Document:

Unassociated Document

    EXHIBIT
      10.1

    

     

    MERGER
      AGREEMENT

     

    This
      merger agreement is entered into as of January 30th, 2007, between Velcera
      Pharmaceuticals, Inc.,
      a
      Delaware corporation (“Velcera”),
      Denali
      Sciences, Inc., a
      Delaware corporation (“Denali”),
      and
Denali Acquisition
      Corp.,
      a
      Delaware corporation (“MergerCo”).

     

    The
      Boards of Directors of Velcera, Denali and MergerCo have determined that it
      is
      in the best interests of those corporations and their respective stockholders
      to
      consummate the merger of MergerCo with and into Velcera with Velcera as the
      surviving corporation (the “Merger”);
      

     

    Denali,
      as the sole stockholder of MergerCo, has approved this agreement, the Merger
      and
      the transactions contemplated by this agreement pursuant to action taken by
      written consent in accordance with the requirements of the Delaware General
      Corporation Law (“DGCL”)
      and
      the Bylaws of MergerCo;

     

    Pursuant
      to the Merger, among other things, the outstanding shares of Velcera common
      stock shall be converted into an identical number of shares of Denali common
      stock upon the Effective Time (as defined herein);

     

    The
      parties to this agreement intend to adopt this agreement as a plan of
      reorganization within the meaning of Section 368(a) of the Internal Revenue
      Code
      of 1986, as amended (the “Code”)
      and
      the regulations promulgated thereunder, and intend that the Merger and the
      transactions contemplated by this agreement be undertaken pursuant to that
      plan;
      and

     

    The
      parties to this agreement intend that the Merger qualify as a “reorganization,”
within the meaning of Section 368(a) of the Code, and that Denali, MergerCo
      and
      Velcera will each be a “party to a reorganization,” within the meaning of
      Section 368(b) of the Code, with respect to the Merger.

     

    The
      parties therefore agree as follows:

     

    ARTICLE I

    MERGER

     

    Subject
      to the satisfaction or waiver of the conditions set forth in Article VI,
      at the
      Effective Time, (i) MergerCo will merge with and into Velcera, and (ii) Velcera
      will become a wholly-owned subsidiary of Denali. The term “Surviving
      Company”
as
      used
      herein shall mean Velcera, as a wholly-owned subsidiary of Denali after giving
      effect to the Merger. The Merger will be effected pursuant to a certificate
      of
      merger in accordance with the provisions of, and with the effect provided in,
      Section 251 of the DGCL. The Merger shall be effective when a certificate of
      merger, in substantially the form attached hereto as Exhibit
      A,
      is
      filed with the Delaware Secretary of State (the “Effective
      Time”).
      As
      used herein, the term “Effective
      Date”
shall
      mean the date on which the certificate of merger is filed with the Delaware
      Secretary of State.

     

    1.1 Effects
      of Merger.

     

    (a) From
      and
      after the Effective Time and until further amended in accordance with law,
      (i)
      the Certificate of Incorporation of Velcera as in effect immediately prior
      to
      the Effective Time shall be the Certificate of Incorporation of the Surviving
      Company, and (ii) the Bylaws of Velcera as in effect immediately prior to the
      Effective Time shall be the Bylaws of the Surviving Company. 

     

    (b) Denali,
      Velcera and MergerCo shall each use their best efforts to take all such action
      as may be necessary or appropriate to effectuate the Merger in accordance with
      the DGCL at the Effective Time. If at any time after the Effective Time, any
      further action is necessary or desirable to carry out the purposes of this
      agreement and to vest the Surviving Company with full right, title and
      possession to all properties, rights, privileges, immunities, powers and
      franchises of either Velcera or MergerCo, the officers of the Surviving Company
      are fully authorized in the name of Denali, Velcera and MergerCo or otherwise
      to
      take, and shall take, all such lawful and necessary action.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Subject
      to the provisions of Article VI
      and
Article VII hereof,
      the closing of the transactions contemplated hereby (the “Closing”)
      shall
      take place on or before March 31, 2007, at 787 Seventh Avenue, 48th Floor,
      New
      York, New York, or such other time and place as Velcera and Denali mutually
      agree (the “Closing
      Date”).
      On
      the Closing Date, to effect the Merger, the parties hereto will cause the
      Certificate of Merger to be filed with the Delaware Secretary of State in
      accordance with the DGCL. 

     

    1.2 Effect
      on Velcera Capital Stock and MergerCo Capital Stock.
      To
      effectuate the Merger, and subject to the terms of this agreement, at the
      Effective Time:

     

    (a) Each
      share of Velcera common stock issued and outstanding immediately prior to the
      Effective Time (other than Dissenting Shares) shall automatically be converted
      into the same number of shares of Denali common stock;

     

    (b) All
      shares of common stock of MergerCo issued and outstanding immediately prior
      to
      the Effective Time will be converted into and become one validly issued, fully
      paid and nonassessable share of common stock of the Surviving Company.

     

    (c) On
      the
      Effective Date, Denali shall assume all of Velcera’s rights and obligations with
      respect to outstanding stock options (the “Options”)
      issued
      pursuant to Velcera’s 2003 Stock Incentive Plan (the “Stock
      Incentive Plan”).
      Each
      Option shall, from and after the Effective Time, evidence the right to purchase
      a number of shares of Denali common stock equal to the same number of shares
      of
      Velcera common stock into which such Option is exercisable immediately prior
      to
      the Effective Date. 

     

    (d) On
      the
      Effective Date, Denali shall assume the rights and obligations with respect
      to
      outstanding warrants (the “Warrants”),
      to
      purchase shares of Velcera common stock. Each Warrant shall, from and after
      the
      Effective Time, evidence the right to purchase a number of shares of Denali
      common stock equal to the same number of shares of Velcera common stock into
      which such Warrant is exercisable immediately prior to the Effective Date.
      

     

    1.3 Rights
      of Holders of Velcera Common Stock.
      

     

    On
      and
      after the Effective Date and until surrendered for exchange, each outstanding
      stock certificate that immediately prior to the Effective Date represented
      shares of Velcera common stock (except Dissenting Shares) shall be deemed for
      all purposes, to evidence ownership of and to represent the same number of
      shares of Denali common stock into which such shares of Velcera common Stock
      shall have been converted pursuant to this agreement. The record holder of
      each
      such outstanding certificate representing shares of Velcera common stock, shall,
      after the Effective Date, be entitled to vote the shares of Denali common stock
      into which such shares of Velcera common stock shall have been converted on
      any
      matters on which the holders of record of Denali common stock, as of any date
      subsequent to the Effective Date, shall be entitled to vote. In any matters
      relating to such certificates of Velcera common stock, Denali may rely
      conclusively upon the record of stockholders maintained by Velcera containing
      the names and addresses of the holders of record of Velcera common stock on
      the
      Effective Date.  

     

    
      
        
        

      

      
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    1.4 Procedure
      for Exchange of Velcera Common Stock.

