Document:

EX-10.2

 

Exhibit 10.2

 

MERCK & CO., INC.

DEFERRAL PROGRAM

(Amended and Restated as of September 28, 2006)

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	Article I

	 	Administration
	 	 	1	 
	Article II

	 	Eligibility
	 	 	1	 
	Article III

	 	Deferral Into a Deferred Compensation Account
	 	 	1	 
	Article IV

	 	Valuation of Deferred Compensation Accounts
	 	 	2	 
	Article V

	 	Redesignation Within a Deferred Compensation Account
	 	 	4	 
	Article VI

	 	Distribution of Deferred Compensation Accounts
	 	 	6	 
	Article VII

	 	Deductions from Distributions
	 	 	7	 
	Article VIII

	 	Beneficiary Designations
	 	 	7	 
	Article IX

	 	Amendments
	 	 	8	 
	Article X

	 	Section 409A
	 	 	8	 
	Schedule I

	 	Deferral Program Investment Alternatives
	 	 	9	 
	Schedule II

	 	Special Provisions Applicable to Medco Health Employees
	 	 	10	 
	Schedule III

	 	Special Transition Provisions Under AJCA
	 	 	11	 

(i)

 

MERCK & CO., INC. DEFERRAL PROGRAM

     The Deferral Program (the “Program”) is intended to permit a select group of management to
defer income which would otherwise be immediately payable to them as annual base salary or under
various incentive plans of Merck & Co., Inc. (the “Company”).

I. ADMINISTRATION

     This Program is administered by the Compensation and Benefits Committee of the Company’s Board
of Directors. This Committee is composed of non-employee directors only. The Committee shall have
responsibility for determining which investments will be available under the Program, and those
investments shall be listed on Schedule I hereto. The Committee shall review the investment
selections at least once every five years. The Committee shall make all decisions affecting the
timing, price or amount of any and all of the Deferred Compensation of participants subject to
Section 16 of the Securities Exchange Act of 1934, as amended (“Section 16 Officers”), but may
otherwise delegate any of its authority under this Program.

II. ELIGIBILITY

     Eligibility to defer under this Program will be determined in accordance with the terms of the
Company’s Base Salary Deferral Plan and various incentive plans. However, the Committee has the
authority to refuse to permit an employee to participate in this Program, if the Committee
determines that such participation would jeopardize the Program’s compliance with applicable law or
the Program’s status as a top hat plan under the Employee Retirement Income Security Act.

III. DEFERRAL INTO A DEFERRED COMPENSATION ACCOUNT

A. Election to Defer

     A participant’s decision to defer under the Program must be made, (i) for the Base Salary
Deferral Plan, prior to the commencement of the pay period during which the base salary to be
deferred will be earned, (ii) for annual incentive plans, prior to the commencement of the
performance year during which the bonus monies to be deferred will be earned, and (iii) for
long-term incentive plans, prior to the commencement of the last year of the award period during
which the bonus monies to be deferred will be earned. For purposes of annual incentive plans only,
a participant who is hired by the Company during a performance year may make an election, no later
than the 30th day from the participant’s date of hire, to defer bonus monies to be earned during
such performance year. For the Base Salary Deferral Plan, only amounts equal to or in excess of 5
percent of Annual Base Salary (as defined in the Base Salary Deferral Plan) and less than or equal
to the lesser of (1) 50 percent of Annual Base Salary or (2) the Participant’s Annual Base Salary
in excess of the amount determined under Section 401(a)(17) of the Internal Revenue Code (the
“Code”) may be deferred. For the annual and long-term incentive plans, only amounts in excess of
$3,000 may be deferred. Amounts so deferred are known as “Deferred Compensation” and will be
credited to the participant’s “Deferred Compensation Account.” Deferred Compensation shall be held
in one account regardless of the plan (Base Salary Deferral or incentive plan) under which it was
deferred.

 

 

B. Election of Distribution Schedule

1. Timing of Election

     The participant shall elect a distribution schedule for his/her Deferred Compensation. A
participant’s election of a distribution schedule in connection with a deferral election under
annual and/or long-term incentive plans shall be made at the same time that the participant makes
the election to defer. A participant’s initial election of a distribution schedule in connection
with deferrals under the Base Salary Deferral Plan shall be made at the same time as the initial
deferral election, shall be irrevocable during the calendar year for which it was made and shall
apply to all deferrals of Annual Base Salary until a new distribution election becomes effective.
Thereafter, an election of a different distribution schedule in connection with deferrals under the
Base Salary Deferral Plan may be made at any time, provided, however, that such new distribution
schedule shall only apply prospectively to deferrals of Annual Base Salary in the following
calendar year.

2. Distribution Schedule

     A participant may elect to have payments begin (a) in a particular year (whether or not
employment has then ended) or (b) in the year following the participant’s Retirement or Separation
date, or (c) up to 15 years subsequent to the participant’s Retirement or Separation date. A
participant may elect a lump sum or a schedule of annual installments, up to a maximum of 15 annual
installments.

3. Manner of Elections

     All elections under the Program shall be made in the manner and in accordance with the process
approved by the Company’s head of Human Resources Department from time to time.

C. Election of Investment Alternatives

     The participant shall designate, in accordance with procedures established by the Company for
such designation, the portion (in multiples of 1%) of the Deferred Compensation to be allocated to
any investment alternative available under this Program.

IV. VALUATION OF DEFERRED COMPENSATION ACCOUNTS

A. Common Stock 

1. Initial Crediting

     The amount allocated to Merck Common Stock shall be used to determine the number of full and
partial shares of Merck Common Stock which such amount would purchase at the closing price of Merck
Common Stock on the New York Stock Exchange on the date cash payments of base salary, for amounts
deferred under the Base Salary Deferral Plan, or incentive awards, for amounts deferred under the
various incentive plans, would otherwise be paid to the participant (“the Deferral Date”). Should
the Committee determine that valuation on any Deferral Date would not constitute fair market value,
then the Committee shall decide on which date fair market value shall be determined using the
valuation method set forth in this paragraph. The Company shall credit the participant’s Deferred
Compensation Account with the number of full and partial shares of Merck Common Stock so
determined. However, at no time prior to the delivery of such

2

 

shares shall any shares be purchased or earmarked for such Account and the participant shall not
have any of the rights of a shareholder with respect to shares credited to his/her Deferred
Compensation Account.

2. Dividends

     The Company shall credit the Participant’s Deferred Compensation Account with the number of
full and partial shares of Merck Common Stock purchasable at the closing price of Merck Common
Stock on the New York Stock Exchange as of the date each dividend is paid on the Common Stock, with
the dividends which would have been paid on the number of shares credited to such Account
(including pro rata dividends on any partial share) had the shares so credited then been issued and
outstanding.

3. Redesignations

     The value of Merck Common Stock for purposes of redesignation shall be the closing price of
Merck Common Stock on the New York Stock Exchange on (i) the day when the redesignation request is
received pursuant to administrative guidelines established by the Human Resources Financial
Services area of the Treasury department, provided the request is received prior to the close of
the New York Stock Exchange on such day or (ii) the next following business day if the request is
received when the New York Stock Exchange is closed.

4. Distributions

     Distributions of Merck Common Stock will be valued at the closing price of Merck Common Stock
on the New York Stock Exchange on the distribution date.

5. Limitations

     Shares of Merck Common Stock to be delivered under the provisions of this Program may be
delivered by the Company from its authorized but unissued shares of Common Stock or from Common
Stock held in the treasury. The amount of shares available each year under this Program shall be
one-tenth of one-percent of outstanding shares of Merck Common Stock on the last business day of
the preceding calendar year plus any shares authorized under this Program in previous years but not
used, minus any shares distributed under the Executive Incentive Plan after April 26, 1994.

6. Adjustments

     In the event of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering or any other change in the corporate structure or
shares of the Company, the number and kind of shares of Merck Common Stock available under this
Program or credited to participants’ Deferred Compensation Accounts shall be adjusted accordingly.

B. Mutual Funds

1. Initial Crediting

     The amount allocated to each Mutual Fund shall be used to determine the number of full and
partial Mutual Fund shares that such amount would purchase at the closing net asset value of

3

 

the Mutual Fund shares on the Deferral Date. The Company shall credit the participant’s Deferred
Compensation Account with the number of full and partial Mutual Fund shares so determined.
However, no Mutual Fund shares shall be purchased or earmarked for such Account, nor shall the
participant have the rights of a shareholder with respect to such Mutual Fund shares.

2. Dividends

     The Company shall credit the participant’s Deferred Compensation Account with the number of
full and partial Mutual Fund shares purchasable, at the closing net asset value of the Mutual Fund
shares as of the date each dividend is paid on the Mutual Fund shares, with the dividends which
would have been paid on the number of shares credited to such Account (including pro rata dividends
on any partial share) had the shares then been owned by the participant for purposes of the above
computation.

3. Redesignations

     The value of Mutual Fund shares for purposes of redesignation shall be the net asset value of
such Mutual Fund at the close of business on (i) the day when the redesignation request is received
pursuant to administrative guidelines established by the Human Resources Financial Services area of
the Treasury department, provided the request is received prior to the close of the New York Stock
Exchange on such day or (ii) the next following business day if the request is received when the
New York Stock Exchange is closed.

4. Distributions

     Mutual Fund distributions will be valued based on the closing net asset value of the Mutual Fund shares on the distribution date.

5. Adjustments

     In the event of a reorganization, recapitalization, stock split, stock dividend, combination
of shares, merger, consolidation, rights offering or any other change in the corporate structure or
shares of a Mutual Fund, the number and kind of shares of that Mutual Fund credited to
participants’ Deferred Compensation Accounts shall be adjusted accordingly.

V. REDESIGNATION WITHIN A DEFERRED COMPENSATION ACCOUNT

A. Basic Redesignation Rules

     A participant, or the beneficiary or legal representative of a deceased participant, may
redesignate amounts credited to a Deferred Compensation Account among the investments available
under this Program in accordance with the following rules:

	 	(1)	 	Eligible Participants — Active employees, and Participants who incurred a
Separation or Retirement are eligible to redesignate.
	 
	 	(2)	 	Frequency and Timing — Effective June 1, 1999, there is no limit on the number of
times a participant may redesignate amounts measured by Mutual Funds, or, subject to
Section B, below, Merck Common Stock. Redesignation shall take place on (i) the day when
the redesignation request is received pursuant to administrative guidelines

4

 

	 	 	 	established by the Human Resources Financial Services area of the Treasury department,
provided the request is received prior to the close of the New York Stock Exchange on
such day or (ii) the next following business day if the request is received when the New
York Stock Exchange is closed.
	 
	 	(3)	 	Amount and Extent of Redesignation — Redesignation must be in 1% multiples of the
investment from which redesignation is being made.
	 
	 	(4)	 	Beneficiaries or Legal Representatives — The beneficiary or legal representative of
a deceased participant may redesignate subject to the same rules as participants.

B. Special Rules for Redesignation Out of Common Stock 

1. Frequency and Timing

     For Section 16 Officers, redesignations may only be made out of Merck Common Stock during any
window period established by the Company from time-to-time and is restricted to amounts held in
Merck Common Stock for longer than six months.

2. Material, Nonpublic Information

     The Committee, in its sole discretion and with advice of counsel, at any time may rescind a
redesignation out of Merck Common Stock if such redesignation was made by a participant who, (a) at
the time of the redesignation was in the possession of material, nonpublic information with respect
to the Company; and (b) in the Committee’s estimation benefited from such information in the timing
of his/her redesignation. The Committee’s determination shall be final and binding. In the event
of such rescission, the participant’s Deferred Compensation Account shall be returned to a status
as though such redesignation had not occurred. Notwithstanding the above, the Committee shall not
rescind a redesignation if the facts were reviewed by the participant with the General Counsel of
the Company or a designee prior to the redesignation and if the General Counsel or designee had
concluded that such participant was not in possession of adverse material, nonpublic information.

