Document:

Exhibit 10.1

 

COVANCE CLINICAL RESEARCH UNIT INC.

 

TYD INC.

 

RADIANT RESEARCH INC.

 

STOCKHOLDERS’ REPRESENTATIVES

 

 

AGREEMENT AND PLAN OF MERGER

 

 

Dated as of April 20, 2006

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  THE MERGER

  	
   

  
	
   

  	
  1.1

  	
  EFFECTIVE
  TIME OF THE MERGER

  	
  6

  
	
   

  	
  1.2

  	
  CLOSING

  	
  6

  
	
   

  	
  1.3

  	
  EFFECTS OF
  THE MERGER

  	
  6

  
	
  ARTICLE II

  	
  EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION

  	
   

  
	
   

  	
  2.1

  	
  EFFECT ON
  CAPITAL STOCK

  	
  7

  
	
   

  	
   

  	
  2.1.1

  	
  Capital
  Stock of Sub

  	
  7

  
	
   

  	
   

  	
  2.1.2

  	
  Cancellation
  of Company Shares

  	
  7

  
	
   

  	
   

  	
  2.1.3

  	
  Conversion
  of Company Securities

  	
  7

  
	
   

  	
   

  	
  2.1.4

  	
  Dissenter’s
  Rights

  	
  9

  
	
   

  	
  2.2

  	
  ESCROW

  	
  9

  
	
   

  	
  2.3

  	
  WORKING
  CAPITAL

  	
  10

  
	
   

  	
   

  	
  2.3.1

  	
  Working
  Capital Adjustment

  	
  10

  
	
   

  	
   

  	
  2.3.2

  	
  Adjustment
  of Net Distributable Amount

  	
  10

  
	
   

  	
   

  	
  2.3.3

  	
  Balance
  Sheet Date Working Capital Amount Defined

  	
  11

  
	
   

  	
   

  	
  2.3.4

  	
  Closing Date
  Working Capital Amount Defined

  	
  11

  
	
   

  	
  2.4

  	
  DELIVERY OF
  CONSIDERATION

  	
  12

  
	
   

  	
   

  	
  2.4.1

  	
  Disbursing
  Agent

  	
  12

  
	
   

  	
   

  	
  2.4.2

  	
  Exchange
  Procedures

  	
  12

  
	
   

  	
   

  	
  2.4.3

  	
  No Further
  Ownership Rights in Company Shares

  	
  13

  
	
   

  	
   

  	
  2.4.4

  	
  Return to
  Parent

  	
  13

  
	
   

  	
   

  	
  2.4.5

  	
  Withholding
  Rights

  	
  13

  
	
   

  	
   

  	
  2.4.6

  	
  Lost
  Certificates

  	
  13

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  3.1

  	
  REPRESENTATIONS
  AND WARRANTIES OF COMPANY

  	
  13

  
	
   

  	
   

  	
  3.1.1

  	
  Organization,
  Standing, and Power

  	
  13

  
	
   

  	
   

  	
  3.1.2

  	
  Capital
  Structure

  	
  14

  
	
   

  	
   

  	
  3.1.3

  	
  Authority

  	
  15

  
	
   

  	
   

  	
  3.1.4

  	
  No
  Violations

  	
  16

  
	
   

  	
   

  	
  3.1.5

  	
  Consents and
  Approvals; No Violations

  	
  16

  
	
   

  	
   

  	
  3.1.6

  	
  Financial
  Statements

  	
  16

  
	
   

  	
   

  	
  3.1.7

  	
  No Defaults

  	
  17

  
	
   

  	
   

  	
  3.1.8

  	
  Litigation

  	
  17

  
	
   

  	
   

  	
  3.1.9

  	
  No Material
  Adverse Change

  	
  17

  
	
   

  	
   

  	
  3.1.10

  	
  Absence of
  Undisclosed Liabilities

  	
  19

  
	
   

  	
   

  	
  3.1.11

  	
  Legal
  Compliance

  	
  19

  
	
   

  	
   

  	
  3.1.12

  	
  Certain Agreements

  	
  21

  
	
   

  	
   

  	
  3.1.13

  	
  Employees

  	
  21

  
	
   

  	
   

  	
  3.1.14

  	
  Employee
  Benefit Plans

  	
  21

  
	
   

  	
   

  	
  3.1.15

  	
  Real
  Property; Leases

  	
  23

  
	
   

  	
   

  	
  3.1.16

  	
  Environmental

  	
  23

  
	
   

  	
   

  	
  3.1.17

  	
  Customers
  and Suppliers

  	
  25

  
	
   

  	
   

  	
  3.1.18

  	
  Significant
  Contracts

  	
  25

  
	
   

  	
   

  	
  3.1.19

  	
  Taxes

  	
  26

  
	
   

  	
   

  	
  3.1.20

  	
  Interests of
  Insiders

  	
  28

  
	
   

  	
   

  	
  3.1.21

  	
  Technology
  and Intellectual Property Rights

  	
  29

  
	
   

  	
   

  	
  3.1.22

  	
  Vote
  Required

  	
  31

  

 

ii

 

	
   

  	
   

  	
  3.1.23

  	
  Brokers’ and
  Other Fees

  	
  31

  
	
   

  	
   

  	
  3.1.24

  	
  Complete
  Copies of Materials

  	
  31

  
	
   

  	
   

  	
  3.1.25

  	
  Board
  Recommendation

  	
  32

  
	
   

  	
   

  	
  3.1.26

  	
  Insurance

  	
  32

  
	
   

  	
   

  	
  3.1.27

  	
  Intentionally
  omitted

  	
  32

  
	
   

  	
   

  	
  3.1.28

  	
  Accounts
  Receivable

  	
  32

  
	
   

  	
   

  	
  3.1.29

  	
  Personal
  Property

  	
  32

  
	
   

  	
   

  	
  3.1.30

  	
  Guarantees
  and Suretyships

  	
  32

  
	
   

  	
   

  	
  3.1.31

  	
  Disclosure

  	
  32

  
	
   

  	
   

  	
  3.1.32

  	
  Reliance

  	
  32

  
	
   

  	
  3.2

  	
  REPRESENTATIONS
  AND WARRANTIES OF PARENT AND SUB

  	
  32

  
	
   

  	
   

  	
  3.2.1

  	
  Organization;
  Standing and Power

  	
  33

  
	
   

  	
   

  	
  3.2.2

  	
  Authority

  	
  33

  
	
   

  	
   

  	
  3.2.3

  	
  Consents and
  Approvals; No Violations

  	
  33

  
	
   

  	
   

  	
  3.2.4

  	
  Financing

  	
  33

  
	
   

  	
   

  	
  3.2.5

  	
  Interim
  Operation of Sub

  	
  33

  
	
   

  	
   

  	
  3.2.6

  	
  Disclosure

  	
  33

  
	
   

  	
   

  	
  3.2.7

  	
  Reliance

  	
  34

  
	
  ARTICLE IV

  	
  COVENANTS OF COMPANY

  	
   

  
	
   

  	
  4.1

  	
  CONDUCT OF
  BUSINESS

  	
  34

  
	
   

  	
   

  	
  4.1.1

  	
  Ordinary
  Course

  	
  34

  
	
   

  	
   

  	
  4.1.2

  	
  Exclusivity;
  Acquisition Proposals

  	
  36

  
	
   

  	
  4.2

  	
  BREACH OF
  REPRESENTATIONS AND WARRANTIES; NOTIFICATION; ACCESS TO INFORMATION

  	
  38

  
	
   

  	
  4.3

  	
  CONSENTS

  	
  39

  
	
   

  	
  4.4

  	
  COMMERCIALLY
  REASONABLE EFFORTS

  	
  39

  
	
   

  	
  4.5

  	
  NOTICE TO
  STOCKHOLDERS

  	
  39

  
	
   

  	
  4.6

  	
  TAX RETURNS

  	
  39

  
	
   

  	
  4.7

  	
  INTENTIONALLY
  OMITTED

  	
  39

  
	
   

  	
  4.8

  	
  PARACHUTE
  PAYMENTS

  	
  39

  
	
   

  	
  4.9

  	
  PRE-MERGER
  SPIN

  	
  40

  
	
   

  	
  4.10

  	
  STOCKHOLDER
  APPROVAL

  	
  40

  
	
  ARTICLE V

  	
  COVENANTS OF PARENT

  	
   

  
	
   

  	
  5.1

  	
  BREACH OF
  REPRESENTATIONS AND WARRANTIES

  	
  40

  
	
   

  	
  5.2

  	
  CONSENTS

  	
  40

  
	
   

  	
  5.3

  	
  COMMERCIALLY
  REASONABLE EFFORTS

  	
  40

  
	
  ARTICLE VI

  	
  ADDITIONAL AGREEMENTS

  	
   

  
	
   

  	
  6.1

  	
  CONFIDENTIALITY
  AGREEMENT

  	
  40

  
	
   

  	
  6.2

  	
  LEGAL
  CONDITIONS TO THE MERGER

  	
  40

  
	
   

  	
  6.3

  	
  HSR ACT
  FILINGS

  	
  40

  
	
   

  	
   

  	
  6.3.1

  	
  Filings and
  Cooperation

  	
  41

  
	
   

  	
   

  	
  6.3.2

  	
  Objections

  	
  41

  
	
   

  	
  6.4

  	
  OFFICERS AND
  DIRECTORS

  	
  42

  
	
   

  	
  6.5

  	
  EXPENSES

  	
  42

  
	
   

  	
  6.6

  	
  ADDITIONAL
  AGREEMENTS

  	
  42

  
	
   

  	
  6.7

  	
  PUBLIC
  ANNOUNCEMENTS

  	
  42

  
	
   

  	
  6.8

  	
  EMPLOYEE
  MATTERS

  	
  43

  
	
  ARTICLE VII

  	
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  7.1

  	
  CONDITIONS
  TO EACH PARTY’S OBLIGATION TO EFFECT THE MERGER

  	
  43

  
	
   

  	
   

  	
  7.1.1

  	
  Stockholder
  Approval

  	
  44

  

 

iii

 

	
   

  	
   

  	
  7.1.2

  	
  Consents

  	
  44

  
	
   

  	
   

  	
  7.1.3

  	
  No Order

  	
  44

  
	
   

  	
  7.2

  	
  CONDITIONS
  OF OBLIGATIONS OF PARENT AND SUB

  	
  44

  
	
   

  	
   

  	
  7.2.1

  	
  Representations
  and Warranties of Company

  	
  44

  
	
   

  	
   

  	
  7.2.2

  	
  Performance
  of Obligations of Company

  	
  44

  
	
   

  	
   

  	
  7.2.3

  	
  No Company
  Material Adverse Effect

  	
  44

  
	
   

  	
   

  	
  7.2.4

  	
  Legal Action

  	
  44

  
	
   

  	
   

  	
  7.2.5

  	
  Resignations

  	
  44

  
	
   

  	
   

  	
  7.2.6

  	
  Required
  Employee

  	
  45

  
	
   

  	
   

  	
  7.2.7

  	
  Intentionally
  Omitted

  	
  45

  
	
   

  	
   

  	
  7.2.8

  	
  Escrow
  Agreement

  	
  45

  
	
   

  	
   

  	
  7.2.9

  	
  Balance
  Sheet; Working Capital Schedule; Minutes

  	
  45

  
	
   

  	
   

  	
  7.2.10

  	
  Intentionally
  Omitted

  	
  45

  
	
   

  	
   

  	
  7.2.11

  	
  Pre-Merger
  Sales

  	
  45

  
	
   

  	
   

  	
  7.2.12

  	
  Non-Competition
  Agreements

  	
  46

  
	
   

  	
   

  	
  7.2.13

  	
  Good
  Standing Certificate

  	
  46

  
	
   

  	
   

  	
  7.2.14

  	
  Termination
  of Options and Warrants

  	
  46

  
	
   

  	
   

  	
  7.2.15

  	
  Dissenters’
  Rights

  	
  46

  
	
   

  	
   

  	
  7.2.16

  	
  Opinion of
  Counsel

  	
  46

  
	
   

  	
  7.3

  	
  CONDITIONS
  OF OBLIGATION OF COMPANY

  	
  46

  
	
   

  	
   

  	
  7.3.1

  	
  Representations
  and Warranties of Parent and Sub

  	
  46

  
	
   

  	
   

  	
  7.3.2

  	
  Performance
  of Obligations of Parent and Sub

  	
  46

  
	
  ARTICLE VIII

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
  8.1

  	
  INDEMNIFICATION
  RELATING TO AGREEMENT

  	
  47

  
	
   

  	
  8.2

  	
  THIRD PARTY CLAIMS

  	
  47

  
	
   

  	
  8.3

  	
  TAX CONTESTS

  	
  48

  
	
   

  	
  8.4

  	
  BINDING
  EFFECT

  	
  48

  
	
   

  	
  8.5

  	
  TIME LIMIT

  	
  48

  
	
   

  	
  8.6

  	
  LIMITATIONS

  	
  48

  
	
   

  	
  8.7

  	
  CONTRIBUTION

  	
  49

  
	
   

  	
  8.8

  	
  EXCLUSIVE
  REMEDY

  	
  49

  
	
   

  	
  8.9

  	
  STRADDLE
  PERIOD

  	
  49

  
	
  ARTICLE IX

  	
  TERMINATION, AMENDMENT, AND WAIVER

  	
   

  
	
   

  	
  9.1

  	
  TERMINATION

  	
  49

  
	
   

  	
  9.2

  	
  EFFECT OF TERMINATION

  	
  50

  
	
  ARTICLE X

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
  10.1

  	
  SURVIVAL OF
  REPRESENTATIONS, WARRANTIES, AND AGREEMENTS

  	
  51

  
	
   

  	
  10.2

  	
  NOTICES

  	
  51

  
	
   

  	
  10.3

  	
  INTERPRETATION

  	
  52

  
	
   

  	
  10.4

  	
  COUNTERPARTS

  	
  52

  
	
   

  	
  10.5

  	
  MISCELLANEOUS

  	
  52

  
	
   

  	
  10.6

  	
  NO JOINT
  VENTURE

  	
  53

  
	
   

  	
  10.7

  	
  GOVERNING
  LAW

  	
  53

  
	
   

  	
  10.8

  	
  AMENDMENT

  	
  53

  
	
   

  	
  10.9

  	
  EXTENSION,
  WAIVER

  	
  53

  
	
   

  	
  10.10

  	
  SUCCESSORS
  AND ASSIGNS

  	
  53

  
	
   

  	
  10.11

  	
  SPECIFIC
  PERFORMANCE

  	
  53

  
	
   

  	
  10.12

  	
  SEVERABILITY

  	
  53

  
	
   

  	
  10.13

  	
  SUBMISSION
  TO JURISDICTION

  	
  54

  
	
   

  	
  10.14

  	
  STOCKHOLDERS’
  REPRESENTATIVES

  	
  54

  

 

iv

 

AGREEMENT AND PLAN OF
MERGER

 

AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of April 20, 2006, among Covance
Clinical Research Unit Inc., a Florida corporation (“Parent”),
TYD Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Sub”), Radiant Research Inc., a Delaware corporation (“Company”), and James Stevenson and Christopher Grant, Jr.
(the “Stockholders’ Representatives”)
as agents and attorneys-in-fact for the holders of Company Shares (as defined
in Section 2.1).

 

INTENDING TO BE LEGALLY BOUND, and in
consideration of the premises and the mutual representations, warranties,
covenants, and agreements contained herein, Parent, Sub, Company and the
Stockholders’ Representatives hereby agree as follows:

 

ARTICLE I

THE MERGER

 

1.1                               Effective
Time of the Merger. Subject to the provisions of this Agreement, Sub
will be merged with and into Company (the “Merger”). A
certificate of merger (“Certificate of Merger”)
shall be duly prepared by the parties, executed by the Surviving Corporation
(as defined below) and thereafter delivered to the Secretary of State of
Delaware for filing, as provided in the Delaware General Corporation Law (the “DGCL”) as soon as practicable on or after the Closing Date
(as defined in Section 1.2). The Merger shall become effective upon the
later of the acceptance for filing of the Certificate of Merger by the
Secretary of State of Delaware or at such time thereafter as is provided in the
Certificate of Merger (the “Effective Time”).
Solely for purposes of clarification, Company and the Stockholders’
Representatives acknowledge and agree that Parent will have no obligation to
make any payment pursuant to this Agreement until the Merger has been confirmed
in writing by the Secretary of State of the State of Delaware.

 

1.2                               Closing.
The closing of the Merger (the “Closing”) will
take place as soon as practicable but no later than the fifth business day
after satisfaction or waiver of the last to be fulfilled of the conditions set
forth in Article VII (the “Closing Date”),
at the Seattle, Washington offices of Preston Gates & Ellis LLP at 925
Fourth Avenue, Suite 2900, Seattle, Washington 98104, which Closing is
anticipated to occur on the last day of the month in which such conditions have
been satisfied or waived, unless another date or place is agreed to in writing
by Parent and Company.

 

1.3                               Effects
of the Merger. At the Effective Time, (i) the separate existence
of Sub shall cease and Sub shall be merged with and into Company and Company
shall continue as the surviving corporation and as a wholly owned subsidiary of
Parent (subsequent to the Merger, Company is sometimes referred to herein as
the “Surviving Corporation”), (ii) the
certificate of incorporation of Company shall be amended in its entirety to be
the same as the certificate of incorporation of Sub, as in effect immediately
prior to the Effective Time, until thereafter amended in accordance with the
DGCL, (iii) the bylaws of Surviving Corporation shall be amended and
restated in its entirety to be the same as the bylaws of the Sub, as in effect
immediately prior to the Effective Time, until thereafter amended in accordance
with the provisions thereof, the certificate of incorporation, and
(iv) the directors and officers of Sub immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation in each
case until their respective successors shall have been duly elected,
designated, or qualified or until their earlier death, resignation, or removal
in accordance with the Surviving Corporation’s certificate of incorporation and
bylaws. The Merger shall, from and after the Effective Time, have all the
effects provided by Section 259 of the DGCL and other applicable law.

 

6

 

ARTICLE II

EFFECT OF
THE MERGER; DELIVERY OF CONSIDERATION

 

2.1                               Effect
on Capital Stock.  As of the Effective Time, by virtue of the
Merger and without any action (except as provided in Section 4.5 and in
this Section 2.1) on the part of Sub, Parent, Company, or the holder of any
shares of Company capital stock (“Company Shares”):

 

2.1.1                                                Capital
Stock of Sub.  Each share of Sub common stock, $0.01 par
value per share, issued and outstanding immediately prior to the Effective
Time, shall be converted into one (1) validly issued, fully paid, and
nonassessable share of Surviving Corporation common stock (“Surviving Corporation Common Stock”), with the stock
certificate of Sub evidencing ownership of such share of Surviving Corporation
Common Stock.

 

2.1.2                                                Cancellation
of Company Shares.  Each Company Share held by Company as
treasury stock and each Company Share owned directly or indirectly by Company
or by any subsidiary (as defined in Section 10.3) of Company shall
automatically be canceled and retired and shall cease to exist and no
consideration shall be delivered or deliverable in exchange therefor. Company
shall obtain a written consent to such cancellation from any subsidiary that
owns Company Shares, whether or not such subsidiary is wholly owned.

 

2.1.3                                                Conversion
of Company Securities.  Subject to Section 2.2 and
Article VIII, each Company Share issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares, as defined in
Section 2.1.4, and those Company Shares referred to in
Section 2.1.2), shall, without any action on the part of the holder
thereof (except as set forth in this Section 2.1.3), be converted into
their respective conversion payment (“Conversion Payment”),
which shall be calculated as follows:

 

(a)                                  Each share of Company Series 1A
Preferred Stock, $0.01 par value (the “Series 1A
Preferred Stock”),
issued and outstanding immediately prior to the Effective Time, shall be
converted into the right to receive an amount (the “Series 1A
Liquidation Amount”)
equal to $9.56 per share, as provided for in Section 2(a) of Company’s
certificate of incorporation.

 

(b)                                 Each share of Company Series 2 Preferred
Stock, $0.01 par value (the “Series 2
Preferred Stock”),
issued and outstanding immediately prior to the Effective Time, shall be
converted into the right to receive an amount (the “Series 2
Liquidation Amount”)
equal to $0.92304 per share, as provided for in Section 2(a) of Company’s
certificate of incorporation.

 

(c)                                  Each share of Company common stock, $0.01
par value (the “Company Common Shares”), issued
and outstanding immediately prior to the Effective Time shall be converted into
the right to receive an amount equal to the CSE Amount.

 

(d)                                 At the Effective Time all such Company
Shares shall no longer be outstanding and shall be cancelled and cease to
exist, and each certificate (“Certificate”)
previously representing any Company Shares shall represent only the right to
receive the applicable Conversion Payment as provided by this
Section 2.1.3. Notwithstanding anything to the contrary in this
Section 2.1.3, the amount to which any holders of Company Shares are
entitled pursuant to Section 2.1.3 shall be subject to reduction as a
result of the holdback of funds pursuant to, and the other terms and conditions
of, Section 2.2, Article VIII, Section 10.14 hereof, and the Escrow
Agreement.

 

(e)                                  Effective immediately prior to the
Effective Time and contingent upon consummation of the Merger, all outstanding
options to purchase Company Common Shares (the “Company
Options”) issued under
the Company’s 1998 Stock Incentive Compensation Plan (the 

 

7

 

“Company Stock Option Plan”)
shall become exercisable in full. At the Effective Time, all outstanding
Company Options that have not been exercised shall automatically be converted
into the right to receive a cash payment and shall be cancelled by virtue of
the Merger without any action on the part of the holder thereof. The cash
payment to be received with respect to each unexercised Company Option shall be
equal to the product obtained by multiplying (i) the excess, if any, of the CSE
Amount over the applicable exercise price per share for such Company Option by
(ii) the number of Company Common Shares that would have been issued to the
holder of such Company Option had such Company Option been exercised in full
(without regard to exercisability) immediately prior to the Effective Time
(such payment to be net of applicable withholding taxes).