     

    (a) After
      the
      Effective Time, holders of certificates evidencing outstanding shares of Velcera
      common stock (except Dissenting Shares), upon surrender of such certificates
      to
      the Secretary of Denali, shall be entitled to receive certificates representing
      the number of shares of Denali common stock. Denali shall not be obligated
      to
      deliver any such shares of Denali common stock to which any former holder of
      shares of Velcera common stock is entitled until such holder surrenders the
      certificate or certificates representing such shares. Upon surrender, each
      certificate evidencing Velcera common stock shall be canceled. If there is
      a
      transfer of Velcera common stock ownership which is not registered in the
      transfer records of Velcera, a certificate representing the proper number of
      shares of Denali common stock may be issued to a person other than the person
      in
      whose name the certificate so surrendered is registered if: (1) upon
      presentation to the Secretary of Denali, such certificate shall be properly
      endorsed or otherwise be in proper form for transfer, (2) the person requesting
      such payment shall pay any transfer or other taxes required by reason of the
      issuance of shares of Denali common stock to a person other than the registered
      holder of such certificate or establish to the reasonable satisfaction of Denali
      that such tax has been paid or is not applicable, and (3) the issuance of such
      Denali common stock shall not, in the sole discretion of Denali, violate the
      requirements of the Regulation D “safe harbor” of the Securities Act of 1933, as
      amended, including the rules and regulations promulgated thereunder (the
“Securities
      Act”)
      with
      respect to the private placement of Denali common stock that precedes from
      the
      Merger. 

     

    (b) All
      shares of Denali common stock issued upon the surrender of Velcera common stock
      in accordance with the above terms shall be deemed to have been issued and
      paid
      in full satisfaction of all rights pertaining to such shares of Velcera common
      stock.

     

    (c) Shares
      of
      Denali common stock issued pursuant to the Merger will not be transferable
      except (1) pursuant to an effective registration statement under the
      Securities Act or (2) upon receipt by Denali of a written opinion of
      counsel for the holder reasonably satisfactory to Denali to the effect that
      the
      proposed transfer is exempt from the registration requirements of the Securities
      Act and relevant state securities laws. Restrictive legends shall be placed
      on
      all certificates representing shares of Denali common stock containing the
      identical language to the restrictive legend placed on each corresponding
      Velcera common stock certificate being surrendered. The rights and obligations,
      including without limitation, the restrictions on transferability, of Velcera
      set forth in the subscription agreements between Velcera and the Velcera
      stockholders who purchased common stock pursuant to Velcera’s 2004 private
      placement offering of 2,031,626 shares of common stock will inure to the benefit
      of Denali. 

     

    (d) In
      the
      event any certificate for Velcera common stock has been lost, stolen or
      destroyed, Denali shall issue and pay in exchange for such lost, stolen or
      destroyed certificate, promptly following its receipt of an affidavit of that
      fact by the holder thereof, such shares of the Denali common stock.

     

    1.5 Dissenting
      Shares.
      Shares
      of common stock of Velcera held by stockholders of Velcera who have properly
      exercised and preserved appraisal rights with respect to those shares in
      accordance with Section 262 of the DGCL (“Dissenting
      Shares”)
      shall
      not be converted into shares of Denali common stock pursuant to Section
      1.2
      above,
      and the holders thereof shall be entitled only to such rights as are granted
      by
      Section 262 of the DGCL. Each holder of Dissenting Shares who becomes entitled
      to payment for such shares pursuant to Section 262 of the DGCL shall receive
      payment from the Surviving Company in accordance with such laws; provided,
      however,
      that if
      any holder of Dissenting Shares shall have effectively withdrawn such holder’s
      demand for appraisal of such shares or lost such holder’s right to appraisal and
      payment of such shares under Section 262 of the DGCL, such holder shall forfeit
      the right to appraisal of such shares and each such share shall thereupon be
      deemed to have been canceled, exchanged, as of the Effective Time, into one
      share of Denali common stock as provided in Section
      1.2
      above.
      Any payments with respect of Dissenting Shares will be deemed made by the
      Surviving Company. 

     

    
      
        
        

      

      
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    1.6 Directors
      and Officers of the Surviving Corporation.
      From and
      after the Effective Time, the directors and officers of the Surviving Company
      shall be the persons who were directors and officers of Velcera immediately
      prior to the Effective Time, respectively. These directors and officers of
      the
      Surviving Company shall hold office for the term specified in, and subject
      to
      the provisions contained in, the Certificate of Incorporation and Bylaws of
      the
      Surviving Company and applicable law. 

     

    1.7 Directors
      and Officers of Denali.
      At the
      Closing, the board of directors of Denali shall, subject to compliance with
      Section 14(f) of the Securities Exchange Act of 1934, as amended, including
      the
      rules and regulations promulgated thereunder (the “Exchange
      Act”),
      take
      the following action, to be effective upon the Effective Time: (i) increase
      the
      size of the Board of Directors of Denali to seven (7) persons; (ii) elect to
      the
      board of directors of Denali the persons who were directors of Velcera
      immediately prior to the Closing; and (iii) appoint as the officers of Denali
      those who were the officers of Velcera immediately prior to the Closing, or,
      in
      either case with regard to clauses (ii) and (iii), such other persons designated
      by Velcera. All of the persons serving as directors of Denali immediately prior
      to the Closing shall resign immediately following the election of the new
      directors, and the officers of Denali immediately prior to the Closing shall
      resign at the Closing from all of their positions with Denali, all subject
      to
      compliance with Rule 14f-1 promulgated under the Exchange Act. Subject to
      applicable law, Denali shall take all action reasonably requested by Velcera,
      but consistent with the Certificate of Incorporation and Bylaws of Denali,
      that
      is reasonably necessary to effect any such election or appointment of the
      designees of Velcera to Denali’s board of directors, including promptly
      hereafter mailing to Denali’s stockholders an information statement containing
      the information required by Section 14(f) of the Exchange Act and Rule 14f-1
      promulgated thereunder. Velcera shall supply Denali all information with respect
      to it and its nominees, officers, directors and Affiliates required by such
      Section 14(f) and Rule 14f-1. The provisions of this Section
      1.7
      are in
      addition to and shall not limit any rights which Velcera or any of its
      Affiliates may have as a holder or beneficial owner of shares of capital stock
      of Denali as a matter of law with respect to the election of directors or
      otherwise. “Affiliate”
has
      the
      meaning as defined in Rule 12b-2 promulgated under the Exchange Act, as such
      regulation is in effect on the date hereof.

     

    ARTICLE II

    REPRESENTATIONS
      AND WARRANTIES OF DENALI AND MERGERCO

     

    Denali
      and MergerCo hereby represent and warrant to Velcera as follows:

     

    2.1 Organization
      and Qualification

     

    .
      Denali
      and MergerCo each are, and on the Effective Date will be, corporations duly
      organized, validly existing and in good standing under the laws of the State
      of
      Delaware, and each has, and on the Effective Date will have, the requisite
      corporate power to carry on their respective businesses as now conducted. The
      copies of the Certificate of Incorporation and Bylaws of Denali and MergerCo
      that have been made available to Velcera on or prior to the date of this
      agreement are correct and complete copies of such documents as in effect as
      of
      the date hereof, and shall be in effect on the Effective Date. 