C. Conversion of Common Stock Accounts

     The Committee may, in its sole discretion, convert all of the shares of Merck Common Stock
allocated to a participant’s Deferred Compensation Account in the manner provided below where a
position which a participant has taken or wishes to take is, in the opinion of the Committee, such
as would make uncertain the propriety of the participant’s having a continued interest in Merck
Common Stock. The date of conversion shall be the date of commencement of such other employment or
the date of the Committee’s action, whichever is later.

     Conversion shall be from an expression of value in shares of Merck Common Stock in the
participant’s Deferred Compensation Account to an expression of value in United States dollars in
another available investment. The value of the Merck Common Stock shall be based upon its closing
price on the New York Stock Exchange on the date of conversion or if no trading took place on such
day, the next business day on which trading took place. Any conversion under this paragraph shall
be irrevocable and absolute.

5

 

VI. DISTRIBUTION OF DEFERRED COMPENSATION ACCOUNTS

     Distribution of Deferred Compensation Accounts shall be made in accordance with the
participant’s distribution schedule pro rata by investment. Distributions from Merck Common Stock
will be made in shares, with cash payable for any partial share, subject to the limitations set
forth in Article IV, Section A.5. For Section 16 Officers, distribution of amounts in Merck Common
Stock is also restricted to amounts held in Merck Common Stock for longer than six months.
Distributions from Mutual Funds will be in cash. Distributions will be valued on the fifteenth day
of the distribution month (or, if such day is not a business day, the next business day) and paid
as soon thereafter as practicable.

A. Retirement

     A participant’s Retirement from active service will cause distributions of his/her Deferred
Compensation Account to commence as soon as administratively feasible in accordance with the
participant’s previously elected schedule. “Retirement” means a termination of employment at a
time when the participant is eligible for Early, Normal, or Deferred Retirement under the
Retirement Plan for Salaried Employees of Merck & Co., Inc., or other applicable qualified
retirement plan (the “Retirement Plan”) or when the participant has been approved for a Disability
Retirement under the Retirement Plan, but only if the participant is “disabled” within the meaning
of Section 409A. Such a participant may change his or her distribution schedule in accordance with
Section G, below.

B. Death

     In the event of a participant’s death, distributions under this Program will be made in a lump
sum as soon as administratively feasible.

C. Automatic Distribution

     If a participant terminates employment for reasons other than Retirement, death, Separation,
or to take a position with a joint venture or other business entity defined in Section E, below,
then his/her Deferred Compensation Account will be automatically paid in a lump sum as soon as
administratively feasible following his/her termination of employment. Furthermore, except as
provided in Schedule II, any participant whose Deferred Compensation Account is valued at less than
$125,000 on the date of his/her termination of employment for any reason whatsoever will have
his/her Deferred Compensation Account distributed in a lump sum as soon as administratively
feasible following such termination.

D. Termination Due to Separation

     If a participant is employed by a subsidiary of the Company that is sold, so that the
subsidiary is no longer considered within the controlled group of the Company, that participant
shall be considered to have terminated employment with the Company for purposes of this Program.
If a participant’s employment terminates as a result of a “Separation” that is, a divestiture of a
division or subsidiary of the Company, or as a result of a separation due to a reorganization,
reduction in force, or elimination of the participant’s job, then distributions under this Program
will commence as soon as administratively feasible after such termination of employment in
accordance with his/her previously elected schedule or such schedule as re-elected in accordance
with Section G, below.

6

 

E. Joint Venture Service

     A participant’s termination of employment in order to take a position with a joint venture or
other business entity in which the Company shall directly or indirectly own fifty percent or more
of the outstanding voting or other ownership interest shall not be considered a termination of
employment with the Company for purposes of distribution under this Program.

F. Hardship Distributions

     The Committee, in its sole discretion, may accelerate the time of distribution of a
participant’s Deferred Compensation Account, if the participant experiences severe financial
hardship due to illness, accident or death in the immediate family, loss of or damage to property
due to casualty, or other extraordinary and unforeseeable circumstances. Such participant should
provide the Committee with a statement in reasonable detail as to the nature of such financial
hardship together with a statement that such acceleration is necessary to alleviate such hardship.

G. Modifications to Distribution Schedule

     A participant who is an employee, or one who has had a Retirement or a Separation may elect to
change his or her distribution schedule from time to time, provided, however, such changes shall
not be permitted if it might reasonably be expected to cause a “plan failure” as such term is used
in Section 409A of the Code; for example, no such election would be permitted if it would
accelerate a distribution, or if it became effective earlier than one year from the date it were
made, or if it permitted an additional deferral that commenced earlier than 5 years from the
previously scheduled distribution date, except as otherwise permitted by Section 409A. Any such
elections shall be made in the manner and in accordance with the process approved by the Company’s
head of Human Resources Department from time to time.

VII. DEDUCTIONS FROM DISTRIBUTIONS

     The Company will deduct from each distribution amounts required to be withheld for income,
Social Security and other tax purposes. Such withholding will be done on a pro rata basis per
investment. The Company may also deduct any amounts the participant owes the Company for any
reason.

VIII. BENEFICIARY DESIGNATIONS

     A participant under this program may designate a beneficiary to receive his/her Deferred
Compensation Account upon the participant’s death. If the beneficiary predeceases the participant
or if the participant does not name a beneficiary, the participant’s Deferred Compensation Account
will be distributed to the participant’s estate.

7

 

IX. AMENDMENTS

     The Committee may amend this Program at any time. However, such amendment shall not
materially adversely affect any right or obligation with respect to any Deferred Compensation made
theretofore.

     For two years following a change in control of the Company (as such term is defined in the
Change in Control Separation Benefits Plan) the material terms of the Program (including terms
relating to eligibility, benefit calculation, benefit accrual, cost to participants, subsidies and
rates of employee contributions) may not be modified in a manner that is materially adverse to
individuals who participated immediately before the change in control. The Company will pay the
legal fees and expenses of any participant that prevails on his or her claim for relief in an
action regarding an impermissible amendment to the Program (other than ordinary claims for
benefits) or, if applicable, in an action regarding restrictive covenants applicable to the
participant.

X. SECTION 409A

     The Deferral Program is a “nonqualified deferred compensation plan” within the meaning of
Section 409A of the Code. Anything in the Deferral Program to the contrary notwithstanding, the
Deferral Program shall be operated in compliance with the requirements, if any, of Section 409A (or
any successor thereto) as in effect from time to time, including but not limited to applicable
regulations of the U.S. Department of the Treasury or Internal Revenue Service. Anything in the
Program to the contrary notwithstanding, to the extent required by Section 409A, distributions on
account of a “separation from service” to a “specified employee,” as such terms are defined in
Section 409A, may not be made before the date which is 6 months after the date of separation from
service (or, if earlier, the date of death of the employee).

8

 

SCHEDULE I

DEFERRAL PROGRAM INVESTMENT ALTERNATIVES

     Until determined otherwise, investment alternatives shall be the same investment alternatives
offered under the Merck & Co., Inc. Employee Savings and Security Plan (the “401(k) Plan”) as in
effect from time to time. The Merck Common Stock fund offered under the Deferral Program shall be
measured as if it were invested 100% in Merck Common Stock.

9

 

SCHEDULE II

SPECIAL PROVISIONS APPLICABLE TO

MEDCO HEALTH EMPLOYEES

(Approved July 23, 2002)

DEFINITIONS

Medco
Health — Medco Health Solutions, Inc.

Medco
Health Employee — A participant who is (i) employed by Medco Health prior to the
Spin-Off or (ii) employed by Merck prior to the Spin-Off and expected to be employed by Medco
Health prior to or as of the Spin-Off.

Separated
Medco Health Employee — A participant in the Deferral Program who is employed by
Medco Health as of the date of the Spin-Off and is considered to have terminated employment with
the Company as a result of the Spin-Off.

Spin-Off
— The distribution by Merck to its shareholders of the equity securities of Medco
Health. The Spin-Off will be a divestiture for purposes of the Deferral Program.

SPECIAL PROVISIONS

Notwithstanding anything to the contrary in Article VI, Section C of the Deferral Program, the
Deferred Compensation Account of each Separated Medco Health Employee shall be paid out in
accordance with Article VI, Section D, without regard to the $125,000 threshold set forth in
Section C.

Notwithstanding anything to the contrary in Article VI, Section G of the Deferral Program, each
Medco Health Employee may submit the petition for an extension of the distribution schedule
permitted under Section G either prior to the Spin-Off or once the Medco Health Employee has become
a Separated Medco Health Employee; provided, however, that if a Medco Health Employee makes a
request for a new distribution schedule prior to the Spin-Off and thereafter does not become a
Separated Medco Health Employee, then such request shall not be effective.

10

 

SCHEDULE III

SPECIAL TRANSITION PROVISIONS UNDER AJCA

(effective December 15, 2005)

Anything in the Program to the contrary notwithstanding, prior to the end of 2005, Eligible
Participants may elect to cancel any or all prior deferral elections into the Deferral Program.

To the extent shares of Merck Common Stock are distributed as a result of any such cancellation, a
dividend equivalent for the amount that would be paid if the shares were held by a shareholder on
November 30, 2005 will be distributed before December 31, 2005.

Distribution of Deferred Compensation the election of which has been cancelled shall be made no
later than December 31, 2005.

For purposes of this Schedule, Eligible Participants include all participants in the Program.

Anything in the Program to the contrary notwithstanding, where a participant has elected that
distributions be made beginning in the year of retirement, distribution shall not be made in 2006
for participants who have a Retirement or Separation, in 2006 (“Active Eligible Participants”);
provided, however, Automatic Distributions pursuant to Paragraph C. of Article VI shall be made in
2006 to the extent applicable.

11<PAGE>

                                                                     Exhibit 4.3

                        CONFIDENTIAL TREATMENT REQUESTED

                  RECORDED AT MUNICH ON FEBRUARY 15TH/16TH 2006

                      On 2006-02-15/16, appeared before me

                   DR. EVA-MARIA HEPP, NOTARY PUBLIC AT MUNICH

                   80539 Munich, Maximilianstra(Beta)e 34/IV,

    in the office of Clifford Chance, Theresienstra(Beta)e 4-6, 80333 Munich,

           where the notarization took place on request of the parties

     (1)  Dr. Matthias Lupp, attorney at law,
          identified by identity card,
          (*)
          (*)
          (*)

     hereinafter not acting in his own name but acting by virtue of sub power of
     attorney and by power of attorney for

     1.   3I GROUP INVESTMENTS LP, a limited partnership registered under the
          Limited Partnerships Act 1907, (*), with its registered office at (*),

     2.   3I EUROPARTNERS IVA LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office (*),

     3.   3I EUROPARTNERS IVB LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

     4.   3I EUROPARTNERS IVC LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

     5.   3I EUROPARTNERS IVK LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*),

(*)  Confidential Treatment Requested.

<PAGE>

          with its registered office at (*),

     6.   TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, with its
          registered office at (*),

     (2)  Mr. Ole Oldenburg, attorney at law,
          identified by identity card,
          born on (*),
          with business address at (*)
          (*)

     hereinafter not acting in his own name but acting by virtue of power of
     attorney for

          CLARAT PARTNERS LIMITED LIABILITY PARTNERSHIP, a limited liability
          partnership incorporated under the Limited Liability Partnerships Act
          2000 (*), with its registered office at (*),

     (3)  Mrs. Christina Louis, attorney at law,
          identified by identity card.
          born on (*),
          with business address at (*)
          (*)

     hereinafter not acting in his own name but acting by virtue of power of
     attorney for

     a)   PETER WALTER, date of birth (*), resident at (*),

     b)   WALTER VERMOGENSVERWALTUNGS KG, a German limited liability partnership
          with its registered office in (*) and registered in the commercial
          register of the district court of (*),

     c)   WALTER FAMILIENGESELLSCHAFT MBH, a German limited liability company
          with its registered office in (*), registered in the commercial
          register of the district court of (*),

     d)   CORDULA HARTKORN, date of birth (*), resident at (*),

(*)  Confidential Treatment Requested.