 

(f)                                    At the Effective Time, all outstanding
warrants to purchase capital stock of the Company (“Company
Warrants”)
shall terminate by virtue of the Merger without any action on the part of the
holder thereof; provided, that outstanding Company Warrants to purchase Series
1A Preferred Stock or Series 2 Preferred Stock shall automatically be converted
into the right to receive a cash payment and shall be cancelled by virtue of
the Merger without any action on the part of the holder thereof. The cash
payment to be received with respect to each unexercised Company Warrant to
purchase Series 1A Preferred Stock (the “Series 1A Warrant Payment”)
shall be equal to the product obtained by multiplying (i) the excess, if any,
of the Series 1A Liquidation Amount over the applicable exercise price per
share for such Company Warrant by (ii) the number of shares of Series 1A
Preferred Stock that would have been issued to the holder of such Company
Warrant had such Company Warrant been exercised in full (without regard to
exercisability) immediately prior to the Effective Time. The cash payment to be
received with respect to each unexercised Company Warrant to purchase Series 2
Preferred Stock (the “Series 2 Warrant Payment”)
shall be equal to the product obtained by multiplying (i) the excess, if any,
of the Series 2 Liquidation Amount over the applicable exercise price per share
for such Company Warrant by (ii) the number of shares of Series 2 Preferred
Stock that would have been issued to the holder of such Company Warrant had
such Company Warrant been exercised in full (without regard to exercisability)
immediately prior to the Effective Time.

 

The numbers used below and in the pro forma calculations in the
attached Schedule 2.1 are for purposes of illustration only and will be
adjusted and set forth in the final Schedule 2.1, which shall be determined in
accordance with the following procedures, adjustments, and definitions as of
Closing and when approved in writing by Parent and Company prior to or at the
Closing shall be the final and determinative interpretation of the following:

 

	
  (i)

  	
   

  	
  Base Amount

  	
   

  	
  $

  	
   65,000,000

  	
   

  
	
  (ii)

  	
   

  	
  Plus In the
  Money Option Consideration

  	
   

  	
  $

  	
  886,693

  	
   

  
	
  (iii)

  	
   

  	
  Less Debt
  Payments

  	
   

  	
  $

  	
  (23,000,000

  	
  )

  
	
  (iv)

  	
   

  	
  Less
  Allocation Adjustment Amount

  	
   

  	
  $

  	
  (1,397,499

  	
  )

  
	
  (v)

  	
   

  	
  Net
  Distributable Amount

  	
   

  	
  $

  	
  41,489,194

  	
   

  
	
  (vi)

  	
   

  	
  Less
  Management Bonus Amount

  	
   

  	
  $

  	
  (2,292,389

  	
  )

  
	
  (vii)

  	
   

  	
  Less
  Aggregate Series 1A Payments

  	
   

  	
  $

  	
  (9,207,244

  	
  )

  
	
  (viii)

  	
   

  	
  Less
  Aggregate Series 2 Payments

  	
   

  	
  $

  	
  (17,012,309

  	
  )

  
	
  (ix)

  	
   

  	
  Adjusted
  Base Amount to CSEs

  	
   

  	
  $

  	
  12,977,252

  	
   

  
	
  (x)

  	
   

  	
  Common Share
  Equivalents (CSEs)

  	
   

  	
  33,638,236

  	
   

  
	
  (xi)

  	
   

  	
  CSE Amount

  	
   

  	
  $

  	
  0.38579

  	
   

  

 

8

 

The following definitions shall be used in making the foregoing
calculations:

 

“Adjusted Base Amount to CSEs” shall mean the Net Distributable
Amount less the Management Bonus Amount and the Aggregate Series 1A Payments
and the Aggregate Series 2 Payments as set forth in items (vi) through (viii)
of the above table.

 

“Aggregate Series 1A Payments” shall mean the sum of the aggregate
Series 1A Liquidation Amounts and the aggregate Series 1A Warrant Payments.

 

“Aggregate Series 2 Payments” shall mean the sum of the aggregate
Series 2 Liquidation Amounts and the aggregate Series 2 Warrant Payments.

 

“Allocation Adjustment Amount“ shall mean that amount which reduces the
Base Amount and is allocated in accordance with Schedule 2.1 attached
hereto. The Allocation Adjustment Amount reflects certain payments for
transaction expenses and the termination payment due under the Caltius
Investment Agreement (as defined in Section 3.1.1 of the Company Disclosure
Schedule).

 

“Base Amount” shall mean $65,000,000.

 

“CSEs” shall mean “Common Share Equivalents,” and shall consist of all
of the Company Common Shares outstanding immediately prior to Closing and including
any Company Common Shares underlying any “in-the-money” Company Options
outstanding immediately prior to Closing (Company Options shall be deemed
“in-the-money” to the extent the exercise price thereof is less than the CSE
Amount).

 

“CSE Amount” shall mean the Adjusted Base Amount
to CSEs divided by the number of CSEs.

 

“Debt Payments” shall mean those payments of outstanding debt of
Company set forth on Schedule 2.1.3, final pay-off amounts of which shall be
obtained on the date of Closing.

 

“In the Money Option
Consideration” shall mean the
aggregate exercise price of all in-the-money Company Options outstanding
immediately prior to the Closing.

 

“Management Bonus Amount” shall mean those bonus payments to be made to
Company management from the Net Distributable Amount in accordance with
Schedule 2.1 attached hereto.

 

“Net Distributable Amount” shall mean the Base Amount plus In the Money
Option Consideration and less Debt Payments and the Allocation Adjustment
Amount as set forth in items (ii) through (iv) of the above table.

 

2.1.4                                                Dissenters’
Rights. Company Shares issued and outstanding immediately prior to the
Effective Time and held by a holder who has not consented to the Merger in
writing and who is entitled to demand and properly demands appraisal for such
Company Shares in accordance with the DGCL (the “Dissenting Shares”) shall not be converted into a right to
receive the Conversion Payment unless such holder fails to perfect or withdraws
or otherwise loses such holder’s right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or otherwise loses such
holder’s right to appraisal, such Company Shares shall be treated as if they
had been converted as of the Effective Time pursuant to Section 2.1.3,
without any interest therefor. Company shall give Parent prompt notice of any
demands received by Company for appraisal

 

9

 

of Company Shares, and Parent
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Company shall not, except with the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands. Any amounts paid to a holder by Company pursuant to
dissenters’ rights in excess of the amount such holder would have otherwise
received hereunder shall be deducted from the Escrow Amount and will not be
reimbursed by Parent or an Affiliate of Parent.

 

2.2                               Escrow.
At the Closing, $15,000,000.00 of the Net Distributable Amount (the “Escrow Amount”) to be received by holders
of Company Shares and Company management, as applicable, pursuant to
Section 2.1.3 shall not be distributed to or made available for holders of
Company Shares or Company management in accordance with Section 2.1.3 but
rather shall be deposited by Parent with, and held by, an escrow agent,
reasonably acceptable to Company, in an escrow fund pursuant to the Escrow
Agreement substantially in the form attached hereto as Exhibit 2.2 (the “Escrow Agreement”)
to secure claims by Parent or Surviving Corporation for indemnification
pursuant to Article VIII. The portion of the Net Distributable Amount to be
escrowed with respect to each holder of Company Shares and each applicable
member of Company management is set forth on Schedule 2.1. The release of the
Escrow Amount, and the availability of the Escrow Amount for certain claims,
shall be subject to the terms of the Escrow Agreement.

 

2.3                               Working
Capital.

 

2.3.1                                                Working
Capital Adjustment. Within ninety (90) days following the Closing Date,
the Stockholders’ Representatives shall cause to be delivered to Parent an
unaudited balance sheet of the Company as of the Closing Date and a calculation
of the Balance Sheet Date Working Capital Amount and the Closing Date Working Capital
Amount (as defined below) (collectively, the “Working
Capital Amounts”). The Stockholders’ Representatives and their
authorized representatives shall have reasonable access to all relevant books
and records and employees of Surviving Corporation to the extent reasonably
required to prepare such calculation. Parent shall then have twenty (20) days
following delivery of such balance sheet and the calculation of the Working
Capital Amounts to review, at its expense, such balance sheet and calculation and
the workpapers used in the preparation thereof. In the event Parent objects to
such calculation within twenty (20) days following delivery of such balance
sheet and calculation by written notice to the Stockholders’ Representatives
(specifying such objections in reasonable detail and the basis therefor within
such time period), and in the further event the Stockholders’ Representatives
do not agree with such objections, the Stockholders’ Representatives and
Parent, within twenty (20) days following such notice of objection (the “Resolution Period”), shall attempt to resolve their
differences, and any resolution by them (evidenced in writing) as to any
disputed amounts shall be final, binding and conclusive. If at the conclusion
of the Resolution Period any amounts remain in dispute then the amounts so in
dispute shall be submitted to a firm of nationally recognized, independent
public accountants (the “Neutral Auditors”)
selected by the Stockholders’ Representatives and Parent within 10 days after
the expiration of the Resolution Period. If the Stockholders’ Representatives
and Parent are unable to agree on the Neutral Auditors, then a nationally
recognized accounting firm will be selected by lot from two names submitted by
the Stockholders’ Representatives and two names submitted by Parent, none of
which shall be engaged by the Stockholders’ Representatives, Parent, or
Parent’s affiliates. The Neutral Auditors shall act as an arbitrator to
determine and resolve, based solely on presentations by the Stockholders’
Representatives and Parent, and not by independent review, only those issues
still in dispute. The Neutral Auditors’ determination shall be made within
thirty (30) days of their selection, shall be set forth in a written statement
delivered to the Stockholders’ Representatives and Parent and shall be final,
binding and conclusive. The Stockholders’ Representatives and Parent agree to
execute, if requested by the Neutral Auditors, a reasonable engagement letter.
All fees and disbursements of the Neutral Auditors shall be paid one-half by
the Stockholders’ Representatives and one-half by Parent; provided, that if the
calculation of the Working Capital Amounts was materially accurate, Parent
shall pay for the entire cost of the Neutral Auditors.

 

2.3.2                                                Adjustment
of Net Distributable Amount. Upon the final determination of the
Working Capital Amounts, the Net Distributable Amount shall be increased by an
amount equal to the excess, if any, of the Closing Date Working Capital Amount
over the Balance Sheet Date Working Capital Amount or
shall be decreased by an amount equal to the excess, if any, of the Balance
Sheet Date Working Capital Amount over the Closing Date Working Capital Amount;
provided, however, that no such adjustment

 

10

 

shall be made to the Net
Distributable Amount unless the difference between the Balance Sheet Date
Working Capital Amount and the Closing Date Working Capital Amount is greater
than $5,000. If the Net Distributable Amount as so recalculated (the “Recalculated NDA”) exceeds the Net Distributable Amount,
Parent shall cause the amount of such excess to be delivered, within 10 days
after such final determination, to the Disbursement Agent for disbursement as
provided in Section 2.4 below. If the Net Distributable Amount exceeds the
Recalculated NDA, the amount of such excess shall be deemed a “Working Capital Deficit Adjustment”  that is an Indemnifiable Amount under
Section 8.1 hereof.

 

2.3.3                                                Balance
Sheet Date Working Capital Amount Defined. “Balance
Sheet Date Working Capital Amount” means the aggregate of the book
value on February 28, 2006 (the “Balance Sheet Date”
) or the amount stated below (if any) of those items listed under paragraph (i)
below less the aggregate amount on the Balance Sheet Date of those items listed
under paragraph (ii) below (all as determined in a manner consistent with the
methodology historically used by Company).

 

(i)                                     Working Capital
Assets:

 

(a)                                  All
accounts receivable and other receivables amount, net of allowances,
attributable to the Early Phase Business;

 

(b)                                 All
petty cash attributable to the Early Phase Business;

 

(c)                                  All
current, noncash assets owned by Company and attributable to the Early Phase
Business (as defined in Section 7.2.11), including prepaids, deposits and other
current assets (except for fixed assets);

 

(d)                                 All
fixed assets (i.e. Furniture, Fixtures & Equipment) owned by Company and
attributable to the Early Phase Business (excluding accumulated depreciation);
and

 

(e)                                  All
long term deposits and other noncash assets owned by Company and attributable
to the Early Phase Business (excluding goodwill and any stock or other equity
interests in any subsidiary of Company or any other legal entity).

 

(ii)                                  Working Capital
Liabilities:

 

(a)                                  All
trade payables attributable to the Early Phase Business;

 

(b)                                 All
accrued employee compensation and benefits expenses and accrued vacation pay as
of the Balance Sheet Date of or with respect to the employees at the clinical
research sites that comprise the Early Phase Business and the other key
employees of the Early Phase Business set forth on Schedule 6.8;

 

(c)                                  All
accrued capital lease expenses attributable to the Early Phase Business;

 

(d)                                 The
other expenses accrued by Company as of the Balance Sheet Date with respect to
the Early Phase Business, including accruals for incentive bonus amounts,
stipends, unclaimed property, and other expenses and

 

(e)                                  Deferred
revenue and deferred rent.

 

The Balance
Sheet Date Working Capital Amount is set forth on Schedule 2.3.3.

 

2.3.4                                                Closing
Date Working Capital Amount Defined. “Closing Date
Working Capital Amount”  means
the aggregate book value on the Closing Date of those items listed under
paragraph (i) below less the aggregate amount on the Closing Date of those items
listed under paragraph (ii)

 

11

 

below, in each case determined
after the Pre-Merger Spin has occurred such that the amounts in question relate
solely to the Early Phase Business retained by Company (all as determined in a
manner consistent with the methodology historically used by Company).

 

(i)                                     Working Capital
Assets:

 

(a)                                  All
accounts receivable and other receivables net of allowances of Company;

 

(b)                                 All
petty cash of Company;

 

(c)                                  All
current, noncash assets of Company, including prepaids, deposits and other
current assets (except for fixed assets);

 

(d)                                 All
fixed assets (i.e. Furniture, Fixtures & Equipment) owned by Company
(excluding accumulated depreciation); and

 

(e)                                  All
long term deposits and other noncash assets of Company (excluding goodwill and
any stock or other equity interests in any subsidiary of Company or any other
legal entity).

 

(ii)                                  Working Capital
Liabilities:

 

(a)                                  All
trade payables of Company;

 

(b)                                 All
accrued employee compensation and benefits expenses and accrued vacation pay as
of the Closing Date of or with respect to the employees at the clinical
research sites that comprise the Early Phase Business and the other key
employees of the Early Phase Business set forth on Schedule 6.8;

 

(c)                                  All
accrued capital lease expenses attributable to the Early Phase Business;

 

(d)                                 The
other expenses accrued by Company as of the Closing Date, including accruals
for incentive bonus amounts, stipends, unclaimed property, and other expenses;
provided however that any adjustment shall not include any increases in amounts
specifically accrued for bonuses to Eligible Employees set forth in the Balance
Sheet Working Capital Amount; and

 

(e)                                  Deferred
revenue and deferred rent.

 

2.4                               Delivery
of Consideration.

 

2.4.1                                                Disbursing
Agent. No later than the Closing Date, Parent shall cause to be
deposited with Mellon Investor Services, LLC, or other bank or trust company,
reasonably acceptable to Company, as Parent may choose in its discretion (the “Disbursing Agent”), the Net Distributable Amount less the
Escrow Amount. The deposited sum shall be invested in the Disbursing Agent’s
discretion (provided that Parent shall be responsible for replacing any losses
of principal resulting from such investments) and all interest thereon shall be
paid to Parent for its sole benefit.

 

2.4.2                                                Exchange
Procedures. At the Effective Time, Parent will instruct the Disbursing
Agent to pay, and the Disbursing Agent will pay, by check or by wire transfer
of same-day funds the applicable Conversion Payment, pursuant to
Section 2.1 and subject to Section 2.2 hereof, plus applicable
interest pursuant to Section 2.4.1 above, to each record holder of Company
Shares as of the Effective Time, other than to those holders of Dissenting
Shares not entitled thereto, upon (i) the submission of a Certificate to
the Disbursing Agent and a duly executed letter of transmittal (the “Letter of Transmittal”) by such holder of record, which
shall specify that risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Disbursing Agent, and which
shall be in the form and have such provisions as Parent and Company may

 

12

 

reasonably specify, and
(ii) the surrender of the Certificates in exchange for the applicable
Conversion Payment by such holder of record (which Certificates shall forthwith
be canceled).

 

2.4.3                                                No
Further Ownership Rights in Company Shares. The applicable Conversion
Payment delivered upon surrender in exchange for Company Shares in accordance
with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such Company Shares. After the
Effective Time there shall be no transfers on the stock transfer books of
Company of Company Shares issued prior thereto. Upon the effectiveness of the
Merger, all Company Shares issued prior thereto (other than Dissenting Shares)
shall no longer be outstanding and shall cease to exist, and each Certificate
previously representing any such shares shall represent only the right to
receive the applicable Conversion Payment as described in Section 2.1.3
subject to the terms of this Agreement. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Disbursing Agent
for transfer, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.

 

2.4.4                                                Return
to Parent.  Any cash made
available to the Disbursing Agent and not exchanged for Certificates (or
affidavits regarding lost, stolen or destroyed Certificates pursuant to Section
2.4.6 below) within twelve (12) months after the Effective Time shall be
redelivered or repaid by the Disbursing Agent to Parent. After such time any
holder of Certificates who has not theretofore delivered or surrendered such
Certificates to the Disbursing Agent, subject to applicable law, shall look as
a general creditor only to Parent for payment of the applicable Conversion
Payment. Notwithstanding any provision of this Agreement, to the fullest extent
permitted by applicable law, none of Parent, the Disbursing Agent, the
Surviving Corporation, the Stockholders’ Representatives, or any other party
hereto shall be liable to any holder of Company Shares for any cash delivered
to a public official pursuant to applicable abandoned property, escheat, or
similar law.

 

2.4.5                                                Withholding
Rights.  Parent or the Disbursing
Agent shall be entitled to deduct and withhold from the applicable Conversion
Payment otherwise payable pursuant to this Agreement to any Person (as defined
in Section 10.3) who was a holder of Company Shares immediately prior to
the Effective Time, such amounts as Parent or the Disbursing Agent is required
to deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the “Code”),
or any provision of state, local, or foreign tax law. Any such withheld amounts
shall be timely paid over to the appropriate Governmental Entity (as defined in
Section 3.1.5). To the extent that amounts are so withheld by Parent or
the Disbursing Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Certificates in
respect of which such deduction and withholding was made by Parent or the
Disbursing Agent.

 

2.4.6                                                Lost
Certificates.

 

If any Certificate shall have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen, or destroyed and, if required by the Surviving Corporation,
the agreement by such Person to indemnify Parent and Surviving Corporation
against any claim that may be made against either of them with respect to such
Certificate, the Disbursing Agent will issue in exchange for such lost, stolen,
or destroyed Certificate, the applicable Conversion Payment to which the holder
thereof is entitled pursuant to this Article II. Any fees or expenses of
the Disbursing Agent shall be borne by the Person to whom such Conversion
Payment is made as a condition precedent to the making of such Conversion
Payment.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1                               Representations
and Warranties of Company. Except as set forth in a correspondingly
numbered disclosure schedule delivered by Company to Parent dated as of the
date hereof (the “Company Disclosure
Schedule”) and arranged in paragraphs corresponding to numbered and
lettered sections contained in this Section 3.1, Company hereby makes the
representations and warranties set forth in Sections 3.1.1 through 3.1.32 below
to Parent and Sub; provided, however that such representations and warranties
are made as though the Pre-Merger Spin (as defined below) had been consummated
pursuant to, and in accordance with, the Pre-Merger Spin Agreements in the
forms set forth as Exhibit 7.2.11(a) (“Pre-Merger Spin Agreements”)
as of the

 

13

 

date hereof. All references in
the subsections of this Section 3.1 to “Company” shall include Company’s
subsidiaries except to the extent specifically excluded or except as otherwise
clearly required by the context. For purposes of this Agreement, “Company Material Adverse Effect” means, after the date
hereof unless otherwise indicated, a material adverse effect on the financial
condition, business, assets or results of operations of Company and its
subsidiaries, taken as a whole, or that would materially impair the ability of
Company to consummate the transactions contemplated by this Agreement. Any
single adverse effect or related series of adverse effects that has,
individually or in the aggregate, a negative financial impact on Company of
$250,000 or less shall not be considered a material adverse effect for purposes
of this Agreement.

 

3.1.1                                                Organization,
Standing, and Power. Each of Company and its subsidiaries is an entity
duly organized, validly existing, and in good standing, as applicable, under
the laws of its jurisdiction of incorporation or organization, has all
requisite corporate power and authority to own, lease, and operate its
properties and to carry on its businesses as now being conducted, and is duly
qualified and in good standing, as applicable, to do business in each
jurisdiction in which the character of the property owned, leased, or operated
by it or the nature of its activities makes such qualification necessary (all
such jurisdictions are listed in Section 3.1.1 of the Company Disclosure
Schedule), except in such jurisdictions in which a failure to be so qualified
would not have, or reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect (as defined above). Company has
delivered or made available to Parent complete and correct copies of Company’s
certificate of incorporation and bylaws and minutes of Company’s board of
directors (and each committee thereof) and the comparable governing instruments
and minutes of each of its subsidiaries, in each case, as amended to the date
hereof, other than those minutes or portions of such minutes relating to the
Merger, this Agreement, or the transactions contemplated hereby (the “Transactions”) or to the Pre-Merger Spin. The minute books
and stock records of Company contain correct and complete records of all
material proceedings and actions taken at all meetings of, or effected by
written consent of, the stockholders of Company and its board of directors, and
the stock records of Company contain correct and complete records of all
original issuances and subsequent transfers, repurchases, and cancellations of
Company’s capital stock. Company is the owner, directly or indirectly, of all
outstanding shares of capital stock of each of its subsidiaries free and clear
of all liens, pledges, security interests, claims, or other encumbrances and
all such shares are duly authorized, validly issued, fully paid, and
nonassessable. All subsidiaries of Company are identified in Section 3.1.1
of the Company Disclosure Schedule, together with each subsidiary’s
jurisdiction of incorporation or formation, the jurisdictions in which it is
qualified to conduct business, and its authorized capitalization, and other
than the subsidiaries so identified, Company does not own or control, directly
or indirectly, shares of capital stock of any other corporation, or any
interest in any partnership, joint venture, or other non-corporate business
entity or enterprise.