     

    2.2 Authority
      Relative to this Agreement; Non-Contravention.
      Each
      of
      Denali and MergerCo has the requisite corporate power and authority to enter
      into this agreement, and to carry out its obligations hereunder. The execution
      and delivery of this agreement by Denali and MergerCo, and the consummation
      by
      Denali and MergerCo of the transactions contemplated hereby have been duly
      authorized by the boards of directors of Denali and MergerCo. No further
      corporate proceedings on the part of Denali or MergerCo are necessary to
      authorize the execution and delivery of this agreement and the consummation
      of
      the transactions contemplated hereby. This agreement has been duly executed
      and
      delivered by Denali and MergerCo and, assuming it is a valid and binding
      obligation of Velcera, constitutes a valid and binding obligation of Denali
      and
      MergerCo enforceable in accordance with its terms except as enforcement may
      be
      limited by general principles of equity whether applied in a court of law or
      a
      court of equity and by bankruptcy, insolvency and similar laws affecting
      creditors’ rights and remedies generally. Except for (a) approvals under
      applicable Blue Sky laws
      and the
      filing of Form D with the Securities and Exchange Commission (“SEC”)
      and (b)
      the filing of the Certificate of Merger with the Delaware Secretary of State,
      no
      authorization, consent or approval of, or filing with, any public body, court
      or
      authority is necessary on the part of Denali or MergerCo for the consummation
      by
      Denali or MergerCo of the transactions contemplated by this agreement, except
      for such authorizations, consents, approvals and filings as to which the failure
      to obtain or make the same would not, in the aggregate, reasonably be expected
      to have a Material Adverse Effect on Denali or MergerCo, or adversely affect
      the
      consummation of the transactions contemplated hereby. For the purposes of this
      agreement “Material
      Adverse Effect”
shall,
      with respect to an entity, mean a material adverse effect on the business,
      operations, results of operations or financial condition of such entity on
      a
      consolidated basis.

     

    
      
        
        

      

      
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    2.3 No
      Conflicts.
      Neither
      Denali nor MergerCo is subject to, or obligated under, any provision of (a)
      their respective Certificates of Incorporation or Bylaws, (b) any agreement,
      arrangement or understanding, (c) any license, franchise or permit, nor (d)
      any
      law, regulation, order, judgment or decree, which would conflict with, be
      breached or violated, or in respect of which a right of termination or
      acceleration or any security interest, charge or encumbrance on any of their
      respective assets would be created, by the execution, delivery or performance
      of
      this agreement or the consummation of the transactions contemplated hereby,
      other than any such conflicts, breaches, violations, rights of termination
      or
      acceleration or security interests, charges or encumbrances which, in the
      aggregate, could not reasonably be expected to have a Material Adverse Effect
      on
      Denali
      or
      MergerCo.

     

    2.4 Capitalization.

     

    (a) As
      of the
      date hereof, Denali is, and on the Effective Date will be, authorized to issue
      75,000,000 shares of common stock, par value $.001 per share, and 10,000,000
      shares of preferred stock, par value $.001 per share, of which 125,000 shares
      of
      common stock and no shares of preferred stock are currently issued and
      outstanding. The issued and outstanding shares of common stock of Denali are,
      and on the Effective Date will be, duly authorized, validly issued, fully paid
      and nonassessable and not issued in violation of any preemptive rights and,
      to
      Denali’s Knowledge (as defined below), free from any restrictions on transfer
      (other than restrictions under the Securities Act or state securities laws)
      or
      any option, lien, pledge, security interest, encumbrance or charge of any kind.
      Denali has, and on the Effective Date will have, no other equity securities
      or
      securities containing any equity features authorized, issued or outstanding.
      There are no agreements or other rights or arrangements existing which provide
      for the sale or issuance of capital stock by Denali and there are no rights,
      subscriptions, warrants, options, conversion rights or agreements of any kind
      outstanding to purchase or otherwise acquire from Denali any shares of capital
      stock or other securities of Denali of any kind, and there will not be any
      such
      agreements prior to or on the Effective Date. There are, and on the Effective
      Date there will be, no agreements or other obligations (contingent or otherwise)
      which may require Denali to repurchase or otherwise acquire any shares of its
      capital stock other
      than the Redemption Agreement (as defined below).
      For the
      purposes of this agreement, “Knowledge”
means,
      with respect to an individual, that such individual is actually aware of a
      particular fact or other matter, with no obligation to conduct any inquiry
      or
      other investigation to determine the accuracy of such fact or other matter.
      A
      Person other than an individual shall be deemed to have Knowledge of a
      particular fact or other matter if the officers, directors or other management
      personnel of such Person had Knowledge of such fact or other matter.
“Person”
means
      any individual, corporation (including any non-profit corporation), general
      or
      limited partnership, limited liability company, joint venture, estate, trust,
      association, organization, labor union, governmental authority or other
      entity.

     

    (b) Denali
      is
      not a party to, and, to Denali’s Knowledge, there do not exist, any voting
      trusts, proxies, or other contracts with respect to the voting of shares of
      capital stock of Denali.

     

    
      
        
        

      

      
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    (c) The
      authorized capital of MergerCo consists of 1,000 shares of common stock, par
      value $.001 per share, all of which are, and on the Effective Date will be,
      issued and outstanding and held of record by Denali. The issued and outstanding
      shares of capital stock of MergerCo are, and on the Effective Date will be,
      duly
      authorized, validly issued, fully paid and nonassessable and have not been
      issued in violation of any preemptive rights, and, to Denali’s Knowledge, free
      from any restrictions on transfer (other than restrictions under the Securities
      Act or state securities laws) or any option, lien, pledge, security interest,
      encumbrance or charge of any kind. There are no rights, subscriptions, warrants,
      options, conversion rights or agreements of any kind outstanding to purchase
      or
      otherwise acquire from MergerCo any shares of capital stock or other securities
      of MergerCo of any kind, and there will not be any such agreements prior to
      or
      on the Effective Date. There are, and on the Effective Date there will be,
      no
      agreements or other obligations (contingent or otherwise) which may require
      MergerCo to repurchase or otherwise acquire any shares of its capital stock.
      

     

    2.5 Exchange
      Act Reports.
      Prior
      to
      the date of this agreement, Velcera has reviewed (a) Denali’s Registration
      Statement on Form 10-SB/A as filed with the SEC on December 30, 2005 (b)
      Denali’s Annual Report on Form 10-KSB for the fiscal year ended December 31,
      2005, and (c) Denali’s Quarterly Reports on Form 10-QSB for the quarters ended
      March 31, 2006, June 30, 2006, and September 30, 2006, as filed with the SEC
      (collectively, the “Denali
      SEC Filings”).
      As of
      their respective dates or as subsequently amended prior to the date hereof,
      each
      of the Denali SEC Filings (i) did not contain any untrue statement of a material
      fact or omit to state a material fact required to be stated therein or necessary
      to make the statements therein, in light of the circumstances under which they
      were made, not misleading and (ii) complied as to form in all material respects
      with the applicable rules and regulations of the SEC. Since its Form 10-SB/A,
      Denali has timely filed all reports that it has been required to file with
      the
      SEC pursuant to Section 13(a), 14(a), 14(c) and 15(d) of the Exchange Act.
      The
      financial statements (including footnotes thereto) included in or incorporated
      by reference into the Denali SEC Filings have been prepared in accordance with
      United States generally accepted accounting principles as in effect from time
      to
      time (“GAAP”)
      applied on a consistent basis during the periods involved (except as otherwise
      noted therein) and fairly present, in all material respects, the financial
      condition of Denali as of the dates thereof and results of operations for the
      periods referred to therein. 

