the Exchange Act), be the beneficial owner
of 16.5% or more of the Company’s outstanding Common Stock.  For purposes of this Section 4.7, beneficial
ownership shall be determined pursuant to a Rule 13d-3 under the Exchange Act.

5.             Conditions to Closing of Investor.The
Investor’s obligation to purchase the Shares at the Closing is subject to the
fulfillment as of such Closing of the following conditions (unless waived in
writing by the Investor):

5.1          Representations
and Warranties Correct.  The representations and warranties made by
the Company in Section 3 hereof shall be true and correct, without regard to
any materiality or Material Adverse Effect qualifiers contained therein, as of
the date of this Agreement and as of the Closing Date as though made on and as
of such Closing Date (except (i) to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct, without regard to any
materiality or Material Adverse Effect qualifiers contained therein, as of such
date, and (ii) where the failure to be true and correct, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect), and the Company shall have delivered to the Investor a
certificate, dated as of the Closing Date, executed by the President and Chief
Executive Officer of the Company, certifying to the foregoing.

5.2          Covenants.  All covenants,
agreements and conditions contained in this Agreement to be performed by the
Company on or prior to the Closing Date shall have been performed or complied
with in all material respects, and the Company shall have delivered to the
Investor a certificate, dated as of the Closing Date, executed by the President
and Chief Executive Officer of the Company, certifying to the foregoing.

5.3          No
Material Adverse Effect.  There
shall not have occurred any event or events that have had or could,
individually or in the aggregate, reasonably be expected to have, a Material
Adverse Effect.

5.4          Collaboration
and License Agreement.  The
MOU, or if later entered into the Collaboration and License Agreement, shall be
in full force and effect.

5.5          Investor
Rights Agreement.  The
Investor Rights Agreement shall be in full force and effect.

5.6          Market
Listing.  On the
Closing Date, the Shares to be delivered at that Closing shall be approved for
listing on the NASDAQ Global Market.

 14
 

 

6.             Conditions to Closing of the Company.The
Company’s obligation to sell the applicable Shares at the Closing is subject to
the fulfillment as of such Closing of the following conditions (unless waived
in writing by the Company):

6.1          Representations
and Warranties Correct.  The
representations and warranties made by the Investor in Section 4 hereof shall
be true and correct as of the date of this Agreement and as of the Closing Date
as though made on and as of such Closing Date (except (i) to the extent such
representations and warranties are specifically made as of a particular date, in
which case such representations and warranties shall be true and correct as of
such date, and (ii) where the failure to be true and correct, individually or
in the aggregate, has not had and could not reasonably be expected to have a
material adverse effect on the ability of the Investor to consummate the
transactions contemplated by this Agreement).

6.2          Covenants.  All covenants,
agreements and conditions contained in this Agreement to be performed by the
Investor on or prior to the Closing Date shall have been performed or complied
with in all material respects.

6.3          Collaboration
and License Agreement. 
The MOU, or if later entered into the Collaboration and License
Agreement, shall be in full force and effect.

6.4          Investor
Rights Agreement.  The
Investor Rights Agreement shall be in full force and effect.

7.             Mutual Conditions to Closing.The
obligations of each of the Investor and the Company to consummate the Closing
is subject to the fulfillment as of the Closing Date of the following
conditions:

7.1          HSR
Act and Other Qualifications.  The
filings required under the HSR Act shall have been made and the required
waiting period shall have elapsed as of the Closing Date, and all other
authorizations, consents, waivers, permits, approvals, qualifications and registrations
to be obtained or effected with any Governmental Authority, including, without
limitation, necessary Blue Sky law permits and qualifications required by any
state, for the offer and sale to the Investor of the Shares shall have been
duly obtained and effective as of the Closing Date.

7.2          Absence
of Litigation.  There
shall be no law or injunction, action, suit, proceeding or investigation
pending or currently threatened in writing against the Company or the Investor
which questions the validity of this Agreement, the Investor Rights Agreement,
the MOU (or, if later entered into, the Collaboration and License Agreement) or
the right of the Company or the Investor to enter into this Agreement, the
Investor Rights Agreement or the MOU (or, if entered into, the Collaboration
and License Agreement) or to consummate the transactions contemplated hereby or
thereby or which prohibits or restrains the consummation of the transactions
contemplated hereby or thereby.