 

3.1.2                                                Capital
Structure.

 

(a)                                  The authorized capital stock of Company
consists of 86,500,000 shares of stock consisting of (i) 65,000,000 Company
Common Shares of which 24,771,305 shares are issued and outstanding as of the
date hereof, and (ii) 21,500,000 shares of Preferred Stock, $0.01 par
value (“Company Preferred Shares”), 1,500,000 of which have been
designated as Series 1A Preferred Stock, and of which 894,368 are issued
and outstanding as of the date hereof, and 20,000,000 of which have been
designated as Series 2 Preferred Stock, and of which 18,219,688 are issued and
outstanding as of the date hereof. As of the date hereof, 11,355,828 Company
Common Shares are reserved for issuance upon the exercise of Company Options
under the Company Stock Option Plan.
As of the date hereof, Company Options for 9,632,806 Company
Common Shares have been granted and remain outstanding under the Company Stock
Option Plan. All Company Shares, Company Options, and any other securities
(including all outstanding warrants) of Company outstanding as of the date
hereof (collectively referred to as the “Company
Securities”),
the record owners of such securities, and with respect to Company Options the
vesting schedule thereof, are as set forth on Section 3.1.2(a) of the
Company Disclosure Schedule, and no Company Securities are held by Company in
its treasury. True and complete copies of all Company stock option plans and
the forms of any other instruments setting

 

14

 

forth the rights of all Company Securities as of
the date hereof have been delivered to Parent or its counsel.

 

(b)                                 All outstanding Company Common Shares and
Company Preferred Shares are, and any Company Shares issued upon exercise of
any Company Options when issued in accordance with the respective terms thereof
will be, validly issued, fully paid, nonassessable and not subject to any
preemptive rights, or similar rights under the DGCL, the certificate of
incorporation or bylaws of Company, or to any agreement to which Company is a
party or by which Company may be bound. Except for the shares described above
issuable pursuant to the exercise of Company Options (all as set forth on
Section 3.1.2(a) of the Company Disclosure Schedule) there are not any
options, warrants, calls, conversion rights, commitments, agreements,
contracts, understandings, restrictions, arrangements or rights of any
character to which Company is a party or by which Company may be bound
obligating Company to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the capital stock of Company, or obligating
Company to grant, extend or enter into any such option, warrant, call,
conversion right, conversion payment, commitment, agreement, contract,
understanding, restriction, arrangement or right. Company does not have
outstanding any bonds, debentures, notes or other indebtedness, the holders of
which (i) have the right to vote (or are convertible or exercisable into
securities having the right to vote) with holders of Company Common Shares or
Company Preferred Shares on any matter or (ii) are or will become entitled to
receive any payment as a result of the execution of this Agreement or the
completion of the Transactions. There is no agreement or right allowing for the
repurchase or redemption of any capital stock or convertible securities of
Company, and Company has not repurchased any of its capital stock. Company does
not have outstanding any restricted stock, restricted stock units, stock
appreciation rights, stock performance awards, dividend equivalents, or other
stock-based or equity-linked securities of a similar nature. There are no
agreements requiring Company to make contributions to the capital of, or lend
or advance funds to, any subsidiaries of Company. Company is not a party to,
nor to the knowledge of Company is any stockholder of Company a party to, any
voting agreement, voting trust, or similar agreement or arrangement relating to
any class or series of Company’s capital stock, or any agreement or arrangement
providing for registration rights with respect to any capital stock or other
securities of Company. There are no accrued and unpaid dividends with respect
to any outstanding shares of Company capital stock. Company does not own or
hold the right to acquire any shares of capital stock or any other security or
interest in any other Person.

 

(c)                                  All of the issued and outstanding Common
Shares and Company Preferred Shares have been offered and sold by Company in
compliance with applicable federal and state securities laws.

 

(d)                                 To the knowledge of Company, no
stockholder of Company has granted options or other rights to purchase any
Company Common Shares or Company Preferred Shares from such stockholder.

 

3.1.3                                                Authority.
Company has all requisite corporate power and authority to execute and
deliver this Agreement and, subject to approval of the stockholders of Company
and the Company Required Statutory Approvals (as defined in Section 3.1.5
below), to consummate the Transactions. The execution and delivery by Company
of this Agreement and the performance of Company’s obligations hereunder have
been duly and validly authorized by all necessary corporate action on the part
of Company, subject only to approval of the Merger and adoption of this
Agreement by the stockholders of Company. This Agreement has been duly executed
and delivered by Company and, assuming the due execution and delivery by Parent
and Sub, constitutes a valid and binding obligation of Company enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by the effect of (i) any applicable bankruptcy, insolvency,
reorganization,

 

15

 

moratorium, or other similar
laws affecting the enforcement of creditors’ rights generally, and
(ii) general equitable principles, regardless of whether such
enforceability is considered in a proceeding at law or in equity.

 

3.1.4                                                No
Violations. Subject to the satisfaction of the conditions set forth in
Sections 7.1 and 7.3, the execution and delivery of this Agreement do
not, and the consummation of the Transactions will not, conflict with or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation, or
acceleration of any obligation or to loss of a material benefit under, or the
creation of a lien, pledge, security interest, charge, or other encumbrance on
assets (any such conflict, violation, default, right, loss, or creation being
referred to herein as a “Violation”)
pursuant to (a) any provision of the certificate of incorporation or
bylaws of Company or the comparable governing instruments of any subsidiary of
Company, or (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Company or its properties or
assets, other than, in the case of (b), any such Violation that individually or
in the aggregate would not have, or reasonably be expected to have, a Company
Material Adverse Effect.

 

3.1.5                                                Consents
and Approvals.

 

(a)                                  Except as provided in Section 3.1.5 of
the Company Disclosure Schedule, no third-party consent is necessary or
required under any loan or credit agreement, note, bond, mortgage, indenture,
lease, or other material contract or agreement or instrument to which Company
is a party in connection with the execution and delivery of this Agreement or
the consummation by Company of the Transactions (“Third Party
Consents”).

 

(b)                                 No consent, approval, order, or
authorization of, or registration, declaration, or filing with or exemption by,
any court, administrative agency, or commission or other governmental authority
or instrumentality, whether domestic or foreign (each a “Governmental
Entity”) (collectively with any Third Party Consents, “Consents”), is required by or with respect to Company in
connection with the execution and delivery of this Agreement or the
consummation by Company of the Transactions, except for Consents, if any,
relating to (x) the filing of a premerger notification report and all
other required documents by Parent and Company, and the expiration or
termination of all applicable waiting periods, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the rules and regulations
promulgated thereunder (the “HSR Act”) and
any similar required foreign antitrust filings (if applicable),
(y) compliance with various such filings, authorizations, orders, and
approvals as may be required under foreign laws and state securities laws, and
(z) the filing of the Certificate of Merger in accordance with the DGCL (the
filings and approvals referred to in clauses (x) through (z) are
collectively referred to as the “Company Required Statutory
Approvals”).

 

3.1.6                                                Financial
Statements.

 

(a)                                  Company has delivered to Parent
(a) audited balance sheets of Company as of December 31, 2004 and
2003 and the related audited statements of income, changes in owner’s equity
and cash flow for each of the fiscal years then ended, including the notes
thereto, (b) an unaudited balance sheet of the Early Phase Business of the
Company as at December 31, 2005 (collectively, the “Balance
Sheet”)
and the related unaudited statements of income for the year then ended, and (c)
unaudited balance sheets dated as at February 28, 2006 for each of the portion
of the Company not subject to the Pre-Merger Spin and the portion that is
subject to such transaction (collectively, the “Financial
Statements”).
Such Financial Statements comply in all material respects with all accounting
requirements applicable to Company and have been prepared in accordance with
generally accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the

 

16

 

periods covered thereby (except that the unaudited financial information may not
contain the footnotes required by GAAP), and fairly present the consolidated
financial position of Company as at the dates thereof and its results of
operations and cash flows for the periods then ended (subject to normal,
recurring audit adjustments, which are not expected to be material in scope or
amount). There has been no change in Company’s accounting policies or the
methods of making accounting estimates or changes in estimates that are
material to the Financial Statements. The Company has never entered into, nor
engaged in, any securitization transactions or “off-balance sheet arrangements”
(as defined in Item 303(c) of Regulation S-K promulgated by the SEC).

 

3.1.7                                                No
Defaults.

 

Company is not, nor has it received notice that it would be with the
passage of time, in default or violation of any term, condition, or provision
of (i) the certificate of incorporation or bylaws of Company or any
comparable governing instrument of any subsidiary, (ii) any judgment,
decree, or order, or (iii)  any loan or credit agreement, note, bond,
mortgage, indenture, lease, license, sponsor contract or, to its knowledge, any
other contract, agreement or instrument to which Company is now a party or by
which it or any of its properties or assets may be bound, except with respect
to clause (iii) violations that, individually or in the aggregate, would not
have, or reasonably be expected to have, a Company Material Adverse Effect.

 

3.1.8                                                Litigation.

 

There is no claim, action, suit, or proceeding pending or, to the
knowledge of Company, threatened against or affecting Company, any of its
officers, directors or employees, or any of its properties before any court or
arbitrator or any Governmental Entity, which, if adversely determined, would
have, or reasonably be expected to have, a Company Material Adverse Effect.
There is no investigation pending or, to the knowledge of Company, threatened
against Company, before any Governmental Entity, which, if adversely
determined, would have, or reasonably be expected to have, a Company Material
Adverse Effect. Section 3.1.8 of the Company Disclosure Schedule sets
forth as of the date hereof, with respect to any pending action, suit,
proceeding, or investigation to which Company is a party, the forum, the
parties thereto, the subject matter thereof, and the amount of damages claimed,
if any.

 

3.1.9                                                No
Material Adverse Change.

 

Since the Balance Sheet Date, there has not been a Company Material
Adverse Effect. Without limiting the foregoing, except as contemplated by this
Agreement or set forth on Section 3.1.9 of the Company Disclosure Schedule,
since the Balance Sheet Date, there has not been:

 

(a)                                  any declaration, setting aside, or
payment of any dividend or other distribution, stock split, reclassification,
subdivision, or exchange with respect to any Company Shares;

 

(b)                                 any amendment of any provision of the
certificate of incorporation or bylaws of, or of any term of any outstanding
security issued by, Company;

 

(c)                                  any incurrence, assumption, or guarantee
by Company of any indebtedness for borrowed money, or any mortgage, pledge,
imposition of any security interest, claim, encumbrance, or other restriction
on any of the assets, tangible or intangible of Company;

 

(d)                                 a material change to any tax election or
any accounting method or any settlement or consent to any claim or assessment
relating to taxes incurred, or any incurrence of any obligation to make any
payment of, or in respect of, any taxes, except in the ordinary course of
business, or agreement to extend or waive the statutory period of limitations
for the assessment or collection of taxes;

 

(e)                                  any (i) grant of severance or
termination pay (unless required by law) to any director, officer, or employee
of Company, (ii) entry into any employment, deferred compensation (based
upon the meaning of such term prior to the adoption of Code Section 409A),
or

 

17

 

other similar agreement (or any material
amendment to any such existing agreement) with any director, officer, or
employee of Company, (iii) increase in benefits payable under any existing
severance or termination pay policies or employment agreements, (iv) increase
in compensation, bonus, or other benefits payable to directors, officers, or
employees of Company, in each case other than those required by written
contractual agreements or made in the ordinary course consistent with past
practices and not in excess of $50,000 on an individual basis, (v) amendment or
change to the exercise price of outstanding warrants or (vi) acceleration
of, or amendment or change to, the period of exercisability, vesting, or
exercise price of options, restricted stock, stock bonus, or other awards
granted under the Company Stock Option Plan (including any discretionary
acceleration of the exercise periods by Company’s board of directors, the
compensation committee of Company’s board of directors, or a committee
overseeing the Company Stock Option Plan as permitted under such plan) or
authorization of cash payments in exchange for any options, warrants,
restricted stock, stock bonus, or other awards granted under any of such plans
except, in each case, as may be required under applicable law or the existing
terms of the Company Stock Option Plan or other related agreements;

 

(f)                                    any issuance of capital stock or
securities convertible into capital stock of Company (including grants or other
issuances of options, warrants or other rights to acquire capital stock of
Company) other than pursuant to Company Options;

 

(g)                                 any acquisition or disposition of assets
(other than in the ordinary course of business or in connection with the
Pre-Merger Spin (as defined below)), any acquisition or disposition of capital
stock of any third party, or any merger or consolidation with any third party;

 

(h)                                 any entry by Company into any joint venture,
partnership, or limited liability company or operating agreement with any
Person;

 

(i)                                     any damage, destruction, or loss (whether
or not covered by insurance) affecting Company’s properties or business that
has had, or would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect;

 

(j)                                     any granting by Company of a security
interest in or lien on any material property or assets of Company;

 

(k)                                  any cancellation of any debts or waiver
of any claims or rights;

 

(l)                                     any capital expenditure or acquisition of
any property, plant, and equipment by Company for a cost in excess of $50,000
in the aggregate, other than any such capital expenditure or acquisition of any
property, plant, and equipment made in the ordinary course of business and
consistent with past practices and as described in Section 3.1.9 of the Company
Disclosure Schedule;

 

(m)                               any discharge or satisfaction by Company
of any lien or encumbrance, or any payment of any material obligation or
liability (absolute or contingent) other than current liabilities incurred as
of the Balance Sheet Date and current liabilities incurred since the Balance
Sheet Date in the ordinary course of business;

 

(n)                                 any termination, modification, or
rescission of, or waiver by Company of rights under, any existing contract
having, or reasonably likely to have, a Company Material Adverse Effect;

 

18

 

(o)                                 any event or condition resulting in a
Company Material Adverse Effect; or

 

(p)                                 any agreement, authorization, or
commitment, whether in writing or otherwise, to take any action described in
this Section 3.1.9.

 

3.1.10                                         Absence
of Undisclosed Liabilities.

 

Company has no liabilities, obligations, or contingencies (whether
absolute, accrued, or contingent) except (i) liabilities, obligations, or
contingencies (each a “Liability” and
collectively, “Liabilities”) that are quantified
on the face of the consolidated balance sheet of Company as of the Balance
Sheet Date (rather than in the notes thereto); (ii) additional Liabilities
that have arisen in the ordinary course of business consistent with past
practice, but which Liabilities are either unknown or would not have, or
reasonably be expected to have, a Company Material Adverse Effect, or (iii)
additional Liabilities that are expressly provided for in any of Company’s
contracts that are not required to be reflected in Company’s financial
statements under GAAP.

 

3.1.11                                         Legal
Compliance.

 

(a)                                  Company, its subsidiaries, and their
respective affiliates have complied with all applicable federal, state, local,
or foreign statutes, laws, ordinances, rules, judgments, orders, and
regulations of any Governmental Entity (including without limitation the United
States Food and Drug Administration (“FDA”))
applicable to their respective businesses and operations as, to the Company’s
knowledge, has each clinical investigator that has been engaged to perform
services on any of their behalf (each a “Clinical Investigator”)
only as it relates to their performance of services for the Company.
Section 3.1.11(a) of the Company Disclosure Schedule lists each Clinical
Investigator engaged by the Company, its subsidiaries, or any affiliate
thereof, since January 1, 2003. Neither Company, nor to Company’s knowledge any
person or other entity acting on behalf of Company has, directly or indirectly,
on behalf of or with respect to Company (i) made or received any unreported
political contribution, (ii) made or received any payment that was not legal to
make or receive, (iii) created or used any “off-book” bank or cash account or
“slush fund,” or (iv) engaged in any conduct constituting a violation of the
Foreign Corrupt Practices Act of 1977, as amended. All permits and licenses
required to conduct the business of Company as currently conducted have been
obtained, are in full force and effect, and are being complied with.

 

(b)                                 All clinical trials (including any
post-marketing studies), animal studies and other preclinical tests conducted
by Company were, and if still pending, are, being conducted in all material
respects in accordance with all applicable experimental protocols, informed
consents, procedures and controls of Company and applicable FDA and Clinical
Laboratory Improvement Amendments Act of 1988 ( “CLIA”)
requirements including, but not limited to, good clinical practice and good
laboratory practice regulations. Company has not received any written notice
from the FDA or any other Governmental Entity requiring the termination or
suspension or material modification of any animal study, preclinical study or
clinical trial conducted by or on behalf of Company.

 

(c)                                  Company is not subject to any pending or,
to the knowledge of Company, threatened investigation by the FDA and does not,
nor do the Clinical Investigators with respect to their services for the
Company, make any claims for insurance reimbursement.

 

(d)                                 Company has not submitted any claim to
any payment program in connection with any referrals that violated any
applicable self-referral law, including the Federal Ethics in Patient Referrals
Act, 42 U.S.C. § 1395nn (the “Stark Law”), or
any applicable state self-referral law. Company

 

19

 

has complied with the disclosure requirements of
any applicable self-referral law, including the Stark Law and any applicable
state self-referral law.

 

(e)                                  Company has not submitted any claim for
payment to any payment program in violation of any laws relating to false claim
or fraud, including without limitation the Federal False Claim Act, 31 U.S.C. §
3729, or any applicable state false claim or fraud law.

 

(f)                                    Company has not knowingly or willfully
solicited, received, paid or offered to pay any remuneration, directly or
indirectly, overtly or covertly, in cash or kind for the purpose of making or
receiving any referral which violated any applicable anti-kickback or similar
law, including the Anti-Kickback Statute, or any applicable state anti-kickback
law.

 

(g)                                 Company has complied with applicable
security and privacy standards regarding protected health information under the
Health Insurance Portability and Accountability Act of 1996, including the
regulations promulgated thereunder (“HIPAA”), or any
applicable state privacy laws.

 

(h)                                 Neither Company, nor to the knowledge of
Company any of its respective officers, directors or employees, acting in their
capacities as such, is or has been involved in any activities which are, or are
alleged in writing by any qui tam relator or Governmental Entity to be,
prohibited under the federal Medicare and Medicaid statutes, which are
specifically defined as 42 U.S.C. §§ 1320a-7, 1320a-7a, 1320a-7b, 1395nn, 18
U.S.C. §1347, § 287, §1001, and § 1035, or the federal CHAMPUS/TRICARE statute,
or the regulations promulgated pursuant to such federal statutes.

 

(i)                                     Section 3.1.11(i) of the Company
Disclosure Schedule lists, as of the date of this Agreement, all written claims
or statements (including all correspondence, other than immaterial
correspondence, with Governmental Entities, intermediaries or carriers)
concerning or relating to any federal or state government funded health care
program that involves, relates to or alleges (i) any violation of any
applicable rule, regulation, policy or requirement of any such program with
respect to any activity, practice or policy of Company; or (ii) any
violation of any applicable rule, regulation, policy or requirement of any such
program with respect to any claim for payment or reimbursement made by Company
or any payment or reimbursement paid to Company. There are no such violations
nor is Company aware of the commencement of any investigation or inquiry, or
the assertion of any claim or demand by, any Governmental Entity, intermediary
or carrier with respect to any of the activities, practices, policies or claims
of Company, or any payments or reimbursements claimed by Company, in each case
concerning or relating to any federal or state government funded health care
program. Company is not, as of the date of this Agreement, subject to any
outstanding audit by any Government Entity, intermediary or carrier and, to the
knowledge of Company, there are no grounds to anticipate any such audit, except
such audits in the ordinary course of review, in the foreseeable future.

 

(j)                                     Neither Company, its affiliates, its
subsidiaries, and their respective affiliates nor any Clinical Investigator or
any person employed thereby has been debarred under Section 306(a) or (b) of
the Federal Food, Drug and Cosmetic Act; provided that with respect to Clinical
Investigators, such representation relates only to the period of time they have
been engaged by the Company or an affiliate of the Company; to the Company’s
knowledge prior to being engaged by the Company or an affiliate no Clinical
Investigator or any person employed thereby had been debarred under Section
306(a) or (b) of the Federal Food, Drug and Cosmetic Act.

 

20

 

3.1.12                                         Certain
Agreements. Neither the execution and delivery of this Agreement nor
the consummation of the Transactions will (i) result in any payment
(including severance, unemployment compensation, parachute payment, bonus, or
otherwise) becoming due to any director, employee, or independent contractor of
Company, from Company under any Plan (as defined in Section 3.1.14),
agreement or document, (ii)  increase any benefits otherwise payable under
any Plan or agreement, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.

 

3.1.13                                         Employees.
Since the inception of Company (or any predecessor entity, if applicable),
Company has been in compliance in all material respects with all then
applicable laws and regulations respecting employment, termination of
employment, discrimination in employment, terms and conditions of employment,
wages, hours, and occupational safety and health and employment practices, and
has not engaged in any unfair labor practice. Since the inception of Company
(or any predecessor entity, if applicable), Company has in all material
respects withheld all amounts required by law or by agreement to be withheld
from the wages, salaries, and other payments to its employees, including common
law employees, and is not liable for any material arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing (or, if any
arrears, penalty or interest were assessed against Company regarding the
foregoing, it has been fully satisfied). Company is not, to its knowledge,
liable for any material payment to any trust or other fund or to any governmental
or administrative authority with respect to unemployment compensation benefits,
social security, or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent
with past practice). There are no known pending claims against Company under
any workers compensation plan or policy or for long term disability. There are
no known controversies pending or threatened between Company and any of its
employees, which controversies have or could reasonably be expected to result
in an action, suit, proceeding, claim, arbitration, or investigation before any
agency, court, or tribunal, foreign or domestic, including claims for
compensation, pending severance benefits, vacation time, vacation pay, or
pension benefits, or any other claim pending in any court or administrative
agency from any current or former employee or any other Person arising out of
Company’s status as employer or purported employer or any workplace practices
or policies whether in the form of claims for employment discrimination,
harassment, unfair labor practices, grievances, wage and hour violations,
wrongful discharge, or otherwise. Company is not a party to any collective
bargaining agreement or other labor union contract nor does Company know of any
activities or proceedings of any labor union to organize any such employees,
and Section 3.1.13 of the Company Disclosure Schedule lists all countries
in which employees of Company are represented by a works council or similar employee
organization. To the knowledge of Company, except as set forth in
Section 3.1.13 of the Company Disclosure Schedule no employees of Company
are or have in the past been in material violation of any term of any
employment contract, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
Company because of the nature of the business conducted by Company or to the
use of trade secrets or proprietary information of others that individually or
in the aggregate would have, or reasonably be expected to have, a Company
Material Adverse Effect. Any and all releases of employment claims in favor of
Company obtained from employees during the three-year period preceding the
Effective Time are effective and binding to release all employment claims for
each such employee.