<PAGE>

     e)   PETRA KINZL, date of birth (*), resident at (*),

     f)   ROSEMARIE KARANEZ, date of birth (*), resident at (*),

     g)   HORST ERHARDT, date of birth (*), resident at (*),

     h)   ANDREA BERG, date of birth (*), resident at (*),

     i)   HANNES FERWAGNER, date of birth (*), resident at (*),

     j)   DR. DAVID EBSWORTH, date of birth (*), resident at (*),

     k)   EBSWORTH VERMOGENSVERWALTUNGS KOMMANDITGESELLSCHAFT, a German limited
          liability partnership with its registered office in (*), registered in
          the commercial register of the district court of (*),

     l)   DAVID EBSWORTH VERMOGENSVERWALTUNGS GMBH, a German limited liability
          company with its registered office in (*) and registered in the
          commercial register of the district court of (*),

     m)   DETLEF FELS, date of birth (*), resident at (*),

     n)   FAMILIE FELS VERMOGENSVERWALTUNGS KOMMANDITGESELLSCHAFT, a German
          limited liability partnership with its registered office in (*) and
          registered in the commercial register of the district court of (*),

     o)   THOMAS NEDTWIG, date of birth (*), resident at (*),

     p)   NEDTWIG VERMOGENSVERWALTUNGS KG, a German limited liability
          partnership with its registered office in (*) and registered in the
          commercial register of the district court of (*),

     q)   KAIROS VERMOGENSVERWALTUNG GMBH, a German limited liability company
          with its registered office in (*) and registered in the commercial
          register of the district court of (*),

(*)  Confidential Treatment Requested.

<PAGE>

     (4)  Mr. Sebastian Olk, attorney at law,
          identified by identity card,
          born on (*),

          with business address at (*),

     hereinafter not acting in his own name but acting by virtue of power of
     attorney for

     a)   BLITZ 06-651 GMBH (to be renamed: Reddy Holding GmbH), a German
          limited liability company with its registered office in (*) and
          registered in the commercial register of the district court of (*),

     b)   DR. REDDY'S LABORATORIES LTD., with its registered office in 7-1-27
          Amerpeet, Hyderabad 500016, A.P., India and registered in Hyderabad,
          India under Companies Act, 1956.

     The persons present requested that the notary public notarizes this deed in
     English language. The notary public having a good command of written and
     spoken English language made sure that the persons present have good
     command of the English language. She informed the persons present about
     their right to have an interpreter present during notarization or to
     request for a certified translation of this deed. The persons present
     explicitly waived this right.

     Upon request I hereby record the declarations of the persons appearing made
     before me as follows:

(*)  Confidential Treatment Requested.

<PAGE>

                                   ----------

                    SALE AND PURCHASE AGREEMENT REGARDING THE
                    ENTIRE SHARE CAPITAL OF BETA HOLDING GMBH

                                   ----------

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
Preamble...................................................................    4
1.  Definitions............................................................    4
2.  Sale and Assignment; Transfer of Shareholder Loans.....................    8
3.  Purchase Price and payments at closing.................................   10
4.  Sellers' Representations and Warranties................................   14
5.  Limitation of Sellers' Liability.......................................   17
6.  Purchaser and Guarantor Representations and Warranties.................   20
7.  Covenants, Indemnities, Non-Compete....................................   21
8.  Rescission.............................................................   28
9.  Confidentiality........................................................   29
10. Guarantor's Undertaking................................................   30
11. Miscellaneous..........................................................   30
</TABLE>

<PAGE>

SALE AND PURCHASE AGREEMENT

between

     1.   3I GROUP INVESTMENTS LP, a limited partnership registered under the
          Limited Partnerships Act 1907, (*), with its registered office at (*),

                             (hereinafter referred to as "3I GROUP INVESTMENTS")

     2.   3I EUROPARTNERS IVA LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

                                        (hereinafter referred to as "3I EP IVA")

     3.   3I EUROPARTNERS IVB LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

                                        (hereinafter referred to as "3I EP IVB")

     4.   3I EUROPARTNERS IVC LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

                                        (hereinafter referred to as "3I EP IVC")

     5.   3I EUROPARTNERS IVK LP, a limited partnership registered under the
          Limited Partnerships Act 1907 (*), with its registered office at (*),

                                        (hereinafter referred to as "3I EP IVK")

     6.   TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, with its
          registered office at (*),

                                             (hereinafter referred to as "TIAA")

(*)  Confidential Treatment Requested.

<PAGE>

                                                                             -2-

     7.   CLARAT PARTNERS LIMITED LIABILITY PARTNERSHIP, a limited liability
          partnership incorporated under the Limited Liability Partnerships Act
          2000 (*), with its registered office at (*),

                                  (hereinafter referred to as "CLARAT PARTNERS")

     8.   PETER WALTER, date of birth (*), resident at (*),

     9.   WALTER VERMOGENSVERWALTUNGS KG, a German limited liability partnership
          with its registered office in (*) and registered in the commercial
          register of the district court of (*),

     10.  WALTER FAMILIENGESELLSCHAFT MBH, a German limited liability company
          with its registered office in (*), registered in the commercial
          register of the district court of (*),

     11.  CORDULA HARTKORN, date of birth (*), resident at (*),

     12.  PETRA KINZL, date of birth (*), resident at (*),

     13.  ROSEMARIE KARANEZ, date of birth (*), resident at (*),

     14.  HORST ERHARDT, date of birth (*), resident at (*),

     15.  ANDREA BERG, date of birth (*), resident at (*),

     16.  HANNES FERWAGNER, date of birth (*), resident at (*),

     17.  DR. DAVID EBSWORTH, date of birth (*), resident at (*),

     18.  EBSWORTH VERMOGENSVERWALTUNGS KOMMANDITGESELLSCHAFT, a German limited
          liability partnership with its registered office in (*), registered in
          the commercial register of the district court of (*),

(*)  Confidential Treatment Requested.

<PAGE>

                                                                             -3-

     19.  DAVID EBSWORTH VERMOGENSVERWALTUNGS GMBH, a German limited liability
          company with its registered office in (*) and registered in the
          commercial register of the district court of (*),

     20.  DETLEF FELS, date of birth (*), resident at (*),

     21.  FAMILIE FELS VERMOGENSVERWALTUNGS KOMMANDITGESELLSCHAFT, a German
          limited liability partnership with its registered office in (*) and
          registered in the commercial register of the district court of (*),

     22.  THOMAS NEDTWIG, date of birth (*), resident at (*),

     23.  NEDTWIG VERMOGENSVERWALTUNGS KG, a German limited liability
          partnership with its registered office in (*) and registered in the
          commercial register of the district court of (*),

     24.  KAIROS VERMOGENSVERWALTUNGS GMBH, a German limited liability company
          with its registered office in (*) registered with the commercial
          register of the local court of (*),

          (Parties 1 through 24 hereinafter jointly referred to as "SELLERS",
          Parties 1 through 5 hereinafter jointly referred to as the "3I
          INVESTORS", Parties 8 through 24 hereinafter jointly referred to as
          "MANAGERS" and Parties 11 through 16 and 22 through 24 hereinafter
          jointly referred to as "ACTIVE MANAGERS")

and

     25.  BLITZ 06-651 GMBH (to be renamed: Reddy Holding GmbH), a German
          limited liability company with its registered office in (*) and
          registered in the commercial register of the district court of (*),

                                        (hereinafter referred to as "PURCHASER")

and

     26.  DR. REDDY'S LABORATORIES LTD., with its registered office in 7-1-27
          Amerpeet, Hyderabad 500016, A.P., India and registered in Hyderabad,
          India under Companies Act, 1956,

                                        (hereinafter referred to as "GUARANTOR")

(*)  Confidential Treatment Requested.

<PAGE>

                                                                             -4-

                                   (Sellers, Purchaser and Guarantor hereinafter
                       referred together to as "PARTIES" and each as a "PARTY").

PREAMBLE

(A)  The Sellers are the sole shareholders of beta Holding GmbH, a limited
     liability company incorporated under the laws of Germany with its business
     address at Vogelweg 95, 86156 Augsburg and registered in the commercial
     register of the Local Court in Augsburg under number HRB 20801 with a
     nominal share capital of EUR 150,500.00 (the "COMPANY"). Each of the
     Sellers owns those shares which are set against its name in Schedule A
     (together the "SHARES").

(B)  The Company holds those participations in the companies and partnerships
     set out in Schedule B (the "BETA GROUP COMPANIES"; the Company and the beta
     Group Companies are referred to together as the "BETA GROUP").

(C)  Each Seller (other than Clarat Partners) intends to sell all of its Shares
     (and in the case of Clarat Partners, to grant a Call Option (defined
     below)) and any Shareholder Loan (as defined below) made by it and, having
     carried out a comprehensive due diligence review of the beta Group,
     Purchaser intends to acquire all such Shares (and in the case of Clarat
     Partners, will consider exercising its discretion in respect of the Call
     Option (defined below) and Shareholder Loans pursuant to the terms and
     conditions set out in this Agreement and the Guarantor intends to guarantee
     the Purchaser's obligations under this Agreement.

1.   DEFINITIONS

     "ACTIVE MANAGERS" shall have the meaning set out in the introduction;

     "BEST KNOWLEDGE" shall have the meaning set out in Clause 4.1.2;

     "BGB" shall mean the German Civil Code (Burgerliches Gesetzbuch);

     "BETA GROUP" shall have the meaning set out in Preamble (B);

     "BETA GROUP COMPANIES" shall have the meaning set out in Preamble (B);

     "BETA KG" shall mean beta Healthcare GmbH & Co. KG registered in the
     commercial register of the Local Court in Augsburg under HRA 15020

<PAGE>

                                                                             -5-

     "BREACH" shall have the meaning set out in Clause 4.2;

     "BUSINESS DAY" shall have the meaning set out in Clause 3.8.1;

     "CLARAT PARTNERS" shall have the meaning set out in the introduction;

     "CLOSING DATE" shall have the meaning set out in Clause 3.3;

     "CLOSING" shall have the meaning set out in Clause 3.3;

     "COMPANY" shall have the meaning set out in Preamble (A);

     "CONDITIONS PRECEDENT" shall have the meaning set out in Clause 1.4;

     "EARN-OUT SETTLEMENT ACCOUNT" shall mean the following bank account:

               Account Number: (*)
               Account Holder: (*)
               Bank:           (*)
               Bank Code:      (*)
               IBAN:           (*)

     "ESCROW ACCOUNT" shall be the account in the name of the Escrow Agent with
     the account number (*) subject to the Escrow Agreement;

     "ESCROW AGENT" means the notary public (*);

     "ESCROW AGREEMENT" shall have the meaning set out in Schedule 3.9;

     "GUARANTOR" shall have the meaning set out in the introduction;

     "MANAGERS" shall have the meaning set out in the introduction;

     "MEZZANINE FACILITIES AGREEMENTS" shall mean a mezzanine facility agreement
     dated 3 March 2004 between beta Holding GmbH as parent, beta KG as
     borrower, Commerzbank Aktiengesellschaft and Indigo Capital Limited as
     arrangers, Indigo Capital Limited as agent, Commerzbank Aktiengesellschaft
     as security agent and others;

     "MEZZANINE OPTION AGREEMENT" shall mean the Option Agreement between beta
     KG and Indigo Capital IV L.P. and Commerzbank Aktiengesellschaft dated 3
     March

(*)  Confidential Treatment Requested.