8.                                      Additional
Covenants and Agreements.

8.1          Market
Listing.  The
Company shall use commercially reasonable efforts to maintain the listing and
trading of the Common Stock on the NASDAQ Global Market.  The Company shall use its best efforts to
effect the listing of the Shares on the NASDAQ Global 

 15
 

 

Market, including submitting a notice of listing of additional shares
with respect to the Shares to the NASDAQ Stock Market, Inc. no later than 15
calendar days prior to the Closing Date.

8.2          Share
Legend Removal.  The
legend set forth in Section 4.6 hereof shall be removed from the certificate(s)
evidencing the Shares and the Company shall, or shall cause its transfer agent
to, issue, no later than five business days from receipt of a request from the
Investor pursuant to this Section 8.2, a certificate or certificates evidencing
all or a portion of the Shares, as requested by the Investor, without such
legend if (i) such securities have been resold under an effective registration
statement under the Securities Act, (ii) such securities have been or will be
transferred in compliance with Rule 144 under the Securities Act, (iii) such
securities are eligible for resale pursuant to Rule 144(k) under the Securities
Act or (iv) the Investor shall have provided the Company with an opinion of
counsel, reasonably satisfactory to the Company, stating that such securities
may lawfully be transferred without registration under the Securities Act.

9.                                      Miscellaneous.

9.1          Survival
of Warranties.  The
representations and warranties of the Company contained in Sections 3.1, 3.2,
3.4, 3.5, 3.6 and 3.18 and of the Investor contained in this Agreement shall
survive the Closing without limitation as to time and the other representations
and warranties of the Company made herein and in the certificates delivered
pursuant hereto shall survive for eighteen months following the Closing.  The covenants and undertakings set forth in
Sections 8.1 and 8.2 of this Agreement contemplating performance by any party
following the Closing shall survive in accordance with their respective terms.

9.2          Remedies.  The rights, powers
and remedies of the parties under this Agreement are cumulative and not
exclusive of any other right, power or remedy which such parties may have under
any other agreement or law.  No single or
partial assertion or exercise of any right, power or remedy of a party
hereunder shall preclude any other or further assertion or exercise thereof.

9.3          Successors
and Assigns.  Except
as otherwise expressly provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties, including, without limitation,
successors through merger, consolidation, reorganization, recapitalization, any
similar transaction or otherwise. 
Neither this Agreement nor any rights or duties of a party hereto may be
assigned by such party, in whole or in part, without the prior written consent
of the other party hereto; provided that the Investor may assign, in its sole discretion, any of
or all their rights, interests and obligations under this Agreement to any
affiliate of the Investor that would not reasonably be expected to cause any
delay in the satisfaction of the condition set forth in Section 7.1.  Any attempted assignment in violation of this
Section 9.3 shall be void.

9.4          Entire
Agreement.  This
Agreement and the other writings referred to herein or delivered pursuant
hereto which form a part hereof contain the entire agreement among the parties
with respect to the subject matter hereof and thereof and supersede all prior
and contemporaneous arrangements or understandings, whether written or oral,
with respect thereto.  This Agreement is
for the sole benefit of the parties hereto and their permitted assigns and 

 16
 

 

nothing herein expressed or implied shall give or be construed to give
to any person, other than the parties hereto and such assigns, any legal rights
or equitable rights hereunder.

9.5          Governing
Law, Consent to Jurisdiction and Waiver of Trial by Jury.

(a)           This
Agreement shall be governed by and construed under the laws of the State of New
York (without regard to the conflict of law principles thereof).  Each of the parties hereto hereby irrevocably
and unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the Federal and state courts of the State of New York in any
action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (i)
agrees not to commence any such action or proceeding except in such courts,
(ii) agrees that any claim in respect of any such action or proceeding may be
heard and determined in such courts, (iii) waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have
to the laying of venue of any such action or proceeding in such courts, and
(iv) waives, to the fullest extent permitted by laws, the defense of an
inconvenient forum to the maintenance of such action or proceeding in such
courts.  Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by laws. 
Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 9.9.  Nothing in this Agreement shall affect the
right of any party to this Agreement to serve process in any other manner
permitted by laws.

(b)           EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT MAY INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(I) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (II) IT
MAKES SUCH WAIVERS VOLUNTARILY, AND (III) IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.5.

9.6          Counterparts.  This Agreement may
be executed in any number of counterparts, each such counterpart shall be
deemed to be an original instrument, and all such counterparts together shall
constitute but one agreement.  Any such
counterpart may contain one or more signature pages.  This Agreement may be executed by facsimile
signature pages.