 

3.1.14                                         Employee
Benefit Plans.

 

(a)                                  Each employee benefit, equity incentive
plan, or compensation plan or program covering currently active, former, or
retired employees of Company (“Plan”) is listed in Section 3.1.14(a) of
the Company Disclosure Schedule. Company has provided or made available to
Parent a copy of each Plan document (or, if there is no Plan document, a
written description), and where applicable, any related trust agreement,
annuity, or insurance contract and, where applicable, the three (3) most
recent annual reports (Form 5500) filed with the Internal Revenue Service (“IRS”)
(including all attachments and schedules thereto). To the extent applicable, each
Plan complies in all material respects with the requirements of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and the Code, and any Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the IRS, and its related trust is tax-exempt and has

 

21

 

been determined to be so by the IRS, or the plan
and trust are entitled to rely on a prototype plan approval letter. No
“prohibited transaction,” as defined in ERISA Section 406 or Code
Section 4975, has occurred with respect to any Plan, except as would not
have, or reasonably be expected to have, a Company Material Adverse Effect.
Each Plan has been maintained and administered in material compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules, and regulations, including ERISA and the Code, which are applicable to
such Plans. To the knowledge of Company, there are no pending or anticipated claims
against or otherwise involving any of the Plans (excluding claims for benefits
incurred in the ordinary course of Plan activities) and no suit, action or
other litigation has been brought against or with respect to any Plan. All
contributions, reserves, or premium payments to each Plan accrued to the date
hereof, have been made or provided for. Company has no obligation for retiree
health or life benefits under any Plan, except as required by applicable law or
to avoid excise taxes under Section 4980(B) of the Code. There are no
restrictions on the rights of Company to amend or terminate any Plan without
incurring any liability thereunder (other than accelerated vesting, ordinary
administrative expenses and satisfaction of applicable notice requirements). No
tax under Section 4980B of the Code (other than a tax that has been fully
satisfied) has been incurred in respect of any Plan that is a group health
plan, as defined in Section 5000(b)(1) of the Code.

 

(b)                                 Neither Company nor any entity that is or
was considered one employer with Company under ERISA Section 4001(14) or Code
Section 414(b), (c) or (m) has ever maintained, had an obligation to contribute
to, contributed to, or had any liability with respect to any current or former
employee benefit plan that is or has been subject to Title IV of ERISA
(including any “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA). No Plan is a multiple employer welfare
arrangement as defined in Section 3(40) of ERISA.

 

(c)                                  All Plans that are subject to the laws of
any jurisdiction outside the United States are in compliance with and have been
operated consistent with their terms and such applicable laws (including
relevant tax laws), and the requirements of any trust deed under which they
were established, in all material respects. Section 3.1.14(c) of the
Company Disclosure Schedule identifies all of Company’s employee benefit plans
that are subject to the laws of any jurisdiction outside the United States.
With respect to each Plan, no event has occurred, and there exists no condition
or set of circumstances, that would subject Company, directly or indirectly, to
any material liability arising under any applicable laws, including relevant
tax laws (including any liability to or under any such Plan or any indemnity
agreement to which Company is a party), excluding liability for benefit claims
and funding obligations. With respect to each such Plan, there are no funded
benefit obligations for which the contributions have not been made or properly
accrued and there are no unfunded benefit obligations that have not been
accounted for by reserves, or otherwise properly footnoted, on the financial
statements of Company.

 

(d)                                 No Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of the IRS, the U.S.
Department of Labor, or any other federal, state, or local governmental entity
or is scheduled to be subject to such an audit, investigation, or proceeding.

 

(e)                                  Company
is not a party to any agreement, plan, contract or arrangement pursuant to
which compensation is or would be includible in the gross income of an
employee, director, or independent contractor of Company prior to the receipt
by such individual of such compensation, or to which interest or any additional
tax would apply as a result of Code Section 409A, assuming such plans are
amended in a timely manner to comply with Code Section 409A.

 

22

 

3.1.15                                         Real
Property; Leases. Company owns no real property. Company has made
available to Parent copies of all leases or subleases in effect on the date
hereof pursuant to which Company leases (i) real property (as either a
tenant, subtenant, or lessor) that require annual base payments in excess of
$100,000, or (ii) personal property that require annual payments in excess
of $50,000 with respect to each such lease or sublease (clauses (i) and
(ii) collectively, the “Company Leases”).
To the knowledge of Company, no default exists under any Company Leases. Except
as provided in Section 3.1.15 of the Company Disclosure Schedule, none of the
Company Leases may be terminated as a result of the execution of this Agreement
or the consummation of the Transactions. Each Company Lease is listed in
Section 3.1.15 of the Company Disclosure Schedule. Each Company Lease is
in full force and effect in accordance with its respective terms. Company has
not received notice that a party to any Company Lease intends to cancel,
terminate, or refuse to renew the same or to exercise any option or other right
thereunder.

 

3.1.16                                         Environmental.

 

(a)                                  Company is, and has been at all times
when non-compliance may result in liability after the date of this Agreement,
in material compliance with all Environmental Law governing its business,
operations, properties, and assets, including, without limitation:  (i) all requirements of Environmental
Law relating to the discharge and handling of Hazardous Material (as defined
below); (ii) all requirements of Environmental Law relating to notice,
record keeping and reporting; and (iii) all requirements of Environmental
Law relating to obtaining and maintaining Company Environmental Permits for the
ownership of its properties and assets and the operation of its business as
presently conducted, including licenses relating to the handling and discharge
of Hazardous Material.

 

(b)                                 No Hazardous Material has been released
(except as specifically authorized, such as by permits issued by a Governmental
Entity) by Company, or to the knowledge of Company by any prior owner, onto or
under any property occupied by Company or any affiliate of Company, nor, to the
knowledge of Company, has any Hazardous Material migrated beneath such
properties.

 

(c)                                  Except as would not result, or reasonably
be expected to result, individually or in the aggregate, in a Company Material
Adverse Effect, Company has not transported, stored, used, manufactured,
disposed of, released, or exposed its employees or others to Hazardous
Materials (collectively, “Hazardous Materials
Activities”) in violation of any Environmental Law (as defined
below) in effect on or before the Effective Time.

 

(d)                                 Company currently holds all environmental
approvals, permits, licenses, clearances, and consents (“Company
Environmental Permits”) necessary for the conduct of Company’s
Hazardous Material activities and other businesses of Company as such
activities and businesses are currently being conducted, except where the
absence of such Company Environmental Permits would not have, or reasonably be
expected to have, individually or in the aggregate, result in a Company
Material Adverse Effect.

 

(e)                                  No action, proceeding, revocation
proceeding, amendment procedure, writ, or injunction is pending and, to
knowledge of Company, no action, proceeding, revocation proceeding, amendment
procedure, writ, or injunction has been threatened by any Governmental Entity
against Company concerning any Company Environmental Permit, Hazardous
Material, or any Hazardous Materials activity of Company. Company has received
no written notification that it is or may be liable for natural resource
damages, the investigation or cleanup of Hazardous Materials, or for the
response costs incurred by others in conducting such investigation or cleanup,
which, in either case would not have, or reasonably be expected to have,
individually or in the aggregate, a Company 

 

23

 

Material Adverse Effect. To the knowledge of
Company, no fact or circumstance currently exists that is reasonably likely to
involve Company in any environmental litigation or impose upon Company any
environmental liability.

 

(f)                                    Company has not, either by agreement or
by operation of law, assumed or undertaken any liability (including future or
contingent liability but not including pursuant to any acquisition of operating
businesses) of another Person under any Environmental Law, including any
obligation for investigation, cleanup, corrective action, or natural resource
damages with respect to Hazardous Materials.

 

(g)                                 Neither Company nor, to the knowledge of
Company, any of its agents, possess copies of any reports concerning the
presence or possible presence of released Hazardous Materials on real property
currently or formerly owned, leased, or occupied by Company, including any
environmental site assessment reports.

 

(h)                                 The Company does not own or operate, nor
has Company owned or operated any “underground storage tanks” as defined in any
applicable Environmental Law, and to the knowledge of Company, there are not
now nor have there ever been any such underground storage tanks beneath any
real property currently or previously owned or leased by Company that are
required to be registered under applicable Environmental Law. All Aboveground
Storage Tanks owned or operated by Company have been registered and operated in
compliance with all applicable Environmental Law.

 

(i)                                     The documented results of all reports
undertaken by Company or its agents, or otherwise in Company’s possession,
regarding the potential effects of any release of Hazardous Material on real
property currently or previously owned or leased by Company have been made
available to Parent or its counsel.

 

(j)                                     “Hazardous Material” means any substance that has been
designated by any Governmental Entity or by applicable federal, state, or local
law to be radioactive, toxic, hazardous, or otherwise a danger to health or the
environment, including PCBs, friable asbestos, petroleum, urea-formaldehyde and
all substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
lawfully used or stored for their intended purposes.

 

(k)                                  “Aboveground Storage Tank”
means a stationary device that is: (1) designed to contain an accumulation
of Hazardous Material; (2) constructed primarily of non-earthen materials
to provide structural support; and (3) situated in such a way that the
entire surface area of the tank is completely above the plane of the adjacent
surrounding surface and the entire surface area of the tank (including the tank
bottom) is able to be visually inspected.

 

(l)                                     “Environmental Law” means all applicable foreign, domestic,
federal, state, local, or other laws, regulations, ordinances, or other binding
requirements of Governmental Entities, all applicable orders, judgments, or
binding determinations of administrative or judicial authorities, and any
required permit, license, or other authorization, concerning pollution or
protection of human health or the environment, including all those relating to
the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling,

 

24

 

testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Material.

 

3.1.17                                         Customers
and Suppliers.

 

(a)                                  As of the date hereof, Company has no
outstanding material dispute, which has been communicated in writing,
concerning its business operations, including without limitation any Company
products or services with any customer who, in the year ended December 31,
2005, was one of the twenty (20) largest sources of revenues recognized
under GAAP for Company during such period (each, a “Significant
Customer”).
Each Significant Customer and the percentage of Company’s total revenues such
Significant Customer represented during such time period are listed on
Section 3.1.17(a) of the Company Disclosure Schedule. As of the date
hereof, Company has not received any written notice from any Significant
Customer that such customer shall not continue as a customer of Surviving
Corporation after Closing or that such customer intends to terminate or
materially modify existing agreements with Company or Surviving Corporation. As
of the date hereof, no purchaser of Company’s products or services has asserted
any claims of breach of warranty with regard to such products or services nor
does Company have any indemnity liability for any such products or services to
such purchasers. To the knowledge of Company, Company could not reasonably be
expected as a result of warranty or liability claims against it to be required
to modify in any material respect any of Company’s products or services that
are material to Company.

 

(b)                                 As of the date hereof, Company has no
outstanding material dispute, which has been communicated in writing,
concerning its business operations, including without limitation any products
or services of any supplier who, in the year ended December 31, 2005 was one of
the twenty largest suppliers of products and/or services to Company, based on amounts
paid or payable (each, a “Significant Supplier”). Each Significant Supplier is listed on
Section 3.1.17(b) of the Company Disclosure Schedule. As of the date
hereof, Company has not received any written notice from any Significant
Supplier that such supplier shall not continue as a supplier to the Surviving
Corporation after the Closing or that such supplier intends to terminate or
materially modify existing agreements with Company or the Surviving
Corporation.

 

3.1.18                                         Significant
Contracts.

 

(a)                                  Section 3.1.18 of the Company
Disclosure Schedule sets forth all of the following contracts to which Company
is a party as of the date of this Agreement (the “Significant
Contracts”):

 

(i)                                     any agreement
(A) relating to the employment of, or the performance of services by, any
employee, consultant or other Person other than ordinary course, at-will
written or oral offers or agreements terminable within ninety (90) days
without the payment of any penalty and excluding employment arrangements
required by law, (B) pursuant to which Company is or may become obligated
to make any severance, termination, or similar payment to any current or former
employee or director, other than with respect to agreements listed or described
in the Company Disclosure Schedule as applicable to all Company employees
generally, or applicable to all Company employees in specified jurisdictions
outside of the United States, (C) pursuant to which Company is or may
become obligated to make any bonus or similar payment to any current or former
employee or director, other than with respect to agreements listed or described
in the Company Disclosure Schedule as applicable to all Company employees
generally, or applicable to all Company employees in specified jurisdictions
outside of the United States, or (D) pursuant to which Company may be
required to provide, or accelerate the vesting of, any payments, benefits, or
equity rights upon the occurrence of any of the Transactions;

 

25

 

(ii)                                  any agreement that
provides for indemnification of any officer, director, employee, or agent of
Company;

 

(iii)                               any agreement imposing
any restriction on the right or ability of Company, or that, after consummation
of the Merger, would impose a restriction on the right or ability of Parent or
any of its subsidiaries, to compete in any line of business or in any
geographic region with any other Person or to transact business or deal in any
other manner with any other Person;

 

(iv)                              any agreement with a
third party pursuant to which Company has (A) paid an amount in excess of
$50,000 during the twelve month period ended December 31, 2005, or (B) is
obligated to pay an amount in excess of $50,000 during the twelve month period
beginning January 1, 2006;

 

(v)                                 any agreement with a
Significant Customer (A) pursuant to which Company recognized revenues in
excess of $100,000  in the aggregate
during the twelve month period ended December 31, 2005, or (B) that requires
such party to purchase in excess of $100,000 in products and/or services from
Company during the twelve month period beginning January 1, 2006;

 

(vi)                              any agreement of
partnership or joint venture, limited liability company or operating agreement
that would give rise to an obligation on the part of Company to form a joint
venture or to acquire securities of a third party;

 

(vii)                           any other contract,
agreement, or commitment not otherwise listed in Section 3.1.18 of the
Company Disclosure Schedule, (A) the termination of which would cause a
Company Material Adverse Effect, or (B) that, if no required consent
regarding the Transactions is obtained, would have, or reasonably be expected
to have, a Company Material Adverse Effect or a material adverse effect on
Parent’s ability to operate the business of Company in the same manner as the
business of Company is currently operated;

 

(viii)                        any union contract or
collective bargaining agreement;

 

(ix)                                any lease for real or
personal property in which the amount of payments which Company is required to
make on an annual basis exceeds $100,000 in the case of real property leases or
$50,000 in the case of personal property leases; and

 

(x)                                   except for trade
indebtedness incurred in the ordinary course of business and except as
disclosed in the financial statements, any instrument evidencing or related in
any way to indebtedness for borrowed money by way of direct loan, sale of debt
securities, purchase money obligation, conditional sale, guarantee, or
otherwise.

 

(b)                                 Each Significant Contract is in full
force and effect and is a valid and binding obligation of Company, and, to the
knowledge of Company, neither Company nor any other party thereto is in breach
of, or default under, any such Significant Contract, except for such failures
to be in full force and effect and such breaches and defaults that, in the
aggregate, would not have, or reasonably be expected to have, a Company
Material Adverse Effect. As of the date hereof, none of the parties to any of
the Significant Contracts identified in Section 3.1.18 of the Company
Disclosure Schedule has expressed in writing an intent to terminate or
materially reduce the amount of its business with Company in the future.

 

3.1.19                                         Taxes.

 

(a)                                  For the purposes of this Agreement, the
terms “tax” and “taxes”
shall include all federal, state, local, and foreign taxes, assessments,
duties, tariffs, registration fees, and other governmental charges, including
all income, franchise, property, production, sales, use, payroll, license,
windfall profits, severance, withholding, excise, gross receipts, and other
taxes, as well as any

 

26

 

interest, additions, or penalties relating
thereto and any interest in respect of such additions or penalties.

 

(b)                                 Company has timely filed (or caused to be
filed), or received an extension for the filing of, all federal, state, local,
and foreign tax returns, reports, information statements, and similar
statements (“Returns”) required to be filed,
which Returns are true, correct, and complete in all material respects. Company
has paid, or fully accrued in accordance with GAAP on the Financial Statements
all taxes in respect of all periods (or portions thereof), whether or not such
taxes are reflected on any Return, and since such date Company has not incurred
any tax liability other than in the ordinary course of business. Company has
not engaged in any “reportable transaction” within the meaning of Code
Section 6707A(c)(1). Company has not taken any position on any Return or
filing which is or would be subject to penalties under Section 6662 of the
Code. Company is not currently the beneficiary of any extension of time to file
any Return that has not yet been filed. Company has provided to Parent or made
available true and correct copies of all Returns and related work papers, all
correspondence with any taxing authorities, any tax planning memoranda, or
other material tax data of Company.

 

(c)                                  No deficiencies or adjustments that
remain outstanding for any tax have been assessed nor has Company received
written notice proposing or threatening a tax assessment. No claim has ever
been made by an authority in a jurisdiction where Company does not file Returns
that Company is or may be subject to taxation by that jurisdiction.
Section 3.1.19(c) of the Company Disclosure Schedule accurately sets forth
the years for which Company’s federal, state, local, and foreign Returns have
been audited and any years that are the subject of a pending audit by the IRS
or any applicable state taxing authorities. Except as so disclosed, Company is
not subject to any pending, nor has it received written notice proposing or
threatening, a tax audit or examination and Company has not waived or entered
into any other agreement with respect to any statute of limitation with respect
to its taxes or Returns. No consent or agreement has been made under former
Section 341(f) of the Code by or on behalf of Company or any predecessor
thereof. Company has no interests in real estate that would be subject to any
transfer tax as a result of the consummation of the Transactions.
Section 3.1.19(c) of the Company Disclosure Schedule sets forth as of the
date hereof, (i) the tax basis of Company in its assets, (ii) the amount of any
net operating loss carryover, net capital loss carryover, unused investment
credit or other credit carryover and charitable contribution carryover of
Company as of December 31, 2004, (iii) the amount of any deferred gain or loss
allocable to Company or excess loss account of Company and (iv) a list of all joint ventures, partnerships,
limited liability companies, or other business entities (within the meaning of
Treasury Regulation Section 301.7701-3) in which Company has an interest.

 

(d)                                 There are no liens for taxes upon the
assets of Company except for taxes that are not yet delinquent. Company has
withheld all taxes required to be withheld by it in respect of wages, salaries,
and other payments to all employees, officers, and directors and any taxes
required to be withheld from any other person and timely paid all such amounts
withheld to the proper taxing authority. Company is not party to any tax
sharing or tax allocation agreements and has not been a member of any
affiliated group of corporations within the meaning of Section 1504 of the
Code other than the group of which Company is currently the common parent.
Company neither has nor has had a “permanent establishment” (as defined in any
applicable income tax treaty) in any country other than the United States.
There are no outstanding rulings or requests for rulings from any taxing authority
with respect to Company. Company neither is nor has ever been a real property
holding corporation within the meaning of Section 897 of the Code.
Schedule 3.1.19 sets forth the net operating loss carryforwards of the Company
as of December 31, 2004. The use of any such net operating loss carryover, net
capital loss carryover, unused investment credit or other credit carryover

 

27

 

of Company is not subject to degredation from
either (i) any activities of the Company since January 1, 2005, or (ii) the
Pre-Merger Spin other than such changes that would not have a Company Material
Adverse Effect in the aggregate.

 

(e)                                  Company has not participated in, or
cooperated with, an international boycott within the meaning of
Section 999 of the Code. Company is not required to include in income any
adjustment pursuant to Section 481(a) of the Code (or similar provisions
of other law or regulations) in its current or in any future taxable period, by
reason of a change in accounting method, nor has the IRS (or other taxing
authority) proposed any such change in accounting method. In connection with
the consummation of the Transactions, no payments of money or other property,
acceleration of benefits, or provisions of other rights have or will be made
hereunder, under any agreement contemplated herein, or under the Plans or the
Company Stock Option Plan that would be reasonably likely to result in
imposition of the sanctions imposed under Sections 280G and 4999 of the
Code, determined without regard to whether such payment is reasonable
compensation for services performed or to be performed in the future, and
whether or not some other subsequent action or event would be required to cause
such payment, acceleration, or provision to be triggered. Neither Company,
Parent, or any affiliate of Parent will be obligated to pay, or reimburse any
individual for, any excise taxes or similar taxes imposed on any employee or
former employee of, or individual providing services to, Company under
Section 4999 of the Code or any similar provisions as a result of the
consummation of the Transactions, either alone or in connection with any other
event. None of the assets of Company is property that is required to be treated
as owned by any other Person pursuant to the “safe harbor lease” provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954 as amended
and in effect immediately prior to the enactment of the Tax Reform Act of 1986
and none of the assets of Company is “tax exempt use property” within the
meaning of Section 168(h) of the Code. None of the assets of Company
secures any debt the interest on which is tax exempt under Section 103 of
the Code.

 

(f)                                    Company has not constituted either a
“distributing corporation” or a “controlled corporation” in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i)
in the two (2) years prior to the date of this Agreement, or (ii) in a
distribution that could otherwise constitute part of a “plan” or “series of
related transactions” (within the meaning of Section 355(e) of the Code)
in conjunction with the Transactions.

 

3.1.20                                         Interests
of Insiders.

 

Except for (a) relationships with Company as an officer, director,
or employee thereof (and compensation by Company in consideration of such
services) and (b) relationships with Company as stockholders or option
holders therein, none of the directors, officers, or holders of 5% or more of
the Company Shares, or any member of any of their families, is presently a
party to, or was a party to during the year preceding the date of this
Agreement, any transaction with Company, including, without limitation, any
contract, agreement, or other arrangement (i) providing for the furnishing
of services to or by, (ii) providing for rental of real or personal
property to or from, or (iii) otherwise requiring payments to or from, any
such person or any corporation, partnership, trust, or other entity in which
any such person has or had a 5% or more interest (as a stockholder, partner,
beneficiary, or otherwise) or is or was a director, officer, employee, or
trustee. None of Company’s officers or directors has any interest in any
property, real or personal, tangible or intangible, including inventions,
copyrights, trademarks, or trade names, used in or pertaining to the business
of Company, or any supplier, distributor, or customer of Company, except for
the normal rights of a stockholder, and except for rights under existing
employee benefit plans.