<PAGE>

                                                                             -6-

     2004;

     "MEZZANINE AND PIK WARRANT SETTLEMENT ACCOUNT" shall mean the following
     bank account:

               Account Number: (*)
               Account Holder: (*)
               Bank:           (*)
               Swift Code:     (*)
               IBAN:           (*)

     "OPTION AGREEMENTS" shall mean the Mezzanine Option Agreement and the PIK
     Option Agreement;

     "PARTIES" shall have the meaning set out in the introduction;

     "PIK FACILITY AGREEMENT" shall mean a PIK facility agreement dated 3 March
     2004 between beta Holding GmbH as parent, beta KG as borrower, Indigo
     Capital Limited as arranger and agent, Commerzbank Aktiengesellschaft as
     security agent and others and all documents executed in connection
     therewith, in each case as amended and in force at the Closing Date;

     "PIK OPTION AGREEMENT" shall mean the Option Agreement between beta KG and
     Indio Capital IV L.P. dated 3 March 2004;

     "PURCHASE PRICE FOR SHAREHOLDER LOAN" shall have the meaning set out in
     Clause 3.2;

     "PURCHASE PRICE FOR SHARES" shall have the meaning set out in Clause 3.1;

     "PURCHASER" shall have the meaning set out in the introduction;

     "PURCHASER'S CLAIM" shall have the meaning set out in Clause 5.2;

     "PURCHASER'S KNOWLEDGE" shall have the meaning set out in Clause 6.7;

     "SELLERS' CLOSING ACCOUNT" shall have the meaning set out in Clause 3.4.1;

(*)  Confidential Treatment Requested.

<PAGE>

                                                                             -7-

     "SELLERS" shall have the meaning set out in the introduction;

     "SELLERS' REPRESENTATIVE" shall mean the representative for the 3i
     Investors pursuant to Section 11.4. or any advisor, who is subject to
     professional duty of confidentiality (berufliche Schweigepflicht),
     appointed by him.

     "SENIOR FACILITIES AGREEMENT" shall mean a senior facilities agreement
     dated 3 March 2004 between beta Holding GmbH as parent, beta KG as original
     borrower, Commerzbank Securities as arranger, Commerzbank
     Aktiengesellschaft as agent and security agent and others and all documents
     executed in connection therewith, in each case as amended and in force at
     the Closing Date;

     "SHAREHOLDER LOANS" shall mean those loans granted by certain Sellers to
     beta KG as listed in Schedule C;

     "SHARES" shall have the meaning as set out in Preamble (A);

     "SPA 2003" shall have the meaning as set out in Clause5.2.2;

     "TAX" shall mean (1) any payment which is levied by or on behalf of a
     German or non-German public body (the "TAX AUTHORITY") to raise income,
     including but not limited to taxes (within the meaning of section 3 General
     Fiscal Code (Abgabenordnung)) (Steuern und steuerliche Nebenleistungen) in
     respect of each member of the beta Group, whether direct or indirect and
     whether levied by reference to income, profits, gains, net wealth, asset
     values, turn over, transfer, added value or other reference and statutory,
     governmental, state, provincial, local governmental or municipal
     impositions, duties, special levies (Sonderabgaben), levies
     (Abschopfungen), customs and excise duties (Zolle), (2) including interest,
     costs, penalties, late payment charges and late filing charges or (3) any
     of the payments listed under (1) through (2) above, imposed by a Tax
     Authority on any member of the beta Group as a secondary liability
     (Haftungsschuldner).

     "TAX REFUND" shall mean any and all payments made in cash, or by way of
     offsetting against liabilities to the Company or to any member of the beta
     Group by the respective public body as a refund for Taxes for time periods
     starting 1 January 2004 up to and including 30 November 2005.

     "TAX RETURN" shall mean any return, declaration, report, claim for refund,
     notice, notification, statement, form or information or other documents
     relating to any Tax, including any schedule or attachment thereto.

<PAGE>

                                                                             -8-

     "TOTAL PURCHASE PRICE" shall mean the sum of the Purchase Price for Shares
     and the Purchase Price for Shareholder Loan; and

     "3I INVESTORS" shall have the meaning set out in the introduction.

2.   SALE AND ASSIGNMENT; TRANSFER OF SHAREHOLDER LOANS

2.1  Each Seller, except for Clarat Partners being subject to the Call Option as
     set forth below, separately and individually as an individual obligor,
     hereby sells and assigns to Purchaser with effect from the Closing Date all
     those Shares in the Company which are set against its name in Schedule A
     or, should the description in Schedule A not be entirely correct, in any
     event all shares in the Company. The Purchaser hereby accepts such sale and
     assignment.

2.2  Each sale and assignment specified in Clause 2.1 shall include all
     ancillary rights and benefits arising from those Shares, including voting
     rights, subscription rights and dividend rights to all profits not yet
     distributed to the relevant Seller as at the Closing Date.

2.3  Each of those Sellers listed in Schedule C, separately and individually as
     an individual obligor, hereby sells and assigns to Purchaser the relevant
     Shareholder Loan set out against its name in Schedule C, together with all
     claims against beta KG arising from such Shareholder Loan (including all
     outstanding principal and any accrued but unpaid interest thereon as at the
     Closing Date). The Purchaser hereby assumes all obligations of the
     respective Seller under each agreement constituting a sold Shareholder Loan
     and the respective Seller shall be released accordingly (befreiende
     Schuldubernahme), in each case with effect from the Closing Date. The
     Purchaser accepts such sale and assignment. beta KG has accepted such sale
     and assignment as attached hereto as Schedule 2.3. Each Seller of a
     Shareholder Loan acknowledges that as of the date hereof, and except for
     the amounts specified in Schedule 3.2, there are no payments accrued or
     outstanding under the relevant loan agreement. beta KG has given a
     respective acknowledgement as attached hereto as Schedule 2.3.

     The assignments of the Shares pursuant to Clause 2.1 and the assignment of,
     and assumption of obligations under, the Shareholder Loans pursuant to
     Clause 2.3 are subject to the fulfilment of each of the following
     conditions precedent (aufschiebende Bedingungen) (the "CONDITIONS
     PRECEDENT"), unless a Condition Precedent has been waived in accordance
     with Clause 2.4 below:
<PAGE>

                                                                             -9-

     2.3.1 receipt of the full amount of the payment specified in Clause 3.4.1
          on the Sellers' Closing Account;

     2.3.2 receipt of the full amount of the payment specified in Clause 3.4.2
          on the Escrow Account;

     2.3.3 receipt of the full amount of the payment specified in Clause 3.4.3
          on the Mezzanine and PIK Warrant Settlement Account; and

     2.3.4 receipt of the full amount of the payment specified in Clause 3.4.4
          on the Earn-Out Settlement Account.

2.4  All or any of the Conditions Precedent set out in Clauses 2.3.1 to 2.3.4
     can be waived by Sellers by giving written notice to Purchaser.

2.5  The consent to the assignments of the Shares (including an assignment
     pursuant to the Call Option as set forth below) set out above given by the
     Sellers as shareholders of the Company as required under paragraph 4 of its
     articles of association is attached as Schedule 2.5.

2.6  Clarat Partners hereby irrevocably grants Purchaser an option to purchase
     and acquire all of its Share (and not part only), such purchase and
     acquisition being subject to the terms of this Agreement (the "CALL
     OPTION").

2.7  The Call Option shall be exercisable at any time on or after 3 March 2006
     by Purchaser serving an option notice on Clarat Partners or its proxies
     requiring it to sell the Share to the Purchaser in the form substantially
     as set forth in Schedule 2.7 (the "OPTION NOTICE"). An Option Notice, once
     given, may not be withdrawn.

2.8  Immediately following service of an Option Notice, Clarat Partners shall be
     bound to sell and transfer and the Purchaser shall be bound to purchase and
     acquire the Share on the terms as set forth in this Agreement and, subject
     to the Call Option being exercised, Clarat Partners hereby already
     irrevocably agrees to be bound by the terms of this Agreement governing the
     sale and the transfer of its Share to Purchaser, each with economic effect
     as of the day hereof.

2.9  Purchaser may not assign or otherwise dispose of the Call Option.

<PAGE>

                                                                            -10-

2.10 Clarat Partners hereby agrees and covenants with each of the other parties
     to this Agreement to observe, perform and be bound by all the terms of the
     Agreement which are capable of applying to Clarat Partners mutatis mutandis
     and the Purchaser and the Guarantor hereby agree that the terms of this
     Agreement to be observed, performed and which are binding on the Purchaser
     and the Guarantor and which are capable of applying to Clarat Partners for
     its benefit shall apply mutatis mutandis, each with economic effect as of
     the day hereof.

3.   PURCHASE PRICE AND PAYMENTS AT CLOSING

3.1  The purchase price for all the Shares (the "PURCHASE PRICE FOR SHARES")
     shall be EUR 231,072,280.40 (in words: two hundred thirty one million
     seventy two thousand two hundred eighty Euros and forty cents) minus,
     should Closing occur after 3 March 2006 and such delay not be caused by
     Purchaser and/or Guarantor, any amounts being payable for additional
     calendar days according to Clause 3.2 or 3.4 below.

3.2  The purchase price for all the Shareholder Loans (the "PURCHASE PRICE FOR
     SHAREHOLDER LOAN") shall be EUR 63,597,204.65 (in words: sixty-three
     million five hundred ninety-seven thousand two hundred and four Euros and
     sixty-five cents) as specified in Schedule 3.2, plus, should Closing occur
     after 3 March 2006, an amount of EUR 14,452.24 (in words: fourteen thousand
     four hundred fifty-two Euros and twenty-four cents) for any additional
     calendar day after 3 March 2006 including the Closing Date.

3.3  The Total Purchase Price shall be due and payable, and thereby the closing
     (Vollzug) of the transfer of the Shares and the Shareholder Loans (the
     "CLOSING") shall - subject to Clause 3.10 - take place on 3 March 2006 or
     on such other day as may be agreed by Purchaser and 3i Investors (the
     "CLOSING DATE").

3.4  At Closing, Purchaser shall:

     3.4.1 pay an amount equal to the Total Purchase Price minus the amounts
          payable under Clauses 3.4.2 into a bank account of Sellers notified to
          Purchaser at least three (3) Business Days before Closing (the
          "SELLERS' CLOSING ACCOUNT").

     3.4.2 pay the amount of EUR 9,600,611.65 (in words: nine million six
          hundred thousand six hundred eleven Euros and sixty-five cents) into
          the Escrow Account;

<PAGE>

                                                                            -11-

     3.4.3 pay the amount of EUR 15,223,684.88 (in words: fifteen million two
          hundred twenty-three thousand six hundred eighty-four Euros and
          eighty-eight cents) plus, should Closing occur after 3 March 2006, an
          amount of EUR 380.69 (in words: three hundred eighty Euros and
          sixty-nine cents) for any additional calendar day after 3 March 2006
          including the Closing Date into the Mezzanine and PIK Warrant
          Settlement Account;

     3.4.4 pay an amount of EUR 76,983,704.00 (in words: seventy-six million
          nine hundred eighty-three thousand seven hundred and four Euros) plus,
          should Closing occur after 3 March 2006, an amount of EUR 7,187.33 (in
          words: seven thousand one hundred eighty-seven Euros and thirty-three
          cents) for any additional calendar day after 3 March 2006 including
          the Closing Date to the Earn-Out Settlement Account;

     3.4.5 pay (or procure the payment by the Company) to (*) into the following
          bank account:

          Address:                    (*)
          SWIFT Code:                 (*)
          Bank Code:                  (*)
          Beneficiary Account name:   (*)
          SWIFT Code Beneficiary:     (*)X
          Beneficiary Account number: (*)
          Reference:                  (*)

          an amount of EUR 35,173,993.16 (in words: thirty-five million one
          hundred seventy-three thousand nine hundred ninety-three Euro and
          sixteen cents) plus, should Closing occur after 3 March 2006, an
          amount calculated on the basis of Schedule 3.4 for any additional
          calendar day after 3 March 2006 including the Closing Date in order to
          discharge in full all obligations of the beta Group under the Senior
          Facilities Agreement;

     3.4.6 pay (or procure the payment on behalf of beta KG) to

          a)   (*) into the following bank account:

(*)  Confidential Treatment Requested.

