Document:

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                                                               Exhibit 10(tt)

                            LIMITED LIABILITY COMPANY
                               OPERATING AGREEMENT
                                       OF
                              PFC THERAPEUTICS, LLC

      This OPERATING AGREEMENT shall be effective as of the 17th day of May
2000, by and between ALLIANCE PHARMACEUTICAL CORP., a New York corporation
("Alliance") and BAXTER HEALTHCARE CORPORATION, a Delaware corporation
("Baxter"), on the following terms and conditions:

                                    RECITALS

      WHEREAS, Alliance has developed and owns technical know-how, patent
applications and patents relating to the manufacture, composition and use of
certain products capable of transporting oxygen in therapeutic effective amounts
in the bloodstream for all medical uses, including perflubron-based emulsion;

      WHEREAS, Baxter has substantial knowledge and expertise in the research,
development, manufacture and distribution of healthcare products; and

      WHEREAS, Baxter and Alliance are interested in the development and
commercialization of the Product, as hereinafter defined.

      NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

      Capitalized words and phrases used in this Agreement have the following
meanings:

      "Accepting Offerees" shall have the meaning set forth in Section 12.4(d)
hereof.

      "Act" means the Delaware Limited Liability Company Act, 6 Del. C.
ss.18-101, et seq., as amended from time to time (or any corresponding
provisions of succeeding law).

      "Additional Capital Contributions" means, with respect to each Member, the
Capital Contributions made by such Member pursuant to Section 3.2 hereof. In the
event Units are Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Additional Capital Contributions of the
transferor to the extent they relate to the Transferred Units.

      "Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Allocation Year, after giving effect to the following adjustments:

            (i) Credit to such Capital Account any amounts which such Member is
deemed to be obligated to restore pursuant to the penultimate sentences in
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and

* Indicates confidential information which has been omitted and filed separately
with The Securities and Exchange Commission.

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            (ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.

      The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.

      "Affiliate" means, with respect to any Person (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person
(ii) any officer, director, general Member, member or trustee of such Person or
(iii) any Person who is an officer, director, general Member, member or trustee
of any Person described in clauses (i) or (ii) of this sentence. For purposes of
this definition, the terms "controlling," "controlled by" or "under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person or
entity or through the ownership of at least 40% of the voting securities of a
Person or entity.

      "Agreement" or "Operating Agreement" means this Operating Agreement
including all Exhibits and Schedules attached hereto, as amended from time to
time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder"
refer to this Agreement as a whole, unless the context otherwise requires.

      "Alliance Manufacturing and Supplier Agreement" means the agreement to be
entered into between the Company and Alliance pertaining to the manufacture and
supply of the Product by Alliance.

      "Alliance" means Alliance Pharmaceutical Corp., a company organized under
the laws of New York and its Affiliates, including, but not limited to,
divisions and subsidiaries.

      "Allocation Year" means (i) the period commencing on the Effective Date
and ending on December 31, 2000, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, or (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Section 4 hereof.

      "Baxter" means Baxter Healthcare Corporation and its Affiliates.

      "Baxter Manufacturing and Supplier Agreement" means the agreement to be
entered into between the Company and Baxter pertaining to the manufacture and
supply of the Product by Baxter.

      "Business" means the business of developing and commercializing the
Product.

      "Business Day" means a day of the year on which banks are not required or
authorized to close in New York, New York.

      "Capital Account" means, with respect to any Member, the Capital Account
maintained for such Member in accordance with the following provisions:

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            (i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions, (B) such Member's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 4.3 or Section 4.4 hereof, and (C) the amount of
any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member. The principal amount of a promissory note
which is not readily traded on an established securities market and which is
contributed to the Company by the maker of the note (or a Member related to the
maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any Member
until the Company makes a taxable disposition of the note or until (and to the
extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2);

            (ii) To each Member's Capital Account there shall be debited (A) the
amount of money or the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Losses and any items in the nature of expenses or losses
which are specially allocated pursuant to Section 4.3 or Section 4.4 hereof, and
(C) the amount of any liabilities of such Member assumed by the Company or which
are secured by any Property contributed by such Member to the Company;

            (iii) In the event Units are Transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the Transferred Units; and

            (iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.

      The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Management Board shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company or any Members) are computed in
order to comply with such Regulations, the Management Board may make such
modification, provided that it is not likely to have a material effect on the
amounts distributed to any Person pursuant to Section 13 hereof upon the
dissolution of the Company. The Management Board also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of capital reflected on the
Company's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).

      "Capital Contributions" means, with respect to any Member, the amount of
money or the initial Gross Asset Value of any Property (other than money)
contributed to the Company with respect to the Units in the Company held or
purchased by such Member, including Additional Capital Contributions.

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      "Certificate" means the certificate of formation filed with the Secretary
of State of the State of Delaware pursuant to the Act to form the Company, as
originally executed and amended, modified, supplemented or restated from time to
time, as the context requires.

      "Certificate of Cancellation" means a certificate filed in accordance with
6 Del. C.ss. 18-203.

      "Change in Control" shall mean the following and shall be deemed to occur
if any of the following events occur:

            (i) Any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (a
"Person"), is or becomes the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act (a "Beneficial Owner"), directly or indirectly, of securities
of a Member representing (i) 20% or more of the combined voting power of that
Member's then outstanding voting securities, which acquisition is not approved
in advance of the acquisition or within thirty (30) days after the acquisition
by a majority of the Incumbent Board (as hereinafter defined) or (ii) 33% or
more of the combined voting power of the Member's then outstanding voting
securities, without regard to whether such acquisition is approved by the
Incumbent Board;

            (ii) Persons who, as of the Effective Date hereof, constitute the
board of directors (the "Incumbent Board") of any Member cease for any reason to
constitute at least a majority of that Member's board of directors, provided
that any person becoming a director subsequent to the Effective Date hereof
whose election, or nomination for election by such Member's stockholders, is
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Member, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall, for the purposes of this Agreement, be considered as though
such person were a member of the Incumbent Board of such Member;

            (iii) The consummation of a merger, consolidation or reorganization
involving a Member, other than one which satisfies both of the following
conditions:

                  (A) a merger, consolidation or reorganization which would
            result in the voting securities of a Member outstanding immediately
            prior thereto continuing to represent (either by remaining
            outstanding or by being converted into voting securities of another
            entity) at least 55% of the combined voting power of the voting
            securities of such Member or such other entity resulting from the
            merger, consolidation or reorganization (the "Surviving
            Corporation") outstanding immediately after such merger,
            consolidation or reorganization and being held in substantially the
            same proportion as the ownership in such Member's voting securities
            immediately before such merger, consolidation or reorganization, and

                  (B) a merger, consolidation or reorganization in which no
            Person is or becomes the Beneficial Owner, directly or indirectly,
            of securities of a Member

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            representing 20% or more of the combined voting power of such
            Member's then outstanding voting securities; or

            (iv) The stockholders of a Member approve a plan of complete
liquidation of such Member or an agreement for the sale or other disposition by
a Member of all or substantially all of such Member's assets.

Notwithstanding the preceding provisions of this definition, a Change in Control
shall not be deemed to have occurred if the Person described in the preceding
provisions is (1) an underwriter or underwriting syndicate that has acquired the
ownership of any of a Member's then outstanding voting securities solely in
connection with a public offering of such Member's securities, (2) a Member or
an Affiliate of a Member, or (3) an employee stock ownership plan or other
employee benefit plan maintained by a Member or any of its Affiliates that is
qualified under the provisions of the Code.

      "Code" means the United States Internal Revenue Code of 1986, as amended
from time to time.

      "Company" means PFC Therapeutics, LLC, the Delaware limited liability
company formed pursuant to this Agreement and the Certificate, and the limited
liability company continuing the business of this Company in the event of
dissolution of the Company as herein provided.

      "Company Minimum Gain" has the meaning given the term "partnership minimum
gain" in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

      "Compliance Allocations" has the meaning set forth in Section 4.4 hereof.

      "Debt" means (i) any indebtedness for borrowed money or the deferred
purchase price of property as evidenced by a note, bonds, or other instruments,
(ii) obligations as lessee under capital leases, (iii) obligations secured by
any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
existing on any asset owned or held by the Company whether or not the Company
has assumed or become liable for the obligations secured thereby, (iv) any
obligation under any interest rate swap agreement, (v) accounts payable and (vi)
obligations under direct or indirect guarantees of (including obligations
(contingent or otherwise) to assure a creditor against loss in respect of)
indebtedness or obligations of the kinds referred to in clauses (i), (ii),
(iii), (iv) and (v), above provided that Debt shall not include obligations in
respect of any accounts payable that are incurred in the ordinary course of the
Company's business and are not delinquent or are being contested in good faith
by appropriate proceedings.

      "Depreciation" means, for each Allocation Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Allocation Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such Allocation Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Allocation Year is zero,

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Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Management Board.

      "Development" means any work conducted with or in respect of the
development of the Product and Subsequent Applications, including process
development, formulation research, pre-clinical and clinical testing, and
efforts to obtain Regulatory Approval.

      "Development Budget" shall have the meaning set forth in Section 6.2(b)
hereof.

      "Development Plan" shall have the meaning set forth in Section 6.2(b)
hereof.

      "Dissolution Event" shall have the meaning set forth in Section 15.1
hereof.

      "Distribution Percentage" shall have the meaning set forth in Section 5.2
hereof.

      "Effective Date" means the date first written above.

      "FDA" means the United States Food & Drug Administration and, when
appropriate herein, shall also mean any corresponding regulatory agency in any
country.

      "First Indication" means Regulatory Approval of the Product's use in a
surgical setting to enhance systemic oxygenation and/or to reduce patients'
exposure to allogeneic blood transfusions.

      "First Indication Plan and Budget" shall have the meaning set forth in
Section 6.2(a) hereof.

      "Fiscal Quarter" means (i) the period commencing on the Effective Date and
ending on June 30, 2000, (ii) any subsequent three-month period commencing on
each of July 1, October 1, January 1 and April 1 and ending on the last date
before the next such date, and (iii) the period commencing on the immediately
preceding January 1, April 1, July 1, or October 1, as the case may be, and
ending on the date on which all Property is distributed to the Members pursuant
to Section 15 hereof.

      "Fiscal Year" means (i) the period commencing on the Effective Date and
ending on December 31, 2000, (ii) any subsequent twelve-month period commencing
on January 1 and ending on December 31, and (iii) the period commencing on the
immediately preceding January 1 and ending on the date on which all Property is
distributed to the Members pursuant to Section 15 hereof.

      "GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.

      "Gross Asset Value" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:

            (i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the Management Board;

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            (ii) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values (taking Code Section 7701(g)
into account, as determined by the Management Board as of the following times:
(A) the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis Capital Contribution; (B)
the distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; and (C) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses (A) or
(B) of this paragraph shall be made only if the Management Board reasonably
determines that such adjustment is necessary to reflect the relative economic
interests of the Members in the Company;

            (iii) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Management Board; and

            (iv) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the definition of "Profits" and "Losses" or Section 4.3(c) hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
subparagraph (iv) to the extent that an adjustment pursuant to subparagraph (ii)
is required in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv).

      If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset,
for purposes of computing Profits and Losses.

      "Indemnified Party" shall have the meaning set forth in Section 17.4
hereof.

      "Indemnifying Party" shall have the meaning set forth in Section 17.4
hereof.

      "Insolvency" means a financial condition of a Party such that the sum of
such Party's debts is greater than the value of all of such Party's property, at
a fair market valuation, exclusive of: (i) property transferred, concealed, or
removed with intent to hinder, delay, or defraud such entity's creditors; and
(ii) property that may be exempted from property of such Party's estate.

      "Issuance Items" shall have the meaning set forth in Section 4.3(h)
hereof.

      "JDC" means the Joint Development Committee established under Section 7.6
herein.

      "License Agreement" means the license agreement to be entered into between
Alliance and the Company, pursuant to which Alliance will license to the Company
certain intellectual property, know-how and rights to use, manufacture,
formulate, market, sell and distribute the Product.

      "Liquidation Period" has the meaning set forth in Section 15.7 hereof.

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      "Liquidator" has the meaning set forth in Section 15.9(a) hereof.

      "Losses" has the meaning set forth in the definition of "Profits" and
"Losses."

      "Management Board" has the meaning set forth in Section 7.1(a) hereof.

      "Manager" means any of the individuals elected by the Members to serve on
the Management Board, and "Managers" means all of such individuals.

      "Marketing and Distribution Agreement" means the marketing and
distribution agreement to be entered into between Alliance, Baxter and the
Company, pursuant to which Baxter will market and promote the Product.

      "Member" means each of Alliance and Baxter and any other Person who has
become a substituted Member pursuant to the terms of this Agreement and who has
not ceased to be a Member. "Members" means all such Persons.

      "Member Nonrecourse Debt" has the same meaning as the term "partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.

      "Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.

      "Member Nonrecourse Deductions" has the same meaning as the term "partner
nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Regulations.

      "NDA" means a New Drug Application and all supplements filed pursuant to
the requirements of the FDA, including all documents, data and other information
concerning the Product which are necessary for or included in FDA approval to
market the Product as more fully defined in 21 C.F.R. ss.ss.314.5 et seq., as
well as equivalent submissions to the appropriate health authorities in other
countries, provided further that with respect to the European Union, such
application is to be under the E. U. Centralized Procedure.

      "Net Present Value of Net Cash Flow of the Project" shall be calculated in
accordance with the terms provided in Exhibit A hereto.

      "Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.

      "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3)
of the Regulations.

      "Offer Notice" shall have the meaning set forth in Section 12.4(b) hereof.

      "Offer Period" shall have the meaning set forth in Section 12.4(c) hereof.

      "Offer Price" shall have the meaning set forth in Section 12.4(a) hereof.

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      "Offered Units" shall have the meaning set forth in Section 12.4 hereof.

      "Offerees" shall have the meaning set forth in Section 12.4(b) hereof.

      "Percentage Interest" means, with respect to any Member as of any date,
the ratio (expressed as a percentage) of the number of Units held by such Member
on such date to the aggregate Units held by all Members on such date. The
Percentage Interest of each Member immediately after the Effective Date is set
forth in Section 3.1 hereof.