 

28

 

3.1.21                                         Technology
and Intellectual Property Rights.

 

(a)                                  Definitions:

 

(i)                                     “Intellectual Property” shall mean any or
all of the following and all rights in, arising out of, or associated
therewith:  (x) all United States,
international, and foreign:  (1) patents,
utility models, and applications therefor, and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries, including invention disclosures;
(2) all trade secrets and other rights in know-how and confidential or
proprietary information; (3) all mask works and copyrights, registrations
and applications therefor, and all other rights corresponding thereto
(including moral rights), throughout the world; (4) all rights in World
Wide Web addresses and domain names and applications and registrations
therefor, all trade names, logos, common law trademarks and service marks,
trade dress, trademark and service mark registrations and applications
therefor, and all goodwill associated therewith throughout the world; and
(5) any similar, corresponding, or equivalent rights to any of the
foregoing in (1) through (4) above, anywhere in the world (“Intellectual Property Rights”), and
(y) any and all of the following: 
computer software and code, including software and firmware listings,
assemblers, applets, compilers, source code, object code, net lists, design
tools, user interfaces, documentation, annotations, comments, data, data
structures, databases, data collections, system build software and
instructions, design documents, schematics, diagrams, product specifications,
know-how, show-how, techniques, algorithms, routines, works of authorship,
processes, prototypes, test methodologies, supplier and customer lists, trade
secrets, materials that document design or design processes, or that document
research or testing (including design, processes, and results), any media on
which any of the foregoing is recorded, and any other tangible embodiments of
any of the foregoing or of Intellectual Property Rights (“Technology”).

 

(ii)                                  “Company Owned Intellectual  Property”  shall mean all
Intellectual Property owned by Company.

 

(iii)                               “Company
Licensed Intellectual Property”  shall mean all Intellectual Property owned by
third Persons and licensed to Company; unless otherwise noted, all references
to “Company Intellectual Property” shall
refer to both Company Owned Intellectual Property and Company Licensed
Intellectual Property.

 

(b)                                 Section 3.1.21(b) of the Company
Disclosure Schedule lists:

 

(i)                                      All
United States, international, and foreign patents and patent applications
(including provisional applications); registered trademarks and service marks,
applications to register trademarks and service marks, intent-to-use
applications, or other registrations or applications related to trademarks and
service marks, and any domain name registrations; registered copyrights and
applications for copyright registration; registered mask works and applications
to register mask works; in each case to the extent the same are Company Owned
Intellectual Property;

 

(ii)                                   Any
other Company Owned Intellectual Property that is the subject of an
application, certification, filing, registration, or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority at any time;

 

(iii)                                All
licenses, sublicenses, reseller, distribution, customer and other agreements or
arrangements that are Significant Contracts to which Company is a party and
pursuant to which any other Person is authorized to have access to, resell,
distribute, or use Company Owned Intellectual Property or to exercise any other
right with regard thereto;

 

(iv)                               All
agreements and licenses pursuant to which Company has been granted a license to
any Company Licensed Intellectual Property (other than license agreements for
standard “shrink wrapped, off-the-shelf” third party Intellectual Property)
where such Company Licensed Intellectual Property is a part of and/or used in
conjunction with Company’s technology or service offerings (“In-Licenses”); and

 

29

 

(iv)                               Any
obligations of exclusivity, covenants not to sue, noncompetition,
nonsolicitation, right of first refusal, parity of treatment and/or most
favored nation status, or right of first negotiation to which Company is
subject and that relate to and/or restrict any Company Intellectual Property,
Company’s use of Company Intellectual Property in providing services, or any
third party Intellectual Property (with respect to disclosure of noncompetition
and nonsolicitation obligations associated with Company or third party
employees, Section 3.1.21(b)(iv) lists only those that are material).

 

(c)                                  Company
owns or has, free and clear of conditions, or other restrictions or any
requirement of any past, present or future royalty payments, all rights
necessary to carry out, or that otherwise are material to, the current and
anticipated future (as contemplated by Company) business of Company and had
during the relevant period all rights reasonably necessary to carry out, or
that otherwise were material to, the business of Company.

 

(d)                                 Company
is not, nor as a result of the execution or delivery of this Agreement, or
performance of Company’s obligations hereunder, will Company be, in violation
of any license, sublicense, or other agreement relating to the Company
Intellectual Property, including any In-License, except with respect to
violations that, individually or in the aggregate, would not have, or
reasonably be expected to have, a Company Material Adverse Effect.

 

(e)                                  Neither
the (i) use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale, offering for sale, import, or any other exercise
of rights in Company Owned Intellectual Property by Company,
(ii) operation of Company’s business, including Company’s provision of
services, nor (iii) the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, sale, offering for sale, or other
exploitation of Company’s technology, infringes any Intellectual Property
Rights, or any other intellectual property, proprietary, or personal right of
any Person, or constitutes unfair competition or unfair trade practice under
the laws of the applicable jurisdiction. To the knowledge of Company, there is
no unauthorized use, infringement, or misappropriation of any of the Company
Owned Intellectual Property by any third party, employee, or former employee.

 

(f)                                    Company
has not received written notice of any claims (y) challenging the
validity, or ownership by Company of any of the Company Owned Intellectual
Property, or (z) that any of (i), (ii), or (iii) in
Section 3.1.21(e) above infringes, or will infringe on, any third party
Intellectual Property Right or constitutes unfair competition or unfair trade
practices under the laws of the applicable jurisdiction, nor, to the knowledge
of Company, are there any valid grounds for any bona fide claim of any such
kind.

 

(g)                                 Section 3.1.21(g)
of the Company Disclosure Schedule lists all parties who have created any
material portion of, or otherwise have any rights in or to, Company
Intellectual Property other than employees of Company who meet all of the
following requirements:  (i) their
work product in Company technology or service was created by them entirely
within the scope of their employment by Company, (ii) their copyrightable work
product in Company technology or services constitutes works made for hire under
U.S. law, and (iii) they executed Company’s form assignment of invention
agreements with Company that applies to all such employee’s inventions included
in any Company technology or services. Company has secured from all parties who
have created any material portion of, or otherwise have any rights in or to,
Company technology used in any Company service currently or previously offered
on a commercial basis or under development, valid and enforceable written
assignments or licenses of any such technology to Company and provided true and
complete copies of such assignments or licenses to Parent.

 

30

 

(h)                                 Company
has taken commercially reasonable steps to protect rights in confidential
information (both of Company and that of third Persons that Company has
received under an obligation of confidentiality) and has required all current
and former employees and third parties with whom Company has shared
confidential information to execute legally binding written non-disclosure agreements.

 

(i)                                     Company
has not granted any exclusive license of or right to use or authorized the
retention of any exclusive rights to use any Company Intellectual Property.

 

(j)                                     Except
as disclosed under Section 3.1.21(b)(iv), Company is not subject to, and
the Merger will not give rise to, any non-solicitation obligation, non-compete
obligation, exclusivity obligation, covenants not to sue, right of first
refusal, parity of treatment and/or most favored nation status, right of first
negotiation, or other material restriction on the operation of Company’s
business that relate to and/or restrict any Company Intellectual Property,
Company’s use of Company Intellectual Property in providing services, or any
third party Intellectual Property.

 

(k)                                  The
Merger will not give rise to or cause under any agreements relating to Company
Intellectual Property (i) a right of termination under, or a breach of, or
any loss or change in the rights or obligations of Company, except to the
extent that the same, individually or in the aggregate, would not have, or
reasonably be expected to have, a Company Material Adverse Effect; (ii) an
obligation to pay any royalties or other amounts to any third Person in excess
of those that Company is otherwise obligated to pay absent a Merger; or (iii)
Parent’s granting to any third party any right to or with respect to any of
Parent’s Intellectual Property.

 

(l)                                     Company
is not under any contractual obligation (i) to include any Company
Licensed Intellectual Property in any Company technology and/or service, or
(ii) to obtain a third party’s approval of any Company technology and/or
service prior or subsequent to the marketing or distribution of that technology
and/or service.

 

3.1.22                                         Vote
Required.  The affirmative votes
of (i) the holders of a majority of the outstanding Company Common Shares and
Company Preferred Shares (on an as-converted basis), (ii) the holders of at
least seventy percent (70%) of the Company Preferred Shares (on an as-converted
basis), voting together as a single class, and (iii) the holders of sixty
percent (60%) of the Series 2 Preferred Stock (voting together as a separate
class) (the “Company Stockholder Approval”)
at a stockholder meeting or pursuant to a written consent is the only vote of
the holders of Company’s capital stock necessary to approve this Agreement and
the consummation of the Transactions.

 

3.1.23                                         Finders.
 Neither Company nor its respective
directors, officers or employees have retained any broker, finder, or
investment banker in connection with this Agreement or Transactions, nor does
or will any of Company, or its respective directors, officers or employees owe
any fee or other amount to any broker, finder, or investment banker in
connection with this Agreement or the Transactions.

 

3.1.24                                         Complete
Copies of Materials.  Company has
delivered or made available to Parent true and complete copies of each document
that has been listed in the Company Disclosure Schedule.

 

31

 

3.1.25                                         Board
Recommendation.  Company’s board
of directors has unanimously (i) determined that this Agreement and the
Transactions, including the Merger, are advisable and in the best interests of
Company and its stockholders, (ii) approved and adopted this Agreement and
the Transactions, including the Merger and the transactions contemplated
thereby, and (iii) subject to the other terms and conditions of this
Agreement, resolved to recommend the Merger and approval and adoption of this
Agreement and each of the Transactions by Company’s stockholders, and, as of
the date of this Agreement, none of the aforesaid actions by Company’s board of
directors has been amended, rescinded, or modified.

 

3.1.26                                         Insurance.  Section 3.1.26 of the Company Disclosure
Schedule sets forth all insurance policies and all self-insurance programs and
arrangements relating to the business, assets, and operations of Company. All
premiums due and payable under all such policies have been paid and Company is
otherwise in compliance with the terms of such policies and bonds. As of the
date of this Agreement, there has been no threatened termination of, or premium
increase with respect to, any such policies.

 

3.1.27                                         Intentionally
omitted.

 

3.1.28                                         Accounts
Receivable.  All of the accounts
receivable shown on the Balance Sheet have been collected or to Company’s
knowledge are collectible in the ordinary course of business in the aggregate
recorded amounts thereof (less the reserves and allowances for doubtful
accounts also appearing in such Balance Sheet and net of returns and payment
discounts allowable by Company’s policies) and, to Company’s knowledge, are not
subject to counterclaims or setoffs.

 

3.1.29                                         Personal
Property.  Company has good and
marketable title, free and clear of all title defects, security interests, pledges,
options, claims, liens, encumbrances, and restrictions of any nature whatsoever
(including, without limitation, leases, chattel mortgages, conditional sale
contracts, purchase money security interests, collateral security arrangements,
and other title or interest-retaining agreements) to all receivables,
furniture, machinery, equipment, and other personal property, tangible or
otherwise, reflected on the Balance Sheet or used in Company’s business as of
the date of such Balance Sheet even if not reflected thereon.
Section 3.1.29 of the Company Disclosure Schedule lists (i) all
computer equipment and (ii) all other personal property, in each case
having a depreciated book value of $10,000 or more per item, which are
currently used by Company in the conduct of its business and all such equipment
and property, in the aggregate, is in good operating condition and repair,
reasonable wear and tear excepted.

 

3.1.30                                         Guarantees
and Suretyships.  Company has no
powers of attorney outstanding (other than those issued in the ordinary course
of business with respect to tax matters). Company has no obligations or
liabilities (absolute or contingent) as guarantor, surety, cosigner, endorser,
co-maker, indemnitor, or otherwise respecting the obligations or liabilities of
any person, corporation, partnership, joint venture, association, organization,
or other entity.

 

3.1.31                                         Disclosure.  No representation or warranty made by
Company in this Agreement, nor any document, written information, financial
statement, certificate, or exhibit prepared and furnished or to be prepared and
furnished by Company or its representatives pursuant hereto, or in connection
with the Transactions, when read together in their entirety, contains as of the
date hereof any untrue statement of a material fact, or omits as of the date
hereof to state a material fact necessary to make the statements or facts
contained herein or therein, not misleading, in light of the circumstances
under which they were made.

 

3.1.32                                         Reliance.  The
foregoing representations and warranties are made by Company with the knowledge
and expectation that Parent and Sub are placing reliance thereon.

 

3.2                               Representations
and Warranties of Parent and Sub.  Except
as set forth in a correspondingly numbered disclosure schedule delivered to
Company by Parent and Sub and arranged in paragraphs corresponding to numbered
and lettered sections contained in this Section 3.2, Parent and Sub hereby
makes the representations and warranties set forth in Sections 3.2.1 through
3.2.7 below to Company. For purposes of this Agreement, “Parent Material Adverse Effect” means,
after the date hereof unless otherwise

 

32

 

indicated, a material adverse effect on the financial condition,
business, assets, prospects or results of operations of Parent and its
subsidiaries, taken as a whole, or that would materially impair the ability of
the Parent to consummate the transactions contemplated by this Agreement.

 

3.2.1                                                Organization;
Standing and Power.  Each of
Parent and Sub is a corporation duly organized and validly existing and in good
standing, as applicable, under the laws of its jurisdiction of incorporation or
organization. Each of Parent and Sub has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
businesses as now being conducted, and is duly qualified to do business in each
jurisdiction in which the character of the property owned, leased, or operated
by it or the nature of its activities makes such qualification necessary,
except in such jurisdictions in which a failure to so qualify would have, or
reasonably be expected to have, a Parent Material Adverse Effect.

 

3.2.2                                                Authority.  Parent and Sub have all requisite
corporate power and authority to execute and deliver this Agreement and,
subject to Parent Required Statutory Approvals (as defined in
Section 3.2.3 below), to consummate the Transactions. The execution and
delivery by Parent of this Agreement and the performance of Parent’s obligations
hereunder have been duly and validly authorized by all necessary corporate
action on the part of Parent. This Agreement has been duly executed and
delivered by Parent and Sub and, assuming the due execution and delivery by
Company, constitutes a valid and binding obligation of Parent and Sub
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by the effect of (i) any applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting
the enforcement of creditors’ rights generally, and (ii) general equitable
principles, regardless of whether such enforceability is considered in a
proceeding at law or in equity.

 

3.2.3                                                Consents
and Approvals; No Violations.  Subject
to satisfaction of the conditions set forth in Sections 7.1 and 7.2, the
execution and delivery of this Agreement do not, and the consummation of the
Transactions will not, conflict with or result in any Violation of (a) any
provision of the certificate of incorporation or bylaws of Parent or the
certificate of incorporation or bylaws of Sub, or (b) any loan or credit
agreement, note, bond, mortgage, indenture, contract, lease, or other agreement
or instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to Parent or Sub or
their respective properties or assets, other than, in the case of (b), any such
Violation that individually or in the aggregate would not have a Parent
Material Adverse Effect. No consent is required by or with respect to Parent or
Sub in connection with the execution and delivery of this Agreement by Parent
or Sub or the consummation by Parent and Sub of the Transactions, except for
(x) the filing of a pre-merger notification report by Parent and Company,
and the expiration or termination of all applicable waiting periods, under the
HSR Act and any similar foreign antitrust filings (if applicable),
(y) such filings, authorizations, orders, and approvals as may be required
under foreign laws or state securities laws, and (z) the filing of the
Certificate of Merger in accordance with the DGCL (the filings and approvals
referred to in clauses (x) through (z) are collectively referred to
as the “Parent Required Statutory Approvals”
and together with the Company Required Statutory Approvals, the “Required Statutory Approvals”).

 

3.2.4                                                Financing.  Parent has, and will have available to it
upon the consummation of the Merger, sufficient funds to consummate the
Transactions, subject to the terms and conditions of this Agreement.

 

3.2.5                                                Interim
Operation of Sub.  Sub was formed
solely for the purpose of engaging in the Transactions, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.

 

3.2.6                                                Disclosure.  No representation or warranty made by
Parent or Sub, nor any document, written information, statement, financial
statement, certificate, or exhibit prepared and furnished or to be prepared and
furnished by Parent or its representatives pursuant hereto or in connection
with the transaction contemplated hereby, when read together in their entirety,
contains upon the date hereof or will contain upon the consummation of the
Merger any untrue statement of a material fact, or omits upon the date hereof
or will omit

 

33

 

upon the consummation of the Merger to state a material fact necessary
to make the statements or facts contained herein or therein, not misleading, in
light of the circumstances under which they were made.

 

3.2.7                                                Reliance.  The foregoing representations and
warranties are made by Parent with the knowledge and expectation that Company
is placing reliance thereon.

 

ARTICLE IV

COVENANTS OF COMPANY

 

All
references in Sections 4.1 through 4.10 to “Company” shall include
Company’s subsidiaries except to the extent specifically excluded or except as
otherwise clearly required by the context. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except with respect to the performance of,
execution of, and other acts related to the Pre-Merger Spin and the Pre-Merger
Spin Agreements, Company agrees (except as expressly contemplated by this
Agreement or with Parent’s prior written consent) that:

 

4.1                               Conduct
of Business.

 

4.1.1                                                Ordinary
Course.  Company shall carry on
its business in the usual, regular, and ordinary course consistent with past
practice and will continue to observe its obligations to comply with the
requirements of all applicable laws and regulations, use commercially
reasonable efforts to preserve intact its present business organization, keep
available the services of its present officers, consultants, and employees and
maintain satisfactory relationships with licensors, licensees, customers,
suppliers, contractors, distributors, and others having business relationships
with it. Company shall promptly notify Parent of any event or occurrence or
emergency not in the ordinary course of business of Company that would have, or
reasonably be expected to have, a Company Material Adverse Effect.
Notwithstanding the foregoing, with regard to Company’s Early Phase Business,
Company shall not:

 

(a)                                  grant
any severance or termination pay to any officer or director or, to any employee
of Company, other than those made in Company’s ordinary course of business
and consistent with past practices and to the extent required by (i) law,
or (ii) Company’s existing severance plans and agreements as disclosed in
the Company Disclosure Schedule;

 

(b)                                 transfer
to any third Person ownership of Company Intellectual Property Rights;

 

(c)                                  declare,
set aside, or pay any dividend or other distribution with respect to any shares
of capital stock of Company, or repurchase, redeem, or acquire any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Company or effect any stock split (forward or reverse) or
otherwise change its capitalization or capital structure in any manner from the
way it existed on the date hereof;

 

(d)                                 split,
combine, or reclassify any class of capital stock of Company;

 

(e)                                  amend
any provision of the certificate of incorporation or bylaws of, or any term of
any outstanding security issued by Company;

 

(f)                                    except
with regard to the Company’s revolving line of credit with CapitalSource
Finance LLC, incur, assume, or guarantee any indebtedness for borrowed money in
excess of $100,000 in the aggregate during the 90 day period from the date
hereof, and $100,000 in the aggregate during any consecutive 90 day period
thereafter;

 

34

 

(g)                                 change
any method of accounting or accounting practice by Company, except for any such
change required by reason of a change in GAAP or with prior agreement with
Company’s auditor;

 

(h)                                 commence
a lawsuit other than:  (i) for the
routine collection of bills; or (ii) in such cases where Company in good
faith determines that failure to commence a suit would result in a material
impairment of a valuable aspect of Company’s business, provided Company
consults with Parent prior to filing such suit;

 

(i)                                     extend
an offer of employment to a candidate for an officer position of vice president
or above or any position with annual compensation equal to or greater than
$100,000 without prior consultation with Parent;

 

(j)                                     grant
or issue any capital stock, securities convertible into capital stock of
Company, restricted stock, restricted stock units, stock appreciation rights,
stock options, warrants or other equity rights;

 

(k)                                  adopt
or pay, accelerate, or accrue salary or other payments or benefits or promise
or make discretionary employer contributions to, under, or with respect to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation,
group insurance, severance pay, retirement, or other employee benefit plan,
agreement, or arrangement, or any employment or consulting agreement with or
for the benefit of any Company director, officer, employee, agent, or
consultant, whether past or present, or amend any such existing plan,
agreement, or arrangement, in each case other than in the ordinary course of
business or as required by law;

 

(l)                                     assign,
transfer, dispose of, or license assets of Company, grant any license of any
assets of Company, or acquire or dispose of capital stock of any third party or
merge or consolidate with any third party other than in the ordinary course of
business;

 

(m)                               enter
into any joint venture, partnership, limited liability company, or operating
agreement with any Person;

 

(n)                                 breach,
modify, amend, or terminate any of Company’s Significant Contracts, or waive,
release, or assign any rights or claims under any of Company’s Significant
Contracts, except as expressly required by this Agreement or except in the
ordinary course of business;

 

(o)                                 settle,
compromise, or otherwise terminate any litigation, claim, investigation, or
other settlement negotiation that would result in an expenditure by Company
greater than $50,000  individually, or
$100,000  in the aggregate;

 

(p)                                 fail
to keep in full force insurance policies covering Company’s properties and
assets under substantially similar terms and conditions as Company’s current
policies;

 

(q)                                 enter
into any Significant Contract or any other contract that would require Company
to expend a sum in excess of $100,000, provided that this restriction shall not
apply to contracts entered into in the ordinary course of business pursuant to
which Company conducts clinical trials so long as notice of such Significant
Contract or other contract is given to Parent in connection therewith;

 

35

 

(r)                                    adopt
a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization (other than the
Merger);

 

(s)                                  acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association, or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the business of
Company;

 

(t)                                    adopt
or amend any employee benefit plan or employee stock purchase or employee stock
option plan or grant agreement (other than amendments required by law or to
comply with the Code or as requested by Parent pursuant to
Section 6.8(b)), or enter into any employment contract, pay any special
bonus or special remuneration to any director, officer, consultant, or
employee, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers,
consultants, or employees other than increases as required by law or pursuant
to existing employment agreements identified in the Company Disclosure
Schedule, or make any change in its existing borrowing or lending arrangements
for or on behalf of any of such Persons pursuant to an employee benefit plan or
otherwise;

 

(u)                                 pay
or make any accrual or arrangement for payment of any pension, retirement
allowance, or other employee benefit pursuant to any existing plan, agreement,
or arrangement to any officer, director, or employee or pay or agree to pay or
make any accrual or arrangement for payment to any officers, directors, or
employees of Company of any amount relating to unused vacation days, except
payments, and accruals made in the ordinary course of business consistent with
past practice and except as required by law;

 

(v)                                 except
as required or permitted under this Agreement, knowingly take any action that
would or is reasonably likely to (i) make any representation or warranty
of Company contained herein inaccurate, (ii) result in any of the
conditions to the Merger set forth in Article VII not being satisfied, or
(iii) impair the ability of Company to consummate the Merger in accordance
with the terms hereof;

 

(w)                               make
any individual capital expenditure in excess of $50,000 or any capital
expenditures in excess of $100,000 in the aggregate during the 90 day period
from the date hereof and $250,000 in the aggregate during any subsequent
consecutive 90 day period thereafter, in each case excepting tenant
improvements and capital expenditures related to the building out of the Early
Phase sites consistent with current plans provided to Parent and described in
Section 3.1.9 of the Company Disclosure Schedule, provided that any
expenditures related to tenant improvements in connection with the location
moves in Daytona, Austin and Honolulu that are to be expensed in excess of
$50,000 shall be approved in advance by Parent and at such time the parties
shall make a determination as to the impact of such expenses on the Closing
Date Working Capital Amount; or

 

(x)                                   authorize,
commit, or agree to take any of the foregoing actions except as otherwise
permitted by this Agreement.