<PAGE>

                                                                            -12-

               Address:                    (*)
               SWIFT Code:                 (*)
               Bank Code:                  (*)
               Beneficiary Account name:   (*)
               SWIFT Code Beneficiary:     (*)
               Beneficiary Account number: (*)
               Reference:                  (*)

               an amount of EUR 16,517,009,89 (in words: sixteen million five
               hundred seventeen thousand and nine Euro and eighty-nine cents)
               plus, should Closing occur after 3 March 2006, an amount
               calculated on the basis of Schedule 3.4 for any additional
               calendar day after 3 March 2006 including the Closing Date

          b)   (*) into the following bank account:

               SWIFT Code:                 (*)
               Beneficiary Account name:   (*)
               Beneficiary Account number: (*)
               Reference:                  (*)

               an amount of EUR 16,547,515.71 (in words: sixty million five
               hundred forty-seven thousand fife hundred fifteen Euro and
               seventy-one cents) plus, should Closing occur after 3 March 2006,
               an amount calculated on the basis of Schedule 3.4 for any
               additional calendar day after 3 March 2006 including the Closing
               Date

          in order to discharge in full all obligations of the beta Group under
          the Mezzanine Facilities Agreements.

     3.4.7 pay (or procure the payment on behalf of beta KG) to (*) into the
          following bank account:

(*)  Confidential Treatment Requested.

<PAGE>

                                                                            -13-

               SWIFT Code:                 (*)
               Beneficiary Account name:   (*)
               Beneficiary Account number: (*)
               Reference:                  (*)

               an amount of EUR 23,762,000.00 (in words: twenty-three million
               seven hundred sixty-two thousand Euro) plus, should Closing occur
               after 3 March 2006, an amount calculated on the basis of Schedule
               3.4 for any additional calendar day after 3 March 2006 including
               the Closing Date in order to discharge in full all obligations of
               the beta Group under the PIK Facility Agreement.

     The payments in accordance with the Clauses 3.4.1 through 3.4.2 shall be
     made in lieu of due performance (Leistung an Erfullungs statt) in full
     satisfaction of Purchaser's obligations to the Sellers under Clauses 3.1
     and 3.2 (mit schuldbefreiender Wirkung) for value on the Closing Date.

3.5  [Intentionally left blank.]

3.6  After performance of the obligations set out in Clauses 3.4 and 3.5, the
     Parties shall execute a Closing Memorandum substantially in the form set
     out in Schedule 3.6.

3.7  All payments under or in connection with this Agreement shall be made by
     wire transfer of immediately available funds, free of all taxes, bank
     charges and other deductions.

3.8  If any payment under or in connection with this Agreement:

     3.8.1 falls due on a Saturday, Sunday or public holiday in London, England,
          or Frankfurt am Main such payment shall be payable on the next day on
          which the banks in London, England, Hyderabad, Mumbai and Frankfurt am
          Main are open to transact normal commercial business ("BUSINESS DAY");
          or

     3.8.2 is not made in full when due, the outstanding amount shall bear
          interest at a rate of 4 % per annum above one month EURIBOR for
          equivalent amounts (calculated on the basis of 360 days/year) from and
          including the date payment was due up to and including the date of
          actual payment, provided, however, that any amounts outstanding from
          the Purchase Price for Shareholder Loan shall bear interest at a rate
          no lower than that payable under the terms of the underlying
          Shareholder Loan. Clause 3.8.2 shall not

(*)  Confidential Treatment Requested.

<PAGE>

                                                                            -14-

          apply to payments according to 3.4.3 through 3.4.7 where the agreed
          interest shall continue to accrue or to be paid, as the case may be.

3.9  Sellers and Purchaser have concluded with the Escrow Agent the Escrow
     Agreement attached hereto as Schedule 3.9.

3.10 The Parties are aware that, should Closing take place after 31 March 2006,
     anti-trust clearance from the German Cartel Office (Bundeskartellamt) will
     be required. Should Closing occur after 31 March 2006 the Parties will
     cooperate to obtain anti-trust clearance as soon as reasonably possible
     before Closing.

4.   SELLERS' REPRESENTATIONS AND WARRANTIES

4.1  The Parties have intensively discussed and negotiated if and to what extent
     the Sellers shall be liable for defects relating to the Shares, the
     Shareholder Loans or the business of the beta Group and have decided to
     depart from the statutory warranties regarding sold goods (gesetzliche
     Kaufgewahrleistung). Instead, they have agreed to replace the statutory
     system and provide for an independent catalogue of specific rights of the
     Purchaser individually agreed as set forth in this Clause 4. The
     representations and warranties of each Seller pursuant to this Clause 4.1
     shall not constitute guarantees (Garantien) within the meaning of section
     444 BGB, but shall constitute separate, independent obligations of a Seller
     and the scope and content of each representation and warranty of each
     Seller and any liability of a Seller arising hereunder shall be exclusively
     defined by the provisions of this Clause 4 and the remainder of this
     Agreement, which provisions form an integral part of the representations
     and warranties given by each Seller.

     4.1.1 Subject to the limitations of liabilities and the explicit
          restrictions of certain legal rights, including certain caps agreed in
          this Agreement, each Seller severally represents and warrants to
          Purchaser in respect of itself and those Shares and Shareholder Loans
          sold by it hereunder only, by way of an independent guarantee
          (selbstandiges Garantieversprechen) pursuant to section 311 paragraph
          1 BGB, that the statements set out in this Clause 4.1.1 are true and
          correct as of the date hereof as well as of the Closing Date.

          4.1.1.1 Each Seller which is a legal person has the full corporate
               power and authority to enter into this Agreement and to carry out
               the transactions contemplated hereby and such transactions have
               been duly authorised by all necessary corporate action on the
               part of such Seller. Each Seller which is a natural person is
               authorised and has capacity to enter

<PAGE>

                                                                            -15-

               into this Agreement and to carry out the transaction contemplated
               hereby and, to the extent the same is required, the consent under
               section 1365 BGB is attached in Schedule 4.1.1.1. This Agreement
               has been duly executed by or on behalf of each Seller and
               constitutes its binding obligations.

          4.1.1.2 There is no action, suit, investigation or proceeding pending
               against, or to each Seller's actual knowledge, as of the date
               hereof, threatened against or affecting, such Seller before any
               court or arbitrator or any governmental body, agency, official or
               other third party which in any manner challenges or seeks to
               prevent the transfer of the Shares or, where relevant, the
               Shareholder Loans.

          4.1.1.3 The statements in Preamble (A) in respect of the Company are
               correct.

          4.1.1.4 Each Seller is the owner of those Share(s) sold by it pursuant
               to Clause 2.1 or offered pursuant to the "CALL OPTION", and of
               that Shareholder Loan (if any) sold by it under Clause 2.3. On
               the Closing Date such Share(s) and Shareholder Loan will be
               unencumbered and free from any third parties' rights, subject to
               the Releases becoming effective and save only to the extent the
               survival or creation of third party rights is caused (in whole or
               in part) by Purchaser or its financing sources, in particular if
               Purchaser creates new third party rights.

          4.1.1.5 The statements in Schedule B are true and correct. The Company
               holds those and only those direct and indirect participations in
               the beta Group Companies shown in Schedule B. Subject to the
               Releases becoming effective and save only to the extent the
               survival or creation of third party rights is caused (in whole or
               in part) by Purchaser or its financing sources, in particular if
               Purchaser creates new third party rights, there are no
               encumbrances or any other third party rights, including rights to
               subscribe for any new shares or interest, affecting such shares
               and interest in the beta Group Companies.

          4.1.1.6 The aggregate claims under the Shareholder Loans for principal
               and interest accrued thereon will as of the Closing Date be the
               amount of the Purchase Price for Shareholder Loans.

<PAGE>

                                                                            -16-

     4.1.2 Subject to the limitations of liabilities and the explicit
          restrictions of certain legal rights, including certain caps agreed in
          this Agreement, each Active Manager severally represents and warrants
          to Purchaser by way of an independent guarantee (selbstandiges
          Garantieversprechen) pursuant to section 311 paragraph 1 BGB, that to
          the Best Knowledge of the respective Active Manager, the statements
          set out in Schedule 4.1.2 are true and correct as of the date hereof
          and no Active Manager is, to the Best Knowledge of the respective
          Active Manager, aware that they will not be true and correct as of the
          Closing Date as anticipated to occur on 3rd March 2006. "BEST
          KNOWLEDGE" of the respective Active Manager within the meaning of this
          Agreement shall mean the actual knowledge (Kennen) of the Active
          Managers as of the date hereof and the knowledge they could have had
          (Kennen mussen), had the respective Active Manager observed the
          standard of care applicable to him taking account of their individual
          position and level of responsibility.

4.2  If any of the statements made by a Seller in Clause 4.1 above should be
     incorrect in whole or in part (a "BREACH"), as applicable to each
     respective Seller, such Seller shall as a several obligor (Teilschuldner)
     following receipt of the respective written notice of claim by Purchaser:

     4.2.1 restore the position to what it would have been if the Breach had not
          occurred (Naturalrestitution) within a reasonable time period, but no
          later than three (3) months after receipt of the respective notice of
          claim. If (a) such restitution is impossible, or (b) the Seller
          finally refuses (ernsthaft und endgultig verweigern) to make
          restitution in kind, Purchaser may claim compensation in money
          (Schadensersatz in Geld) under Clause 4.2.2 below before the expiry of
          the three (3) month period; or

     4.2.2 subject to Clause 4.2.1, pay to Purchaser compensation in money
          (Schadensersatz in Geld) for the actual damages (unmittelbare Schaden)
          and foreseeable indirect damages (vorhersehbare mittelbare
          Folgeschaden) suffered by the Purchaser as a result of such Breach in
          accordance with the respective provisions of the BGB.

4.3  The Active Managers will inform Purchaser without undue delay of any Breach
     which comes to the attention of any Seller between the date hereof and the
     Closing Date.

<PAGE>

                                                                            -17-

5.   LIMITATION OF SELLERS' LIABILITY

5.1  All claims of Purchaser against any of the Sellers under or in connection
     with this Agreement shall be time barred and lapse on the 30 June 2007,
     except for (i) claims based on defect of title to the Shares or Shareholder
     Loans which shall be time barred and lapse on 31 December 2010, (ii) claims
     based on the tax indemnity according to Clause 7.4 which shall be time
     barred and lapse in accordance with Clause 7.4.8. These limitation periods
     shall be suspended (gehemmt) with regard to a particular claim against a
     particular Seller only by Purchaser instituting legal proceedings against
     that Seller within the meaning of section 204 paragraph 1 No. 1 BGB in
     respect thereof before the competent court.

5.2  Purchaser shall not be entitled to bring any claim against any of the
     Sellers under or in connection with Clause 4 of this Agreement
     ("PURCHASER'S CLAIM") and no Seller shall be liable if and to the extent:

     5.2.1 the underlying facts, circumstances or events forming the basis of
          Purchaser's Claim (anspruchsbegrundende Umstande i.S.v. Section 199
          Abs 1 Nr. 2 BGB) or determining the amount of damages caused
          (haftungsausfullende Kausalitat), form part of Purchaser's Knowledge
          pursuant to Clause 6.7 or the matter to which Purchaser's Claim
          relates has specifically and expressly been provided for in the
          consolidated audited accounts for the business year ending on 30
          November 2005 of the Company or its underlying items having entered
          into these accounts; or

     5.2.2 Purchaser fails to give Sellers the opportunity to remedy pursuant to
          Clause 4.2 within the agreed three (3) months time period, or fails to
          use all reasonable efforts to mitigate its loss, including - for the
          avoidance of doubt - any remedy available to any member of the beta
          Group under or in connection with the share purchase and transfer
          agreement with beta healthcare GmbH & Co KG dated 22 December 2003
          (roll of deeds no. 188/2003 of the notary public Dr. Patrick Wamester,
          Basel) ("SPA 2003") unless this is not reasonably expected to mitigate
          losses, provided that if and to the extent Purchaser proves that any
          non-compliance with this Clause 5.2.2 did not result in a higher
          obligation or liability of the Seller in question, Purchaser shall not
          be excluded from bringing a Purchaser's Claim. Purchaser shall inform
          Sellers reasonably without undue delay after

<PAGE>

                                                                            -18-

          becoming aware of any alleged incorrectness or incompleteness and no
          respective Seller shall be liable to the extent any damages are caused
          by a delay in the information to Sellers.