      "Permitted Transfer" has the meaning set forth in Section 12.2 hereof.

      "Person" means any individual, Company (whether general or limited),
limited liability company, corporation, trust, estate, association, nominee or
other entity.

      "Product" means all injectable perfluorochemical emulsions capable of
transporting oxygen in therapeutic effective amounts in the bloodstream for all
medical uses, including therapeutic and diagnostic, which have been evaluated,
developed and/or acquired prior to this Agreement or will be evaluated,
developed and/or acquired under this Agreement, to the extent owned, licensed to
or controlled by Alliance or the Company.

      "Profits" and "Losses" mean, for each Allocation Year, an amount equal to
the Company's taxable income or loss for such Allocation Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):

            (i) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition of "Profits" and "Losses" shall be added to such taxable income
or loss;

            (ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;

            (iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;

            (iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;

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            (v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Allocation Year,
computed in accordance with the definition of Depreciation;

            (vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Profits
or Losses; and

            (vii) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 4.3 or Section 4.4
hereof shall not be taken into account in computing Profits or Losses.

      The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 4.3 and 4.4 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.

      "Property" means all real and personal property acquired by the Company,
including cash, and any improvements thereto, and shall include both tangible
and intangible property. The Property shall also include, without limitation,
any technology to be developed by Alliance, on behalf of the Company, whether
comprising improvements to technology licensed pursuant to the License Agreement
or entirely new technology.

      "Purchase Offer" shall have the meaning set forth in Section 12.4(a)
hereof.

      "Purchaser" shall have the meaning set forth in Section 12.4(a) hereof.

      "Reconstitution Period" has the meaning set forth in Section 15.1(b)
hereof.

      "Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations are amended from
time to time.

      "Regulatory Approval" means (1) in the United States, approval from the
FDA for marketing and promotion of the Product, or (2) outside of the United
States, an analogous order by a non-U.S. governmental agency which requires
regulatory approval prior to marketing and promotion of the Product in such
non-U.S. country.

      "Securities Act" means the Securities Act of 1933, as amended.

      "Seller" shall have the meaning set forth in Section 12.4 hereof.

      "Subsequent Applications" means any enhancements, modifications,
revisions, improvements and future indications of the Product, including efforts
to obtain Regulatory Approval, made pursuant to Development under this
Agreement, as well as other products developed under this Agreement.

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      "Subsidiary" means, with respect to any Person, any corporation, company,
joint venture, limited liability company, association or other entity in which
such Person owns, directly or indirectly, at least forty percent (40%) or more
of the outstanding equity securities or interests, the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such entity, unless another 13(d) Person owns, directly or
indirectly, more than the percentage of such securities or interests owned by
such Person.

      "Tax Matters Member" shall have the meaning set forth in Section 10.3(a)
hereof.

      "Territory" shall have the meaning ascribed to it in Section 1.18 of the
License Agreement.

      "Transfer" means, as a noun, any voluntary or involuntary transfer, sale,
pledge or hypothecation or other disposition and, as a verb, voluntarily or
involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.

      "Units or Unit" means an ownership interest in the Company representing a
Capital Contribution, including any and all benefits to which the holder of such
Units may be entitled as provided in this Agreement, together with all
obligations of such Person to comply with the terms and provisions of this
Agreement.

                                    ARTICLE 2
                                   THE COMPANY

      2.1 Formation. The Members hereby agree to form the Company as a limited
liability company under and pursuant to the provisions of the Act and upon the
terms and conditions set forth in this Agreement. The fact that the Certificate
is on file in the office of the Secretary of State, State of Delaware, shall
constitute notice that the Company is a limited liability company.
Simultaneously with the execution of this Agreement and the formation of the
Company, each of the Members shall be admitted as members of the Company. The
rights and liabilities of the Members shall be as provided under the Act, the
Certificate and this Operating Agreement.

      2.2 Name. The name of the Company shall be PFC Therapeutics, LLC and all
business of the Company shall be conducted in such name. The Management Board
may change the name of the Company upon ten (10) Business Days notice to the
Members.

      2.3 Purpose; Powers.

      (a) The purposes of the Company are (i) to operate the Business, (ii) to
make such additional investments and engage in such additional activities as the
Members may approve and (iii) to engage in any and all activities related or
incidental to the purposes set forth in clauses (i) and (ii).

      (b) The Company has the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance of
the purposes of the Company set forth in this Section 2.3 and has, without
limitation, any and all powers that may be exercised on behalf of the Company by
the Management Board pursuant to Section 6 hereof.

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      2.4 Principal Place of Business. The principal place of business of the
Company shall be determined by the Management Board. The Management Board may
change the principal place of business of the Company to any other place within
or without the State of Delaware upon ten (10) Business Days notice to the
Members. The registered office of the Company in the State of Delaware initially
is located at Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801.

      2.5 Term. The term of the Company shall commence on the date the
Certificate is filed in the office of the Secretary of State of the State of
Delaware in accordance with the Act and shall continue until the winding up and
liquidation of the Company and its business is completed following a Dissolution
Event, as provided in Article 15 hereof. Prior to the time that the Certificate
is filed, no Person shall represent to third parties the existence of the
Company or hold himself out as a Member or Manager.

      2.6 Filings; Agent for Service of Process.

      (a) The Managers are hereby authorized to and shall cause the Certificate
to be filed in the office of the Secretary of State of the State of Delaware in
accordance with the Act. The Management Board shall take any and all other
actions reasonably necessary to perfect and maintain the status of the Company
as a limited liability company under the laws of the State of Delaware,
including the preparation and filing of such amendments to the Certificate and
such other assumed name certificates, documents, instruments and publications as
may be required by law, including, without limitation, action to reflect:

            (i) a change in the Company name;

            (ii) a correction of false or erroneous statements in the
Certificate or the desire of the Members to make a change in any statement
therein in order that it shall accurately represent the agreement among the
Members; or

            (iii) a change in the time for dissolution of the Company as stated
in the Certificate and in this Agreement.

      (b) The Members and the Management Board shall execute and cause to be
filed original or amended certificates and shall take any and all other actions
as may be reasonably necessary to perfect and maintain the status of the Company
as a limited liability company or similar type of entity under the laws of any
other jurisdictions in which the Company engages in business.

      (c) The registered agent for service of process on the Company in the
State of Delaware shall be The Corporation Trust Company or any successor as
appointed by the Members in accordance with the Act.

      (d) Upon the dissolution and completion of the winding up and liquidation
of the Company in accordance with Article 15 hereof, the Management Board shall
promptly execute and cause to be filed a certificate of cancellation in
accordance with the Act and the laws of any other jurisdictions in which the
Management Board deems such filing necessary or advisable.

                                       12
<PAGE>

      2.7 Title to Property. All Property owned by the Company shall be owned by
the Company as an entity and no Member shall have any ownership interest in such
Property in its individual name, and each Member's interest in the Company shall
be personal property for all purposes. At all times after the Effective Date,
the Company shall hold title to all of its Property in the name of the Company
and not in the name of any Member.

      2.8 Payments of Individual Obligations. The Company's credit and assets
shall be used solely for the benefit of the Company, and no asset of the Company
shall be Transferred or encumbered for, or in payment of, any individual
obligation of any Member.

      2.9 Independent Activities; Transactions with Affiliates.

      (a) Each Manager shall be required to devote only such time to the affairs
of the Company as may be necessary to manage and operate the Company, and shall
be free to serve any other Person or enterprise in any capacity that such
Manager may deem appropriate in his, her or its discretion.

      (b) Insofar as permitted by applicable law and subject to the provisions
of Section 6.4 hereof, neither this Agreement nor any activity undertaken
pursuant hereto shall prevent any Member or Manager or their Affiliates from
engaging in whatever activities they choose, whether the same are competitive
with the Company or otherwise, and any such activities may be undertaken without
having or incurring any obligation to offer any interest in such activities to
the Company or any Member, or require any Member or Manager to permit the
Company or any other Manager or Member or its Affiliates to participate in any
such activities, and as a material part of the consideration for the execution
of this Agreement by each Member, each Member hereby waives, relinquishes, and
renounces any such right or claim of participation.

      (c) To the extent permitted by applicable law and subject to the
provisions of this Agreement, the Management Board is hereby authorized to cause
the Company to purchase Property from, sell Property to or otherwise deal with
any Member or Manager, acting on its own behalf, or any Affiliate of any Member
or Manager; provided that any such purchase, sale or other transaction shall be
made on terms and conditions which are no less favorable to the Company than if
the sale, purchase or other transaction had been made with an independent third
party.

                                    ARTICLE 3
                         MEMBERS' CAPITAL CONTRIBUTIONS

      3.1 Original Capital Contributions. Alliance and Baxter shall each
contribute as their original Capital Contributions to the Company as follows:

      (a) Alliance Contribution. Alliance shall contribute to the Company , on
or prior to the Effective Date, five million dollars ($5,000,000) in cash, in
exchange for ten (10) Units.

      (b) Baxter Contribution. Baxter shall contribute to the Company, on or
prior to the Effective Date, five million dollars ($5,000,000) in cash, in
exchange for ten (10) Units.

      The initial Percentage Interest of each of the Members is fifty percent
(50%).

                                       13
<PAGE>

      3.2 Additional Capital Contributions. The Members may make additional
Capital Contributions only with the written consent of all Members, in which
event the Company shall issue to the contributing Member additional Units of an
amount to be unanimously agreed by the Members.

                                    ARTICLE 4
                                   ALLOCATIONS

      4.1 Profits. After giving effect to the special allocations set forth in
Sections 4.3 and 4.4, Profits shall be allocated to the Members in proportion to
their Distribution Percentages.

      4.2 Losses. After giving effect to the special allocations set forth in
Sections 4.3 and 4.4, Losses shall be allocated to the Members in proportion to
their Distribution Percentages.

      4.3 Special Allocations. The following special allocations shall be made
in the following order:

      (a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Article 4, if there is a net decrease in Company Minimum Gain during any
Allocation Year, each Member shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Member's share of the net decrease
in Company Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with sections 1.704-2(f)(6) and 1.704-2(g)(2) of the Regulations. This Section
4.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.

      (b) Member Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i) (4) of the Regulations, notwithstanding any other provision
of this Article 4, if there is a net decrease in Member Nonrecourse Debt Minimum
Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each
Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable
to such Member Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Member's share of the net decrease
in Member Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section
4.3(b) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.

      (c) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4),

                                       14
<PAGE>

1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of
Company income and gain shall be specially allocated to such Member in an amount
and manner sufficient to eliminate, to the extent required by the Regulations,
the Adjusted Capital Account Deficit of the Member as quickly as possible,
provided that an allocation pursuant to this Section 4.3(c) shall be made only
if and to the extent that the Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article 4 have been
tentatively made as if this Section 4.3(c) were not in the Agreement.

      (d) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Allocation Year which is in excess of the sum of (i)
the amount such Member is obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 4.3(d) shall be made only if and to the extent that
such Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Section 4 have been made as if Section
4.3(c) and this Section 4.3(d) were not in the Agreement.

      (e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation Year
shall be specially allocated to the Members in proportion to their respective
Percentage Interests.

      (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for
any Allocation Year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).

      (g) Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of
such Member's interest in the Company, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in accordance with
their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was
made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

      (h) Allocations Relating to Taxable Issuance of Company Units. Any income,
gain, loss or deduction realized as a direct or indirect result of the issuance
of Units by the Company to a Member (the "Issuance Items") shall be allocated
among the Members so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this Agreement to each
Member shall be equal to the net amount that would have been allocated to each
such Member if the Issuance Items had not been realized.

      (i) Research and Development Credits. All research and development tax
credits shall be allocated to the Members in accordance with Section
1.704-1(b)(4)(ii) of the Regulations.

                                       15
<PAGE>

      4.4 Curative Allocations. The allocations set forth in Sections 4.3(a),
4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(g) and 4.5 (the "Compliance
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Compliance Allocations shall be offset either with other Compliance Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 4.4. Therefore, notwithstanding any other
provision of this Article 4 (other than the Compliance Allocations), the
Management Board shall make such offsetting special allocations of Company
income, gain, loss or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Compliance Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 4.1, 4.2,
and 4.3(h).

      4.5 Loss Limitation. Losses allocated pursuant to Section 4.2 hereof shall
not exceed the maximum amount of Losses that can be allocated without causing
any Member to have an Adjusted Capital Account Deficit at the end of any
Allocation Year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 4.2 hereof, the limitation set forth in this Section 4.5
shall be applied on a Member by Member basis and Losses not allocable to any
Member as a result of such limitation shall be allocated to the other Members in
accordance with the positive balances in such Member's Capital Accounts so as to
allocate the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) and Section 1.702(g)(i) of the Regulations.

      4.6 Other Allocation Rules.

      (a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Management
Board using any permissible method under Code Section 706 and the Regulations
thereunder.

      (b) The Members are aware of the income tax consequences of the
allocations made by this Article 4 and hereby agree to be bound by the
provisions of this Article 4 in reporting their shares of Company income and
loss for income tax purposes.

      (c) Solely for purposes of determining a Member's proportionate share of
the "excess nonrecourse liabilities" of the Company within the meaning of
Regulations Section 1.752-3(a)(3), the Members' interests in Company profits are
in proportion to their Percentage Interests.

      To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the
Management Board shall endeavor to treat distributions of Net Cash Flow as
having been made from the proceeds of a Nonrecourse Liability or a Member
Nonrecourse Debt only to the extent that such distributions would cause or
increase an Adjusted Capital Account Deficit for any Member.

      4.7 Tax Allocations: Code Section 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any Property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis

                                       16
<PAGE>

of such Property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition of Gross Asset
Value) using the allocation method to be determined by the Management Board.

      In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.

      Any elections or other decisions relating to such allocations shall be
made by the Management Board in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 4.7 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.

                                    ARTICLE 5
                                  DISTRIBUTIONS

      5.1 Net Profits. Except as otherwise provided in Article 15 below, Net
Profit (as defined in Annex I to Exhibit A attached hereto), if any, shall be
distributed not later than the forty-fifth day (45th) after the end of each
Fiscal Quarter to the Members in proportion to their Distribution Percentages.