     

    2.6 Litigation.
      There
      are
      no actions, suits, proceedings, orders or investigations pending or, to the
      Knowledge of Denali, threatened against Denali, MergerCo, or Denali’s officers,
      directors, employees or Affiliates, individually or in the aggregate, at law
      or
      in equity, or before or by any federal, state or other governmental department,
      court, commission, board, bureau, agency or instrumentality, domestic or
      foreign, and to the Knowledge of Denali, there is no reasonable basis for any
      proceeding, claim, action or governmental investigation directly or indirectly
      involving Denali, MergerCo, or Denali’s officers, directors, employees or
      affiliates, individually or in the aggregate. Neither Denali nor MergerCo is
      a
      party to any order, judgment or decree issued by any federal, state or other
      governmental department, court, commission, board, bureau, agency or
      instrumentality, domestic or foreign.

     

    2.7 Subsidiaries.
      MergerCo is Denali’s only subsidiary, direct or indirect. 

     

    2.8 No
      Brokers or Finders.
      Neither Denali, MergerCo, nor any of their officers, directors, employees or
      Affiliates have employed any broker, finder, investment banker or investment
      advisor or Person performing a similar function, or incurred any liability
      for
      brokerage commissions, finders’ fees, investment advisory fees or similar
      compensation in connection with the Merger. 

     

    2.9 Tax
      Matters.
      Denali
      has timely filed (or has had timely filed on its behalf) all returns,
      declarations, reports, estimates, information returns, and statements, including
      any schedules and amendments to such documents (“Denali
      Returns”),
      required to be filed or sent by it in respect of any taxes or required to be
      filed or sent by it by any taxing authority having jurisdiction. All such Denali
      Returns are complete and accurate in all material respects and Denali has timely
      and properly paid (or has had paid on its behalf) all taxes required to be
      paid
      by it.

     

    
      
        
        

      

      
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    2.10 Contracts
      and Commitments.
      Except as set forth on Schedule
      2.10,
      Denali
      is not a party to any contract, agreement, arrangement or other understanding,
      whether written or oral.

     

    2.11 Compliance
      with Laws.
      Except
      for any noncompliance that would not reasonably be expected to have a Material
      Adverse Effect on Denali, Denali and its officers, directors, agents and
      employees have complied with all applicable laws, regulations and other
      requirements, and no claims have been filed against Denali, and Denali has
      not
      received any notice, alleging a violation of any such laws, regulations or
      other
      requirements. Denali is not relying on any exemption from or deferral of any
      such applicable law, regulation or other requirement that would not be available
      to Velcera after it acquires Denali’s properties, assets and
      business.

     

    2.12 Validity
      of the Denali Common Stock.
      The
      shares of Denali common stock to be issued to holders of Velcera common stock
      pursuant to this agreement will be, when issued, duly authorized, validly
      issued, fully paid and nonassessable. 

     

    2.13 No
      Business
      Operations.
      Since
      their respective inception dates, neither Denali, nor MergerCo, have had any
      employees, revenues, or conducted any business operations.

     

    2.14 Real
      Property.
      Denali
      does not own or lease any real property. 

     

    2.15 Insurance.
      Denali
      does not own or maintain any insurance policies. 

     

    2.16 No
      Undisclosed Liabilities.
      Except
      as
      set forth on Schedule
      2.17
      hereto,
      Denali has no liabilities, whether accrued, absolute, contingent, unliquidated
      or otherwise.

     

    2.17 Tax
      Free
      Reorganization.
      Neither
      Denali nor, to Denali’s Knowledge, any of its Affiliates has through the date of
      this agreement taken or agreed to take any action that would prevent the Merger
      from qualifying as a reorganization under Section 368(a) of the Code.

     

    2.18 Full
      Disclosure.
      The
      representations and warranties of Denali and MergerCo contained in this
      agreement (and in any schedule, exhibit, certificate or other instrument to
      be
      delivered under this agreement) are true and correct in all material respects,
      and such representations and warranties do not omit any material fact necessary
      to make the statements contained therein, in light of the circumstances under
      which they were made, not misleading. There is no fact of which Denali or
      MergerCo has Knowledge that has not been disclosed to Velcera pursuant to this
      agreement, including the schedules hereto, all taken together as a whole, which
      has had or could reasonably be expected to have a Material Adverse Effect on
      Denali or MergerCo, or materially adversely affect the ability of Denali or
      MergerCo to consummate in a timely manner the transactions contemplated hereby.
      

     

    ARTICLE III

    REPRESENTATIONS
      AND WARRANTIES OF VELCERA

     

    3.1 Organization
      and Qualification.
      Velcera
      is, and on the Effective Date will be, a corporation duly organized, validly
      existing and in good standing under the laws of the State of Delaware, and
      has,
      and on the Effective Date will have, the requisite corporate power to carry
      on
      its business as now conducted. The copies of the Certificate of Incorporation
      and Bylaws of Velcera that has been made available to Denali and MergerCo on
      or
      prior to the date of this agreement are correct and complete copies of such
      documents as in effect as of the date hereof, and shall be in effect on the
      Effective Date. 

     

    
      
        
        

      

      
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    3.2 Authority
      Relative to this Agreement; Non-Contravention.
      Velcera
      has the requisite corporate power and authority to enter into this agreement,
      and to carry out its obligations hereunder. The execution and delivery of this
      agreement by Velcera, and the consummation by Velcera of the transactions
      contemplated hereby have been duly authorized by its board of directors. No
      further corporate proceedings on the part of Velcera are necessary to authorize
      the execution and delivery of this agreement and the consummation of the
      transactions contemplated hereby. This agreement has been duly executed and
      delivered by Velcera and, assuming it is a valid and binding obligation of
      Denali and MergerCo, constitutes a valid and binding obligation of Velcera
      enforceable in accordance with its terms except as enforcement may be limited
      by
      general principles of equity whether applied in a court of law or a court of
      equity and by bankruptcy, insolvency and similar laws affecting creditors’
rights and remedies generally. Except for (a) approvals under applicable Blue
      Sky laws
      and the
      filing of Form D with the SEC
      and (b)
      the filing of the certificate of merger with the Delaware Secretary of State,
      no
      authorization, consent or approval of, or filing with, any public body, court
      or
      authority is necessary on the part of Velcera for the consummation by Velcera
      of
      the transactions contemplated by this agreement, except for such authorizations,
      consents, approvals and filings as to which the failure to obtain or make the
      same would not, in the aggregate, reasonably be expected to have a Material
      Adverse Effect on Velcera, or adversely affect the consummation of the
      transactions contemplated hereby. 