9.7          Titles
and Subtitles.  The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.

 17
 

 

9.8          Terms
Generally.  Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice-versa.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”, unless the
context expressly provides otherwise. 
All references herein to Sections, paragraphs, subparagraphs, clauses,
Exhibits or Schedules shall be deemed references to Sections, paragraphs,
subparagraphs or clauses of, or Exhibits or Schedules to this Agreement, unless
the context requires otherwise.  Unless
otherwise expressly defined, terms defined in this Agreement have the same
meanings when used in any Exhibit or Schedule hereto, including the Disclosure
Schedule.  Unless otherwise specified,
the words “herein”, “hereof”, “hereto” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
provision of this Agreement.  The term “or”
is not exclusive.  The word “extent” in
the phrase “to the extent” shall mean the degree to which a subject or other
thing extends, and such phrase shall not mean simply “if”.  The phrase “date hereof” or “date of this
Agreement” shall be deemed to refer to July 25, 2006.  Any contract, instrument or law defined or
referred to herein or in any contract or instrument that is referred to herein
means such contract, instrument or law as from time to time amended, modified
or supplemented, including (in the case of contracts or instruments) by waiver
or consent and (in the case of laws) by succession of comparable successor laws
and references to all attachments thereto and instruments incorporated
therein.  References to a person are also
to its permitted successors and assigns.

9.9          Notices.  Unless otherwise
provided, all notices, requests, consents and other communications hereunder to
any party shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or five business days after being
duly sent by first class registered or certified mail, or other courier
service, postage prepaid, or the following business day after being faxed with
a confirmation copy by regular mail, and addressed or faxed to the party to be
notified at the address or fax number indicated for such party, as the case may
be, set forth below or such other address or fax number, as the case may be, as
may hereafter be designated in writing by the addressees to the addressor
listing all parties:

To the Company:

675 West Kendall Street

Cambridge, Massachusetts 02142

Attention:  Chief Executive Officer

Fax:  (617) 621-0431

With a copy (which shall not constitute notice) to:

Wilmer Cutler Pickering Hale and Dorr LLP

60 State Street

Boston, Massachusetts 02109

Attention:   Steven D. Singer, Esq.

Fax:  (617) 526-5000

 18
 

 

To the Investor:

Novartis Pharma AG

Lichtstraße 35

CH 4058 Basel BS

Attention Peter Rupprecht

Fax:   +41 61
3245372

With a copy (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

Worldwide Plaza

825 Eighth Avenue

New York, NY 10019

Attention:  Philip A. Gelston, Esq.

Fax:  (212) 474- 3700

9.10        Finder’s
Fee.  The
Investor agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finder’s  fee (and the reasonable costs and expenses of
defending against such liability or asserted liability) for which the Investor
or any of its officers, partners, employees, or representatives is
responsible.  The Company agrees to
indemnify and hold harmless the Investor from any liability for any commission
or compensation in the nature of a finder’s 
fee (and the reasonable costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.

9.11        Expenses.  Except as otherwise
contemplated herein, each party shall pay its own fees and expenses with
respect to this Agreement.

9.12        Amendments
and Waivers.  Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the Investor (other than the waiver of any condition set forth in
Section 5, which may be waived in the sole discretion of the Investor, and
other than the waiver of any condition set forth in Section 6, which may be
waived in the sole discretion of the Company).

9.13        Severability.  If one or more
provisions of this Agreement are held to be unenforceable under applicable law,
in any jurisdiction, such provision shall be ineffective, as to such
jurisdiction, and the balance of the Agreement shall be interpreted as if such
provision were so excluded, without invalidating the remaining provisions of
this Agreement and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.

9.14        Confidentiality
and Publicity.  The
Company and the Investor will mutually agree upon the form and substance of any
press release relating to the terms of this Agreement, the MOU, the
Collaboration and License Agreement, the Investor Rights Agreement or the
transactions contemplated hereby or thereby prior to issuing any such press
release, including any press release to be issued promptly after the execution
hereof.  Either party may only 