      5.2 Distribution Percentages.

      (a) The percentage interest of each member in the Net Profits distributed
by the Company (the "Distribution Percentage") shall vary each Fiscal Year over
the Model Term (as defined in subsection (b) below) as needed so that each of
the Members receives, on a cumulative basis, fifty percent (50%) of the Net
Present Value of the Net Cash Flow of the Project. Initially, the Distribution
Percentage for each Member shall equal fifty percent (50%), and shall be
adjusted as set forth in subsection (b) below.

      (b) Not later than thirty (30) days following receipt of Regulatory
Approval anywhere in the Territory, the Management Board shall develop a
financial model (the "Initial Model") of anticipated results of operations of
the Company from the Effective Date through December 31, 2013 (the "Model
Term"). The Initial Model shall show each Member's Distribution Percentage to be
fifty percent (50%). Within ninety (90) days after the end of each Fiscal Year
following the year in which the first commercial sale of the Product in the
Territory occurs, the Management Board shall prepare a revised model (the
"Revised Model") to take into account actual results to date and the then
expected future results for the balance of the Model Term. Based on such Revised
Model, the Distribution Percentages for the Members for the then current Fiscal
Year shall be adjusted if and to the extent necessary so that each Member
receives fifty percent (50%) of the Net Present Value of Net Cash Flow of the
Project according to the Revised Model. The Initial Model and the Revised Models
shall be prepared in accordance with the procedures set forth in Exhibit A
attached hereto.

                                       17
<PAGE>

      (c) At the end of the Model Term, the actual Net Present Value of Net Cash
Flow of the Project received by each of the members over the Model Term shall be
calculated by the Management Board and to the extent that any Member has
received more than fifty percent (50%) of the Net Present Value of Net Cash Flow
of the Project, such Member shall promptly pay to the other member the amount of
such excess.

      (d) After the end of the Model Term, the Distribution Percentage for each
Member shall be fifty percent (50%).

      5.3 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any payment,
distribution or allocation to the Company or the Members shall be treated as
amounts paid or distributed, as the case may be, to the Members with respect to
which such amount was withheld pursuant to this Section 5.3 for all purposes
under this Agreement. The Company is authorized to withhold from payments and
distributions, or with respect to allocations to the Members, and to pay over to
any federal, state and local government or any foreign government, any amounts
required to be so withheld pursuant to the Code or any provisions of any other
federal, state or local law or any foreign law, and shall allocate any such
amounts to the Members with respect to which such amount was withheld.

      5.4 Limitations on Distributions.

      (a) The Company shall make no distributions to the Members except (i) as
provided in this Article 5 and in Article 15 hereof, or (ii) as agreed to by all
of the Members.

      (b) A Member may not receive a distribution from the Company to the extent
that, after giving effect to the distribution, all liabilities of the Company,
other than liability to Members on account of their Capital Contributions, would
exceed the fair value of the Company's assets.

                                    ARTICLE 6
                                   DEVELOPMENT

      6.1 Development Activities. The Company will engage in the Development of
the Product and Subsequent Applications with the intent of bringing the Product
to the market as soon as reasonably practicable. The Development activities
contemplated hereunder shall be conducted and managed on a day-to-day basis
through the Joint Development Committee ("JDC") as described in Section 7.6.

      6.2 Development Plan and Budget.

      (a) First Indication. Attached hereto as Exhibit B is the development plan
and budget (the "First Indication Plan and Budget") for the Development of the
First Indication. The First Indication Plan and Budget shall be updated as
deemed appropriate by the JDC, but in no event less frequently than annually.
Any changes or updates to the First Indication Plan and Budget shall be subject
to the review and approval of the Management Board as provided in Section
7.3(a)(xv).

                                       18
<PAGE>

      (b) Subsequent Applications. Promptly following the approval of a
Subsequent Application by the JDC under Section 6.3(c)(i) below, the JDC shall
prepare and submit to the Management Board the development plan for the
Development (the "Development Plan") and a budget for proposed Development costs
(the "Development Budget") pertaining to such Subsequent Application. The
Development Plan shall specify Development activities and priorities, time
frames for completion of activities, which party, including a third party, is to
be responsible for each activity, and any other items reasonably required by
Alliance, Baxter or a third party. The Development Plan also will include, to
the extent practicable, the then-expected profile for the Subsequent
Application, the desired labeling and the criteria for determining acceptable
requirements for any appropriate regulatory filings in the Territory. Any
Development Budget and Development Plan shall be updated as deemed appropriate
by the JDC, but in no event less frequently than annually. The Development Plan
and the Development Budget and certain changes therein shall be subject to the
review and approval of the Management Board as provided in Section 7.3(a)(xv).

      (c) Headcount Allocation. In preparing any Development Budget and
determining Development costs, the Parties will use the headcount allocation
expense rates approved by the JDC.

      6.3 Development Responsibilities.

      (a) Generally. The Company shall have the right, subject to approval of
the Management Board, Baxter, Alliance or the JDC, as such approval may be
required under Sections 7.3, 7.5(a), 7.5(b) and 7.6, respectively, to enter into
agreements with Members, Affiliates or third Parties for the performance of
services necessary or appropriate for the furtherance of Development, which
right includes, but is not limited to, entering into the agreements set forth in
Article 13.

      (b) First Indications.

            (i) Alliance will use reasonable efforts to develop the First
Indication in accordance with the First Indication Plan and Budget set forth in
Exhibit B hereto, as such Exhibit may be modified or updated in accordance with
Section 6.2(a). The actions described in this Section 6.3(b) and in Exhibit B,
as such Exhibit may be modified or updated in accordance with Section 6.2(a),
shall be at Alliance's sole expense. If such Regulatory Approval is obtained,
then Alliance shall transfer to the Company or Baxter, at Baxter's election, all
regulatory filings and documents pertaining to and control over such approved
First Indication.

            (ii) The obligations of Alliance under Section 6.3(b)(i) above shall
be secured by a security interest in favor of the Company on all Licensed
Patents and Know-How (as such terms are defined in the License Agreement). To
perfect such security interest, Alliance and the Company shall enter into a
security agreement and take all appropriate action to have such security
agreement filed with the United States Patent and Trademark Office and/or other
governmental entity. In conjunction with such security agreement, Alliance shall
execute a power of attorney providing the Company with the authority to file,
update or supplement, on Alliance's behalf, applications, claims and filings
with the United States Patent and Trademark Office and/or other governmental
entity.

                                       19
<PAGE>

      (c) Subsequent Applications. Either of Alliance or Baxter may propose to
the JDC the development of Subsequent Applications.

            (i) If Development of such Subsequent Application is approved by the
JDC, which decision may be reviewed by the Management Board, then the Company
shall engage in the Development of such Subsequent Application pursuant to the
terms of this Agreement. In accordance with Section 6.2(b) above, the JDC shall
prepare and submit to the Management Board a Development Plan and a Development
Budget for such Subsequent Application.

            (ii) If such Subsequent Application is not approved by the JDC or if
the JDC fails to act on a recommendation for a Subsequent Application within
ninety (90) days of such recommendation, then Baxter shall have the option to
develop such Subsequent Application, and Baxter will have sixty (60) days to
notify the JDC in writing if Baxter elects to exercise such option. If Baxter
exercises its option and provides written notice of such election to the JDC,
then Baxter, at its own expense, shall have the right to file any necessary
documentation with the appropriate regulatory authorities, and shall receive,
upon request, a license from the Company to use any patents, licenses, know-how
or other technology owned by or licensed to the Company for the purpose of
developing the Subsequent Application; provided, however, that the Company shall
retain all ownership rights with respect to the Subsequent Application,
including, but not limited to, any NDAs, Regulatory Approvals or patents issued
in connection therewith. If at any time in the future the Company desires to
utilize or rely upon the Subsequent Application developed by Baxter under this
Section 6.3(c)(ii), then the Company shall notify Baxter of such decision in
writing, and Alliance shall pay *   of the total cost of the Development of such
Subsequent Application by Baxter, plus *   of such amount per year compounded on
an annual basis from the date such Subsequent Application was declined by the
Company under this subsection (ii) until a decision is made to utilize such
Subsequent Application in accordance with this Section.

            (iii) If sixty (60) days expires and Baxter has not exercised its
option under Section 6.3(c)(ii) or if Baxter elects not to exercise such option,
Alliance may notify the JDC in writing that it intends to develop the Subsequent
Application. Alliance will have sixty (60) days after Baxter's option period
expires or Baxter's election not to exercise such option, whichever is later, to
provide written notice to the JDC that it elects to develop the Subsequent
Application. If Alliance provides written notice of such election to the JDC,
then Alliance, at its own expense, shall have the right to file any necessary
documentation with the appropriate regulatory authorities, and shall receive,
upon request, a license from the Company to use any patents, licenses, know-how
or other technology owned by or licensed to the Company for the purpose of
developing the Subsequent Application; provided, however, that the Company shall
retain all ownership rights with respect to the Subsequent Application,
including, but not limited to, any NDAs, Regulatory Approvals or patents issued
in connection therewith. If at any time in the future the Company desires to
utilize or rely upon the Subsequent Application developed by Alliance, then the
Company shall notify Alliance in writing, and Baxter shall pay *   of the total
cost of the Development of such Subsequent Application by Alliance, plus *   of
such amount per year compounded on an annual basis from the date such Subsequent
Application was declined by the Baxter under Section 6.3(c)(ii) until a decision
is made to utilize such Subsequent Application in accordance with this Section.

                                       20
<PAGE>

      6.4 Marketing of Product.

      (a) Certain Obligations; Adverse Experience Reporting.

            (i) Alliance will refrain from selling or otherwise distributing the
Product inside, or for use inside, the Territory. Alliance agrees not to sell
the Product to any third party Alliance knows or has reason to know is reselling
the Product either directly or indirectly inside or for use inside the
Territory. Alliance shall not knowingly employ any sales practice or issue or
display any advertisement which in Baxter's reasonable opinion is detrimental to
the interests of Baxter or the Company. Alliance shall use reasonable efforts to
cause its sub-distributors and licensees to comply with the foregoing
obligations.

            (ii) Baxter and Alliance will act as the main repository for adverse
experience worldwide for their respective territories of responsibility and will
ensure that each company is informed of all adverse experiences discovered
inside or outside the Territory. Each company will make an initial assessment as
to the seriousness of an adverse event, however each is entitled to have its own
medical advisors change the initial classification of an event according to the
regulatory requirements of the reporting country and the approved labeling
information. In the event that all the required information is not obtained in
the first report of any adverse experience, the parties will use their best
efforts as defined by each company's procedures to follow up with the reporting
source to obtain as much information as possible. Each adverse event report
shall be accompanied by all supporting documentation or reports that are
available to the reporting company. The parties will use their best efforts to
obtain from the reporting source the information requested on the current
version FDA Medwatch form. The information may be transmitted in either a
Medwatch format or CIOMS I format, providing that all the fields of a Medwatch
form are represented. All reports will be prepared in English. All serious
adverse events will be reported within five (5) calendar days of receipt by
Baxter or Alliance, as the case may be. All serious adverse events that are
fatal will be reported with 24 hours by phone or fax. If the report is made by
phone, a full report will be forwarded within five (5) calendar days of receipt.

      (b) Marketing of Product Inside the Territory. If the license to market
the Product in the Territory becomes nonexclusive pursuant to Section 3.2(c) of
the Marketing and Distribution Agreement, Baxter and Alliance shall have equal
rights to use or supply to any third party data, material and information
related to the First Indication and Subsequent Applications. In accordance with
Section 7.5(a)(vi) below, Alliance shall be required to consult with Baxter for
the purpose of coordinating Alliance's and Baxter's respective strategies, plans
and programs for the marketing of the Product in the Territory.

      6.5 Funding of Development. Except for any costs incurred by Alliance in
connection with Section 6.3(b) above, the following provisions shall apply to
Development performed under this Agreement:

      (a) Costs Associated with Development Plans. Each of Alliance and Baxter
shall share equally in the costs of the Development contemplated hereunder to
the extent such costs (A) are contained in a Development Plan or Development
Budget, and/or (B) have been approved, if budget overruns, by the JDC or the
Management Board pursuant to Section 7.3(a)(xv).

                                       21
<PAGE>

      (b) Payments. Within thirty (30) days after each calendar quarter, each
Party shall pay its share of the amount due to the Company as set forth in the
Development Plan and the Development Budget. If reasonably possible, the JDC
shall prepare the Development Budget to avoid or minimize as much as possible
any budget overruns.

      (c) Budget Overruns. During each year of the term hereof, any overruns or
anticipated overruns in the Development Budget which in the aggregate for such
year: (i) are less than or equal to ten percent (10%), they shall be shared
equally by Alliance and Baxter, (ii) exceed ten percent (10%), they must be
approved by the JDC and are subject to further approval by the Management Board,
prior to being paid by either Alliance or Baxter; or (iii) exceed ten percent
(10%) and are not approved by the JDC or the Management Board, they shall be
paid by the Party who is responsible for the overrun.

      6.6 Commercialization Bonus to Alliance. The Company shall pay a
commercialization bonus to Alliance of *   within thirty (30) days following the
first commercial sale of the Product in the Territory (the "Initial Payment
Date"). If the Company does not have funds available to make such payment, any
short-fall shall be accrued and paid as soon as the Company has sufficient
funds. On each subsequent anniversary of the Initial Payment Date during the
term of this Agreement, the Company shall pay *   to Alliance, plus an
additional *   of such amount per year, on a compounded basis, for each year
which has elapsed since the Initial Payment Date.

                                    ARTICLE 7
                                   MANAGEMENT

      7.1 Managers; Management Board.

      (a) The management of the Company shall be vested in the committee of
Managers (the "Management Board") designated by the Members as provided in this
Article.

      (b) The number of Managers on the Management Board shall be four (4)
unless otherwise provided herein or agreed to by the Members. Each Member shall
be entitled to designate one-half of the number of authorized Managers.