5.3  The liability of Sellers under or in connection with this Agreement shall
     be limited as follows:

     5.3.1 The liability of Sellers under or in connection with this Agreement
          is several only (Einzel- und Teilschuldner).

     5.3.2 Purchaser is entitled to a claim under or in connection with this
          Agreement (except for claims based on Clauses 4.1.1.6 and 7.4) only if
          any individual claim exceeds EUR 100,000.00 (in words: hundred
          thousand Euros), provided that a series of related claims
          (Serienschaden) shall be considered one claim for purposes of this
          Clause 5.3.2, (de minimis) (Freigrenze) and if the sum of all such
          claims exceeds EUR 1,000,000.00 (in words: one million Euros) in the
          exceeding amount only (Freibetrag).

     5.3.3 For all claims under or in connection with this Agreement:

          (a)  the maximum aggregate liability of the Sellers together under or
               in connection with the guarantees according to Clause 4.1.1 and
               in respect of any liability that may arise in relation to Clause
               7.1.5 is the amount of the Total Purchase Price and, for the
               avoidance of doubt, for each Seller is that amount of the Total
               Purchase Price attributable to it;

          (b)  the maximum aggregate liability of the Active Managers under or
               in connection with this Agreement, excluding only (i) the
               liability referred to under (a) above to which the cap under (a)
               above shall apply and (ii) the liability referred to under Clause
               7.4 below to which the cap under Clause 7.4.9 shall apply, is 30
               % (thirty percent) of that part of the Total Purchase Price which
               is attributable to the Active Managers i.e. EUR 3,600,611.65 (in
               words: three million six hundred thousand six hundred eleven Euro
               and sixty-five cents);

          (c)  the total liability of each Seller shall not exceed that amount
               of the Total Purchase Price attributable to it.

     5.3.4 In respect of fraud or wilful misconduct, the statutory rules shall
          apply.

<PAGE>

                                                                            -19-

     5.3.5 Subject to the further limitations as set forth in this Agreement, if
          more than one Seller is individually liable in respect of the same
          Purchaser's Claim, the liability of each Seller in respect of such
          claim shall be the percentage of the Total Purchase Price attributable
          to that particular Seller.

5.4  Purchaser confirms that it has had access to information from and about the
     beta Group Companies and has satisfactorily completed a due diligence
     review prior to the signing of this Agreement. Consequently, the
     representations and warranties and indemnities given by each Seller are
     limited solely to those expressly set out in this Agreement and no other
     representations, warranties, indemnities or guarantees are given, or any
     liability assumed, by any Seller whether expressly, impliedly or by law.
     Any claim of Purchaser and any liability of a Seller under or in connection
     with this Agreement, including under Clause 4 or this Clause 5, but
     excluding under Clause 7.4 (tax indemnity), is further excluded if and to
     the extent to which facts or circumstances have been disclosed in this
     Agreement (including the Schedules). The same applies with respect to the
     other information provided to the Purchaser, its representatives or
     advisors in writing during the negotiations leading up to the execution and
     implementation of this Agreement attached hereto as Schedule 5.4, including
     the management presentations and question and answer sessions.

5.5  Any right of Purchaser to rescind or withdraw from this Agreement shall be
     excluded save as set out in Clause 8. Any claims and rights of Purchaser
     beyond the independent guarantees provided for in Clause 4 and the rights
     provided for in Clause 7 and the consequences set forth therein, in
     particular claims based on defects, claims under section 280 BGB which,
     according to former case law for breach of a representation or warranty,
     would have been considered as claims based on breach of pre-contractual
     obligations (culpa in contrahendo) or positive breach of contractual
     obligations, rights of rescission because of an absence of essential
     qualities, or any claims under section 313 BGB (Wegfall der
     Geschaftsgrundlage) are excluded. Any claims for specific performance
     (Vertragserfullung) under this Agreement, or based on wilful misconduct or
     sections 123 and 826 BGB shall not be affected.

5.6  The Parties agree that no provision of this Agreement constitutes a
     contract for the benefit of a third party within the meaning of section 328
     BGB or otherwise (kein Vertrag zugunsten Dritter oder mit Schutzwirkung fur
     Dritte), irrespective of whether any payment under Clause 4 in connection
     with this Clause 5 is made to the Purchaser, the Company or a beta Group
     Company.

<PAGE>

                                                                            -20-

6.   PURCHASER AND GUARANTOR REPRESENTATIONS AND WARRANTIES

     The Purchaser and the Guarantor hereby guarantee to Sellers by way of an
     independent promise of guarantee pursuant to section 311 paragraph 1 BGB
     (selbstandiges Garantieversprechen) that the statements set forth in this
     Clause 6 are true and correct as of the date hereof. The representations
     and warranties in Clause 6.1 to Clause 6.7 below shall not constitute
     guarantees (Garantien) within the meaning of section 444 BGB, but shall
     constitute separate, independent obligations of Purchaser and Guarantor and
     the scope and content of each representation and warranty of each of them
     and any liability arising hereunder shall be exclusively defined by the
     provisions of this Clause 6, which provisions form an integral part of such
     representations and warranties.

6.1  Purchaser and Guarantor have the full corporate power and authority to
     deliver this Agreement and to carry out the transactions contemplated
     hereby and such transactions have been duly authorised by all necessary
     corporate action on the part of Purchaser and Guarantor. This Agreement has
     been duly executed on behalf of Purchaser and Guarantor and constitutes
     their binding obligations.

6.2  There is no action, suit, investigation or proceeding pending against, or
     threatened against or affecting Purchaser or Guarantor before any court or
     arbitrator or any governmental body, agency, official or other third party
     which in any manner challenges or seeks to prevent the transactions
     contemplated hereby.

6.3  The execution and performance by Purchaser and Guarantor of this Agreement
     and the consummation of the transactions contemplated hereby require no
     prior approval by or filing with any governmental body, public agency or
     official or other third party. In particular, based on the turnover
     information provided by the Sellers, the transaction will not be subject to
     mandatory German pre-merger filing requirements and can therefore be
     consummated without the need to obtain prior clearance by the German
     Federal Cartel Office (Bundeskartellamt).

6.4  Neither Purchaser nor Guarantor is insolvent or over-indebted and no
     insolvency proceedings have been initiated or opened, or rejected because
     of a lack of assets, and no circumstances exist which would justify the
     initiation or opening of such insolvency proceedings.

<PAGE>

                                                                            -21-

6.5  Purchaser has sufficient unconditional and immediately available funds to
     meet its obligations hereunder. True and complete copies of all commitments
     under which such funding is available have been delivered to Sellers prior
     to the date hereof.

6.6  Neither Purchaser nor Guarantor has any obligation or liability to pay any
     fees or commissions to any broker or finder with respect to the
     transactions contemplated by this Agreement for which any of the Sellers,
     could become liable.

6.7  To Purchaser's Knowledge, at the date hereof there exist no claims nor
     grounds for any claim against any Seller under Clause 4 (Sellers'
     Representations and Warranties). "PURCHASER'S KNOWLEDGE" within the meaning
     of this Agreement shall mean the actual knowledge of the persons listed in
     Schedule 6.7 as of the date hereof.

7.   COVENANTS, INDEMNITIES, NON-COMPETE

7.1  Each Active Manager, and each Seller as regards Clause 7.1.5, undertakes to
     use all reasonable efforts in its capacity as shareholder of the Company to
     ensure that, without the prior approval of Purchaser (which approval shall
     not be unreasonably withheld) and so far as legally permissible, from the
     date hereof until the Closing Date the members of the beta Group do

     7.1.1 conduct their business in all material respects in the ordinary
          course of business consistent with past practice;

     7.1.2 not (i) dispose of, or subject to any encumbrance or change on other
          third party right, any assets (including Intellectual Property Rights
          as defined in Schedule 4.1.2) with a value exceeding EUR 250,000.00,
          (ii) dismiss any of their key employees with a total annual
          remuneration in excess of EUR 150,000.00 other than for cause, (iii)
          enter into any material agreement or commitment involving annual or
          one time obligations in excess of EUR 250,000.00, (iv) grant any
          increase in wages, salaries, bonuses or other remuneration of any
          employee (including for the avoidance of doubt, managing directors)
          having a total effect or more than EUR 200,000.00 for one year
          following the Signing Date, (v) cancel or waive claims or rights of a
          value in excess of EUR 250,000.00 or (vi) terminate customer and
          supplier agreements or license agreements relating to any intellectual
          property rights or marketing authorizations for medicinal products, in
          each case with an annual value in excess of EUR 250,000.00 other than
          for cause;

     7.1.3 not carry out or effect any material capital expenditures or other
          material investments in excess of EUR 50,000.00 (fifty thousand Euro)
          per each ten

<PAGE>

                                                                            -22-

          day period already approved in any relevant budget or capital
          expenditure plan of the beta Group for such period or;

     7.1.4 maintain insurance protection material for the business of the beta
          Group broadly comparable to that existing at the date hereof;

     7.1.5 not declare, make or pay any dividends (including constructive
          dividends) or distributions (other than to other members of the beta
          Group) or make any other payments to the Sellers or any affiliate
          thereof other than in an arms' length transaction in the ordinary
          course of business;

     7.1.6 not amend any of their constitutional documents, issue any shares,
          equity securities or securities convertible into shares or equity
          securities or agree upon such issuance or reduce the share capital or
          grant any option or encumbrance in respect of or over shares or any
          such securities; and

     7.1.7 not agree, whether or not in writing, to do anything described in
          Clauses 7.1.2, 7.1.3, 7.1.5 and 7.1.6.

7.2  At all times after the Closing Date Purchaser will grant during normal
     business hours Sellers and their advisors and representatives reasonable
     access to the books, records and employees of beta Group, which such
     Seller(s) may reasonably require for auditing, tax and other reasonable
     purposes.

7.3  On the Closing Date, Sellers shall deliver to Purchaser such resignation
     letters and resolutions or other declarations as may be necessary or
     appropriate such that.

     David Ebsworth, Barry Clare, Ian Nolan, Werner Lappla and Bernd Schuler

     shall cease to be members of the advisory board (Beirat) of the beta Group
     Companies and shall grant them full discharge (Entlastung). The Company and
     the Purchaser each hereby waives all claims it may have against them (now
     or in the future) in their capacity as members of the advisory board and
     shall procure that the beta Group Companies shall waive any claims they may
     have against them (now or in the future) in their capacity as members of
     the advisory board.

7.4  TAX INDEMNITY

     7.4.1 Sellers shall indemnify and hold harmless the Purchaser or, at the
          election of the Purchaser, the respective member of the beta Group,
          from and against any Taxes due and payable by any member of the beta
          Group for time periods

<PAGE>

                                                                            -23-

          starting 1 January 2004 up to and including 30 November 2005 (such
          period the "INDEMNIFICATION PERIOD") (the "INDEMNIFIABLE TAX"),
          however, only to the extent that (i) the aggregate amount of the
          Indemnifiable Tax exceeds the aggregate amount of all accruals,
          provisions or liabilities for Taxes shown in the financial statements
          of the members of the beta Group as of 30 November 2005 (deferred tax
          assets and liabilities are disregarded in this respect), and (ii) the
          relevant Taxes have not already been paid to the competent Tax
          Authority by the Sellers or any member of the beta Group. For the sake
          of clarification, withholding taxes relate to the time periods in
          which they are triggered.