     

    3.3 No
      Conflicts.
      Velcera
      is not subject to, or obligated under, any provision of (a) its Certificate
      of
      Incorporation or Bylaws, (b) any agreement, arrangement or understanding, (c)
      any license, franchise or permit, or (d) any law, regulation, order, judgment
      or
      decree, which would conflict with, be breached or violated, or in respect of
      which a right of termination or acceleration or any security interest, charge
      or
      encumbrance on any of their respective assets would be created, by the
      execution, delivery or performance of this agreement or the consummation of
      the
      transactions contemplated hereby, other than any such conflicts, breaches,
      violations, rights of termination or acceleration or security interests, charges
      or encumbrances which, in the aggregate, could not reasonably be expected to
      have a Material Adverse Effect on Denali or MergerCo.

     

    ARTICLE IV

    CONDUCT
      OF BUSINESS PENDING THE MERGER

     

    4.1 Conduct
      of Business by Denali
      and
      MergerCo.
      From
      the
      date of this agreement to the Effective Date, unless Velcera shall otherwise
      agree in writing or as otherwise expressly contemplated or permitted by other
      provisions of this agreement, including but not limited to this Section
      4.1,
      neither
      Denali nor MergerCo shall, directly or indirectly, (a) amend its Certificate
      of
      Incorporation or Bylaws, (b) split, combine or reclassify any outstanding shares
      of capital stock of Denali, (c) declare, set aside, make or pay any dividend
      or
      distribution in cash, stock, property or otherwise with respect to the capital
      stock of Denali, (d) issue or sell any additional shares of, or options,
      warrants, conversions, privileges or rights of any kind to acquire any shares
      of, any of its capital stock, (e) acquire (by merger, exchange, consolidation,
      acquisition of stock or assets or otherwise) any corporation, partnership,
      joint
      venture or other business organization or division or material assets thereof
      or
      (f) make or change any material tax elections.

     

    ARTICLE V

    ADDITIONAL
      COVENANTS AND AGREEMENTS

     

    5.1 Governmental
      Filings.
      Subject
      to the terms provided herein, each party will use all reasonable efforts to
      take, or cause to be taken, all actions and to do, or cause to be done, all
      things necessary, proper or advisable to consummate and make effective as
      promptly as practicable the transactions contemplated by this agreement. Each
      party will use all reasonable efforts and will cooperate with the other party
      in
      the preparation and filing, as soon as practicable, of all filings, applications
      or other documents required under applicable laws, including, but not limited
      to, the Exchange Act, to consummate the transactions contemplated by this
      agreement. Prior to submitting each filing, application, registration statement
      or other document with the applicable regulatory authority, each party will,
      to
      the extent practicable, provide the other party with an opportunity to review
      and comment on each such application, registration statement or other document
      to the extent permitted by applicable law. Each party will use all reasonable
      efforts and will cooperate with the other party in taking any other actions
      necessary to obtain such regulatory or other approvals and consents at the
      earliest practicable time, including participating in any required hearings
      or
      proceedings. 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    5.2 Expenses.
      Except
      as
      otherwise provided in this agreement, all costs and expenses incurred in
      connection with this agreement and the transactions contemplated hereby shall
      be
      paid by the party incurring such costs and expenses.

     

    5.3 Due
      Diligence; Access to Information.
      To the
      extent not previously provided, Denali shall afford to Velcera and its
      authorized representatives the opportunity to conduct and complete a due
      diligence investigation of Denali. In light of the foregoing, Denali shall
      disclose and make available (together with the right to copy) to Velcera and
      its
      officers, employees, attorneys, accountants and other representatives
      (hereinafter collectively referred to as “Representatives”),
      all
      books, papers, and records relating to the assets, stock, properties,
      operations, obligations and liabilities of Denali and MergerCo.

     

    5.4 Tax
      Treatment.
      It is
      intended by the parties hereto that the Merger shall constitute a reorganization
      within the meaning of Section 368(a) of the Code. Each of the parties hereto
      adopts this agreement as a “plan of reorganization” within the meaning of
      Treasury Regulation § 1.368-2(g) and 1.368-3(a). Both prior to and after the
      Closing, each party’s books and records shall be maintained, and all federal,
      state and local income tax returns and schedules thereto shall be filed in
      a
      manner consistent with the Merger being qualified as a reverse triangular merger
      under Section 368(a)(2)(E) of the Code (and comparable provisions of any
      applicable state or local laws); except to the extent the Merger is determined
      in a final administrative or judicial decision not to qualify as a
      reorganization within the meaning of Code Section 368(a).

     

    5.5 Press
      Releases.
      Velcera
      and Denali shall agree with each other as to the form and substance of any
      press
      release or public announcement related to this agreement or the transactions
      contemplated hereby; provided, however, that nothing contained herein shall
      prohibit either party, following notification to the other party, from making
      any disclosure which is required by law or regulation. If any such press release
      or public announcement is so required, the party making such disclosure shall
      consult with the other party prior to making such disclosure, and the parties
      shall use all reasonable efforts, acting in good faith, to agree upon a text
      for
      such disclosure which is satisfactory to both parties. 

     

    5.6 Securities
      Reports.
      Denali
      shall timely file with the SEC all reports and other documents required to
      be
      filed under the Securities Act or Exchange Act. All such reports and documents
      (i) shall not, as of the date of such filing, contain any untrue statement
      of
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein, in light of the circumstances under
      which they were made, not misleading, and (ii) shall comply as to form, in
      all
      material respects, with the applicable rules and regulations of the SEC.

     

    5.7 Private
      Placement.
      Each of
      Velcera and Denali shall take all necessary action on its part such that the
      issuance of the Denali common stock to Velcera stockholders constitutes a valid
      “private placement” under the Securities Act. Without limiting the generality of
      the foregoing, Velcera shall (1) provide each Velcera stockholder with a
      stockholder qualification questionnaire in the form reasonably acceptable to
      both Denali and Velcera (a “Stockholder
      Questionnaire”)
      and
      (2) use its best efforts to cause each Velcera stockholder to truthfully
      attest
      that (i) such stockholder is acquiring the Denali common stock for his, her
      or
      its sole account, for investment and not with a view to the resale or
      distribution thereof and (ii) that stockholder either (A) is an “accredited
      investor” as defined in Regulation D of the Securities Act, (B) has such
      knowledge and experience in financial and business matters that the stockholder
      is capable of evaluating the merits and risks of receiving the Denali common
      stock, or (C) has appointed an appropriate person reasonably acceptable to
      both
      Denali and Velcera to act as the stockholder’s purchaser representative in
      connection with evaluating the merits and risks of receiving the
      Merger.

     

    
      
        
        

      

      
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    5.8 Velcera
      Stockholder Written Consent; Materials to Stockholders.

     

    (a) Velcera
      shall use its best efforts to obtain, in lieu of holding a stockholder meeting,
      the written consent of the number of Velcera stockholders necessary under its
      Certificate of Incorporation, Bylaws, and the DGCL to approve this agreement
      and
      the Merger.

     

    (b) Velcera
      shall as promptly as practicable following the date of this agreement prepare
      and mail to Velcera stockholders all information as may required to comply
      with
      the DGCL, the Securities Act and the Exchange Act.