      (c) A Manager shall remain in office until removed by the Member
designating such Manager. Members shall designate Managers by delivering to the
Company their written statement designating their Manager or Managers and
setting forth such Manager's or Managers' business address and telephone number.

      (d) A Manager may be removed at any time, with or without cause, by the
written notice of the Member that designated such Manager, delivered to the
Company, demanding such removal and designating the Person who shall fill the
position of the removed Manager.

      (e) In the event any Manager dies or is unwilling or unable to serve as
such or is removed from office by the Member that designated such Manager, the
appropriate Member shall promptly designate a successor to such Manager. A
Manager chosen to fill a vacancy shall be designated by the Member whose
previously designated Manager shall have been removed or shall have resigned.

                                       22
<PAGE>

      (f) The Managers designated by each Member shall collectively have one (1)
vote. Except as otherwise provided in this Agreement, the Management Board shall
act by unanimous vote.

      (g) Each Manager shall perform his duties as a Manager in good faith, in a
manner he reasonably believes to be in the best interests of the Company, and
with such care as an ordinarily prudent person in a like position would use
under similar circumstances. A person who so performs his duties shall not have
any liability by reason of being or having been a Manager of the Company.

      (h) The Management Board shall have the power to delegate authority to
such committees of Managers, officers, employees, agents and representatives of
the Company as it may from time to time deem appropriate. Any delegation of
authority to take any action must be approved in the same manner as would be
required for the Management Board to approve such action directly.

      (i) A Manager shall not be liable under a judgment, decree or order of
court, or in any other manner, for a debt, obligation or liability of the
Company.

      7.2 Meetings of the Management Board.

      (a) The Management Board shall hold regular meetings no less frequently
than once every Fiscal Year and shall establish meeting times, dates and places
and requisite notice requirements and adopt rules or procedures consistent with
the terms of this Agreement. Unless otherwise approved by the Management Board,
each regular meeting of the Management Board will be held at the Company's
principal place of business. At such meetings the Management Board shall
transact such business as may properly be brought before the meeting, whether or
not notice of such meeting referenced the action taken at such meeting.

      (b) Special meetings of the Management Board may be called by any Manager.
Notice of each such meeting shall be given to each Manager on the Management
Board by telephone, telecopy, e-mail or other electronic method (in each case,
notice shall be given at least seventy-two (72) hours before the time of the
meeting) or sent by first-class mail (in which case notice shall be given at
least five (5) days before the meeting), unless a longer notice period is
established by the Management Board. Each such notice shall state (i) the time,
date, place (which shall be at the principal office of the Company unless
otherwise agreed to by all Managers) or other means of conducting such meeting
and (ii) the purpose of the meeting to be so held. No actions other than those
specified in the notice may be considered at any special meeting unless
unanimously approved by the Managers. Any Manager may waive notice of any
meeting in writing before, at, or after such meeting. The attendance of a
Manager at a meeting shall constitute a waiver of notice of such meeting, except
when a Manager attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not properly called.

      (c) Any action required to be taken at a meeting of the Management Board,
or any action that may be taken at a meeting of the Management Board, may be
taken at a meeting held by means of conference telephone or other communications
equipment by means of which all

                                       23
<PAGE>

persons participating in the meeting can hear each other. Participation in such
a meeting shall constitute presence in person at such meeting.

      (d) Notwithstanding anything to the contrary in this Section 7.2, the
Management Board may take without a meeting any action that may be taken by the
Management Board under this Agreement if such action is approved by the
unanimous written consent of the Managers.

      7.3 Management Board Powers.

      (a) Except as otherwise provided in Sections 7.5 and 7.6 and Article 8 of
this Agreement, all powers to control and manage the Business and affairs of the
Company shall be exclusively vested in the Management Board, and the Management
Board may exercise all powers of the Company and do all such lawful acts as are
not by statute, the Certificate or this Agreement directed or required to be
exercised or done by the Members and in so doing shall have the right and
authority to take all actions which the Management Board deems necessary, useful
or appropriate for the management and conduct of the Business, including
exercising the following specific rights and powers:

            (i) Conduct its business, carry on its operations and have and
exercise the powers granted by the Act in any state, territory, district or
possession of the United States, or in any foreign country which may be
necessary or convenient to effect any or all of the purposes for which it is
organized;

            (ii) Acquire by purchase, lease, or otherwise any real or personal
property which may be necessary, convenient, or incidental to the accomplishment
of the purposes of the Company;

            (iii) Operate, maintain, finance, improve, construct, own, grant
options with respect to, sell, convey, assign, mortgage, and lease any real
estate and any personal property necessary, convenient, or incidental to the
accomplishment of the purposes of the Company;

            (iv) Execute any and all agreements, contracts, documents,
certifications, and instruments necessary or convenient in connection with the
management, maintenance, and operation of the Business, or in connection with
managing the affairs of the Company, including, executing amendments to this
Agreement and the Certificate in accordance with the terms of this Agreement,
both as Managers and, if required, as attorney-in-fact for the Members pursuant
to any power of attorney granted by the Members to the Managers;

            (v) Borrow money and issue evidences of indebtedness necessary,
convenient, or incidental to the accomplishment of the purposes of the Company,
and secure the same by mortgage, pledge, or other lien on any Company assets;

            (vi) Execute, in furtherance of any or all of the purposes of the
Company, any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, bill of sale, contract, or other instrument purporting to convey or
encumber any or all of the Company assets;

                                       24
<PAGE>

            (vii) Prepay in whole or in part, refinance, recast, increase,
modify, or extend any liabilities affecting the assets of the Company and in
connection therewith execute any extensions or renewals of encumbrances on any
or all of such assets;

            (viii) Care for and distribute funds to the Members by way of cash
income, return of capital, or otherwise, all in accordance with the provisions
of this Agreement, and perform all matters in furtherance of the objectives of
the Company or this Agreement;

            (ix) Contract on behalf of the Company for the employment and
services or employees and/or independent contractors, such as lawyers and
accountants, and delegate to such Persons the duty to manage or supervise any of
the assets or operations of the Company;

            (x) Engage in any kind of activity and perform and carry out
contracts of any kind (including contracts of insurance covering risks to
Company assets and Manager liability) necessary or incidental to, or in
connection with, the accomplishment of the purposes of the Company, as may be
lawfully carried on or performed by a limited liability company under the laws
of each state in which the Company is then formed or qualified;

            (xi) Take, or refrain from taking, all actions, not expressly
proscribed or limited by this Agreement, as may be necessary or appropriate to
accomplish the purposes of the Company;

            (xii) Institute, prosecute, defend, settle, compromise, and dismiss
lawsuits or other judicial or administrative proceedings brought on or in behalf
of, or against, the Company, the Members or any Manager in connection with
activities arising out of, connected with, or incidental to this Agreement, and
to engage counsel or others in connection therewith;

            (xiii) Purchase, take, receive, subscribe for or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose
of, and otherwise use and deal in and with, shares or other interests in or
obligations of domestic or foreign corporations, associations, general or
limited Companies, other limited liability companies, or individuals or direct
or indirect obligations of the United States or of any government, state,
territory, government district or municipality or of any instrumentality of any
of them;

            (xiv) Indemnify a Member or Manager or former Member or Manager to
the extent authorized by this Agreement, and indemnify a Member, former Member
or other Person to the extent authorized by law; and

            (xv) Approve, disapprove, authorize or prohibit any action taken or
proposed by the JDC, including, but not limited to, approving a Development
Plan, a Development Budget, budget overruns and Subsequent Applications; and

            (xvi) Resolve disputes among the JDC members.

                                       25
<PAGE>

      7.4 Duties and Obligations of the Management Board.

      (a) The Management Board shall cause the Company to conduct its business
and operations separate and apart from that of any Member or Manager or any of
its Affiliates, including, without limitation, (i) segregating Company assets
and not allowing funds or other assets of the Company to be commingled with the
funds or other assets of, held by, or registered in the name of, any Member or
Manager or any of its Affiliates, (ii) maintaining books and financial records
of the Company separate from the books and financial records of any Member or
Manager and its Affiliates, and observing all Company procedures and
formalities, including, without limitation, maintaining minutes of Company
meetings and acting on behalf of the Company only pursuant to due authorization
of the Members, (iii) causing the Company to pay its liabilities from assets of
the Company, and (iv) causing the Company to conduct its dealings with third
parties in its own name and as a separate and independent entity.

      (b) The Management Board shall take all actions which may be necessary or
appropriate (i) for the continuation of the Company's valid existence as a
limited liability company under the laws of the State of Delaware and of each
other jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged and (ii) for the accomplishment of the Company's purposes,
including the acquisition, development, maintenance, preservation, and operation
of Property in accordance with the provisions of this Agreement and applicable
laws and regulations.

      (c) The Management Board shall be under a fiduciary duty to conduct the
affairs of the Company in the best interests of the Company and of the Members,
including the safekeeping and use of all of the Property and the use thereof for
the exclusive benefit of the Company.

      7.5 Duties and Rights of Baxter and Alliance.

      (a) Notwithstanding any other provision in this Agreement, Baxter (or a
third Party to whom Baxter has designated authority for approving any or all of
the following actions) must approve the following actions prior to being taken
by the Company or by Alliance:

            (i) Granting any material or exclusive license, or any sublicense,
with respect to technical information, patents or other intellectual property
related to the Product within the Territory;

            (ii) Using or disposing of any patents, trademarks, brand names or
other proprietary property or rights with respect to the Product within the
Territory;

            (iii) Performing testing services and activities on behalf of the
Company with respect to the manufacture of the Product for distribution within
the Territory;

            (iv) Executing, modifying, administering, interpreting, terminating
or otherwise acting on behalf of the Company with respect to any agreement or
understanding between the Company and Alliance or one of its Affiliates,
including, but not limited to, the agreements specified in Sections 13.1(a) and
(b);

                                       26
<PAGE>

            (v) Except as otherwise contemplated by Section 3.2(c) of the
Marketing and Distribution Agreement, granting of any distributorship, sales or
marketing license or rights with respect to the Product in the Territory;

            (vi) Except as otherwise contemplated by Section 3.2(c) of the
Marketing and Distribution Agreement, implementing a program or strategy for the
marketing of the Product in the Territory, including the use of Medical Liaison
Representatives (as that term is defined in the Marketing and Distribution
Agreement); and

            (vii) Appointing service providers, including accountants and legal
counsel, for the Company.

      (b) Notwithstanding any other provision in this Agreement, Alliance (or a
third Party to whom Alliance has designated authority for approving any or all
of the following actions) must approve the following actions prior to being
taken by the Company or by Baxter:

            (i) Granting any material or exclusive license, or any sublicense,
with respect to technical information, patents or other intellectual property
related to the Product within the Territory;

            (ii) Using or disposing of any patents or other proprietary property
or rights with respect to the Product within the Territory; and

            (iii) Executing, modifying, administering, interpreting, terminating
or otherwise acting on behalf of the Company with respect to any agreement or
understanding between the Company and Baxter or one of its Affiliates,
including, but not limited to, the agreements specified in Sections 13.1(c) and
(d).

      (c) Baxter, at its sole election, may cause the Company to exercise the
Company's termination rights under Section 10.2 of the License Agreement.

      7.6 Joint Development Committee ("JDC").

      (a) Composition. Initially, the JDC will be composed of four (4) members,
two (2) representatives from each of Baxter and Alliance who are directly
involved with and responsible for Development activities. Promptly after the
Effective Date, the Parties will appoint their respective representatives to the
JDC. A Party may change any of its representatives at any time by giving written
notice to the other Party.

      (b) Responsibilities. The JDC shall be responsible for overseeing and
directing all aspects of the Development. In particular, the JDC shall:

            (i) prepare and submit Development Plans and the Development Budgets
to the Management Board for approval;

            (ii) implement the First Indication Plan and Budget and any other
Development Plans and ensure that the developing Parties stay within the First
Indication Plan and Budget and other Development Budgets;

                                       27
<PAGE>

            (iii) review progress and recommend to the Management Board any
necessary interim changes to the First Indication Plan and Budget and any other
Development Plan, including the approval or disapproval of budget overruns, and
review the results of clinical studies;

            (iv) discuss and resolve ongoing issues;

            (v) periodically report progress to the Management Board;

            (vi) evaluate and make recommendations to the Management Board with
respect to the manufacture of the Product, including capacity, ramp up and
similar production issues;

            (vii) evaluate recommendations with respect to Subsequent
Applications;

            (viii) oversee Product recalls;

            (ix) assure that any adverse drug experiences are reported in
connection with the use of the Product, including the incidence or severity
thereof, associated with non-clinical toxicity studies, clinical uses, studies,
investigations or tests, whether or not determined to be attributable to the
Product; and

            (x) subject to any pre-existing agreements to which any Member is a
party, review and approve any publication pertaining to data, results or
information developed in studies undertaken pursuant to Development under this
Agreement.

      (c) Meetings and Voting. The JDC will meet at such times as the
chairperson or either of the Project Managers may request, but in no event less
frequently than once every three (3) months. If possible, the meetings shall be
held in person, or where appropriate, by video or telephone conference. The JDC
shall make decisions by unanimous consent. Voting by proxy is permissible.
Additional participants may be invited by any member to attend meetings where
appropriate (e.g., representatives of regulatory affairs or outside
consultants). Such additional participants shall have no vote. Minutes of each
meeting of the JDC shall be exchanged for review and comment by the members.
Thereafter, once agreed upon, they shall be signed by both Project Managers.

      In between meetings, the Members shall use reasonable efforts to keep each
other informed of any significant developments relating to the Product.

      (d) Dispute Resolution. If the JDC is unable to reach unanimous agreement
on any matter submitted to a vote of JDC members, then such matter shall be
referred to and decided by the Management Board.

      (e) Project Managers. Each of Alliance and Baxter shall designate one
senior representative to serve as the primary contact person between the parties
(the "Project Manager"). Both Project Managers shall be members of the JDC and
shall be responsible for facilitating the exchange of all Development
information and data between Baxter and Alliance.