 19
 

 

disclose the terms of the MOU or the Collaboration and License
Agreement if such party reasonably determines, based on advice from its
counsel, that it is required to make such disclosure by applicable law,
regulation or legal process (whether in connection with its ongoing disclosure
obligations, in connection with a corporate activity or otherwise), including
without limitation by the rules or regulations of the SEC or similar regulatory
agency in a country other than the United States or of any stock exchange or
NASDAQ, in which event such party shall provide prior notice of such intended
disclosure to the other party sufficiently in advance to enable the other party
to seek confidential treatment or other protection for such information unless
the disclosing party is prevented by law or regulation from providing such
advance notice and shall disclose only such terms of the MOU or the
Collaboration and License Agreement as such disclosing party reasonably
determines, based on advice from its counsel, are required by applicable law,
regulation or legal process to be disclosed (whether in connection with its
ongoing disclosure obligations, in connection with a corporate activity or
otherwise).  In the event that either
party determines that it must publicly file the MOU or the Collaboration and
License Agreement with the SEC such party shall (i) initially file a redacted
copy of the MOU or the Collaboration and License Agreement, as applicable, (ii)
request, and use commercially reasonable efforts to obtain, confidential
treatment of all terms redacted from such redacted MOU or Collaboration and
License Agreement, provided that the redaction of such terms is permitted by
the applicable rules and regulations of the SEC, (iii) permit the other party
to review and approve such initial request for confidential treatment and any
subsequent correspondence with respect thereto at least five (5) business days
prior to its submission to the SEC and (iv) promptly deliver to the other party
any written correspondence received by it or its representatives from the SEC
with respect to such confidential treatment request and promptly advise the
other party of any other material communications between it or its
representatives with SEC with respect to such confidential treatment request.

9.15        Disclosure
Schedule.  The
Disclosure Schedule shall be arranged in Subsections corresponding to the
numbered Subsections contained in Section 3, and the disclosure in any
Subsection of the Disclosure Schedule shall qualify the corresponding
Subsection in Section 3.  The inclusion
of any information in the Disclosure Schedule shall not be deemed to be an
admission or acknowledgment, in and of itself, that such information is
required by the terms hereof to be disclosed, is material, has resulted in or
would result in a Material Adverse Effect, or is outside the ordinary course of
business.

9.16        Definitions.  As used in this
Agreement, the following terms shall have the following meanings:

“Agreement”
shall have the meaning set forth in the Preamble.

“Aggregate Purchase Price” shall have the
meaning set forth in Section 1.

“Amended and Restated Certificate” shall have
the meaning set forth in Section 2.2(a).

“Audited
Financial Statements” shall have the meaning set forth in Section 3.13(a).

“business day” means any day other than the
days on which banks in New York, New York or Basel, Switzerland are required or
authorized to close.

 20
 

 

“By-laws” shall have the meaning set forth in
Section 2.2(a).

“Code” shall mean the Internal Revenue Code of
1986, as amended.

“Closing” shall have the meaning set forth in Section 2.1.

“Closing Date” shall have the meaning set forth
in Section 2.1.

“Collaboration and License Agreement” shall
mean that certain Collaboration and License Agreement to be entered into
between the Company and the Investor contemplated by the MOU.

“Common Stock” shall have the meaning set forth
in Section 1.

“Company” shall have the meaning set forth in
the Preamble.

“Company’s Public Filings” shall mean the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and
the Company’s Quarterly Report on Form 10-Q for the period ended March 31,
2006.

“Company SEC Documents” shall have the meaning
set forth in Section 3.13(b).

“Company Stock Options” shall have the meaning
set forth in Section 3.2(c).

“Company Stock Plans” shall have the meaning
set forth in Section 3.2(c).

“Cross Receipt” shall mean an executed document
signed by each of the Company and the Investor setting forth the Shares being
purchased at the Closing and the Aggregate Purchase Price.

“Disclosure Schedule” shall have the meaning
set forth in Section 3.

“Employee Benefit Agreement” shall mean (a)
each employment, deferred compensation, severance, termination, change in
control, employee benefit, loan, indemnification, retention, stock repurchase,
stock option or similar agreement, commitment or obligation between the Company
or any Subsidiary, on the one hand, and any Participant, on the other hand, (b)
each agreement between the Company or any Subsidiary, on the one hand, and any
Participant, on the other hand, 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 by this Agreement and (c) any
trust or insurance contract or other agreement to fund or otherwise secure
payment of any compensation or benefit to be provided to any Participant.

“Employee Benefit Plan” shall mean each “employee
benefit plan”, as defined in ERISA, and each other plan, arrangement or policy
(written or oral and whether or not terminable at will) relating to
equity-based compensation, incentive compensation, deferred compensation,
severance, fringe benefits, perquisites or other employee benefits, in each
case maintained or contributed to, or required to be maintained or contributed
to, by the Company, any Subsidiary or Common Controlled Entity, for the benefit
of any Participant.