     7.4.2 The Tax indemnity pursuant to 7.4.1 is granted by Sellers subject to
          the following:

          7.4.2.1 Sellers shall not be liable for Taxes pursuant to this Clause
               7.4 if and to the extent such Taxes (i) result from any change in
               the accounting and taxation principles or practices, the exercise
               of any tax or accounting election right, or the amendment of any
               Tax return of the Company or any member of the beta Group
               (including methods of submitting Tax Returns) introduced after
               the Closing Date, unless such changes are required by mandatory
               law, (ii) arise due to any transaction, merger, restructuring or
               other measure (e.g., a premature cancellation of a fiscal unity
               (Organschaft) introduced after the Closing Date), or (iii) are
               subject of a valid and enforceable claim for repayment or
               indemnification, unless (a) such claim has not been realised, and
               (b) cannot be realised with reasonable efforts within eighteen
               (18) months after the respective claim for indemnification
               pursuant to Clause 7.4.1 became due and payable, in which case
               the Purchaser or the respective member of the beta Group shall
               assign to Sellers such claim including all ancillary rights and
               documentation concurrently (Zug um Zug) with the indemnification
               payment by Sellers.

          7.4.2.2 If and to the extent that a circumstance which triggers Taxes
               for which an indemnification claim under this Clause 7.4 exists
               in principle (dem Grunde nach) results in a reduction of the tax
               base of any member of the beta Group, the Purchaser or any
               affiliate of the Purchaser (e.g., because of the lengthening of
               depreciation periods or higher depreciation allowances -
               Phasenverschiebungen) in the Indemnification Period or in periods
               commencing thereafter (such reduction the "REVERSAL EFFECT"), the
               Sellers' obligation pursuant to this Clause 7.4 shall be reduced
               by

<PAGE>

                                                                            -24-

               the Tax benefit resulting from the Reversal Effect (the "TAX
               BENEFIT"). The Tax Benefit resulting from the Reversal Effect
               shall be calculated by applying a flat tax rate of 25 % on the
               aggregate amount by which the tax base is reduced because of the
               Reversal Effect.

     7.4.3 If and to the extent that any member of the beta Group, the Purchaser
          or any affiliate of the Purchaser receives a Tax Refund not reflected
          in the financial statements of the relevant member of the beta Group
          as of 30 November 2005 (deferred tax assets and liabilities are
          disregarded in this respect), the amount of such Tax Refund shall be
          paid by the Purchaser to the Sellers within ten (10) days following
          its receipt. A Tax Refund shall be deemed received at the time it is
          received in cash or as a cash equivalent (including by way of set-off
          against any Tax liability).

     7.4.4 All payments made pursuant to this Clause 7.4 shall constitute a
          reduction or an increase of the Purchase Price, as the case may be. If
          and to the extent payments are made by Sellers to a beta Group
          Company, such payment shall be construed as contributions (Einlagen)
          made by Purchaser into the respective company and shall be treated as
          a reduction of the Purchase Price as between the Parties to the extent
          permitted by applicable Tax law.

     7.4.5 After the Closing Date, the Purchaser shall prepare and make, and
          cause the members of the beta Group to prepare and make, when due all
          Tax Returns required to be filed by or on behalf of the any member of
          the beta Group relating in whole or in part to the Indemnification
          Period subject to the review and prior written consent of the Sellers'
          Representative, which shall not be unreasonably withheld. The
          Purchaser shall ensure that any Tax Return will be furnished to the
          Sellers' Representative no later than thirty (30) days prior to the
          due date of its filing. The Sellers' Representative shall provide the
          Purchaser with his comments without undue delay. The Sellers shall be
          deemed to have given their consent to any Tax Return timely furnished
          to the Sellers' Representative for his review if he had failed to
          review such Tax filing and to provide his comments to the Purchaser or
          the respective member of the beta Group within three (3) weeks
          following the receipt (Zugang) thereof.

     7.4.6 Payment of Indemnification

          7.4.6.1 Any payment pursuant to Clause 7.4.1 shall become due and
               payable five (5) Business Days prior to the due date of the
               relevant Tax, provided that the Purchaser has provided without
               undue delay and at the

<PAGE>

                                                                            -25-

               latest fifteen (15) Business Days prior to the due date of the
               relevant Tax the Sellers' Representative with all documentation
               (including copies of Tax assessments) necessary to reasonably
               assess the claim.

          7.4.6.2 In the case of any Tax being appealed and to the extent that
               the Tax Authority has granted a payment relief until such Tax
               becomes final and binding (bestandskraftig), payment of such Tax
               to the Tax Authority will be considered due no earlier than on
               the date a final and binding determination to such effect is made
               by either the Tax Authority or a court of proper jurisdiction. If
               this is not the case, the Sellers shall make a respective advance
               indemnification payment to the Purchaser or, at the request of
               the Purchaser, to the respective member of the beta Group. If the
               amount of the respective Tax finally assessed and to be paid is
               lower than the advance indemnification payment by the Sellers,
               then the difference shall be reimbursed by the Purchaser,
               including all interest earned thereon, if any, within ten (10)
               days after the refund has been received in cash or as a cash
               equivalent (including by way of set-off against any Tax
               liability) by the respective member of the beta Group, the
               Purchaser or any affiliate of the Purchaser.

     7.4.7 Indemnification Procedures

          7.4.7.1 Following the Closing Date, the Purchaser shall notify and
               shall cause the relevant member of the beta Group to notify the
               Sellers' Representative of any Tax audit or assessment, dispute
               or administrative or judicial proceeding that is announced or
               commenced and that might constitute a basis for any liability
               under this Agreement. Such notice shall be given within eleven
               (11) Business Days after the Purchaser or the relevant member of
               the beta Group has received the relevant information from the Tax
               authorities. If the Purchaser or the relevant member of the beta
               Group has reason to believe that a payment is to be made by the
               Sellers pursuant to this Clause 7.4, the Purchaser shall duly
               give written notice to the Sellers' Representative including
               those information reasonably necessary to determine the fact,
               amount and payment.

          7.4.7.2 The Purchaser shall cause the relevant member of the beta
               Group (i) to give the Sellers' Representative (at the expense of
               the Sellers) the opportunity to participate in any audits,
               disputes or administrative or judicial proceedings relating to
               any Tax attributable to the Indemnification

<PAGE>

                                                                            -26-

               Period, (ii) upon Sellers' Representative's written request and
               at Sellers' cost, to challenge and litigate any Tax assessment or
               other decision of any Tax Authority related to such Tax, (iii) to
               comply, unless legally prohibited, with instructions given by the
               Sellers' Representative in relation to the conducting of the
               proceedings referred to in (i) and (ii) above (provided that any
               reasonable costs incurred by them in connection with such
               instructions shall be borne by the Sellers), and (iv) not to
               accept or settle a dispute on a claim for a Tax for which the
               Sellers might be liable under this Clause 7.4 without the
               Sellers' Representative's prior written consent.

          7.4.7.3 If the Purchaser has failed to comply with any of his
               obligations set forth in this Clause 7.4, the Sellers shall no
               longer be liable under this Agreement for the relevant Tax if and
               to the extent the relevant Tax were not payable had the Purchaser
               complied with its obligations. The burden of proof whether
               Purchaser's failure caused such effects shall be governed by
               applicable law (including any rules facilitating any such proof -
               Beweiserleichterungen), except that such burden of proof shall be
               on the Purchaser with respect to the relevant Tax, if and to the
               extent that (i) a Tax assessment becomes binding and
               non-appealable and the Purchaser or the respective member of the
               beta Group has failed to provide the Sellers the opportunity to
               challenge or litigate, or to request the Purchaser or the
               relevant member of the beta Group to challenge or litigate, such
               Tax assessment in accordance with Clause 7.4.7.2, (ii) the Tax
               matter has been acknowledged or settled (irrespective of whether
               in a Tax contest or by other means including so-called package
               deals) without the Sellers' Representative prior written consent,
               (iii) the Purchaser has failed to comply with a reasonable
               (taking into account the legitimate interest of the Sellers) and
               executable written instruction of the Sellers' Representative
               regarding the relevant Tax audit, assessment or proceeding, (iv)
               the Purchaser has failed, despite a prior reasonable written
               request by the Sellers' Representative, to grant the Sellers'
               Representative access to specifically named documents, directors
               or employees materially relevant in connection with the defence
               against the Tax audit, assessment or proceeding, (v) the
               Purchaser has failed to notify the Sellers' Representative about
               (a) a final meeting in a tax audit (Schlussbesprechung within the
               meaning of Sec. 201 of the German General Tax Code -
               Abgabenordnung) dealing with Taxes which may have to be
               indemnified by Sellers under this

<PAGE>

                                                                            -27-

               Clause 7.4, or (b) any other meeting with representatives of the
               Tax authorities announced by the Tax authorities in writing with
               a notice period of at least three (3) Business Days and dealing
               with Taxes which may have to be indemnified by Sellers under this
               Clause 7.4, in both cases (a) and (b) at least five (5) Business
               Days or to the extent possible prior to the date on which such
               meeting takes place, or (vi) the Purchaser has submitted a letter
               or similar document to the Tax auditor specifically prepared for
               the tax audit upon written request by the Tax auditor containing
               statements relating to Taxes which may have to be indemnified for
               under this Clause 7.4 to the Tax authorities either without
               having informed the Sellers or in violation of a specific
               reasonable written instruction by the Sellers' Representative
               with respect to such documents. For the purpose of (iii) and (iv)
               of the preceding sentence, any request or instruction made in any
               meeting or conference and laid down in any written minutes
               thereof accepted in writing by the relevant Parties and their
               representatives shall be deemed to be in writing.

     7.4.8 Claims pursuant to Clause 7.4 shall be time barred and lapse six (6)
          months after (i) the relevant Tax assessment notice has becomes final
          and binding (bestandskraeftig und unanfechtbar), or (ii) the regular
          statutory limitation period for the relevant Tax. Notwithstanding the
          above, claims pursuant to Clause 7.4 shall be time barred and lapse on
          the seventh anniversary of this Agreement.

     7.4.9 For all claims under or in connection with this Clause 7.4 the
          maximum aggregate liability of the Sellers shall be EUR 6,000,000.00
          (in words: Euro six million).

     7.4.10 The liability of Sellers with respect to Taxes shall exclusively be
          governed by this Section 7.4 unless explicitly stated otherwise in
          this Agreement or the Schedules and Annexes thereto.

7.5  Each Active Manager undertakes to use all reasonable efforts that the
     Company will from the date hereof until the Closing Date deliver to
     Purchaser management accounts in the form and to the point in time as
     prepared consistent with past practice on a regular basis and the Sellers
     in their capacity as shareholders of the Company hereby authorize the
     Active Managers to do so.

7.6  The Sellers, except for the 3i Investors and TIAA, (the "RELEVANT SELLERS")
     and any entities affiliated with them within the meaning of Section 15 et.
     seq. of the German

<PAGE>

                                                                            -28-

     Stock Corporation Act shall, for a period of three (3) years from the
     Closing Date, in the area of manufacturing, marketing, buying and selling
     of marketing authorizations and dossiers regarding generic pharmaceuticals
     in Germany as well as distributing generic pharmaceuticals as currently
     done so by beta Group, not engage in any activity which would, directly or
     indirectly, compete with or result in competion with such present business
     operations in Germany. The Relevant Sellers shall not establish or acquire,
     or acquire shares in, any business operations competing with the beta
     Group; it is understood, however, that the Relevant Sellers shall be
     entitled to acquire up to 10 % of the share capital of a corporation listed
     on a stock exchange, provided that the Relevant Sellers are excluded from
     any control over the management of such listed corporation competing with
     the beta Group. The Relevant Sellers covenant that the other companies
     belonging to the Relevant Sellers' group in the aforementioned period
     comply with the forgoing provisions of this Section 7.6 accordingly.