                                       28
<PAGE>

      7.7 Indemnification of the Managers.

      (a) The Company, its receiver, or its trustee (in the case of its receiver
or trustee, to the extent of Company Property) shall indemnify, save harmless,
and pay all judgments and claims against any Manager relating to any liability
or damage incurred by reason of any act performed or omitted to be performed by
any Manager in connection with the Business, including reasonable attorneys'
fees incurred by the Manager in connection with the defense of any action based
on any such act or omission, which attorneys' fees may be paid as incurred.

      (b) In the event of any action by a Member against any Manager, including
a Company derivative suit, the Company shall indemnify, save harmless, and pay
all expenses of such Manager, including reasonable attorneys' fees incurred in
the defense of such action.

      (c) The Company shall indemnify, save harmless, and pay all expenses,
costs, or liabilities of any Manager, if for the benefit of the Company and in
accordance with this Agreement said Manager makes any deposit or makes any other
similar payment or assumes any obligation in connection with any Property
proposed to be acquired by the Company and suffers any financial loss as the
result of such action.

      (d) Notwithstanding the provisions of Sections 7.7(a)-(c) above, such
Sections shall be enforced only to the maximum extent permitted by law and no
Manager shall be indemnified from any liability for the fraud, intentional
misconduct, gross negligence or a knowing violation of the law which was
material to the cause of action.

      (e) The obligations of the Company set forth in this Section 7.7 are
expressly intended to create third party beneficiary rights of each of the
Managers and any Member is authorized, on behalf of the Company, to give written
confirmation to any Manager of the existence and extent of the Company's
obligations to such Manager hereunder.

      (f) The Company shall have the power to purchase and maintain insurance on
behalf of any Manager who is or was an agent of the Company against any
liability asserted against such Manager and incurred by such Manager in any such
capacity, or arising out of such Manager's status as an agent of the Company.

                                    ARTICLE 8
                                 ROLE OF MEMBERS

      8.1 Rights or Powers. The Members shall not have any right or power to
take part in the management or control of the Company or its business and
affairs or to act for or bind the Company in any way. Notwithstanding the
foregoing, the Members have all the rights and powers specifically set forth in
this Agreement and, to the extent not inconsistent with this Agreement, in the
Act.

      8.2 Voting Rights. No Member has any voting right except with respect to
those matters specifically reserved for a Member which are set forth in this
Agreement and as required in the Act. Subject to the provisions of Section 7.5,
any action by the Members shall require unanimous approval.

                                       29
<PAGE>

      8.3 Meetings of the Members.

      (a) Meetings of the Members may be called upon the written request of any
Member. The call shall state the location of the meeting and the nature of the
business to be transacted. Notice of any such meeting shall be given to all
Members not less than seven (7) business days nor more than thirty (30) days
prior to the date of such meeting. Members may vote in person, by proxy or by
telephone at such meeting and may waive advance notice of such meeting. Whenever
the vote or consent of Members is permitted or required under the Agreement,
such vote or consent may be given at a meeting of the Members or may be given in
accordance with the procedure prescribed in this Section 8.3. Except as
otherwise expressly provided in the Agreement, the unanimous vote of the Members
shall be required to constitute the act of the Members.

      (b) For the purpose of determining the Members entitled to vote on, or to
vote at, any meeting of the Members or any adjournment thereof, the Management
Board or the Member requesting such meeting may fix, in advance, a date as the
record date for any such determination. Such date shall not be more than thirty
(30) days nor less than ten (10) Business Days before any such meeting.

      (c) Each Member may authorize any Person or Persons to act for it by proxy
on all matters in which a Member is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy must
be signed by the Member or its attorney-in-fact. No proxy shall be valid after
the expiration of eleven (11) months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
Member executing it.

      (d) Each meeting of Members shall be conducted by a Person designated by
the Management Board.

      (e) Notwithstanding this Section 8.3, the Company may take any action
contemplated under this Agreement as approved by the consent of the Members,
such consent to be provided in writing, or by telephone or facsimile, if such
telephone conversation or facsimile is followed by a written summary of the
telephone conversation or facsimile communication sent by registered or
certified mail, postage and charges prepaid, addressed as described in Section
20.5 hereof, or to such other address as such Person may from time to time
specify by notice to the Members and Managers.

      8.4 Withdrawal/Resignation. Except as otherwise provided in Sections 5 and
15 hereof, no Member shall demand or receive a return on or of its Capital
Contributions or withdraw from the Company without the consent of all Members.
Except as otherwise provided in the Act or this Agreement, upon resignation, any
resigning member is entitled to receive only the distribution to which he is
entitled under this Agreement, which shall be equal to the fair market value of
his Units in the Company as of the date of resignation. Under circumstances
requiring a return of any Capital Contributions, no Member has the right to
receive Property other than cash except as may be specifically provided herein.

      8.5 Member Compensation. No Member shall receive any interest, salary or
drawing with respect to its Capital Contributions or its Capital Account or for
services rendered

                                       30
<PAGE>

on behalf of the Company, or otherwise, in its capacity as a Member, except as
otherwise provided in this Agreement.

      8.6 Members Liability. No Member shall be liable under a judgment, decree
or order of a court, or in any other manner for the Debts or any other
obligations or liabilities of the Company. A Member shall be liable only to make
its Capital Contributions and shall not be required to restore a deficit balance
in its Capital Account or to lend any funds to the Company or, after its Capital
Contributions have been made, to make any additional contributions, assessments
or payments to the Company. The Manager shall not have any personal liability
for the repayment of any Capital Contributions of any Member.

      8.7 Partition. While the Company remains in effect or is continued, each
Member agrees and waives its rights to have any Property partitioned, or to file
a complaint or to institute any suit, action or proceeding at law or in equity
to have any Company Property partitioned, and each Member, on behalf of itself,
its successors and its assigns hereby waives any such right.

      8.8 Confidentiality. During the term hereof and for a period of five (5)
years following termination of this Agreement, except as contemplated hereby or
required by law or a court of competent authority, each Member shall keep
confidential and shall not disclose to others and shall use its reasonable
efforts to prevent its Affiliates and any of its, or its Affiliates', present or
former employees, agents, and representatives or third party investors
explicitly authorized to receive confidential information (as defined herein)
from disclosing to others without the prior written consent of all Members any
information which (i) pertains to this Agreement, any other agreement
contemplated hereby any negotiations pertaining thereto, any of the transactions
contemplated hereby, or the Business of the Company, or (ii) pertains to
confidential or proprietary information of any Member or the Company or which
any Member has labeled in writing as confidential or proprietary. No Member
shall use, and each Member shall use reasonable efforts to prevent any Affiliate
of such Member from using, any information which (i) pertains to this Agreement,
any negotiations pertaining hereto, any of the transactions contemplated hereby,
or the Business of the Company, or (ii) pertains to the confidential or
proprietary information of any Member or the Company or which any Member has
labeled in writing as confidential or proprietary, except in connection with the
transactions contemplated hereby. The term "confidential information" is used in
this Section 8.8 to describe information which is confidential, non-public or
proprietary in nature, was provided to such Member or its representatives by the
Company, any other Member, or such Person's agents, representatives and
employees, and relates either directly, or indirectly to the Company or the
Business. Information which (i) is available, or becomes available, to the
public through no fault or action by such Member, its agents, representatives or
employees, (ii) becomes available on non-confidential basis from any source
other than the Company, any other Member, or such Person's agents,
representatives or employees and such source is not prohibited from disclosing
such information, or (iii) was in the receiving party's possession prior to
disclosure or is independently developed by the receiving party, as evidenced by
written documentation, shall not be deemed confidential information.

      8.9 Transactions Between a Member and the Company. Except as otherwise
provided by applicable law, any Member may, but shall not be obligated to, lend
money to the Company, act as surety for the Company and transact other business
with the Company and has the same rights and obligations when transacting
business with the Company as a person or

                                       31
<PAGE>

entity who is not a Member. A Member, any Affiliate thereof or an employee,
stockholder, agent, director or officer of a Member or any Affiliate thereof,
may also be an employee or be retained as an agent of the Company. The existence
of these relationships and acting in such capacities will not result in the
Member being deemed to be participating in the control of the business of the
Company or otherwise affect the limited liability of the Member.

      8.10 Other Instruments. Each Member hereby agrees to execute and deliver
to the Company within five (5) days after receipt of a written request therefor,
such other and further documents and instruments, statements of interest and
holdings, designations, powers of attorney and other instruments and to take
such other action as the Management Board deems necessary, useful or appropriate
to comply with any laws, rules or regulations as may be necessary to enable the
Company to fulfill its responsibilities under this Agreement.

                                    ARTICLE 9
                         REPRESENTATIONS AND WARRANTIES

      9.1 In General. As of the date hereof, each Member hereby makes each of
the representations and warranties applicable to such Member as set forth in
Section 9.2 hereof, and such warranties and representations shall survive the
execution of this Agreement.

      9.2 Representations and Warranties. Each Member hereby represents and
warrants that:

      (a) Due Incorporation or Formation; Authorization of Agreement. Such
Member is a corporation duly organized or a partnership or limited liability
company duly formed, validly existing, and in good standing under the laws of
the jurisdiction of its incorporation or formation and has the corporate,
partnership, or company power and authority to own its property and carry on its
business as owned and carried on at the date hereof and as contemplated hereby.
Such Member is duly licensed or qualified to do business and in good standing in
each of the jurisdictions in which the failure to be so licensed or qualified
would have a material adverse effect on its financial condition or its ability
to perform its obligations hereunder. Such Member has the corporate, partnership
or company power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and the execution, delivery, and performance
of this Agreement has been duly authorized by all necessary corporate,
partnership, or company action. This Agreement constitutes the legal, valid, and
binding obligation of such Member.

      (b) No Conflict with Restrictions; No Default. Neither the execution,
delivery, and performance of this Agreement nor the consummation by such Member
of the transactions contemplated hereby (i) will conflict with, violate, or
result in a breach of any of the terms, conditions, or provisions of any law,
regulation, order, writ, injunction, decree, determination, or award of any
court, any governmental department, board, agency, or instrumentality, domestic
or foreign, or any arbitrator, applicable to such Member or any of its
Affiliates, (ii) will conflict with, violate, result in a breach of, or
constitute a default under any of the terms, conditions, or provisions of the
articles of incorporation, bylaws, partnership agreement or operating agreement
of such Member or any of its Affiliates or of any material agreement or
instrument to which such Member or any of its Affiliates is a party or by which
such Member or any of its Affiliates is or may be bound or to which any of its
material properties or assets is subject, (iii)

                                       32
<PAGE>

will conflict with, violate, result in a breach of, constitute a default under
(whether with notice or lapse of time or both), accelerate or permit the
acceleration of the performance required by, give to others any material
interests or rights, or require any consent, authorization, or approval under
any indenture, mortgage, lease agreement, or instrument to which such Member or
any of its Affiliates is a party or by which such Member or any of its
Affiliates is or may be bound, or (iv) will result in the creation or imposition
of any lien upon any of the material properties or assets of such Member or any
of its Affiliates.

      (c) Governmental Authorizations. Any registration, declaration, or filing
with, or consent, approval, license, permit, or other authorization or order by,
any governmental or regulatory authority, domestic or foreign, that is required
in connection with the valid execution, delivery, acceptance and performance by
such Member under this Agreement or the consummation by such Member of the
transaction contemplated hereby has been completed, made, or obtained on or
before the Effective Date.

      (d) Litigation. There are no actions, suits, proceedings, or
investigations pending or, to the knowledge of such Member or any of its
Affiliates, threatened against or affecting such Member or any of its Affiliates
or any of their properties, assets, or businesses in any court or before or by
any governmental department, board, agency, or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely determined (or, in the case
of an investigation could lead to any action, suit, or proceeding, which if
adversely determined could) reasonably be expected to materially impair such
Member's ability to perform its obligations under this Agreement or to have a
material adverse effect on the consolidated financial condition of such Member;
and such Member or any of its Affiliates has not received any currently
effective notice of any default, and such Member or any of its Affiliates is not
in default, under any applicable order, writ, injunction, decree, permit,
determination, or award of any court, any governmental department, board,
agency, or instrumentality, domestic or foreign, or any arbitrator which could
reasonably be expected to materially impair such Member's ability to perform its
obligations under this Agreement or to have a material adverse effect on the
consolidated financial condition of such Member.

      (e) Investment Company Act; Public Utility Holding Company Act. Neither
such Member nor any of its Affiliates is, nor will the Company as a result of
such Member holding an interest therein be, an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940. Neither
such Member nor any of its Affiliates is, nor will the Company as a result of
such Member holding an interest therein be, a "holding company," "an affiliate
of a holding company," or a "subsidiary of a holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

      (f) Investigation. Such Member is acquiring its Units based upon its own
investigation, and the exercise by such Member of its rights and the performance
of its obligations under this Agreement will be based upon its own
investigation, analysis, and expertise. Such Member's acquisition of its Units
is being made for its own account for investment, and not with a view to the
sale or distribution thereof. Such Member is a sophisticated investor possessing
an expertise in analyzing the benefits and risks associated with acquiring
investments that are similar to the acquisition of its Units.

                                       33
<PAGE>

                                   ARTICLE 10
                          ACCOUNTING, BOOKS AND RECORDS

      10.1 Accounting, Books and Records.

      (a) The Company shall keep on site at its principal place of business each
of the following:

            (i) Separate books of account for the Company which shall show a
true and accurate record of all costs and expenses incurred, all charges made,
all credits made and received, and all income derived in connection with the
conduct of the Company and the operation of the Business in accordance with this
Agreement.