 

4.1.2                                                Exclusivity;
Acquisition Proposals.

 

(a)                                  Unless
and until this Agreement shall have been terminated by either party pursuant to
Section 9.1 hereof, and except with respect to any Pre-Merger Spin and
transactions related thereto which shall not be considered “Restricted
Transactions” for purposes of this Agreement,

 

36

 

Company agrees that it shall not (and shall prohibit and use its
commercially reasonable efforts to ensure that none of its officers, directors,
agents, employees, or affiliates, or any investment banker, financial advisor,
attorney, accountant, or other advisor, agent, or representative (collectively,
“Representatives”)) take or cause
or permit any person to take, directly or indirectly, any of the following
actions with any party other than Parent and its designees:  (i) solicit, encourage, initiate, or
participate in any negotiations, inquiries, or discussions with respect to any
offer or proposal to acquire all or any significant part of Company, its
business, assets, or capital shares, whether by merger, consolidation, other
business combination, purchase of capital stock purchase of assets, license
(but excluding non-exclusive licenses entered into in the ordinary course of
business), lease, tender or exchange offer, or otherwise (each of the
foregoing, a “Restricted Transaction”);
(ii) disclose, in connection with a Restricted Transaction, any nonpublic
information to any person other than Parent or its representatives concerning
Company’s business or properties or afford to any person other than Parent or
its representatives access to its properties, books, or records, except as
required by law or pursuant to a governmental request for information;
(iii) enter into or execute any agreement relating to a Restricted
Transaction; or (iv) make or authorize any public statement,
recommendation, or solicitation in support of any Restricted Transaction or any
offer or proposal relating to a Restricted Transaction other than with respect
to the Merger. In the event that Company is contacted by any third party
expressing an interest in discussing a Restricted Transaction, Company will
promptly, but in no event later than twenty-four (24) hours following
Company’s knowledge of such contact, notify Parent in writing of such contact
and the identity of the party so contacting Company and any information
conveyed to Company by such third party in connection with such contact or
relating to such Restricted Transaction, and shall promptly, but in no event
later than twenty-four (24) hours, advise Parent of any material
modification or proposed modification thereto; provided, however, prior to
Company Stockholder Approval, in each case, if and to the extent that
(a) Company’s board of directors determines in good faith by resolution
duly adopted, after consultation with Company’s outside legal counsel and
Company’s financial advisor, that such Restricted Transaction is, or could
reasonably be expected to lead to, a Superior Proposal (as defined hereafter),
and (b) Company’s board of directors determines in good faith by
resolution duly adopted, after consultation with Company’s outside legal
counsel, that the failure to participate in such discussions, disclose such
nonpublic information, provide such access to its properties, books, or
records, enter into any agreement relating to such Restricted Transaction, or
make or authorize any public statement relating to any Restricted Transaction
or any offer or proposal relating to a Restricted Transaction would be
inconsistent with the fiduciary duties of Company’s board of directors under
applicable law, then Company may participate in discussions regarding such Restricted
Transaction, provide non-public information with respect to Company, afford
access to the properties, books, or records of Company, enter into any
agreement relating to such Restricted Transaction, or make or authorize any
public statement relating to any Restricted Transaction or any offer or
proposal relating to a Restricted Transaction, as applicable.

 

(b)                                 Neither
the board of directors of Company nor any committee thereof shall directly or
indirectly (i) (A) withdraw (or amend or modify in a manner adverse
to Parent), or publicly propose to withdraw (or amend or modify in a manner
adverse to Parent), the approval, recommendation, or declaration of
advisability by the board of directors of Company or any such committee thereof
of this Agreement, the Merger, or the Transactions, or (B) recommend,
adopt, or approve, or propose publicly to recommend, adopt, or approve, any
Acquisition Proposal (any action described in this clause (i) being
referred to as a “Change of Recommendation”)
or (ii) approve or recommend, or publicly propose to approve or recommend,
or allow Company or any subsidiary of Company to execute or enter into, any
letter of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture agreement,
partnership agreement, or other similar agreement, arrangement, or
understanding (A) constituting or 

 

37

 

related to, or that is intended to or could reasonably be expected to lead
to, any Acquisition Proposal or (B) requiring it to abandon, terminate, or
fail to consummate the Merger or any other transaction contemplated by this
Agreement. Notwithstanding the foregoing, until Company Stockholder Approval is
obtained, and subject to Company’s compliance at all times with the other
provisions of this Section 4.1.2, the board of directors of Company may
make a Change of Recommendation if such board of directors determines in good
faith by resolution duly adopted, after consultation with outside legal
counsel, that it is required to do so in order to comply with its fiduciary
duties to the stockholders of Company under applicable law. Company will
provide Parent with forty eight (48) hours’ prior notice of any meeting of
Company’s board of directors at which such board of directors is reasonably
expected to take action with respect to any Acquisition Proposal or Change of
Recommendation.

 

(c)                                  Notwithstanding
anything to the contrary contained in this Agreement, the obligation of Company
to call, give notice of, convene, and hold the Company Stockholders’ Meeting
shall not be limited or otherwise affected by the commencement, disclosure,
announcement, or submission to it of any Acquisition Proposal, or by any Change
of Recommendation.

 

(d)                                 For
purposes of this Agreement, “Acquisition
Proposal” means any inquiry, proposal, or offer from any Person
relating to, or that could reasonably be expected to lead to a Restricted
Transaction. For purposes of this Agreement, “Superior
Proposal” means any unsolicited proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, substantially all of the equity securities of Company entitled to
vote generally in the election of directors or substantially all of the assets
of Company, on terms which Company’s board of directors reasonably believes
(after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to its stockholders than the Merger and the Transactions.

 

4.2                               Breach of
Representations and Warranties; Notification; Access to Information.

 

(a)                                  Notwithstanding
the foregoing or anything contained herein to the contrary, from the date
hereof to the earlier of the Effective Time or the termination of this
Agreement in accordance with Section 9.1, Company shall (a) confer
with Parent and its respective representatives, at such times as they may
reasonably request, as to operational and integration matters to the extent
permitted by law, but not so as to prevent Company from conducting its business
in the ordinary course; (b) in the event of, and promptly after becoming
aware of, the occurrence of or the pending or threatened occurrence of any
event that would cause or constitute a breach of any of the representations and
warranties set forth in Section 3.1, give detailed written notice thereof
to Parent and use commercially reasonable efforts to promptly remedy any such
material breach or inaccuracy; and (c) promptly notify the same of any change
in the normal course of any business, operations, or financial condition of
Company or its assets or properties, or any emergency related thereto which
would result in a Company Material Adverse Effect. Without limiting the
generality of the foregoing, Company shall promptly notify Parent of
(i) any discussions or actions (of any type, preliminary or
otherwise) relating to bankruptcy of Company; (ii) any complaints,
investigations, or hearings (or communications indicating that the same may be
contemplated) of any Governmental Entity (for which Company has received
written or oral notice); (iii) any loss of or damage to any property owned
by Company which has a Company Material Adverse Effect; (iv) the
institution of any litigation, (v) the threat of any litigation that could
reasonably be expected to have a Company Material Adverse Effect; (vi) the
failure of Company to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by it pursuant to this Agreement, or
(vii) any other matter that would result in a Company Material Adverse
Effect.

 

38

 

(b)                                 Subject
to appropriate restrictions on access to information that Company determines in
good faith to be proprietary, privileged or competitively sensitive and any
applicable law that restricts Company from disclosing information related to
Company’s employees or customers, Company shall, subject to applicable law,
afford Parent and its respective Representatives, reasonable access during normal
business hours during the period prior to the Effective Time to
(i) Company’s properties, books, contracts, commitments, written
communications , and records, and (ii) all other information concerning
the business, properties, and personnel of Company, as Parent may reasonably
request that is necessary to complete the transaction and prepare for an
orderly transition to operations after the Effective Time. Company agrees to
provide to Parent and its Representatives copies of monthly internal financial
statements within forty-five (45) days of completion of such month. No
information or knowledge obtained in any investigation pursuant to this
Section 4.2(b) shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of Parent to
consummate the Merger. Any access to Company’s properties shall be subject to
Company’s reasonable security measures and insurance requirements and shall not
include the right to perform any “invasive” testing. Company shall permit
Parent’s representatives to meet, at such times as they may reasonably request
(but not so as to prevent Company from conducting its business in the ordinary
course),  with the officers of Company
responsible for the financial statements and internal controls of Company and
its subsidiaries to discuss such matters as Parent may deem reasonably
necessary or appropriate to satisfy its obligations under Section 302 and
906 of the Sarbanes-Oxley Act of 2002 and any rules and regulations relating thereto.

 

4.3                               Consents.  Company will promptly apply for or
otherwise seek, and use commercially reasonable efforts to obtain, all Consents
set forth in Schedule 4.3, and make all filings, required with respect to
Company for the consummation of the Merger.

 

4.4                               Commercially
Reasonable Efforts.  Company will
use commercially reasonable efforts to effectuate the Transactions and to
fulfill and cause to be fulfilled the conditions to Closing under this
Agreement.

 

4.5                               Notice to
Stockholders.  If applicable, Company
shall promptly comply with the notice requirements of Sections 228 and 262 of
the DGCL. Company shall provide notice required by Company’s certificate of
incorporation.

 

4.6                               Tax Returns.  Prior to the Closing Date, Company shall
properly and timely file or cause to be filed all Returns or eligible
extensions, in each case if due, with respect to Company and any of its
subsidiaries for all taxable periods that have ended and shall pay (or cause
any applicable subsidiaries to pay) all taxes required to be paid prior to the
Closing Date. All such Returns shall be prepared consistent with past practice,
except as may be required by applicable law, and shall be subject to approval
of Parent, which shall not be unreasonably withheld or delayed. Company shall (i)
notify Parent promptly if it receives written notice of any tax audit, the
assessment of any tax, the assertion of any tax lien, or any request, notice,
or demand for taxes by any taxing authority, (ii) provide Parent a
description of any such matter in reasonable detail (including a copy of any
written materials received from the taxing authority), and (iii) take no
action with respect to such matter without the consent of Parent, which shall
not be unreasonably withheld or delayed. Company shall not (v) amend any
Return previously filed, (w) incur any obligation to make any payment of, or in
respect of, any taxes, except in the ordinary course of business, (x) make
or revoke any tax election that may affect Company, (y) agree to extend or
waive the statutory period of limitations for the assessment or collection of
any tax, or (z) enter into any agreement or settlement with respect to any
tax without the approval of Parent, which shall not be unreasonably withheld or
delayed.

 

4.7                               Intentionally Omitted.

 

4.8                               Parachute Payments.  At the Company Stockholders Meeting (as
defined in Section 4.10), Company will submit to all persons entitled to
vote (within the meaning of the Treasury Regulations under

 

39

 

Section 280G of the Code) the material facts concerning all
payments that Parent reasonably believes, in the absence of stockholder
approval of such payments, would be “parachute payments” as defined in
Section 280G(b)(2) of the Code (“Parachute
Payments”), in form and substance reasonably satisfactory to Parent
and its counsel, which shall satisfy all requirements of the DGCL and
Section 280G(b)(5)(B) of the Code and the Treasury Regulations thereunder,
and Company shall solicit the consent of the holders of Company Shares to the
Parachute Payments. Company’s board of directors shall recommend approval of
the Parachute Payments, unless Company’s board of directors believes in good
faith, after consultation with Company’s counsel, that such recommendation would
be inconsistent with the fiduciary duties of Company’s board of directors under
applicable law.

 

4.9                               Pre-Merger Spin.  Prior to the Closing the Company shall
have consummated the Pre-Merger Spin transaction such that all assets and
liabilities of the Company’s business not directly related to, or used in the
Company’s Early Phase Business, as defined in Section 7.2.11, shall have been
transferred to an entity not owned by Company.

 

4.10                        Stockholder Approval.  Company will take all action necessary in
accordance with the DGCL and Company’s certificate of incorporation and bylaws
to solicit consent or to hold and convene a special meeting of its stockholders
to be held as soon as practicable to submit this Agreement, the Merger, and
related matters, including those described in Section 4.8, for the
consideration and approval of Company’s stockholders (such consent or meeting
referred to herein as the “Company
Stockholders’ Meeting”). Such approval will be recommended by
Company’s board of directors, subject to the conditions set forth in
Section 4.1.2; provided, that in any event such meeting will be called,
held, and conducted notwithstanding any Change of Recommendation.

 

ARTICLE
V

COVENANTS OF PARENT

 

During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Parent agrees (except
as expressly contemplated by this Agreement or with Company’s prior written
consent, which will not be unreasonably withheld) that:

 

5.1                               Breach of Representations
and Warranties.  In the event of,
and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event that would cause or constitute a breach of
any of the representations and warranties set forth in Section 3.2, Parent
will give detailed notice thereof to Company and will use commercially
reasonable efforts to prevent or promptly remedy such breach or inaccuracy.

 

5.2                               Consents.  Parent will promptly apply for or
otherwise seek, and use commercially reasonable efforts to obtain, all consents
and approvals, and make all filings, required for the consummation of the
Merger.

 

5.3                               Commercially
Reasonable Efforts.  Parent will
use commercially reasonable efforts to effectuate the Transactions and to
fulfill and cause to be fulfilled the conditions to Closing under this
Agreement.

 

5.4                               Name
Change and Related Rights.  Parent
acknowledges and agrees that within one (1) business day after Closing Parent
shall cause the name of Company and the Texas direct and indirect subsidiaries
to be changed to something other than Radiant Research Inc. and shall not
otherwise include the term “Radiant” and acknowledges and agrees that all trade
name, trademark, and other intellectual property rights related to the names
“Radiant”, “Radiant Research” and “Radiant Research Inc.” and the Company’s
Texas direct and indirect subsidiaries shall remain with Radiant Research
Holdings, Inc. 

 

40

 

ARTICLE VI

ADDITIONAL AGREEMENTS

 

In
addition to the foregoing, Parent and Company each agree to take the following
actions subsequent to the execution of this Agreement.

 

6.1                               Confidentiality
Agreement.  Company and Parent
agree that the Confidentiality Agreement by and among Company and Parent dated
September 16, 2005 (“Confidentiality
Agreement”) shall continue in full force and effect and shall be
applicable to all Information (as defined in the Confidentiality Agreement)
exchanged pursuant to this Agreement.

 

6.2                               Legal Conditions to
the Merger.  Each of Parent, Sub,
and Company will take all reasonable actions necessary to comply promptly with
all legal requirements that may be imposed on any of them with respect to the
Merger and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon the other. Each of
Parent, Sub, and Company will take, and will cause their respective
subsidiaries to take, all reasonable actions to obtain (and to cooperate with
the other parties in obtaining) any consent, approval, order, or authorization
of, or any exemption by, any Governmental Entity, or other third party,
required to be obtained or made by Company or Parent or their respective
subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.

 

6.3                               HSR Act Filings.

 

6.3.1                                                Filings
and Cooperation.  Each of Parent
and Company shall take all reasonable steps to: 
(i) promptly, but in any event on or before the seventh business
day after signing this Agreement, each file or cause to be filed with the
Federal Trade Commission and the Antitrust Division of the Department of
Justice, pursuant to the HSR Act, Notification and Report Forms (the “HSR Filings”) with respect to the Merger
and Transactions in substantial compliance with the requirements of the HSR
Act, and each of Parent and Company shall furnish to the other such information
and assistance as the other may reasonably request in connection with the
preparation of its HSR filing or, if applicable, another submission under the
HSR Act; (ii) comply in a timely manner with any request under any
Antitrust Laws (as defined in Section 6.3.2) for additional information,
documents, or other material received by such party or any of its affiliates or
subsidiaries from the Federal Trade Commission or the Antitrust Division of the
Department of Justice or other Governmental Entity in respect of such filings,
the Merger, or the Transactions; and (iii) cooperate with the other party
in connection with any such filing and in connection with resolving any Request
for Additional Information and Documentary Material (“Second Request”) under the HSR Act or any
investigation or other inquiry of any such agency or other Governmental Entity
under any Antitrust Laws with respect to any such filing, the Merger, or the
Transactions. Parent shall coordinate all communications with Governmental
Entities regarding such investigation or Second Request, and each party shall
inform the other party:  (i) prior to
delivering any material communication to a Governmental Entity,
(ii) promptly after receiving any material communication from a
Governmental Entity, and (iii) before entering into any proposed understanding,
undertaking, or agreement with any Governmental Entity regarding any such
filings, the Merger, or the Transactions. Neither party shall participate in
any meeting with any Governmental Entity in respect of any such filings,
investigation, or other inquiry without giving the other party prior notice of
the meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate; provided however that nothing herein
shall preclude either party from participating in discussions with a
Governmental Entity without participation by the other party where the
discussions are initiated by the Governmental Entity, or where the subject
matter in the reasonable judgment of that party cannot be effectively discussed
in the presence of the other party. Parent shall pay, at the time of filing,
all filing fees for the HSR Filings under this Section 6.3 and all costs
associated with responding to a Second Request.

 

6.3.2                                                Objections.  Each of Parent and Company shall take all
reasonable steps to comply with such information requests and to resolve such
objections, if any, as may be asserted by any Governmental Entity with respect
to the Merger or the Transactions under the HSR Act, the Sherman Antitrust Act
of 1890, as amended, the Clayton Antitrust Act of 1914, as amended, the Federal
Trade Commission Act of

 

41

 

1914, as amended, and any other federal, state, or foreign statutes,
rules, regulations, orders, or decrees that are designed to prohibit, restrict,
or regulate actions having the purpose or effect of monopolization or restraint
of trade (collectively, “Antitrust Laws”).
In connection therewith, if any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) alleging the Merger as violative
of any Antitrust Law, and, if by mutual agreement Parent and Company decide
that litigation is in their best interests, each of Parent and Company shall
cooperate to vigorously contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment, injunction,
or other order, whether temporary, preliminary, or permanent, that is in effect
and that prohibits, prevents, or restricts consummation of the Merger; provided
that Parent shall coordinate all communications with Governmental Entities
regarding any such administrative or judicial action or proceeding. Each of
Parent and Company shall take such reasonable action as may be required to
cause the expiration of the notice periods under the HSR Act with respect to
the Merger and the Transactions as promptly as possible after the execution of
this Agreement. Notwithstanding anything to the contrary in this
Section 6.3.2 or in Section 6.3.1, (a) neither Parent nor any of
its subsidiaries shall be required to divest any of their respective
businesses, product lines, or assets, or to take or agree to take any other
action or agree to any limitation on the business of Parent or any subsidiary
of Parent, and (b) neither Company nor its subsidiaries shall be required
to divest any of their respective businesses, product lines, or assets, or to
take or agree to take any other action or agree to any limitation that would
have, or reasonably be expected to have, a Company Material Adverse Effect,
provided that this clause (b) shall not be read to apply to actions acceptable
to Parent required to be taken after the Closing.

 

6.4                               Insurance.  Parent shall cause the Surviving
Corporation to maintain Company’s existing insurance policies’ indemnification
provisions (including with respect to advancement of expenses) as of the date
hereof with respect to present and former directors, officers, employees, and
agents of Company and all other Persons who may presently serve or have served
at Company’s request as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise
(collectively, the “Indemnified Parties”)
for all expenses, judgments, fines, and amounts paid in settlement by reason of
actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time that relate to the Early Phase Business to the fullest
extent permitted or required under applicable law and Company’s certificate of
incorporation and bylaws in effect as of the date of this Agreement (to the
extent consistent with applicable law), for a period of three (3) years after
the Effective Time, as well as any
rights to indemnification and advancement of expenses provided in employment
agreements or indemnification agreements between Company and any Indemnified
Parties, and shall cause the Surviving Corporation to perform (and guarantees
that the Surviving Corporation shall perform) its obligations under such
indemnification provisions and agreements in accordance with their respective
terms. The provisions of this Section 6.4 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs, and their representatives. If Surviving Corporation elects (or Parent
causes Surviving Corporation to elect) to obtain “tail” coverage with regard to
any other insurance policies of Company, such coverage shall be at Parent’s or
Surviving Corporation’s expense.

 

6.5                               Expenses.  Except as set forth above in Sections 6.3
and 6.4, all costs and expenses incurred in connection with this Agreement, the
Transactions, and the transactions contemplated by the Merger shall be paid by
the party incurring such expense. Company shall accrue on the Closing Balance
Sheet all fees of its professional advisors incurred up to the date of Closing.

 

6.6                               Additional Agreements.  In case at any time after the Effective
Time any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities, and franchises of
Company or Sub, including without limitation the termination of any UCC
financing statements, amendments, and assignments, the proper officers and
directors of each corporation that is a party to this Agreement shall take all
such necessary action.

 

6.7                               Public Announcements.  Company and Parent may each issue a press
release following the execution of this Agreement. Neither Company nor Parent
shall make any public announcement concerning this Agreement and the
Transactions without the prior written consent of the other party, and shall
furnish to the other party all releases prior to publication. Nothing contained
herein shall prevent Company at any time from

 

42

 

furnishing any information to any Governmental Entity or from issuing
any release as required by law and Parent shall not be required to obtain any
prior approval of releases and statements it is required to make, in its sole
discretion, pursuant to its interpretation of any securities laws, however each
party shall make commercially reasonable efforts to consult with the other
party to the extent practicable. Furthermore, nothing contained herein shall
restrict Company’s internal communications with its employees, its discussion
with customers that may be affected by the Transactions, or its providing any
notices or other communications that are contemplated by this Agreement (e.g.,
seeking consents to assignment from Company’s landlords).