 21
 

 

“Encumbrance(s)” shall mean any security
interest, pledge, mortgage, lien (including, without limitation, environmental
and tax liens), charge, encumbrance, adverse claim, or restriction of any kind,
including, without limitation, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of ownership.

“Environmental Laws” shall have the meaning set
forth in Section 3.19.

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended.

“ESPP” shall have the meaning set forth in
Section 3.2(c).

“Exchange Act” shall have the meaning set forth
in Section 3.13(b).

“Financial Statements” shall have the meaning
set forth in Section 3.13(a).

“GAAP” shall have the meaning set forth in
Section 3.13(a).

“Governmental Authority” shall mean any nation
or government, any federal, state, foreign, municipal, local, provincial,
regional or other political subdivision thereof, and any Person exercising
executive, legislative, judicial regulatory or administrative functions of or
pertaining to government.

“HSR Act” shall have the meaning set forth in
Section 3.7.

“Intellectual Property” shall have the meaning
set forth in Section 3.9.

“Investor” shall have the meaning set forth in
the Preamble.

“Investor Rights Agreement” shall mean that
certain Investor Rights Agreement between the Company and the Investor dated as
of the date hereof.

“Key Employee” shall have the meaning set forth
in Section 3.17.

“Material Adverse Effect” shall have the
meaning set forth in Section 3.1.

“MOU” shall mean the memorandum of
understanding among the Company and the Investor (or an affiliate of the
Investor) dated the date hereof.

“Obligations” shall have the meaning set forth
in Section 3.10(c).

“Participant” shall mean any present officers,
employees or directors of the Company or any Subsidiary.

“Person” means any individual, partnership,
firm, corporation, association, trust, unincorporated organization, government
or any department or agency thereof or other entity, as well as any syndicate
or group that would be deemed to be a Person under Section 13(d)(3) of the
Securities Exchange Act.

 22
 

 

“Preferred Stock” shall have the meaning set
forth in Section 3.2(a)(i).

“SEC” shall have the meaning set forth in
Section 3.13(b).

“Securities Act” shall have the meaning set
forth in Section 3.11.

“Series A Preferred Stock” shall have the
meaning set forth in Section 3.2(a)(i).

“Shares” shall have the meaning set forth in
Section 1.

“Shareholder Rights Plan” shall mean the rights
agreement between the Company and American Stock Transfer & Trust Company,
as rights agent, dated as of November 7, 2005.

“Subsidiary” shall mean any and all
corporations, partnerships, joint ventures, associations and other entities
controlled by the Company directly or indirectly through one or more
intermediaries, including, without limitation, Momenta Pharmaceuticals
Securities Corporation.

(Signature Page
Follows)

 23

 

IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.

	
   

  	
  NOVARTIS PHARMA AG,

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Peter Rupprecht

  	
   

  	
  /s/ Dr. Thomas Werken

  
	
   

  	
   

  	
  Name:Peter Rupprecht 

  	
  Dr. Thomas Werken

  
	
   

  	
   

  	
  Title: Authorized Signatory

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MOMENTA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Alan Crane

  	
   

  
	
   

  	
   

  	
  Name: Alan Crane

  
	
   

  	
   

  	
  Title: President & CEO

  

[Signature Page to
Stock Purchase Agreement]

 

EXHIBIT B

[               ,2006]

CROSS RECEIPT

Reference is made to the Stock Purchase Agreement,
dated as of July 25, 2006 (the “Agreement”), by and between Novartis
Pharma AG, a company organized under the laws of Switzerland (the “Investor”),
and Momenta Pharmaceuticals, Inc.,
a company incorporated under the laws of Delaware (the “Company”).

The Investor hereby
acknowledges its receipt from the Company of 4,708,679 shares (the “Shares”) of common stock
of the Company, par value $0.0001 per share (the “Common Stock”),
pursuant to Section 2.2(a) of the Agreement.

The Company hereby acknowledges the receipt from the
Investor of $75,000,000 by wire transfer to the account specified by the
Company pursuant to Section 2.2(b) of the Agreement.

This cross receipt may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same cross receipt.

[Signatures on the Following
Page]

 

IN WITNESS WHEREOF, the Investor and the Company
have each caused this cross-receipt to be signed on the date written above.

	
   

  	
  NOVARTIS PHARMA AG,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:Peter Rupprecht

  Title: Authorized Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MOMENTA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  Title:

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