            (ii) A current list of the full name and last known business,
residence, or mailing address of each Member and Manager, both past and present;

            (iii) A copy of the Certificate and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which any amendment
has been executed;

            (iv) Copies of the Company's federal, state, and local income tax
returns and reports, if any, for the four most recent years;

            (v) Copies of this Agreement;

            (vi) Copies of any writings permitted or required under Section
18-502 of the Act regarding the obligation of a Member to perform any
enforceable promise to contribute cash or property or to perform services as
consideration for such Member's Capital Contribution;

            (vii) Unless contained in this Agreement, a statement prepared by
the Management Board of the Company which describes:

                  (A) The amount of cash and a description and statement of the
agreed value of the other property or services contributed by each Member and
which each Member has agreed to contribute in the future;

                  (B) The times at which or events on the happening of which any
Additional Capital Contributions agreed to be made by each Member are to be
made;

                  (C) If agreed upon, the time at which or the events on the
happening of which a Member may terminate its Units in the Company and the
amount of, or the method of determining, the distribution to which it may be
entitled respecting its Units and the terms and conditions of the termination
and distribution;

                  (D) Any right of a Member to receive distributions, which
include a return of all or any part of a Member's contribution; and

                                       34
<PAGE>

            (viii) Any written consents obtained from Members pursuant to
Section 18-302 of the Act regarding action taken by Members without a meeting;
and

            (ix) Separate books and records for each of the agreements to which
the Company is a party, including, but not limited to, the agreements identified
in Article 13 hereof, relating to items such as Product testing, component or
quality inspections, compliance with specifications, process validation,
NDA-type reports, costs, fees, royalties and any other payments made or expenses
incurred in connection with such agreements. Such books and records, or copies
thereof, will be provided to the Company by Alliance, Baxter or a third Party,
as the case may be.

      (b) The Company shall use the accrual method of accounting in preparation
of its financial reports and for tax purposes and shall keep its books and
records accordingly. Any Member or its designated representative has the right
to have reasonable access to and inspect and copy the contents of such books or
records and shall also have reasonable access during normal business hours to
such additional financial information, documents, books and records. The rights
granted to a Member pursuant to this Section 10.1 are expressly subject to
compliance by such Member with the safety, security and confidentiality
procedures and guidelines of the Company, as such procedures and guidelines may
be established from time to time. The Member who is not a party to the agreement
for which books and records are being maintained by the Company under Section
10.1 hereof has the right to control, supervise and/or bring an action to
enforce an audit performed on such agreement.

      (c) Either Member may cause the Company to exercise any of the Company's
audit rights under any agreement between the Company and the other Member.

      10.2 Reports.

      (a) In General. Baxter or its designee shall be responsible for causing
the preparation of financial reports of the Company and the coordination of
financial matters of the Company with the Company's accountants.

      (b) Periodic and Other Reports. Baxter or its designee shall cause to be
delivered to each Member the financial statements listed in clauses (i) and (ii)
below, prepared, in each case (other than with respect to Member's Capital
Accounts, which shall be prepared in accordance with this Agreement) in
accordance with GAAP consistently applied (and, if required by any Member or its
Affiliates for purposes of reporting under the Securities Exchange Act of 1934,
Regulation S-X), and such other reports as any Member may reasonably request
from time to time; provided that, if the Management Board so determines within
thirty (30) days thereof, such other reports shall be provided at such
requesting Member's sole cost and expense. The monthly and quarterly financial
statements referred to in clause (ii) below may be subject to normal year-end
audit adjustments.

            (i) As soon as practicable following the end of each Fiscal Year
(and in any event not later than ninety (90) days after the end of such Fiscal
Year) and at such time as distributions are made to the Members pursuant to
Article 15 hereof following the occurrence of a Dissolution Event, a balance
sheet of the Company as of the end of such Fiscal Year and the related
statements of operations, Members' Capital Accounts and changes therein, and
cash

                                       35
<PAGE>

flows for such Fiscal Year, together with appropriate notes to such financial
statements and supporting schedules, all of which shall be audited by Baxter or
its designated accountants, and in each case, to the extent the Company was in
existence, setting forth in comparative form the corresponding figures for the
immediately preceding Fiscal Year end (in the case of the balance sheet) and the
two (2) immediately preceding Fiscal Years (in the case of the statements).

            (ii) As soon as practicable following the end of each of the first
three Fiscal Quarters of each Fiscal Year (and in any event not later than
forty-five (45) days after the end of each such Fiscal Quarter), a balance sheet
of the Company as of the end of such Fiscal Quarter and the related statements
of operations and cash flows for such Fiscal Quarter and for the Fiscal Year to
date, in each case, to the extent the Company was in existence, setting forth in
comparative form the corresponding figures for the prior Fiscal Year's Fiscal
Quarter and the interim period corresponding to the Fiscal Quarter and the
interim period just completed.

      The quarterly or monthly statements described in clause (ii) above shall
be accompanied by a written certification of Baxter or its designee that such
statements have been prepared in accordance with GAAP and Regulation S-X, if
applicable, consistently applied or this Agreement, as the case may be.

      10.3 Tax Matters.

      (a) Tax Elections. Baxter or its designee shall, subject to the reasonable
approval of Alliance (which will not be unreasonably withheld), make any and all
elections for federal, state, local, and foreign tax purposes including, without
limitation, any election, if permitted by applicable law: (i) to adjust the
basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or
comparable provisions of state, local or foreign law, in connection with
Transfers of Units and Company distributions; (ii) with the consent of all of
the Members, to extend the statute of limitations for assessment of tax
deficiencies against the Members with respect to adjustments to the Company's
federal, state, local or foreign tax returns; and (iii) to the extent provided
in Code Sections 6221 through 6231 and similar provisions of federal, state,
local, or foreign law, to represent the Company and the Members before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Company or the Members in their capacities as Members, and to file any tax
returns and execute any agreements or other documents relating to or affecting
such tax matters, including agreements or other documents that bind the Members
with respect to such tax matters or otherwise affect the rights of the Company
and the Members. Baxter or its designee is specifically authorized to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law.

      (b) Tax Information. Necessary tax information shall be delivered to each
Member as soon as practicable after the end of each Fiscal Year of the Company
but not later than five (5) months after the end of each Fiscal Year.

                                       36
<PAGE>

                                   ARTICLE 11
                                   AMENDMENTS

      11.1 Amendments.

      (a) Amendments to this Agreement may be proposed by any Manager or any
Member. Following such proposal, the Management Board shall submit to the
Members a verbatim statement of any proposed amendment, provided that counsel
for the Company shall have approved of the same in writing as to form, and the
Management Board shall include in any such submission a recommendation as to the
proposed amendment. The Management Board shall seek the written vote of the
Members on the proposed amendment or shall call a meeting to vote thereon and to
transact any other business that it may deem appropriate. A proposed amendment
shall be adopted and be effective as an amendment hereto only if it receives the
affirmative vote of a majority of the Members.

      (b) Notwithstanding Section 11.1(a) hereof, this Agreement shall not be
amended to (i) modify the limited liability of a Member, or (ii) alter the
interest of a Member in Profits, Losses, other items, or any Company
distributions, without the consent of each Member adversely affected by such
amendment.

                                   ARTICLE 12
                                    TRANSFERS

      12.1 Restrictions on Transfers. Except as otherwise permitted by this
Agreement, no Member shall Transfer all or any portion of its Units. In the
event that any Member pledges or otherwise encumbers all or any part of its
Units as security for the payment of a Debt, any such pledge or hypothecation
shall be made pursuant to a pledge or hypothecation agreement that requires the
pledgee or secured party to be bound by all of the terms and conditions of this
Article 12.

      12.2 Permitted Transfers. Subject to the conditions and restrictions set
forth in Section 12.3 hereof, a Member may at any time Transfer all or any
portion of its Units to (a) any other Member or Affiliate of another Member, (b)
any Affiliate of the transferor, (c) the transferor's administrator or trustee
to whom such Units are transferred involuntarily by operation of law, or (d) any
Purchaser in accordance with Section 12.4 hereof (any such Transfer being
referred to in this Agreement as a "Permitted Transfer").

      12.3 Conditions to Permitted Transfers. A Transfer shall not be treated as
a Permitted Transfer under Section 12.2 hereof unless and until the following
conditions are satisfied:

      (a) Except in the case of a Transfer involuntarily by operation of law,
the transferor and transferee shall execute and deliver to the Company (i) such
documents and instruments of conveyance as may be necessary or appropriate in
the opinion of counsel to the Company to effect such Transfer. In the case of a
Transfer of Units involuntarily by operation of law, the Transfer shall be
confirmed by presentation to the Company of legal evidence of such Transfer, in
form and substance satisfactory to counsel to the Company. In all cases, the
Company shall

                                       37
<PAGE>

be reimbursed by the transferor and/or transferee for all costs and expenses
that it reasonably incurs in connection with such Transfer.

      (b) The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the Units transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns. Without limiting the generality of the foregoing, the Company shall
not be required to make any distribution otherwise provided for in this
Agreement with respect to any transferred Units until it has received such
information.

      (c) Except in the case of a Transfer of Units involuntarily by operation
of law, either (a) such Units shall be registered under the Securities Act, and
any applicable state securities laws, or (b) the transferor shall provide an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to the Management Board, to the effect that such Transfer is exempt from all
applicable registration requirements and that such Transfer will not violate any
applicable laws regulating the Transfer of securities.

      (d) Except in the case of a Transfer of Units involuntarily by operation
of law, the transferor shall provide an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to the Management Board, to the effect
that such Transfer will not cause the Company to be deemed to be an "investment
company" under the Investment Company Act of 1940.

      (e) Unless otherwise approved by the Management Board, no Transfer of
Units shall be made except upon terms which would not, in the opinion of counsel
chosen by and mutually acceptable to the Management Board and the transferor
Member, result in the termination of the Company within the meaning of Section
708 of the Code or cause the application of the rules of Sections 168(g)(1)(B)
and 168(h) of the Code or similar rules to apply to the Company. If the
immediate Transfer of such Units would, in the opinion of such counsel, cause a
termination within the meaning of Section 708 of the Code, then if, in the
opinion of such counsel, the following action would not precipitate such
termination, the transferor Member shall be entitled (or required, as the case
may be) (i) immediately to Transfer only that portion of its Units as may, in
the opinion of such counsel, be transferred without causing such a termination
and (ii) to enter into an agreement to Transfer the remainder of its Units, in
one or more Transfers, at the earliest date or dates on which such Transfer or
Transfers may be effected without causing such termination. The purchase price
for the Units shall be allocated between the immediate Transfer and the deferred
Transfer or Transfers pro rata on the basis of the percentage of the aggregate
Units being transferred, each portion to be payable when the respective Transfer
is consummated, unless otherwise agreed by the parties to the Transfer. In the
case of a Transfer by one Member to another Member, the deferred purchase price
shall be deposited in an interest-bearing escrow account unless another method
of securing the payment thereof is agreed upon by the transferor Member and the
transferee Member(s). In determining whether a particular proposed Transfer will
result in a termination of the Company, counsel to the Company shall take into
account the existence of prior written commitments to Transfer made pursuant to
this Agreement and such commitments shall always be given precedence over
subsequent proposed Transfers.

                                       38
<PAGE>

      (f) No notice or request initiating the procedures contemplated by Section
12.4 may be given by any Member, while any notice, purchase or Transfer is
pending under Section 12.4 or after a Dissolution Event has occurred. No Member
may sell any portion of its Units pursuant to Section 12.4 during any period
that, as provided above, it may not give the notice initiating the procedures
contemplated by such Section or thereafter until it has given such notice and
otherwise complied with the provisions of such Section.

      12.4 Right of First Refusal. In addition to the other limitations and
restrictions set forth in this Article 12, except as permitted by Section 12.2
hereof, no Member shall Transfer all or any portion of its Units (the "Offered
Units") unless such Member (the "Seller") first offers to sell the Offered Units
to the other Member(s) pursuant to the terms of this Section 12.4.

      (a) Limitation on Transfers. No Transfer may be made under this Section
12.4 unless the Seller has received a bona fide written offer (the "Purchase
Offer") from a Person (the "Purchaser") to purchase the Offered Units for a
purchase price (the "Offer Price") denominated and payable in United States
dollars at closing or according to specified terms, with or without interest,
which offer shall be in writing signed by the Purchaser and shall be irrevocable
for a period ending no sooner than the Business Day following the end of the
Offer Period (as hereinafter defined).

      (b) Offer Notice. Prior to making any Transfer that is subject to the
terms of this Section 12.4, the Seller shall give to the Company and each other
Member written notice (the "Offer Notice") which shall include a copy of the
Purchase Offer and an offer (the "Firm Offer") to sell the Offered Units to the
other Members (the "Offerees") for the Offer Price, payable according to the
same terms as (or more favorable terms than) those contained in the Purchase
Offer, provided that the Firm Offer shall be made without regard to the
requirement of any earnest money or similar deposit required of the Purchaser
prior to closing, and without regard to any security (other than the Offered
Units) to be provided by the Purchaser for any deferred portion of the Offer
Price.

      (c) Offer Period. The Firm Offer shall be irrevocable for a period (the
"Offer Period") ending at 11:59 P.M., local time at the Company's principal
place of business, on the ninetieth day following the day of the Offer Notice.

      (d) Acceptance of First Offer. At any time during the Offer Period, any
Offeree may accept the Firm Offer as to all or any portion of the Offered Units,
by giving written notice of such acceptance to the Seller and each other
Offeree, which notice shall indicate the maximum number of Units that such
Offeree is willing to purchase. In the event that Offerees ("Accepting
Offerees"), in the aggregate, accept the Firm Offer with respect to all of the
Offered Units, the Firm Offer shall be deemed to be accepted and each Accepting
Offeree shall be deemed to have accepted the Firm Offer as to that portion of
the Offered Units that corresponds to the ratio of the number of Units that such
Accepting Offeree indicated a willingness to purchase to the aggregate number of
Units all Accepting Offerees indicated a willingness to purchase. If Offerees do
not accept the Firm Offer as to all of the Offered Units during the Offer
Period, the Firm Offer shall be deemed to be rejected in its entirety.

      (e) Closing of Purchase Pursuant to Firm Offer. In the event that the Firm
Offer is accepted, the closing of the sale of the Offered Units shall take place
within thirty (30)

                                       39
<PAGE>

days after the Firm Offer is accepted or, if later, the date of closing set
forth in the Purchase Offer. The Seller and all Accepting Offerees shall execute
such documents and instruments as may be necessary or appropriate to effect the
sale of the Offered Units pursuant to the terms of the Firm Offer and this
Section 12.