     

    5.9 NoSolicitation. Unless
      and until this agreement shall have been terminated pursuant to Section
7.1,
      neither
      Denali nor its officers, directors or agents shall, directly or indirectly,
      encourage, solicit or initiate discussions or negotiations with, or engage
      in
      negotiations or discussions with, or provide non-public information to, any
      Person or group of Persons concerning any merger, sale of capital stock, sale
      of
      substantial assets or other business combination.

     

    5.10 Failure
      to Fulfill Conditions.
      In
      the
      event that either of the parties hereto determines that a condition to its
      respective obligations to consummate the transactions contemplated hereby cannot
      be fulfilled on or prior to the termination of this agreement, it will promptly
      notify the other party.

     

    5.11 Notification
      of Certain Matters.
      On or
      prior to the Effective Date, each party shall give prompt notice to the other
      party of (i) the occurrence or failure to occur of any event or the discovery
      of
      any information, which occurrence, failure or discovery would be likely to
      cause
      any representation or warranty on its part contained in this agreement to be
      untrue, inaccurate or incomplete after the date hereof in any material respect
      or, in the case of any representation or warranty given as of a specific date,
      would be likely to cause any such representation or warranty on its part
      contained in this agreement to be untrue, inaccurate or incomplete in any
      material respect as of such specific date, and (ii) any material failure of
      such
      party to comply with or satisfy any covenant or agreement to be complied with
      or
      satisfied by it hereunder.

     

    5.12 Redemption
      of Denali Shares.
      Contemporaneously with the execution of this agreement, Lindsay A. Rosenwald,
      M.D., who holds approximately 97% of the outstanding common stock of Denali,
      shall have entered into a redemption agreement with Denali in the form of
Exhibit
      B
      hereto
      (the “Redemption
      Agreement”)
      pursuant to which Denali will redeem all shares of Denali common stock
      beneficially held by him. Prior to the Closing, Denali shall use its best
      efforts to cause the other Denali stockholders to enter into the Redemption
      Agreement. The Denali stockholders who enter into the Redemption Agreement
      will
      receive, in exchange for their shares of Denali common stock, an aggregate
      amount equal to $125,000 less Denali liabilities as of the Effective Date,
      multiplied by the percent of outstanding shares of Denali common stock held
      by
      parties to the Redemption Agreement. The redemption of the Denali common stock
      will become effective concurrently with the Effective Time, however the
      completion of the Merger is a condition to the redemption. Other than the shares
      of Denali common stock which will be issued to Velcera Stockholders hereunder,
      upon the consummation of such redemption (assuming all Denali stockholders
      enter
      into the Redemption Agreement), there will be no other shares of Denali common
      stock outstanding. 

     

    
      
        
        

      

      
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    ARTICLE VI

    CONDITIONS

     

    6.1 Conditions
      to Obligations of Each Party.
      The
      respective obligations of each party to effect the transactions contemplated
      hereby are subject to the fulfillment or waiver at or prior to the Effective
      Date of the following conditions:

     

    (a) No
      Prohibitive Change of Law.
      There
      shall have been no law, statute, rule or regulation, domestic or foreign,
      enacted or promulgated which would prohibit or make illegal the consummation
      of
      the transactions contemplated hereby. 

     

    (b) Velcera
      Stockholder Approval.
      This
      agreement and the Merger shall have been approved by the Stockholders of Velcera
      in accordance with the DGCL. 

     

    (c) Section
      14(f) Compliance.
      Ten
      days shall have elapsed since an information statement containing the
      information required by Section 14(f) of the Exchange Act and Rule 14f-1
      promulgated thereunder has been filed with the SEC and transmitted to the
      stockholders of Denali in accordance with said Rule 14f-1. 

     

    (d) Tax
      Opinion.
      Maslon
      Edelman Borman & Brand, LLP, counsel to Velcera, shall have issued an
      opinion, which opinion may be based on customary reliance and subject to
      customary qualifications, to the effect that for federal income tax purposes:
      (i) the Merger will qualify as a reorganization under Section 368 of the Code;
      and (ii) Velcera, Denali and MergerCo will each be a party to the reorganization
      within the meaning of Section 368(b) of the Code. 

     

    (e) Adverse
      Proceedings.
      There
      shall not be threatened, instituted or pending any action or proceeding before
      any court or governmental authority or agency (i) challenging or seeking to
      make illegal, or to delay or otherwise directly or indirectly restrain or
      prohibit, the consummation of the transactions contemplated hereby or seeking
      to
      obtain material damages in connection with such transactions, (ii) seeking
      to prohibit direct or indirect ownership or operation by Denali or MergerCo
      of
      all or a material portion of the business or assets of Velcera, or to compel
      Denali or MergerCo or Velcera to dispose of or to hold separately all or a
      material portion of the business or assets of Denali or MergerCo or of Velcera,
      as a result of the transactions contemplated hereby; (iii) seeking to
      invalidate or render unenforceable any material provision of this agreement
      or
      any of the other agreements attached as exhibits hereto or contemplated hereby,
      or (iv) otherwise relating to and materially adversely affecting the
      transactions contemplated hereby. 

     

    (f) Governmental
      Action.
      There
      shall not be any action taken, or any statute, rule, regulation, judgment,
      order
      or injunction proposed, enacted, entered, enforced, promulgated, issued or
      deemed applicable to the transactions contemplated hereby, by any federal,
      state
      or other court, government or governmental authority or agency, that would
      reasonably be expected to result, directly or indirectly, in any of the
      consequences referred to in Section
      6.1(e).
      

     

    (g) Market
      Condition.
      There
      shall not have occurred any general suspension of trading on the New York Stock
      Exchange, the Nasdaq Stock Markets, or any general bank moratorium or closing
      or
      any war, national emergency or other event affecting the economy or securities
      trading markets in
      any of
      the foregoing cases generally
      that would make completion of the Merger impossible. 

     

    (h) Representations
      and Compliance.
      The
      representations of Denali, MergerCo, and Velcera contained in this agreement
      were accurate as of the date of this agreement and are accurate as of the
      Effective Time, in all respects (in the case of any representation containing
      any materiality qualification) or in all material respects (in the case of
      any
      representation without any materiality qualification), except for
      representations and warranties made as of a specific date, which shall be
      accurate as of such date. Denali, MergerCo, and Velcera, respectively, shall
      in
      all material respects have performed each obligation and agreement and complied
      with each covenant to be performed and complied with by them hereunder at or
      prior to the Effective Date.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    (i) Officer’s
      Certificate.
      Denali
      and Velcera shall have furnished to each other a certificate of their respective
      Chief Executive Officers, dated as of the Effective Date, in which such officer
      shall certify that, to their Knowledge, the conditions set forth in Section
      6.1(h)
      have
      been fulfilled with respect to their corporation.

     

    (j) Secretary’s
      Certificate.
      Denali
      and Velcera shall have furnished to each other (i) copies of the text of the
      resolutions by which the corporate action necessary to approve this agreement
      and the certificate of merger, which shall be accompanied by a certificate
      of
      the corporate secretary of each respective corporation dated as of the Closing
      Date certifying to each other that such copies are true, correct and complete
      copies of such resolutions and that such resolutions were duly adopted and
      have
      not been amended or rescinded, (ii) an incumbency certificate dated as of the
      Closing Date executed by their respective corporate secretaries certifying
      the
      signature and office of the officer of their respective corporations who
      executes this agreement and the certificate of merger, and (iii) a copy of
      the
      corporation’s respective Certificates of Incorporation, certified by the
      Secretary of State of Delaware, with certificates from the Secretary of State
      of
      Delaware evidencing the good standing in such jurisdiction as of a day within
      three business days prior to the Closing Date. 