     Purchaser will procure that the non-compete provisions (including
     respective compensations) under the current service agreements with the
     Active Managers will continue to apply after Closing upon request of the
     relevant Active Manager.

8.   RESCISSION

8.1  The Sellers shall be entitled to rescind this Agreement at any time by
     written declaration hereof to Purchaser, if the payments under Clause 3.4
     are not made in full when due or if, for any other reason, Closing has not
     been completed by 31 March 2006.

8.2  Purchaser may rescind this Agreement if:

     between the date of this Agreement and the Closing Date, a change,
     condition, event or development shall have occurred or become known which
     would have or would reasonably be expected to have a material adverse
     effect on the assets, results of operation, financial condition or business
     of the beta Group as a whole ("MATERIAL ADVERSE EFFECT"), provided that
     none of the following shall be deemed in themselves to constitute a
     Material Adverse Effect: (i) any failure by the beta Group to achieve
     projected revenue or operating results, (ii) any adverse changes, events,
     developments or effects arising from or relating to legal or regulatory
     developments general business or economic conditions which are not specific
     to the beta Group or financial markets (iii) any outbreak or escalation of
     hostility involving Germany or the occurrence of any act of terrorism
     (excepts acts directed specifically against the beta Group), (iv) any
     change, condition, event or developments, which is attributable to the
     execution or

<PAGE>

                                                                            -29-

     announcement of this Agreement and that the effect for the beta Group must
     exceed a damage of EUR 25,000,000.00 (in words: twenty-five million Euro);

8.3  If Sellers or Purchaser rescind this Agreement under Clause 8, this
     Agreement shall terminate and cease to be of effect immediately, save only
     for the provision of Clauses 9 (Confidentiality), 10 (Guarantor's
     Undertaking) and 11 (Miscellaneous) which shall continue in full force and
     effect. Claims in respect of prior breach shall remain unaffected.

9.   CONFIDENTIALITY

9.1  Each Seller undertakes for a period of five (5) years from the Closing Date
     to keep confidential all confidential information constituting trade
     secrets of the beta Group Companies known to it and not to disclose such
     information, directly or indirectly, to any third party.

9.2  Except as may be required by law or applicable stock exchange or other
     regulatory requirements (in which case prior notice shall be given if
     practicable), no Party (and the respective Party shall, as direct or
     indirect shareholder of the beta Group Companies, procure that none of the
     beta Group Companies) will issue any press release or other public
     communication relating to this Agreement or the transactions contemplated
     hereby and/or will disclose any details regarding this transaction and the
     content of this Agreement to any third party (other than to its respective
     representatives, advisors and financing institutions in connection with the
     preparation, negotiation and the completion of this Agreement and the
     transactions stipulated herein in each case subject to appropriate
     confidentiality obligations) except that 3i Group Investments and the
     Guarantor may each prepare press releases which may be released upon the
     prior consent of the respective other Party, such consent not to be
     unreasonably withheld. Nothing shall prevent Purchaser and Guarantor from
     publishing or circulating without the consent of the Sellers (i)
     announcements to analysts, (ii) prospectuses or (iii) information to
     financial institutions as far as this is reasonably required according to
     common practise at the capital markets.

9.3  The obligations of confidentiality in Clauses 9.1 and 9.2 shall not apply
     to confidential information, which was or is lawfully obtained by a Seller
     from other sources, which was or is or becomes generally available to the
     public, which or ceases to be a trade secret, or which is required to be
     disclosed to a competent tribunal or government agency or other regulatory
     body (including pursuant to a subpoena, civil investigative demand (or
     similar process), order, statute, rule of other legal requirement
     promulgated or imposed by a court or by a judicial, regulatory,
     self-regulatory or

<PAGE>

                                                                            -30-

     legislative body, organisation, agency or committee or otherwise in
     connection with any judicial or administrative proceeding (including, in
     response to oral questions, interrogatories or requests for information or
     documents).

9.4  Notwithstanding Clauses 9.2 and 9.3, any Seller shall be entitled to
     provide such information as may be required by any legal, fiduciary or
     regulatory obligation, to its fund investors or prospective investors, its
     partners, directors, officers or employees and its or their affiliates
     (which for these purposes shall mean any person directly or indirectly,
     controlling, controlled by, or under common control with, another person,
     whereby the term "control" means the power to direct the management or
     policies of a person through securities ownership, by contract or
     otherwise) and professional advisors.

10.  GUARANTOR'S UNDERTAKING

     Guarantor hereby guarantees to Sellers as an independent guarantee
     (Garantieerklarung) on first demand the full and punctual performance of
     all obligations of the Purchaser under or in connection with this
     Agreement, including payment of the Total Purchase Price, the other
     payments under Clause 3.4 as well as any interest payable under Clause
     3.8.2.

11.  MISCELLANEOUS

11.1 All notarial fees, transfer taxes, stamp duties and other public levies, as
     well as the costs of any merger control proceedings or other governmental
     approvals or filings connected with the execution and implementation of
     this Agreement, shall be borne by Purchaser. Apart from this, each Party
     shall bear its own costs and taxes and the costs of its advisors, provided
     that Sellers will be responsible for any external expenses of beta Group in
     connection with the transaction contemplated hereby, if any, unless paid
     prior to and including 30 November 2005 and for periods thereafter only to
     the extent exceeding the amount of EUR 232,891.80 (in words: two hundred
     thirty two thousand eight hundred ninety-one Euros and eighty cents) which
     had been provided for in the consolidated audited accounts of the Company
     for the business year ending on 30 November 2005 or its underlying items
     having entered into these accounts.

11.2 This Agreement, including the Schedules, contains the entire agreement of
     the Parties with respect to the subject matter hereof. Any supplements or
     amendments to or a termination of this Agreement, as well as any
     declarations to be made hereunder, shall be valid only if made in writing,
     or if required by law, in due notarial form. This shall also apply to any
     change to, or cancellation of, this provision.

<PAGE>

                                                                            -31-

11.3 Unless provided otherwise in this Agreement, all declarations
     (Willenserklarungen) to be made or notices to be given by the Parties under
     this Agreement shall be in writing in English. They may be made by telefax,
     in which case they must at the same time be sent by registered mail with
     recorded delivery, or in any other manner permitted by law.

11.4 All declarations (Willenserklarungen) and notices under this Agreement or
     in consummation thereof shall be made, accepted or be received with legally
     binding effect on behalf of a Party by the representative set out against
     its name below, and each Party so represented hereby fully and irrevocably
     grants the corresponding power of attorney to such representative:

     -    As representative for the 3i Investors:

          (*)
          (*)
          (*)
          (*)
          (*)

     -    As representative for Clarat Partners:

          (*)
          (*)
          (*)
          (*)
          (*)

     -    As representative for the Managers:

          (*)
          (*)
          (*)
          (*)

     -    As representative for TIAA:

          (*)
          (*)
          (*)
          (*)

(*)  Confidential Treatment Requested.

<PAGE>

                                                                            -32-

          (*)
          (*)

     -    As representative for the Purchaser and/or Guarantor:

          Dr. Reddy's Laboratories Ltd.
          Attn: Mr. Vasudevan Subramanian
          Chief Financial Officer
          7-1-27, Ameerpet
          Hyderabad 600 016, India.

11.5 Each Party shall be solely responsible for the fulfilment of all
     obligations, if any, vis-a-vis brokers or finders appointed or used by that
     Party in respect of the transactions contemplated hereby, provided that
     Sellers will be responsible for any such obligations of beta Group in
     connection with the transaction contemplated hereby.

11.6 Should a provision of this Agreement, or a provision included in this
     Agreement at a later point in time, be or become invalid or null and void
     as a whole or in part, or should a gap in this Agreement become evident,
     this does not affect the validity of the remaining provisions or parts
     thereof. The invalid or null and void provision is replaced, or the gap
     shall be filled, as the case may be, with effect ex tunc by such valid
     regulation which in legal and economic terms comes closest to what the
     Parties intended or would have intended in accordance with the purpose of
     this Agreement if they had considered the point at the time of conclusion
     of this Agreement.

11.7 Neither Purchaser nor Guarantor shall be entitled (a) to set off
     (aufrechnen) any rights and claims it may have against any rights or claims
     any other party may have under this Agreement or otherwise, or (b) to
     refuse to perform any obligation it may have under this Agreement on the
     grounds that it has a right of retention (Zuruckbehaltungsrecht) unless the
     rights or claims of the relevant party claiming a right to set off
     (Aufrechnung) or retention have been acknowledged (anerkannt) in writing by
     the relevant other party/parties or have been confirmed by final decision
     of a competent court (Gericht).

11.8 Other than in connection with the financing of the transaction envisaged
     under this agreement as collateral, Purchaser may not assign or otherwise
     dispose over any rights or claims under or in connection with this
     Agreement without the prior written consent of the Sellers.

11.9 Sellers remain joint creditors (Gesamtglaubiger) of any claims under this
     Agreement,

(*)  Confidential Treatment Requested.

<PAGE>

                                                                            -33-

     notwithstanding that they are several obligors (Einzel- und Teilschuldner)
     in respect of all their obligations under this Agreement.

11.10 This Agreement shall be governed by German law. The English language
     version shall be determinative (even if a translation is made), provided
     that where German expressions are used in brackets, the German expression
     shall be determinative.

11.11 In this Agreement:

     11.11.1 any German legal term for any action, remedy, method of judicial
          proceeding, legal document, legal status, court, official or any legal
          concept or thing shall, in respect of any jurisdiction other than
          Germany, be deemed to include what most nearly approximates in that
          jurisdiction to the German legal term and any reference to any German
          statute shall be construed so as to include equivalent or analogous
          laws of any other jurisdiction; and

     11.11.2 the headings shall not affect the interpretation of this Agreement.

11.12 Any dispute, controversy or claim arising from or in connection with this
     Agreement and its validity shall be finally settled by three arbitrators in
     accordance with the Arbitration Rules of the German Institution of
     Arbitration e.V. (DIS) without recourse to the courts of law. The venue of
     the arbitration shall be Frankfurt am Main. The language of the arbitral
     proceedings shall be English whereas documentary evidence may be submitted
     in either the English or German language. In the event that mandatory
     applicable law requires any matter arising from or in connection with this
     Agreement and its execution to be decided upon by a court of law the
     competent courts in Frankfurt am Main shall have the exclusive
     jurisdiction.

     Notarization started on February 15th 2006 and lasted without interruption
     until February 16th 2006. when it was closed and signed by the parties.

          Read out aloud including enclosures (Anlagen) to the parties by the
          acting notary; respectively in presence of the notary; as far as
          reading out was not mandatory according to sec. 14 of the German Code

<PAGE>

                                                                            -34-

          of Recording (Beurkundungsgesetz) the parties declare that the
          contents of these enclosures is known to them and they do not want to
          have them read out by the notary; agreed by the parties and signed by
          them as follows:

<PAGE>

                                                                            -35-

                               Table of Schedules

Schedule A     Shares in the Company

Schedule B     Participations held by the Company

Schedule C     Shareholder Loans

Schedule 2.3   Confirmation re transfer and amount of shareholder loans

Schedule 2.5   Consent to assignment of Shares

Schedule 2.7   Option Notice

Schedule 3.2   Purchase Price for Shareholder Loan

Schedule 3.4   Calculation of Interest after 3 March 2006

Schedule 3.6   Closing Memorandum

Schedule 3.9   Escrow Agreement

Schedule 4.1.1 Section 1365 BGB consents

Schedule 4.1.2 Guarantees by Active Managers

Schedule 5.4   Disclosed documents

Schedule 6.7   Persons with knowledge deemed as Purchaser's Knowledge

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