      (f) Sale Pursuant to Purchase Offer If Firm Offer Rejected. If the Firm
Offer is not accepted in the manner hereinabove provided, the Seller may sell
the Offered Units to the Purchaser at any time within sixty (60) days after the
last day of the Offer Period, provided that such sale shall be made on terms no
more favorable to the Purchaser than the terms contained in the Purchase Offer
and provided further that such sale complies with other terms, conditions, and
restrictions of this Agreement that are not expressly made inapplicable to sales
occurring under this Section 12.4. In the event that the Offered Units are not
sold in accordance with the terms of the preceding sentence, the Offered Units
shall again become subject to all of the conditions and restrictions of this
Section 12.4.

      12.5 Prohibited Transfers. Any purported Transfer of Units that is not a
Permitted Transfer shall be null and void and of no force or effect whatever;
provided that, if the Company is required to recognize a Transfer that is not a
Permitted Transfer (or if the Management Board, in its sole discretion, elects
to recognize a Transfer that is not a Permitted Transfer), the Units Transferred
shall be strictly limited to the transferor's rights to allocations and
distributions as provided by this Agreement with respect to the transferred
Units, which allocations and distributions may be applied (without limiting any
other legal or equitable rights of the Company) to satisfy any debts,
obligations, or liabilities for damages that the transferor or transferee of
such interest may have to the Company.

      In the case of a Transfer or attempted Transfer of Units that is not a
Permitted Transfer, the parties engaging or attempting to engage in such
Transfer shall be liable to indemnify and hold harmless the Company and the
other Members from all cost, liability, and damage that any of such indemnified
Members may incur (including, without limitation, incremental tax liabilities,
lawyers' fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce the indemnity granted hereby.

      12.6 Rights of Unadmitted Assignees. A Person who acquires Units but who
is not admitted as a substituted Member pursuant to Section 12.7 hereof shall be
entitled only to allocations and distributions with respect to such Units in
accordance with this Agreement, and shall have no right to any information or
accounting of the affairs of the Company, shall not be entitled to inspect the
books or records of the Company, and shall not have any of the rights of a
Member under the Act or this Agreement.

      12.7 Admission of Substituted Members. Subject to the other provisions of
this Article 12, a transferee of Units may be admitted to the Company as a
substituted Member only upon satisfaction of the conditions set forth in this
Section 12.7:

      (a) A majority of the Members consent to such admission, which consent may
be given or withheld in the sole and absolute discretion of the Members;

      (b) The Units with respect to which the transferee is being admitted were
acquired by means of a Permitted Transfer;

                                       40
<PAGE>

      (c) The transferee of Units (other than, with respect to clauses (i) and
(ii) below, a transferee that was a Member prior to the Transfer) shall, by
written instrument in form and substance reasonably satisfactory to the
Management Board (and, in the case of clause (iii) below, the transferor
Member), (i) make representations and warranties to each nontransferring Member
equivalent to those set forth in Article 9, (ii) accept and adopt the terms and
provisions of this Agreement, including this Article 12, and (iii) assume the
obligations of the transferor Member under this Agreement with respect to the
transferred Units. The transferor Member shall be released from all such assumed
obligations except (x) those obligations or liabilities of the transferor Member
arising out of a breach of this Agreement, (y) in the case of a Transfer to any
Person other than a Member or any of its Affiliates, those obligations or
liabilities of the transferor Member based on events occurring, arising or
maturing prior to the date of Transfer, and (z) in the case of a Transfer to any
of its Affiliates, any Capital Contribution or other financing obligation of the
transferor Member under this Agreement;

      (d) The transferee pays or reimburses the Company for all reasonable
legal, filing, and publication costs that the Company incurs in connection with
the admission of the transferee as a Member with respect to the Transferred
Units; and

      (e) Except in the case of a Transfer involuntarily by operation of law, if
required by the Management Board, the transferee (other than a transferee that
was a Member prior to the Transfer) shall deliver to the Company evidence of the
authority of such Person to become a Member and to be bound by all of the terms
and conditions of this Agreement, and the transferee and transferor shall each
execute and deliver such other instruments as the Management Board reasonably
deems necessary or appropriate to effect, and as a condition to, such Transfer,
including amendments to the Certificate or any other instrument filed with the
State of Delaware or any other state or governmental authority.

      12.8 Representations Regarding Transfers; Legend.

      (a) Each Member hereby covenants and agrees with the Company for the
benefit of the Company and all Members, that (i) it is not currently making a
market in Units and will not in the future make a market in Units, (ii) it will
not Transfer its Units on an established securities market, a secondary market
(or the substantial equivalent thereof) within the meaning of Code Section
7704(b) (and any Regulations, proposed Regulations, revenue rulings, or other
official pronouncements of the Internal Revenue Service or Treasury Department
that may be promulgated or published thereunder), and (iii) in the event such
Regulations, revenue rulings, or other pronouncements treat any or all
arrangements which facilitate the selling of Company interests and which are
commonly referred to as "matching services" as being a secondary market or
substantial equivalent thereof, it will not Transfer any Units through a
matching service that is not approved in advance by the Company. Each Member
further agrees that it will not Transfer any Units to any Person unless such
Person agrees to be bound by this Section 12.8(a) and to Transfer such Units
only to Persons who agree to be similarly bound.

      (b) Each Member hereby represents and warrants to the Company and the
Members that such Member's acquisition of Units hereunder is made as principal
for such Member's own account and not for resale or distribution of such Units.
Each Member further hereby agrees that the following legend may be placed upon
any counterpart of this Agreement, the Certificate, or any other document or
instrument evidencing ownership of Units:

                                       41
<PAGE>

            "The Units represented by this document have not been registered
      under any securities laws and the transferability of such Units is
      restricted. Such Units may not be sold, assigned, or transferred, nor will
      any assignee, vendee, transferee, or endorsee thereof be recognized as
      having acquired any such Units by the issuer for any purposes, unless (1)
      a registration statement under the Securities Act of 1933, as amended,
      with respect to such Units shall then be in effect and such transfer has
      been qualified under all applicable state securities laws, or (2) the
      availability of an exemption from such registration and qualification
      shall be established to the satisfaction of counsel to the Company."

            "The Units represented by this document are subject to further
      restriction as to their sale, transfer, hypothecation, or assignment as
      set forth in the Operating Agreement and agreed to by each Member. Said
      restriction provides, among other things, that no Units may be transferred
      without first offering such Units to the other Members, and that no
      vendee, transferee, assignee, or endorsee of a Member shall have the right
      to become a substituted Member without the consent of a majority of the
      Members which consent may be given or withheld in the sole and absolute
      discretion of the Members."

      12.9 Distributions and Allocations in Respect of Transferred Units. If any
Units are Transferred during any Allocation Year in compliance with the
provisions of this Article 12, Profits, Losses, each item thereof, and all other
items attributable to the Transferred Units for such Allocation Year shall be
divided and allocated between the transferor and the transferee by taking into
account their varying Percentage Interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Management Board. All distributions on or before the date of such Transfer
shall be made to the transferor, and all distributions thereafter shall be made
to the transferee. Solely for purposes of making such allocations and
distributions, the Company shall recognize such Transfer not later than the end
of the calendar month during which it is given notice of such Transfer, provided
that, if the Company is given notice of a Transfer at least ten (10) Business
Days prior to the Transfer, the Company shall recognize such Transfer as of the
date of such Transfer, and provided further that if the Company does not receive
a notice stating the date such Units were transferred and such other information
as the Management Board may reasonably require within thirty (30) days after the
end of the Allocation Year during which the Transfer occurs, then all such items
shall be allocated, and all distributions shall be made, to the Person who,
according to the books and records of the Company, was the owner of the Units on
the last day of such Allocation Year. Neither the Company nor any Member shall
incur any liability for making allocations and distributions in accordance with
the provisions of this Section 12.9, whether or not any Manager or the Company
has knowledge of any Transfer of ownership of any Units.

                                       42
<PAGE>

                                   ARTICLE 13
                            CONDITIONS TO OBLIGATIONS

      13.1 Conditions to Obligations of the Parties. The respective obligations
of the parties hereto to consummate the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Effective Date of all of the
following conditions:

      (a) License Agreement. Alliance and the Company shall have executed the
License Agreement.

      (b) Alliance Manufacturing and Supplier Agreement. Alliance and the
Company shall have executed the Alliance Manufacturing and Supplier Agreement.

      (c) Baxter Manufacturing and Supplier Agreement. Baxter and the Company
shall have executed the Baxter Manufacturing and Supplier Agreement.

      (d) Marketing and Distribution Agreement. Baxter and the Company shall
have executed the Marketing and Distribution Agreement.

                                   ARTICLE 14
                                   TERMINATION

      14.1 Insolvency. Upon the Insolvency (as this term is defined in Article I
of this Agreement) of any Member, the Company shall be dissolved in accordance
with Article 15 hereof.

      14.2 Change in Control. Upon the Change in Control (as this term is
defined in Article I of this Agreement) of any Member, the Members who have not
suffered a Change in Control shall have the option to terminate this Agreement
within thirty (30) days after receiving notice of the Change in Control of a
Member. If the option granted in this Section 14.2 is exercised, the Members
shall have the rights afforded under Article 15 hereof.

      14.3 Termination of Royalty Obligation. Upon termination of the Company's
obligation to pay royalties to Alliance under the License Agreement, the Company
shall be dissolved in accordance with Article 15 hereof.

                                   ARTICLE 15
                           DISSOLUTION AND WINDING UP

      15.1 Dissolution Events.

      (a) Dissolution. The Company shall dissolve and shall commence winding up
and liquidating upon the first to occur of any of the following (each a
"Dissolution Event"):

            (i) The unanimous vote of the Members to dissolve, wind up, and
liquidate the Company;

            (ii) Any one of the events described in Article 14 above; or

                                       43
<PAGE>

            (iii) A judicial determination that an event has occurred that makes
it unlawful, impossible or impractical to carry on the Business.

      The Members hereby agree that, notwithstanding any provision of the Act,
the Company shall not dissolve prior to the occurrence of a Dissolution Event.

      (b) Reconstitution. If it is determined, by a court of competent
jurisdiction, that the Company has dissolved prior to the occurrence of a
Dissolution Event, then within an additional ninety (90) days after such
determination (the "Reconstitution Period"), all of the Members may elect to
reconstitute the Company and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited liability
company on terms identical to those set forth in this Agreement. Unless such an
election is made within the Reconstitution Period, the Company shall liquidate
and wind up its affairs in accordance with Section 15.2 hereof. If such an
election is made within the Reconstitution Period, then:

            (i) The reconstituted limited liability company shall continue until
the occurrence of a Dissolution Event as provided in this Section 15.1(a);

            (ii) Unless otherwise agreed to by a majority of the Members, the
Certificate and this Agreement shall automatically constitute the Certificate
and Agreement of such new Company. All of the assets and liabilities of the
dissolved Company shall be deemed to have been automatically assigned, assumed,
conveyed and transferred to the new Company. No bond, collateral, assumption or
release of any Member's or the Company's liabilities shall be required; provided
that the right of the Members to select successor managers and to reconstitute
and continue the Business shall not exist and may not be exercised unless the
Company has received an opinion of counsel that the exercise of the right would
not result in the loss of limited liability of any Member and neither the
Company nor the reconstituted limited liability company would cease to be
treated as a partnership for federal income tax purposes upon the exercise of
such right to continue.

      15.2 Winding Up. Upon the occurrence of (i) a Dissolution Event or (ii)
the determination by a court of competent jurisdiction that the Company has
dissolved prior to the occurrence of a Dissolution Event (unless the Company is
reconstituted pursuant to Section 15.1(b) hereof), the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's business and affairs,
provided that all covenants contained in this Agreement and obligations provided
for in this Agreement shall continue to be fully binding upon the Members until
such time as the Property has been distributed pursuant to this Section 15.2 and
the Certificate has been canceled pursuant to the Act. The Liquidator shall be
responsible for overseeing the winding up and dissolution of the Company, which
winding up and dissolution shall be completed within ninety (90) days of the
occurrence of the Dissolution Event and within ninety (90) days after the last
day on which the Company may be reconstituted pursuant to Section 15.1(b)
hereof.

      (a) The Liquidator shall take full account of the Company's liabilities
and Property and shall cause the Property to be applied and distributed, to the
maximum extent permitted by law, in the following order:

                                       44
<PAGE>

            (i) First, Alliance and Baxter shall have the first right to
purchase the Property of the Company, the value of which will be determined by
the Liquidator; provided, however, that if the Dissolution Event is the
Insolvency of a Member, only the non-Insolvent Member shall have such right.
Either Baxter or Alliance may exercise such right by providing written notice of
its intention to do so to the non-electing Party within ten (10) days of the
Dissolution Event. If both Alliance and Baxter elect to exercise such first
purchase right, Alliance and Baxter will attempt to resolve the matter using the
dispute resolution procedures set forth in Article 19. If, after the expiration
of the ten (10) day period set forth in this Section, only one Party has
provided notice, the non-electing Party agrees that the Company shall assign to
the exercising Party all of the Company's rights, including, but not limited to,
NDAs, Regulatory Approvals, know-how and patents pertaining to the Product and
Subsequent Applications, owned, licensed or maintained by or under the control
of the Company at the time of the Dissolution Event. If Alliance is the
non-exercising party, Alliance additionally agrees that it will consent, under
Section 11.8 of the License Agreement, to the assignment by the Company to
Baxter of all of the Company's rights under the License Agreement.

            (ii) Second, if neither Alliance nor Baxter elects to exercise the
right of first purchase set forth in Section 15.2(a)(i) above, then the Property
of the Company shall be sold by the Liquidator to a third party.

      (b) The proceeds from any sale made pursuant to Sections 15.2(a)(i) or
(ii), to the extent sufficient therefor, shall be applied and distributed, to
the maximum extent permitted by law, according to the following provisions:

            (i) One, to creditors (including Members and Managers who are
creditors, to the extent otherwise permitted by law) in satisfaction of all of
the Company's Debts and other liabilities (whether by payment or the making of
reasonable provision for payment thereof), other than liabilities for which
reasonable provision for payment has been made and liabilities for distribution
to members under Section 18-601 or 18-604 of the Act;

            (ii) Two, except as provided in this Agreement, to members and
former Members of the Company in satisfaction of liabilities for distribution
under Sections 18-601 or 18-604 of the Act; and

            (iii) Three, the balance, if any, to the Members in accordance with
the positive balance in their Capital Accounts, after giving effect to all
contributions, distributions and allocations for all periods.