     

    6.2 Additional
      Conditions to Obligation of Velcera.
      The
      obligation of Velcera to consummate the transactions contemplated hereby in
      accordance with the terms of this agreement is also subject to the fulfillment
      or waiver of the following conditions:

     

    (a) Filing
      of SEC Reports.
      Denali
      shall have timely filed with the SEC all reports and other documents required
      to
      be filed under the Securities Act or Exchange Act, including without limitation,
      its Form 10-KSB for the year ended December 31, 2006.

     

    (b) Resignations.
      Each of
      the officers and directors of Denali immediately prior to the Effective Time
      shall deliver duly executed resignations from their positions with Denali
      effective immediately after the Effective Time.

     

    (c) Denali
      Redemption of Outstanding Shares.
      The
      Redemption Agreement between Denali and Lindsay A. Rosenwald, M.D. shall be
      in
      full effect and no party thereto shall be in breach thereof or have threatened
      to breach the Redemption Agreement. 

     

    (d) Denali
      Liabilities.
      Except
      for the liabilities set forth on Schedule
      2.17,
      Denali
      shall have no liabilities. 

     

    (e) Dissenters’
      Rights.
      Holders
      of no more than 5% of the outstanding shares of Velcera common stock and shall
      have validly exercised, or remained entitled to exercise, their appraisal rights
      under Section 262 of the DGCL.

     

    (f) Private
      Placement.
      Velcera
      shall have completed a private placement offering of its common stock prior
      to
      or contemporaneously with the Merger, on such terms as are satisfactory to
      Velcera in its sole discretion.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    ARTICLE VII

    TERMINATION,
      AMENDMENT AND WAIVER

     

    7.1 Termination.
      This
      agreement may be terminated prior to the Effective Date:

     

    (a) by
      mutual
      consent of Velcera and Denali, if the board of directors of each so determines
      by vote of a majority of the members of its entire board;

     

    (b) by
      either
      Denali or Velcera, if any representation of the non-terminating party set forth
      in this agreement was inaccurate when made or becomes inaccurate such that
      the
      condition set forth in Section
      6.1(h)
      could
      not be satisfied by the non-terminating party;

     

    (c) by
      either
      Denali or Velcera, if the non-terminating party fails to perform or comply
      with
      any of the obligations that it is required to perform or to comply with under
      this agreement such that the condition set forth in Section 6.1(h)
      could
      not be satisfied by the non-terminating party; 

     

    (d) by
      Velcera, if, Velcera fails to receive stockholder approval to the Merger as
      required by the DGCL; and

     

    (e) by
      either
      Velcera or Denali if the Closing Date is not on or before March 31, 2007, or
      such later date as Velcera and Denali may mutually agree (except that a party
      seeking to terminate this agreement pursuant to this clause may not do so if
      the
      failure to consummate the Merger by such date shall be due to the action or
      failure to act of the party seeking to terminate this agreement in breach of
      such party’s obligations under this agreement).

     

    Any
      party
      desiring to terminate this agreement shall give prior written notice of such
      termination and the reasons therefor to the other party.

     

    ARTICLE VIII

    GENERAL
      PROVISIONS

     

    8.1 Notices.
      All
      notices and other communications hereunder shall be in writing and shall be
      sufficiently given if made by hand delivery, by facsimile, by overnight delivery
      service for next business day delivery, or by registered or certified mail
      (return receipt requested), in each case with delivery charges prepaid, to
      the
      parties at the following addresses (or at such other address for a party as
      shall be specified by it by like notice):

     

    

    
      	
              If
                to Velcera:

            	
              Velcera
                Pharmaceuticals, Inc.

              201
                Corporate Drive

              Langhorne,
                Pennsylvania 19047

              Attn:
                Dennis F. Steadman

              Facsimile:
                (215) 579-8335

            
	 	 
	
              If
                to Denali 

              or
                MergerCo:

            	
              Denali
                Sciences, Inc. / Denali Acquisition Corp.

              c/o
                Paramount BioCapital Investments, LLC

              787
                Seventh Avenue, 48th
                Floor

              New
                York, New York 10019

              Attn:
                Timothy Hofer

              Facsimile:
                (212) 554-4355

            

    

     

    
      
        
        

      

      
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    All
      such
      notices and other communications shall be deemed to have been duly given as
      follows: when delivered by hand, if personally delivered, when received; (i)
      if
      delivered by registered or certified mail (return receipt requested), when
      receipt acknowledged; or (ii) if sent by facsimile, on the day of transmission
      or, if that day is not a business day, on the next business day; and the next
      business day delivery after being timely delivered to a recognized overnight
      delivery service.

     

    8.2 No
      Survival.
      The
      representations and warranties and obligations contained in this agreement
      will
      terminate at the Effective Time or on termination of this agreement in
      accordance with Section
      7.1,
      except
      that the obligations contained in Article I
      and any
      other obligation contained in this agreement requiring performance or compliance
      after the Effective Time will survive the Effective Time indefinitely.

     

    8.3 Interpretation.
      The
      headings contained in this agreement are for reference purposes only and shall
      not affect in any way the meaning or interpretation of this agreement.
      References to Sections and Articles refer to Sections and Articles of this
      agreement unless otherwise stated. Words such as “herein,” “hereinafter,”
“hereof,” “hereto,” “hereby” and “hereunder,” and words of like import, unless
      the context requires otherwise, refer to this agreement (including the Schedules
      hereto). As used in this agreement, the masculine, feminine and neuter genders
      shall be deemed to include the others if the context requires. 

     

    8.4 Severability.
      If
      any
      term, provision, covenant or restriction of this agreement is held by a court
      of
      competent jurisdiction to be invalid, void or unenforceable, the remainder
      of
      the terms, provisions, covenants and restrictions of this agreement shall remain
      in full force and effect and shall in no way be affected, impaired or
      invalidated, and the parties shall negotiate in good faith to modify this
      agreement and to preserve each party’s anticipated benefits under this
      agreement.

     

    8.5 Amendment.
      This
      agreement may not be amended or modified except by an instrument in writing
      approved by the parties to this agreement and signed on behalf of each of the
      parties hereto.

     

    8.6 Waiver.
      At
      any
      time prior to the Effective Date, any party hereto may (a) extend the time
      for
      the performance of any of the obligations or other acts of the other party
      hereto or (b) waive compliance with any of the agreements of the other party
      or
      with any conditions to its own obligations, in each case only to the extent
      such
      obligations, agreements and conditions are intended for its benefit. Any such
      extension or waiver shall only be effective if made in writing and duly executed
      by the party giving such extension or waiver.