 

6.8                               Employee Matters.

 

(a)                                  Company
shall use commercially reasonable efforts to cooperate with regard to the
continuing employment of the Company’s Eligible Employees as of the Effective
Time. For purposes of this Section 6.8, “Eligible
Employees” are those employees of Company who are employed at one of
the research sites included in the Early Phase Business (as defined in
Section 7.2.11(a) below) and those other employees of Company who are
designated as Eligible Employees on Schedule 6.8. A list of all Eligible Employees
is set forth on Schedule 6.8. Each Eligible Employee shall receive base salary
that is the same as or greater than those paid to such Eligible Employee by
Company, and benefits that are at least comparable in the aggregate to the
benefits provided to such Eligible Employee by Company, immediately prior to
the Effective Time. Except as expressly agreed to in writing by Sub or Parent,
no specific terms and conditions of employment, including terms and conditions
pertaining to length of employment, are guaranteed. Parent shall be responsible
for any termination obligations relating to Eligible Employees except to the
extent that any such obligations are the result of the terminations by the
Company prior to Closing.

 

(b)                                 Except
as may otherwise be agreed by Parent and Company in writing prior to the
Effective Time, Surviving Corporation shall continue to maintain all of the
Plans set forth in Section 3.1.14 of the Company Disclosure Schedule that are
intended to be qualified within the meaning of Section 401(a) of the Code, or
the portion of such Plans that remains after the Pre-Merger Spin, after Closing
until Parent determines whether to retain, terminate, or merge such plans.
Additionally, Surviving Corporation shall continue to maintain after Closing
all other employee benefit plans, policies, and arrangements set forth in
Section 3.1.14 of the Company Disclosure Schedule, or the portion of such Plans
that remains after the Pre-Merger Spin, except those designated as terminated
or assumed in the Pre-Merger Spin transaction and those that Parent requests
Company to terminate at or before the Effective Time. After the Effective Time,
Parent shall have sole and exclusive authority to determine the continuation,
amendment, or termination of such plans. To the extent that Parent provides any
employee benefits after the Effective Time under Parent’s employee benefit
plans, Parent shall give each Company employee full credit for such employee’s
service with Company for purposes of eligibility, vesting and benefit accrual
under any employee benefit plan of Parent in which a Company employee
participates, to the same extent recognized by Company at the time coverage
under the existing Company plan ceases. Notwithstanding the foregoing, any
obligations of Surviving Corporation for any Plan after the Effective Date
shall be limited to obligations related to Eligible Employees.

 

ARTICLE VII

CONDITIONS PRECEDENT

 

7.1                               Conditions to Each
Party’s Obligation to Effect the Merger. 
The respective obligations of each party to consummate the Merger
are subject to the satisfaction, or to the extent permitted by applicable law,
the written waiver at or prior to the Effective Time of each of the following
conditions:

 

43

 

7.1.1                                                Stockholder
Approval.  This Agreement and the
Transactions shall have received Company Stockholder Approval.

 

7.1.2                                                Required
Statutory Approvals.  Other than
the filing of the Certificate of Merger with the Secretary of State of
Delaware, all Required Statutory Approvals shall have been satisfied, filed,
occurred, or been obtained.

 

7.1.3                                                No
Order.  No Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced, or
entered any statute, rule,
regulation, executive order, decree, injunction, or other order (whether
temporary, preliminary, or permanent) that (i) is in effect, and
(ii) has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger (which illegality or prohibition would have a
material adverse effect on the combined Early Phase Business of Parent and
Surviving Corporation (the “Company Business”)
if the Merger were consummated notwithstanding such statute, rule, regulation,
executive order, decree, injunction, or other order).

 

7.2                               Conditions of
Obligations of Parent and Sub.  The
obligations of Parent and Sub to consummate the Merger are further subject to
the satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:

 

7.2.1                                                Representations
and Warranties of Company.  The
representations and warranties of Company contained in this Agreement shall be
true and correct in all respects on the date hereof (as though the Pre-Merger
Spin had been consummated as of the
date hereof) and as of the Closing Date (without regard to the proviso in
Section 3.1 relating to the consummation of the Pre-Merger Spin) with the same
force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular date
shall have been true and correct only on such date) except, in each case, as
does not constitute a Company Material Adverse Effect at the Closing Date.
Parent and Sub shall have received a certificate with respect to the foregoing
signed on behalf of Company by the Chief Executive Officer and the Chief
Financial Officer of Company.

 

7.2.2                                                Performance
of Obligations of Company.  Company
shall have performed all agreements and covenants required to be performed by
it under this Agreement prior to the Closing Date, except for breaches that do
not have a Company Material Adverse Effect. Parent shall have received a certificate signed on behalf of
Company by the Chief Executive Officer and the Chief Financial Officer of
Company to such effect.

 

7.2.3                                                No
Company Material Adverse Effect.  From
the date of this Agreement until the Closing Date, there shall not have
occurred any change, event, circumstance, development, or effect that,
individually or in the aggregate, has had a Company Material Adverse Effect,
and Parent shall have received a certificate to that effect signed by the Chief
Executive Officer and the Chief Financial Officer of Company.

 

7.2.4                                                Legal
Action.  There shall not be
pending any action, proceeding, or other application brought by any Governmental
Entity:  (i) challenging or seeking
to restrain or prohibit the consummation of the Transactions, or seeking to
obtain any material damages; or (ii) seeking to prohibit or impose any
material limitations on Parent’s or the Surviving Corporation’s ownership or
operation of all or any portion of Parent’s and Company’s combined Company
Business or to compel Parent or Surviving Corporation to dispose of any portion
of Parent’s and Surviving Corporation’s combined Company Business as a result
of the Transactions, other than in accordance with a plan proposed by or
consented to in writing by Parent.

 

7.2.5                                                Resignations.  Parent shall have received the
resignations of all of the officers and directors of Company and its
subsidiaries (which resignations, other than the right to serve as an officer
or director, shall not impair the rights of any officer or director).

 

44

 

7.2.6                                                Required
Employee.  As of immediately
prior to the Closing, Gwen Booth shall have executed an offer letter and
employee agreement in the form provided by Parent and shall not have revoked
such acceptance, provided that the terms of the offer may not be amended or
modified without the mutual agreement of Parent and such employee.

 

7.2.7                                                Intentionally
Omitted.

 

7.2.8                                                Escrow
Agreement. Parent, the Stockholders’ Representatives, and the escrow
agent identified therein shall have executed and delivered the Escrow
Agreement.

 

7.2.9                                                Equipment
Payoff; Minutes. Company shall have provided Parent with the dollar
amount at closing for equipment lease amounts paid off applicable to the
Company’s Early Phase Business, defined in Section 7.2.11, equipment and assets
no later than the third business day after satisfaction or waiver of the last
to be fulfilled of the conditions set forth in this Article VII that by
their terms are not to occur at the Closing. Company shall have provided Parent
with all minute books of Company and its subsidiaries.

 

7.2.10                                         Intentionally
Omitted.

 

7.2.11                                         Pre-Merger
Spin.

 

(a)                                  Company
shall have consummated all sales, conveyances, transfers, assignments or other
transactions necessary or required to dispose of all Company assets and
liabilities not directly related to, or used in, the Early Phase Business (“Pre-Merger Spin”). For purposes hereof, “Early Phase Business” means the business of
Conducting clinical research studies at Company’s facilities in Portland,
Oregon; San Diego, California; Honolulu, Hawaii; Austin, Texas; Boise, Idaho;
Gainesville, Florida; and Daytona Beach, Florida and at Company’s facility
located at 1341 W. Mockingbird Lane, Suite 400E, Dallas, TX 75247.
The Early Phase Business does not include (i) the business of Company’s
contract research organization division, which division operates under the name
“Radiant Development” and provides contract research organization services in
Phase 0 through IV, including but not limited to IND submissions, protocol
design and development, project management, data management, laboratory data
transfers, statistical analysis, medical writing, report writing and monitoring
activities; or (ii) the Company’s corporate office assets and operations. For
purposes hereof, “Conducting”
means recruiting, consenting and randomizing a human subject into a clinical
trial, administering the test article required by the protocol and collecting
the specific data required by the protocol. Such Pre-Merger Spin shall have
been consummated pursuant to, and in accordance with, the Pre-Merger Spin
Agreement(s) substantially in the form attached hereto as
Exhibit 7.2.11(a), and no material term or condition of the Pre-Merger
Spin Agreement(s) shall have been waived by any party thereto. Company shall
have provided to Parent or its counsel all documentation related to any
Pre-Merger Spin.

 

(b)                                 In
connection with the Pre-Merger Spin, the parties shall execute a Transition
Services Agreement, substantially in the form set forth as Exhibit 7.2.11(b),
relating to certain transition services between the parties after the Closing.

 

(c)                                  In
connection with the Pre-Merger Spin, the parties shall execute a License
Agreement, substantially in the form set forth as Exhibit 7.2.11(c), relating
to certain information technology assets.

 

(d)                                 In
connection with the Pre-Merger Spin, the parties shall execute a letter agreement
(the “Indemnification Side Letter”),
substantially in the form set forth as Exhibit

 

45

 

7.2.11(d), relating to certain indemnification obligations with regard
to the operation of the business activities disposed of pursuant to the
Pre-Merger Spin.

 

7.2.12                                         Non-Competition
Agreements.  Parent shall have
received an executed Non-Competition Agreement from each of the persons listed
in Schedule 7.2.12 and from Radiant Research Holdings Inc., which Non-Competition
Agreements shall be substantially in the forms attached hereto as
Exhibits 7.2.12(a) and 7.2.12(b) (the “Non-Competition
Agreements”).

 

7.2.13                                         Good
Standing Certificate.  Company
shall have received a good standing certificate from the state of Delaware
within three days prior to the Effective Time.

 

7.2.14                                         Termination
of Options and Warrants.  There
shall be no outstanding options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions, arrangements
or rights of any character to which Company is a party or by which Company may
be bound obligating Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Company, or
obligating Company to grant, extend or enter into any such option, warrant,
call, conversion right, conversion payment, commitment, agreement, contract,
understanding, restriction, arrangement or right. Company, through its board of
directors, shall have caused the termination of the Company Stock Option Plan,
including termination of all outstanding options thereunder, and shall have
received appropriate consents from former holders thereof, reasonably
acceptable to Parent and its counsel.

 

7.2.15                                         Dissenters’
Rights.  Company shall not have
received written demands (or expressions of intent to make such a demand) under
the dissenters’ rights provisions of the DGCL from holders of the Company’s
capital stock holding in excess of five percent (5%) of the Participating
Common Stock Equivalents.

 

7.2.16                                         Opinion
of Counsel.  Parent shall have
received an opinion dated as of the Closing Date of Davis Wright Tremaine LLP,
counsel to Company, substantially in the form attached hereto as Exhibit
7.2.16.

 

7.3                               Conditions of
Obligation of Company.  The
obligation of Company to consummate the Merger is subject to the satisfaction,
or to the extent permitted by applicable law, the written waiver at or prior to
the Effective Time of each of the following conditions:

 

7.3.1                                                Representations
and Warranties of Parent and Sub.  The
representations and warranties of Parent and Sub contained in this Agreement
shall be true and correct in all respects on the date hereof and as of the
Closing Date with the same force and effect as if made on the Closing Date (except
that those representations and warranties which address matters only as of a
particular date shall have been true and correct only on such date), except, in
each case, or in the aggregate, as does not constitute a Parent Material
Adverse Effect at the Closing Date. Company shall have received a certificate
with respect to the foregoing signed on behalf of Parent, with respect to the
representations and warranties of Parent, by an authorized officer of Parent
and a certificate with respect to the foregoing signed on behalf of Sub, with
respect to the representations and warranties of Sub, by an authorized officer
of Sub.

 

7.3.2                                                Performance
of Obligations of Parent and Sub.  Parent
and Sub shall have performed all agreements and covenants required to be performed
by them under this Agreement prior to the Closing Date except for breaches that
do not have a Parent Material Adverse Effect, and Company shall have received a
certificate signed on behalf of Parent by an authorized officer of Parent to
such effect.

 

46

 

ARTICLE VIII

INDEMNIFICATION

 

8.1                               Indemnification
Relating to Agreement.  Subject
to Sections 8.5 and 8.6, Ten Million Dollars ($10,000,000) of the
Escrow Amount shall be available from and after the Closing to defend,
indemnify, and hold Parent and Surviving Corporation harmless from and against,
and to reimburse Parent and Surviving Corporation with respect to, any and all
losses, damages, liabilities, claims, judgments, settlements, fines, costs, and
expenses (including reasonable attorneys’ fees) (“Indemnifiable Amounts”) of every nature whatsoever incurred by
Parent and Surviving Corporation by reason of or arising out of or in
connection with (i) any breach, or any claim (including claims by parties
other than Parent) that if true, would constitute a breach by Company of any
representation or warranty of Company contained in this Agreement or in any
certificate or other document delivered to Parent pursuant to the provisions of
this Agreement (in each case as modified by the Company Disclosure Schedule as
of the date hereof); (ii) the failure, partial or total, of Company to
perform any agreement or covenant required by this Agreement to be performed by
it, (iii) any tax liability of Company or asserted tax liability of Company
relating to any period of time prior to and through the Closing Date (a “Pre-Closing Period”), and, except for
(x) taxes attributable to, resulting from or arising out of the Merger,
(y) taxes that are disclosed on the Company Disclosure Schedule, and
(z) taxes reflected in Financial Statements prepared in accordance with
its past practices; and (iv) any Working Capital Deficit Adjustment, in each
case of (i) and (ii) above, without giving effect to any “materiality” limitations
or references to “material adverse effect” therein. Five Million Dollars
($5,000,000) of the Escrow Amount shall be available from and after the Closing
to defend, indemnify, and hold Parent and Surviving Corporation harmless from
and against, and to reimburse Parent and Surviving Corporation with respect to,
any and all losses, damages, liabilities, claims, judgments, settlements,
fines, costs, and expenses (including reasonable attorneys’ fees) (“Special Escrow Indemnifiable Amounts”) of
every nature whatsoever incurred by Parent and Surviving Corporation by reason
of or arising out of or in connection with those matters described in Schedule
8.1. Notwithstanding the foregoing, the Indemnifiable Amounts and the Special
Escrow Indemnifiable Amounts shall be net of the amount of any insurance
proceeds from policies held by Company prior to Closing and any indemnity or
contribution amounts actually recovered by Parent or Surviving Corporation and
are subject to compliance with any applicable provisions in the Transition
Services Agreement (e.g., notice of claims relating to the late phase
business); provided that neither Parent nor Surviving Corporation shall have
any obligation to file any claims with their respective insurers. The
availability of the Escrow Amount to indemnify Parent as provided in this
Article VIII shall be determined without regard to any right to indemnification
to which any holder of any interest in the Escrow Amount may have in his or her
capacity as an officer, director, employee, agent, or any other capacity of
Company and no such holder shall be entitled to any indemnification from
Company or the Surviving Corporation for amounts paid hereunder. Any payment to
Parent pursuant to this Article VIII shall be treated for tax purposes as an
adjustment to the Base Amount.

 

8.2                               Third Party Claims.  Notwithstanding anything to the contrary
contained herein or in the Escrow Agreement, whenever Parent shall have
received a written notice that a claim or demand has been asserted or
threatened by a third party as to which Parent may seek indemnification
hereunder (other than claims or demands covered by Section 8.3), Parent
shall promptly notify the Stockholders’ Representatives of such claim or demand
and of the facts within Parent’s knowledge that relate thereto within a
reasonable time (in any event not to exceed five (5) business days) after
receiving such written notice. The Stockholders’ Representatives shall have the
right to conduct and control, through counsel of their own choosing, any third-party
claim, action or suit (“Third Party Claim”).
Parent may, at its election, participate in the defense of any such Third Party
Claim, with counsel of its choosing, but shall be required to bear the fees and
expenses of such counsel. Notwithstanding the foregoing, if in the reasonable
judgment of Parent after consultation with counsel (i) there is a conflict
or a reasonably likely potential conflict between the positions of
Stockholders’ Representatives and Parent in conducting the defense of such claim,
or (ii) in the case where Parent or Company is the indemnified party and
considerations relating to the operation of the Surviving Corporation could
adversely impact the business condition of the Surviving Corporation, thereby
requiring or causing Parent to defend or respond in a manner different from
that recommended by the Stockholders’ Representatives, Parent shall have the
right to undertake the defense or settlement thereof, at Parent’s expense, and
the Stockholders’ Representatives shall be entitled to participate in the
defense of such claim, the cost of such participation to be at their expense.
If the

 

47

 

Stockholders’ Representatives fail to undertake the reasonable defense
of any Third Party Claim, then Parent may defend, with counsel of its own
choosing, and settle such Third Party Claim and then recover from the
Stockholders’ Representatives the amount of such settlement or of any judgment
and the costs and expenses of such defense. The Stockholders’ Representatives
shall not settle, compromise, or offer to settle or compromise any such claim
or demand without the prior written consent of Parent, which consent shall not
be unreasonably withheld. By way of illustration and not limitation it is understood
that Parent may object to a settlement or compromise that includes any
provision that in its reasonable judgment may have an adverse impact on or
establish an adverse precedent for the business condition of Parent or any of
its Subsidiaries, provided that Parent shall not have the right to object to a
settlement that consists solely of the payment of a monetary damage amount paid
from the Escrow Amount and that is subject to full indemnification under this
Agreement. If the Stockholders’ Representatives fail to give written notice to
Parent of their intention to contest or settle any such claim or demand within
thirty (30) calendar days after Parent has notified the Stockholders’
Representatives that any such claim or demand has been made in writing and
received by Parent, or if any such notice is given but any such claim or demand
is not promptly contested by the Stockholders’ Representatives, Parent shall
have the right to contest and/or settle any such claim or demand and seek
indemnification pursuant to this Article VIII as to any Indemnifiable
Amount or Special Escrow Indemnifiable Amount related to such third party claim
or demand.

 

8.3                               Tax Contests.  Notwithstanding any of the foregoing,
Parent shall have the sole right to conduct any tax audit or other tax contest
relating to or that may affect a Parent tax return, report, election, or
information statement, provided, however, that to the extent that there is a
claim relating to taxes that is subject to indemnification pursuant to this
Article VIII, Parent shall (i) give notice to the Stockholders’
Representatives of such payments to be made that are Indemnifiable Amounts or
Special Escrow Indemnifiable Amounts, (ii) allow the Stockholders’
Representatives to comment on such matters and provide to the Stockholders’
Representatives information reasonably requested by the Stockholders’
Representatives and permit the Stockholders’ Representatives to evaluate such
claim, and (iii) to the extent comments from the Stockholders’
Representatives are received, reasonably and in good faith consider such
comments.

 

8.4                               Binding Effect.  The indemnification provisions contained
in this Article VIII are an integral part of this Agreement and Merger in
the absence of which Parent would not have entered into this Agreement.

 

8.5                               Time Limit.  The representations, warranties,
covenants, and agreements of Company set forth in this Agreement shall survive
the Closing and the consummation of the transactions contemplated by this
Agreement and shall continue until the date that is 12 months after the Closing
Date, at which time all representations and warranties shall expire; provided,
however, that obligations related to those matters set forth on Schedule 8.1
shall continue until a date that is 18 months after the Closing Date; provided
further that obligations of the holders of Company Shares for Indemnifiable
Amounts pursuant to Section 8.1(iii) or arising out of breaches of the
representations and warranties in Section 3.1.19 (relating to taxes) and
Section 3.1.16 (relating to environmental) and obligations arising out of fraud
or material misrepresentations made by Company in bad faith (collectively, “Company Fraud” ) will have no time limit
other than any applicable statute of limitations. Notwithstanding the foregoing,
no representation, warranty, covenant or agreement shall expire to the extent
Parent has provided to the Stockholders’ Representatives written notice of
Parent’s claim for indemnification pursuant to the terms of the Escrow
Agreement prior to the expiration of the applicable survival period; provided
further that, except with respect to Michael K. Lester, Pamela M. Spaniac,
Gordon
Empey, and Jerry Pfeifer, the maximum amount for which Parent may seek
indemnification from each holder of Company Shares in connection with Company
Fraud shall be limited to the Net Distributable Amount payable to such holder
of Company Shares pursuant hereto.

 

8.6                               Limitations.  Notwithstanding any other provision in
this Article VIII, Parent shall be entitled to indemnification only if and
to the extent that the aggregate of the Indemnifiable Amounts and Special
Escrow Indemnifiable Amounts exceed two hundred fifty thousand dollars
($250,000) (the “Threshold Amount”),
provided that at such time as the aggregate Indemnifiable Amounts exceed the
Threshold Amount, Parent shall be entitled to be indemnified up to the full
Indemnifiable Amounts including the Threshold Amount; and provided

 

48

 

further that any amount payable pursuant to Sections 8.1(iii) or (iv),
or arising out of breaches of the representations, warranties, and covenants in
Section 3.1.19 (relating to taxes) and Section 3.1.16 (relating to
environmental), or Company Fraud shall not be subject to the foregoing Threshold
Amount and shall not be included in any calculation of the Threshold Amount as
it relates to other Indemnifiable Amounts or Special Escrow Indemnifiable
Amounts. Parent’s aggregate claims for indemnification may not exceed the
Escrow Amount and the maximum liability for each former holder of Company
securities for any breach of a representation, warranty or covenant of the
Company shall be limited to the portion of the Escrow Amount held by the Escrow
Agent in which such holder has an interest; provided, however, that the
liability of each former holder of Company securities for Indemnifiable Amounts
or Special Escrow Indemnifiable Amounts arising out of breaches related to
Company Fraud or attributable to such holders shall not be subject to the
limitations of this Section 8.6. Any liability of the former holders of
Company securities in excess of the Escrow Amount shall be several and not
joint.

 

8.7                               Contribution.  Holders of Company Shares will have no
right of contribution from the Surviving Corporation for liabilities for such
holders’ obligations pursuant to this Article VIII.