     

    8.7 Miscellaneous.
      This
      agreement (together with all other documents and instruments referred to
      herein): (a) constitutes the entire agreement, and supersedes all other prior
      agreements and undertakings, both written and oral, among the parties, with
      respect to the subject matter hereof; and (b) shall be binding upon and inure
      to
      the benefit of the parties hereto and their respective successors and assigns,
      but shall not be assignable by either party hereto without the prior written
      consent of the other party hereto.

     

    8.8 Counterparts.
      This
      agreement may be executed in any number of counterparts, and each such
      counterpart shall be deemed to be an original instrument, but all such
      counterparts together shall constitute but one agreement. Signatures
      delivered by facsimile and other electronic means of transmission shall be
      valid
      and binding to the same extent as original signatures. 

     

    8.9 Third
      Party Beneficiaries.
      Each
      party hereto intends that this agreement,
      except
      as expressly provided herein, shall
      not
      benefit or create any right or cause of action in or on behalf of any person
      other than the parties hereto. 

     

    
      
        
        

      

      
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    8.10 Governing
      Law.
      This
      agreement is governed by the internal laws of the State of Delaware without
      regard to such state’s principles of conflicts of laws that would defer to the
      substantive laws of another jurisdiction.

     

    8.11 Jurisdiction;
      Service of Process.
      Any action or proceeding seeking to enforce any provision of, or based on any
      right arising out of, this agreement must, to the extent such courts will accept
      such jurisdiction, be brought
      against any of the
      parties in the courts of the State of Delaware, or, if it has or can acquire
      jurisdiction, in the United States District Court for the District of Delaware,
      and each of the parties consents to the jurisdiction of those courts (and of
      the
      appropriate appellate
      courts) in any such action or proceeding and waives any objection to venue
      laid
      therein. Process
      in any such action or proceeding may be served by sending or delivering a copy
      of the process to the party to be served at the address and in the manner
      provided for the giving of notices
      in Section 8.1.
      Nothing
      in this Section 8.11,
      however, affects the right of any party to serve legal process in any other
      manner permitted by law.

     

    [Remainder
      of Page Left Intentionally Blank - Signature Page to Follow]

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this agreement to be executed on the date first
      written above by their respective officers.

     

    

     

    
      	 	 	
              VELCERA
                PHARMACEUTICALS, INC.

               

              By:
                /s/Dennis Steadman

              Title: Chief
                Executive Officer

               

            
	 	 	
              DENALI
                SCIENCES, INC.

               

              By:/s/Timothy
                M. Hofer

              Title:
                Director

               

            
	 	 	
              DENALI
                ACQUISITION CORP.

               

              By:/s/Timothy
                M. Hofer

              Title: Director

            

    

     

    
      
        
        

      

      
        
          Signature
            Page

          
            Merger
              Agreement

          

        

        
          

        

      

      
        
        

      

    

    
EXHIBIT
      A

     

    CERTIFICATE
      OF MERGER

    of

    VELCERA
      PHARMACEUTICALS, INC.

    and

    DENALI
      ACQUISITION CORP.

     

    In
      accordance with Section 251 of the General Corporation Law of the State of
      Delaware, Velcera Pharmaceuticals, Inc. hereby certifies as
      follows:

     

    FIRST:
      That the
      name and state of incorporation of each of the constituent corporations of
      the
      merger is as follows:

     

    
      	
              NAME

            	 	
              STATE
                OF INCORPORATION

            
	
              Velcera
                Pharmaceuticals, Inc.

            	 	
              Delaware

            
	
              Denali
                Acquisition Corp.

            	 	
              Delaware

            

    

     

    SECOND:
      That an
      Agreement and Plan of Merger has been approved, adopted and executed by each
      of
      the constituent corporations in accordance with the requirements of Section
      251
      of the General Corporation Law of the State of Delaware.

     

    THIRD:
      That the
      name of the surviving corporation of the merger is Velcera Pharmaceuticals,
      Inc.

     

    FOURTH:
      The
      certificate of incorporation of Velcera Pharmaceuticals, Inc. will be the
      certificate of incorporation of the surviving corporation.

     

    FIFTH:
      The
      executed Merger Agreement is on file at an office of the surviving corporation,
      the address of which is 201 Corporate Drive, Langhorne, Pennsylvania
      19047.

     

    SIXTH:.
      That a
      copy of the Merger Agreement will be furnished by the surviving corporation,
      on
      request and without cost, to any stockholder of any constituent
      corporation.

     

    The
      undersigned corporation has caused this certificate of merger to be signed
      on
      ___________, 2007.

     

    
      	 	 	
              VELCERA
                PHARMACEUTICALS, INC.

               

              By:
                ______________________________

              Name: Dennis
                Steadman

              Title: Chief
                Executive Officer

            
	 	 	
               

              DENALI
                ACQUISITION CORP.

               

              By:
                ______________________________

              Name: ____________________________

              Title: _____________________________

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    EXHIBIT
      B

    

    Form
      of Redemption AgreementExhibit
      10.5

    

      PHARMA
        BIO-SERV, INC.

      33
        Méndez Vigo, Suite 110

      Dorado,
        PR 00646

      (787)
        278-2709

      

      January,
        2007

      

      Ms.
        Elizabeth Plaza

      363
        Dorado Beach East

      Dorado,
        Puerto Rico 00646-2096

      

      Re:
        Employment
        Agreement

      

      Dear
        Elizabeth:

       

      This
        letter (the “Amendment”) will constitute an amendment to your employment
        agreement (the “Agreement”) dated as of January 25, 2006, by and among
        Pharma-Bio Serv, Inc., a Delaware corporation formerly known as Lawrence
        Consulting Group, Inc., Plaza Consulting Group, Inc., the wholly-owned
        subsidiary of Pharma-Bio Serv, Inc., and you. 

       

      1.  All
        terms
        defined in the Agreement and used in this Amendment shall have the same meanings
        in this Amendment as in the Agreement.

       

      2.  Section
        1(c) of the Agreement is amended to read as follows:

       

      “(c)
        The
“Employment Term” shall mean the period commencing on the date of this Agreement
        and ending on December 31, 2007, unless terminated earlier pursuant to Section
        5
        of this Agreement.”

       

      3.  The
        second sentence of Section 1(d) of the Agreement is amended to read as
        follows:

       

      “The
        “Consulting Term” shall mean the period which commences immediately following
        the Employment Term and ends on January 31, 2009.”

       

      4.  Except
        as
        amended by this Amendment, the Agreement shall remain in full force and
        effect.

       

      Please
        confirm your agreement with the Amendment by signing the Amendment and returning
        it to the Company.

       

      
        	 	 	 
	 	
                Very
                  truly yours,

                 

                PHARMA-BIO SERV, INC.

              
	 
 	 
 	 
 
	 	By:  	/s/ Manuel
                O.
                Morera
	 	
                
Manuel
                O. Morera, CFO

      

      
        	 	 	 
	 	PLAZA
                CONSULTING
                GROUP, INC. 
	 
 	 
 	 
 
	 	By:  	/s/ Manuel
                O.
                Morera  
	 	
                
Manuel
                O. Morera, CFO

      

      
        	 	 	 
	 	 	 
	 	  	/s/ Elizabeth
                Plaza
	
                 

                 

              	
                

                Elizabeth
                  Plaza

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