 

8.8                               Exclusive Remedy.  With the exception of claims based upon
Company Fraud and claims relating to Indemnifiable Amounts pursuant to
Section 8.1(iii) or arising out of breaches of the representations and
warranties in Section 3.1.19 (relating to taxes) or Section 3.1.16
(relating to environmental), from and after the Effective Time, resort to the
Escrow Amount shall be the sole and exclusive right and remedy of Parent and
the Surviving Corporation (and related entities) for Indemnifiable Amounts,
Special Escrow Indemnifiable Amounts, or other damages or amounts which
otherwise might be due under the indemnification provisions contained in, and
for any breach of, this Agreement or otherwise under or in connection with this
Agreement (it being understood that nothing in this Section 8.8 or
elsewhere in this Agreement shall affect Parent’s rights to equitable remedies
to the extent available); provided that nothing in this Agreement shall be
deemed to limit any rights that Surviving Corporation may have under the
Indemnification Side Letter with respect to indemnification related to losses,
damages, liabilities, claims, judgments, settlements, fines, costs, and
expenses (including reasonable attorneys’ fees) arising out of or in connection
with any business of the Company other than the Early Phase Business.

 

8.9                               Straddle Period.  For purposes of Section 8.1(iii), in
the case of any taxable period that includes but does not end on the Closing
Date (a “Straddle Period”), the
amount of any taxes based on or measured by income or receipts of Company
deemed to relate to a Pre-Closing Period shall be determined based on an
interim closing of the books as of the close of business on the Closing Date,
and the amount of other taxes of Company for a Straddle Period which relate to
a Pre-Closing Period shall be deemed to be the amount of such tax for the
entire taxable period multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing Date and the
denominator of which is the total number of days in such Straddle Period.

 

ARTICLE IX

TERMINATION, AMENDMENT, AND WAIVER

 

9.1                               Termination.  Notwithstanding anything herein to the
contrary, this Agreement may be terminated and the Transactions abandoned at
any time prior to the Effective Time:

 

(a)                                  by
mutual consent of Parent and Company, duly authorized by the boards of
directors of Parent and Company, respectively;

 

(b)                                 by
either Parent or Company (provided that the terminating party is not then in
material breach of any representation, warranty, covenant, or agreement
contained in this Agreement) if there has been a material breach by the
non-terminating party of any representation, warranty, covenant, or agreement
as set forth in the Agreement that results in the closing conditions set forth
in Article VII not being met or if any representation or warranty of the
non-terminating party

 

49

 

shall have been untrue or inaccurate when made or shall have become
untrue or inaccurate such that, in the aggregate, in the case of such
representations and warranties, such untruths or inaccuracies would have, or
reasonably be expected to have, a Company Material Adverse Effect or a material
adverse effect on a party’s ability to consummate the Transactions; provided,
however, that if such untruth or inaccuracy in the non-terminating party’s
representations and warranties or breach by the non-terminating party is curable
by such party through exercise of commercially reasonable efforts, then this
Agreement may not be terminated pursuant to this Section 9.1(b) until the
earlier of (i) the expiration of a thirty (30) day period after delivery
of written notice of such untruth or inaccuracy or breach, or (ii) the
date on which the party ceases to exercise commercially reasonable efforts to
cure such untruth or inaccuracy or breach (it being understood that this
Agreement may not be terminated pursuant to this Section 9.1(b) if such
untruth or inaccuracy or breach is cured during such thirty (30) day
period);

 

(c)                                  by
either Parent or Company if the Merger shall not have been consummated before
July 31, 2006 (the “Outside Date”),
provided, however, that the Outside Date shall be September 30, 2006 if the
Department of Justice or the Federal Trade Commission makes a Second Request
pursuant to the HSR Act or in the event of litigation by any Governmental
Entity; provided, further, that the right to terminate this Agreement under this
Section 9.1(c) shall not be available to any party whose action or failure
to act has been a principal cause of or resulted in the failure of the Merger
to have been consummated on or before such date and such action or failure to
act constitutes a breach of this Agreement;

 

(d)                                 by
either Parent or Company if any permanent injunction or other order of a court
or other competent authority preventing the Merger shall have become final and
not subject to appeal;

 

(e)                                  by
Parent if the Company Stockholder Approval shall not have been obtained no
later than thirty (30) minutes before Closing;

 

(f)                                    by
Parent if there has been a Change of Recommendation; or

 

(g)                                 by
Parent if Company’s board of directors shall have recommended to the
stockholders of Company any proposal that would constitute a Restricted
Transaction (provided, that for purposes of this Article IX, “Restricted
Transaction” shall be defined as the acquisition of all or more than twenty
percent (20%) of Company, its business, assets, or capital shares,
excluding non-exclusive licenses entered into in the ordinary course of
business, whether by merger, consolidation, other business combination,
purchase of capital stock purchase of assets, license, lease, tender or
exchange offer, or otherwise but shall not include any Pre-Merger Spin) or
shall have resolved or announced an intention to do so.

 

9.2                               Effect of Termination.  In the event of termination of this
Agreement by either Company or Parent as provided in Section 9.1, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Parent, Sub, or Company, or their
respective officers or directors, except that (i) the provisions of
Sections 6.1, 6.5, 6.7, 9.2, 10.7, 10.11, and 10.13 and the Confidentiality
Agreement shall survive any such termination and abandonment, and (ii) no
party shall be released or relieved from any liability arising from the willful
breach by such party of any of its representations, warranties, covenants, or
agreements as set forth in this Agreement.

 

50

 

ARTICLE X

GENERAL PROVISIONS

 

10.1                        Survival of Representations,
Warranties, and Agreements.  Each
representation and warranty of Company contained in Section 3.1 and any
certificate related to such representations and warranties will survive the
Closing and continue in full force and effect until the date that is twelve
(12) months after the Closing Date, except with respect to (i) matters set
forth on Schedule 8.1, for which the survival period shall be eighteen (18)
months from the Closing Date and (ii) the representations and warranties in
Section 3.1.19 (relating to taxes) and Section 3.1.16 (relating to
environmental) which shall survive until the expiration of the applicable
statute of limitations, and each agreement set forth Sections 5.4, 6.1,
6.4, and 6.7 will survive the Closing and continue in full force and effect
indefinitely.

 

10.2                        Notices.  All notices, requests, demands, or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and deemed given upon: 
(i) personal delivery, (ii) confirmed delivery by a standard
overnight courier or when delivered by hand, (iii) three business days
after depositing in the mail in the United States by certified or registered
mail, postage prepaid, addressed at the following addresses (or at such address
for a party as shall be specified by notice given hereunder), or
(iv) transmitter’s confirmation of a receipt of a facsimile transmission:

 

	
  (a)

  	
   

  	
  if to Parent

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  or Sub, to:

  	
   

  	
  Covance Clinical
  Research Unit Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  c/o Covance Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  210 Carnegie
  Center

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Princeton, NJ
  08540-6233

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  609-419-2585

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Preston Gates
  & Ellis LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  925 Fourth
  Avenue

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 2900

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Seattle, WA
  98104-1158

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
  Christopher H.
  Cunningham

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  206-623-7022

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  if to James
  Stevenson

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  as Stockholders’

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Representative,
  to:

  	
   

  	
  James Stevenson

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ABS Capital
  Partners III

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  400 E. Pratt St,
  Suite 900

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Baltimore, MD
  21202-3127

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  410-246-5606

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  if to
  Christopher Grant, Jr.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  as Stockholders’

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Representative,
  to:

  	
   

  	
  Christopher
  Grant, Jr.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Salix Ventures, LP

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  300 Brickstone Square, Suite 1003

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Andover, MA 01810

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  978 470-2512

  
									

 

51

 

	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Rob Ivy

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Salix Ventures,
  LP

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  30 Burton Hills
  Blvd., Suite 370

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Nashville, TN
  37215

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  615-665-2912

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  if to Company,
  to:

  	
   

  	
  Radiant Research
  Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1120 112th Ave NE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 480

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Bellevue, WA 98004

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  425-468-6245

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Davis Wright
  Tremaine LLP

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1501 Fourth
  Avenue

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 2600

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Seattle, WA
  98146-1688

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Brent
  R. Eller

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:

  	
   

  	
  206-622-3150

  
									

 

10.3                        Interpretation.  For
purposes of this Agreement, “subsidiary”
or “subsidiaries”  means an entity or entities of which Company,
Parent, or such other Person as the context requires directly or indirectly
owns an amount of the voting securities or other voting ownership or voting
partnership interests sufficient to elect a majority of its board of directors
or other governing body (or, if there are no such interests, fifty
percent (50%) or more of the equity interests thereof). For purposes of
this Agreement, “Person” means an
individual, corporation, partnership, association, limited liability company,
trust, estate, or other entity. The words “include,”
“includes,” and “including” when used in this Agreement
shall be deemed in each case to be followed by the words “without limitation.”  The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. The “knowledge of” or other derivations of “know” in this Agreement with respect to a
party will mean the knowledge of the executive officers of such party, in each
case assuming they have acted in good faith and exercised due inquiry
consistent with their applicable fiduciary duties in connection with the Transactions.
Specifically, and without limitation, the actual knowledge of each of Michael
K. Lester, Pamela M. Spaniac,  Gordon Empey, and
Jerry Pfeifer shall be knowledge of Company hereunder and each
shall have made the inquiry noted above. As used in this Agreement, the term “affiliate” shall have the meaning set forth
in Rule 12b-2 promulgated under the Exchange Act. As used in this
Agreement, the term “business day”
means any day other than a Saturday, Sunday, or a day on which banking
institutions in New York, New York are permitted or obligated by law to be
closed for regular banking business. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. A reference to a section,
schedule, or an exhibit will mean a section in, or schedule or
exhibit to, this Agreement unless otherwise explicitly set forth.

 

10.4                        Counterparts.  This
Agreement may be executed (i) in one or more partially or fully executed
counterparts, each of which shall be deemed an original and shall bind the
signatory, but all of which together shall constitute the same instrument, and
(ii) by facsimile. The execution and delivery of a Signature
Page - Agreement and Plan of Merger, in the form annexed to this
Agreement, by any party hereto who shall have been furnished the final form of
this Agreement shall constitute the execution and delivery of this Agreement by
such party.

 

10.5                        Miscellaneous.  This
Agreement, the Confidentiality Agreement, and the documents referred to herein
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other Person any rights or
remedies hereunder

 

52

 

(except as otherwise expressly provided herein and except that
Section 6.4 is for the benefit of the Indemnified Parties); and
(c) shall not be assigned by operation of law or otherwise except as
otherwise specifically provided.

 

10.6                        No Joint Venture.  Nothing
contained in this Agreement will be deemed or construed as creating a joint
venture or partnership between any of the parties hereto. No party is by virtue
of this Agreement authorized as an agent, employee, or legal representative of
any other party. No party will have the power to control the activities and
operations of any other and their status is, and at all times, will continue to
be, that of independent contractors with respect to each other. No party will
have any power or authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in contravention of this
Section.

 

10.7                        Governing Law.  This
Agreement shall be governed in all respects, including validity,
interpretation, and effect, by the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.

 

10.8                        Amendment.  Except
as may otherwise be provided herein, any provision of this Agreement may be
amended or modified by the parties hereto prior to the Closing Date, if, and
only if such amendment or modification is in writing and signed on behalf of
each of the parties hereto; provided that after the adoption of this Agreement
by the stockholders of Company, no such amendment shall be made except as
allowed under applicable law.

 

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

 

10.10                 Successors and
Assigns.  This Agreement shall not be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion and without the consent of any other party, any or all of its
rights, interests, and obligations hereunder to (a) Parent, or
(b) Parent and one or more direct or indirect wholly-owned subsidiaries of
Parent (each an “Assignee”),
provided, however, that (i) no such assignment shall relieve Sub or Parent
of any of its obligations under this Agreement, and (ii) to the extent
required by Section 251 of the DGCL in order for this Agreement, with such
rights assigned, to be valid from and after such assignment, such assignment
shall be effective only after an appropriate amendment to this Agreement to
effectuate such assignment shall have been executed by the parties hereto and
any such Assignee, and such amendment, or this Agreement as so amended, shall
have received all approvals required by the DGCL. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and assigns.

 

10.11                 Specific
Performance.  The parties acknowledge and agree that any
breach of the terms of this Agreement would give rise to irreparable harm for
which money damages would not be an adequate remedy and accordingly the parties
agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.

 

10.12                 Severability.  If
any term or other provision of this Agreement is invalid, illegal, or incapable
of being enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the Transactions are not
affected in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal, or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner.

 

53

 

10.13                 Submission to
Jurisdiction.  All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any
Delaware state or federal court sitting in New Castle County. The parties
hereto hereby (a) submit to the exclusive jurisdiction of any state or federal
court sitting in New Castle County for the purpose of any action arising out of
or relating to this Agreement brought by any party hereto, and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or otherwise, in any
such action, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment
or execution, that the action is brought in an inconvenient forum, that the
venue of the action is improper or that this Agreement or the Transactions may
not be enforced in or by any of the above-named courts.

 

10.14                 Stockholders’
Representatives.

 

(a)                                  By
virtue of the Company Stockholder Approval, and without any further act of any
holder of Company Shares, the holders of Company Shares shall be deemed to have
appointed James Stevenson and Christopher Grant, Jr. (previously defined as the
Stockholders’ Representatives, acting jointly) as agents and attorneys-in-fact
for each holder of Company Shares (except such stockholders, if any, holding
Dissenting Shares), for and on behalf of the holders of Company Shares (except
such stockholders, if any, holding Dissenting Shares) for all matters relating
to this Agreement, including to give and receive notices and communications, to
authorize delivery of cash from the Escrow Amount in satisfaction of claims by
Parent or the Surviving Corporation, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Stockholders’ Representatives for the accomplishment of the foregoing.

 

(b)                                 The
Stockholders’ Representatives may be changed by the holders of Company Shares
from time to time upon not less than thirty (30) days’ prior written
notice to Parent, provided that holders of a majority interest of the Escrow
Amount agree to such removal of James Stevenson and Christopher Grant, Jr. and
any successors thereto and to the identity of the substituted agent. A
Stockholders’ Representative may resign at any time upon giving at least
thirty (30) days’ written notice to the holders of interest in the Escrow
Account, except that no such resignation shall become effective until the
appointment of a successor Stockholders’ Representative. Upon resignation of a
Stockholders’ Representative or a successor Stockholders’ Representative
thereto, the holders of a majority interest of the Escrow Amount shall agree on
a successor Stockholders’ Representative thereto within thirty (30) days
after receiving such notice. If holders of a majority interest of the Escrow
Amount fail to agree upon a successor Stockholders’ Representative within such
time, the resigning Stockholders’ Representative shall have the right to
appoint a successor Stockholders’ Representative, or if a Stockholders’
Representative is not designated within forty-five (45) days after receipt
of the initial notice, Parent shall designate a successor Stockholders’
Representative. Any successor Stockholders’ Representative shall execute and
deliver an instrument accepting such appointment and shall, without further
acts, be vested with all the rights, powers, and duties of the predecessor
Stockholders’ Representative as if originally named as a Stockholders’
Representative and thereafter the resigning Stockholders’ Representative shall
be discharged from any further duties and liability under this Agreement. No
bond shall be required of any Stockholders’ Representative, and no
Stockholders’ Representative shall receive compensation for his or her
services. Notices or communications to or from the Stockholders’
Representatives shall constitute notice to or from each of the holders of
interest of the Escrow Amount for all matters relating to this Agreement.

 

(c)                                  The
Stockholders’ Representatives shall not be liable for any act done or omitted
hereunder as the Stockholders’ Representatives while acting in good faith.
Holders of

 

54

 

Company Shares on whose behalf the Escrow Amount is contributed shall
severally indemnify the Stockholders’ Representatives and hold the
Stockholders’ Representatives harmless against all loss, liability, or expense
incurred without bad faith or willful misconduct on the part of such
Stockholders’ Representatives and arising out of or in connection with the
acceptance or administration of such Stockholders’ Representatives’ duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Stockholders’ Representatives. The Stockholders’
Representatives shall be entitled to the advance and reimbursement of costs and
expenses incurred by or on behalf of the Stockholders’ Representatives in the
performance of their duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Stockholders’ Representatives,
pursuant to the terms of the Escrow Agreement.

 

(d)                                 A
decision, act, consent, or instruction of the Stockholders’ Representatives
relating to this Agreement shall be made by them unanimously and shall
constitute a decision of all holders of Company Shares (except such
stockholders, if any, holding Dissenting Shares) and shall be final, binding,
and conclusive upon each of such holders of Company Shares. Parent, and all
other persons entitled to indemnification under the Escrow Agreement or any
other document or agreement entered into in connection herewith or therewith
(the “Indemnified Persons”), may
rely upon any such decision, act, consent, or instruction of the Stockholders’
Representatives as being the decision, act, consent, or instruction of each and
every such holder of interest in the Escrow Amount. Parent and all other
Indemnified Persons are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent, or
instruction of the Stockholders’ Representatives.

 

[remainder of page intentionally
blank]

 

55

 

SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER

 

IN
WITNESS WHEREOF, Parent, Sub, Company, and the Stockholders’ Representatives
have signed this Agreement or caused this Agreement to be signed by their
respective officers thereunder duly authorized, all as of the date first
written above.

 

 

	
  COVANCE CLINICAL RESEARCH
  UNIT INC.

  	
   

  	
  RADIANT RESEARCH INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Wendel Barr

  	
   

  	
   

  	
  By

  	
  /s/ Michael Lester

  	
   

  
	
  Its

  	
  President

  	
   

  	
   

  	
  Its

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TYD INC.

  	
   

  	
  STOCKHOLDERS’
  REPRESENTATIVES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By

  	
  /s/ Marc S. Ginsky

  	
   

  	
   

  	
  /s/ James E. Stevenson, Jr.

  	
   

  
	
  Its

  	
  Assistant Secretary

  	
   

  	
   

  	
  James Stevenson

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Christopher Grant, Jr.

  	
   

  
	
   

  	
   

  	
  Christopher Grant, Jr.

  
										

 

56Exhibit 4.1

 

AMENDMENT NO. 1 TO RIGHTS AGREEMENT

 

This
Amendment No. 1 to Rights Agreement (this “Amendment”) is
entered into as of April 25, 2006 (to become effective on the date set forth in
Section 5.0 of this Amendment), between Northwestern Corporation, a Delaware
corporation (the “Company”), and LaSalle
Bank National Association, a national banking association, as Rights Agent (the
“Rights Agent”), and amends the Rights
Agreement dated as of December 5, 2005, between the Company and the Rights
Agent (the “Rights Agreement”).

 

WHEREAS,
the Company desires to amend the Rights Agreement to prevent certain Persons
acting with the approval of the Board of Directors of the Company to acquire
all of the equity interests in the Company from becoming Acquiring Persons; and

 

WHEREAS,
this Amendment is entered into pursuant to Section 27 of the Rights Agreement
prior to the time that any Person, to the knowledge of the Company, has become
an Acquiring Person.

 

NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein
set forth, the parties hereto agree as follows:

 

1.0  Defined Terms. Terms
defined in the Rights Agreement and used and not otherwise defined herein shall
have the meanings given to them in the Rights Agreement.

 

2.0  Additional Definitions. Section
1 of the Rights Agreement is hereby amended to add the following definitions,
which shall be inserted into Section 1 in alphabetical order:

 

“Merger Agreement” shall mean the Agreement and Plan of
Merger made and entered into as of April 25, 2006, by and among Parent, Holding
Company, Holdings, Sub and the Company.

 

“Parent” shall mean Babcock & Brown Infrastructure
Limited, an Australian public company.

 

“Holding Company” shall mean BBI US Holdings Pty Ltd.
Company, an Australian Company and direct wholly-owned subsidiary of Parent.

 

“Holdings” shall mean BBI US Holdings II Corp., a Delaware
corporation and direct wholly-owned subsidiary of Holding Company.

 

“Sub” shall mean BBI Glacier Corp., a Delaware corporation
and direct wholly-owned subsidiary of Holdings.

 

1

 

3.0  Amendment of Section 7. Paragraph
(a) of Section 7 of the Rights Agreement is amended by:

 

3.1                               deleting
the word “or” immediately preceding clause (iii) thereof and by adding a “,”
immediately preceding clause (iii) thereof; and

 

3.2                               by
adding the following new phrase immediately following clause (iii) thereof: “or
(iv) immediately prior to the Effective Time (as defined in the Merger
Agreement). “

 

4.0  Addition of a New Section 35. The
Rights Agreement is amended by adding a Section 35 thereof which shall read as follows:

 

“Section 35. Exception
For Merger Agreement. Notwithstanding any provision of this Agreement to the
contrary, neither a Flip-In Event, an event described in clauses (a)(i), (ii),
or (iii) of Section 13, a Distribution Date, nor a Stock Acquisition Date shall
be deemed to have occurred, none of Parent, Holding Company, Holdings, Sub nor
any of their Affiliates or Associates shall be deemed to have become an
Acquiring Person, and no holder of any Rights shall be entitled to exercise
such Rights under, or be entitled to any rights pursuant to, any of Sections
3(a), 7(a), 11(a) or 13 of this Agreement, in any such case by reason of (a)
the approval, execution or delivery of the Merger Agreement or any amendments
thereof, or (b) the commencement or, prior to termination of the Merger
Agreement, the consummation of any of the transactions contemplated by the
Merger Agreement, including the Merger (as defined in the Merger Agreement).”

 

5.0
Effectiveness. This Amendment shall be deemed effective as of
the time immediately prior to the signing of the Merger Agreement. Except as
amended hereby, the Rights Agreement shall remain in full force and effect and
shall be otherwise unaffected hereby.

 

6.0
Miscellaneous. This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such state. This
Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed an original and all such
counterparts shall together constitute but one and the same instrument. If any
term, provision, covenant or restriction of this Amendment is held by a court
of competent jurisdiction or other authority to be invalid, illegal, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

 

2

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to the
Rights Agreement to be duly executed as of the day and year first above written.

 

 

	
   

  	
  NORTHWESTERN CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael J. Hanson

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Michael J. Hanson

  
	
   

  	
  Title: President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION,

  
	
   

  	
  solely as Rights Agent herein under and not within
  its

  individual capacity,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph Pellicore

  	
   

  
	
   

  	
   

  
	
   

  	
  Name: Joseph Pellicore

  
	
   

  	
  Title: Assistant Vice President

  

 

S-1

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