      15.3 Compliance With Certain Requirements of Regulations; Deficit Capital
Accounts. In the event the Company is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 15 to the Members who have positive Capital Accounts in
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a
deficit balance in his Capital Account (after giving effect to all
contributions, distributions and allocations for all Allocation Years, including
the Allocation Year during which such liquidation occurs), such Member shall
have no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any

                                       45
<PAGE>

purpose whatsoever. In the discretion of the Liquidator, a pro rata portion of
the distributions that would otherwise be made to the Members pursuant to this
Article 15 may be:

      (a) Distributed to a trust established for the benefit of the Members for
the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company. The assets of any such trust shall be distributed to the Members
from time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to Section 15.2 hereof;
or

      (b) Withheld to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Company, provided that such withheld amounts
shall be distributed to the Members as soon as practicable.

      15.4 Deemed Distribution and Recontribution. Notwithstanding any other
provision of this Article 15, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has
occurred, the Property shall not be liquidated, the Company's Debts and other
liabilities shall not be paid or discharged, and the Company's affairs shall not
be wound up. Instead, solely for federal income tax purposes, the Company shall
be deemed to have contributed all of its Property and liabilities to a new
limited liability company in exchange for an interest in such new company and,
immediately thereafter, the Company will be deemed to liquidate by distributing
such interest in the new company to the Members.

      15.5 Rights of Members in the Event of Dissolution/Termination.

      (a) Except as otherwise provided in this Agreement, each Member shall look
solely to the Property of the Company for the return of its Capital Contribution
and has no right or power to demand or receive Property other than cash from the
Company. If the assets of the Company remaining after payment or discharge of
the debts or liabilities of the Company are insufficient to return such Capital
Contribution, the Members shall have no recourse against the Company or any
other Member or Manager.

      (b) No Member or Manager shall receive additional compensation for any
services performed pursuant to this Article 15.

      15.6 Notice of Dissolution/Termination.

      (a) In the event a Dissolution Event occurs or an event occurs that would,
but for provisions of Section 15.1, result in a dissolution of the Company, the
Management Board shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Members and to all other parties with whom the
Company regularly conducts business (as determined in the discretion of the
Management Board) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Company regularly conducts business (as
determined in the discretion of the Management Board).

      (b) Upon completion of the distribution of the Company's Property as
provided in this Article 15, the Company shall be terminated, and the Liquidator
shall cause the filing of the

                                       46
<PAGE>

Certificate of Cancellation pursuant to Section 18-203 of the Act and shall take
all such other actions as may be necessary to terminate the Company.

      15.7 Allocations During Period of Liquidation. During the period
commencing on the first day of the Fiscal Year during which a Dissolution Event
occurs and ending on the date on which all of the assets of the Company have
been distributed or liquidated pursuant to Section 15.2 hereof (the "Liquidation
Period"), the Members shall continue to share Profits, Losses, gain, loss and
other items of Company income, gain, loss or deduction in the manner provided in
Article 4 hereof.

      15.8 Character of Liquidating Distributions. All payments made in
liquidation of the interest of a Member in the Company shall be made in exchange
for the interest of such Member in Property pursuant to Section 736(b)(1) of the
Code, including the interest of such Member in Company goodwill.

      15.9 The Liquidator.

      (a) Definition. The "Liquidator" shall mean a Person appointed by the
Management Board to oversee the liquidation of the Company.

      (b) Fees. The Company is authorized to pay a reasonable fee to the
Liquidator for its services performed pursuant to this Article 15 and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.

      (c) Indemnification. The Company shall indemnify, save harmless, and pay
all judgments and claims against such Liquidator or any officers, directors,
agents or employees of the Liquidator relating to any liability or damage
incurred by reason of any act performed or omitted to be performed by the
Liquidator, or any officers, directors, agents or employees of the Liquidator in
connection with the liquidation of the Company, including reasonable attorneys'
fees incurred by the Liquidator, officer, director, agent or employee in
connection with the defense of any action based on any such act or omission,
which attorneys' fees may be paid as incurred, except to the extent such
liability or damage is caused by the fraud, intentional misconduct of, or a
knowing violation of the laws by the Liquidator which was material to the cause
of action.

                                   ARTICLE 16
                                POWER OF ATTORNEY

      16.1 Managers as Attorneys-In-Fact. Each Member hereby makes, constitutes,
and appoints each Manager, severally, with full power of substitution and
resubstitution, its true and lawful attorney-in-fact for it and in its name,
place, and stead and for its use and benefit, to sign, execute, certify,
acknowledge, swear to, file, publish and record (i) all certificates of
formation, amended name or similar certificates, and other certificates and
instruments (including counterparts of this Agreement) which the Management
Board may deem necessary to be filed by the Company under the laws of the State
of Delaware or any other jurisdiction in which the Company is doing or intends
to do business; (ii) any and all amendments, restatements or changes to this
Agreement and the instruments described in clause (i), as now or hereafter
amended, which the Management Board may deem necessary to effect a change or

                                       47
<PAGE>

modification of the Company in accordance with the terms of this Agreement,
including, without limitation, amendments, restatements or changes to reflect
(A) any amendments adopted by the Members in accordance with the terms of this
Agreement, (B) the admission of any substituted Member and (C) the disposition
by any Member of its interest in the Company; (iii) all certificates of
cancellation and other instruments which the Management Board deems necessary or
appropriate to effect the dissolution and termination of the Company pursuant to
the terms of this Agreement and (iv) any other instrument which is now or may
hereafter be required by law to be filed on behalf of the Company or is deemed
necessary by the Management Board to carry out fully the provisions of this
Agreement in accordance with its terms. Each Member authorizes each such
attorney-in-fact to take any further action which such attorney-in-fact shall
consider necessary in connection with any of the foregoing, hereby giving each
such attorney-in-fact full power and authority to do and perform each and every
act or thing whatsoever requisite to be done in connection with the foregoing as
fully as such Member might or could do personally, and hereby ratify and confirm
all that any such attorney-in-fact shall lawfully do, or cause to be done, by
virtue thereof or hereof.

      16.2 Nature of Special Power. The power of attorney granted to each
Manager pursuant to this Article 16:

      (a) Is a special power of attorney coupled with an interest and is
irrevocable;

      (b) May be exercised by any such attorney-in-fact by listing the Members
executing any agreement, certificate, instrument, or other document with the
single signature of any such attorney-in-fact acting as attorney-in-fact for
such Members; and

      (c) Shall survive and not be affected by the subsequent bankruptcy,
insolvency, dissolution, or cessation of existence of a Member and shall survive
the delivery of an assignment by a Member of the whole or a portion of its
interest in the Company (except that where the assignment is of such Member's
entire interest in the Company and the assignee, with the consent of the other
Members, is admitted as a substituted Member, the power of attorney shall
survive the delivery of such assignment for the sole purpose of enabling any
such attorney-in-fact to effect such substitution) and shall extend to such
Member's, or assignee's successors and assigns.

                                   ARTICLE 17
                                 INDEMNIFICATION

      17.1 In Favor of Baxter. Alliance agrees to indemnify, defend and hold
Baxter harmless from and against any and all damages, losses, liabilities, costs
and expenses (including reasonable costs and attorneys' fees) arising from any
claim, lawsuit or other action made or brought against Baxter as a result of (a)
any negligent or willful act or omission of Alliance, or (b) the breach of any
provision, term, warranty or representation made by Alliance herein, or (c) any
claim against Alliance made in connection with its actions under any research
and development, license, manufacturing, supply or other agreement between
Alliance and the Company, including, but not limited to, those agreements
specified in Sections 13(a) and (b) above.

                                       48
<PAGE>

      17.2 In Favor of Alliance. Baxter agrees to indemnify, defend and hold
Alliance harmless from and against any and all damages, losses, liabilities,
costs and expenses (including reasonable costs and attorneys' fees) arising from
any claim, lawsuit or other action made or brought against Alliance as a result
of (a) any negligent or willful act or omission of Baxter, or (b) the breach of
any provision, term, warranty or representation made by Baxter herein, or (c)
any claim against Baxter made in connection with its actions under any services,
distribution, manufacturing or other agreement between Baxter and the Company,
including, but not limited to, those agreements specified in Sections 13.1(c)
and (d) above.

      17.3 Limitation. Notwithstanding anything to the contrary set forth above
or elsewhere herein, in no event shall either party be (a) required to indemnify
the other party for such other party's negligence or intentional misconduct, or
(b) responsible for the lost profits, consequential or indirect damages of the
other party.

      17.4 Notice. Should any claim arise which could reasonably lead to a claim
or demand for indemnification, the party seeking indemnification ("Indemnified
Party") shall promptly notify the other party ("Indemnifying Party") of the
claim and the facts constituting the basis for such claim. The Indemnified Party
shall not settle or compromise any such claim without the prior written consent
of the Indemnifying Party, which consent shall not be unreasonably withheld.

      17.5 Defense. The Indemnifying Party may, upon written notice to the
Indemnified Party, assume the defense of any claim at its sole cost and expense.
The Indemnified Party shall provide reasonable assistance in the defense of such
claim in the event the Indemnifying Party assumes the defense as set forth
above.

      17.6 Insurance. Alliance, Baxter and the Company shall each obtain
liability insurance, or shall self insure to the extent reasonable given the
financial position of such party, with respect to its activities contemplated by
this Agreement in such amounts as are customary for companies engaged in similar
activities. Alliance, Baxter and the Company shall each maintain such insurance
for so long as each continues to conduct such activities, and thereafter for so
long as each customarily maintains insurance for itself covering similar
activities.

                                   ARTICLE 18
                      CERTAIN UNDERSTANDINGS AND AGREEMENTS

      18.1 Other Business Activities. Each of the Members understands that the
other Member or its Affiliates are interested, directly or indirectly, in
various other businesses and undertakings not included in the Company. Each
Member also understands that the conduct of the business of the Company may
involve business dealings with such other businesses or undertakings. The
Members hereby agree that the creation of the Company and the assumption by each
of the Members of their duties hereunder shall be without prejudice to their
rights (or the rights of their Affiliates) to have such other interests and
activities and to receive and enjoy profits or compensation therefrom, and each
Member waives any rights it might otherwise have to share or participate in such
other interests or activities of the other Member or their Affiliates, except to
the extent as may be provided by this Agreement. The Members and their
Affiliates may engage in or possess any interest in any other business venture
of any nature or description independently or with others, and neither the
Company nor the other Member shall have any

                                       49
<PAGE>

right by virtue of this Agreement in and to such venture or the income or
profits derived therefrom, except to the extent as may be provided by this
Agreement. Each Member shall give notice to the other Member of its interest, or
the interest of any of its Affiliates, in any other business or undertaking
which proposes to enter into any business transactions with the Company. No
Member may use the name, corporate logo, or symbol of the other Member without
such Member's prior written consent.

                                   ARTICLE 19
                               DISPUTE RESOLUTION

      19.1 Negotiation Between Executives. The Members will attempt in good
faith to resolve any claim or controversy arising out of or relating to the
execution, interpretation and performance of this Agreement and any other
agreement between the Company and any Member contemplated hereby (including the
validity, scope and enforceability of this dispute resolution provision)
promptly by submitting such dispute to the Management Board. Should the
Management Board be unable to resolve the dispute, there shall be negotiations
between executives of each Member involved in such dispute who have authority to
settle the controversy and who are at a higher level of management than the
persons with the Management Board. Any Member may give the other party written
notice of any dispute not resolved through the Management Board. Within thirty
(30) days after delivery of the notice, the receiving Member shall submit to the
noticing Member a written response. The notice and the response shall include
(a) a statement of each Member's position and a summary of arguments supporting
that position, and (b) the name and title of the executive who will represent
that Member and of any other person who will accompany the executive. Within
thirty (30) days after delivery of the notifying Member's notice, the executives
of the involved Members shall meet at a mutually acceptable time and place, and
thereafter as often as they reasonably deem necessary, to attempt to resolve the
dispute. All reasonable requests for information made by one Member to the other
will be honored. All negotiations pursuant to this clause are confidential and
shall be treated as compromise and settlement negotiations for purposes of
applicable rules of evidence.

      19.2 Mediation. Failing successful negotiation of a resolution to the
dispute, the Members shall consider mediation, which shall be conducted pursuant
to the then current CPR Mediation Procedure unless otherwise agreed by the
parties.

      19.3 Arbitration. Any dispute arising out of or relating to this Agreement
or its breach, termination or validity which has not been resolved within ninety
(90) days of the date of delivery of the notice specified in Section 19.1 above
shall be settled by binding arbitration in accordance with the CPR
Non-Administered Arbitration Rules in effect on the date of this agreement, by
three independent and impartial arbitrators, none of whom shall be appointed by
either Member. The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. Sec. 1-16, and judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof. The place
of the arbitration shall be Northern Illinois. The Arbitrator(s) are not
empowered to award damages in excess of compensatory damages and each Member
hereby irrevocably waives any right to recover such damages.

                                       50
<PAGE>

                                   ARTICLE 20
                                  MISCELLANEOUS

      20.1 Attorneys' Fees. In the event that any dispute among the Members
should result in litigation or arbitration, the prevailing party in such dispute
shall be entitled to recover from the other party all reasonable fees, costs and
expenses of enforcing any right of the prevailing party, including without
limitation, reasonable attorneys' fees and expenses, all of which shall be
deemed to have accrued upon the commencement of such action and shall be paid
whether or not such action is prosecuted to judgment. Any judgment or order
entered in such action shall contain a specific provision providing for the
recovery of attorneys' fees and costs incurred in enforcing such judgment and an
award of prejudgment interest from the date of the breach at the maximum rate of
interest allowed by law.

      20.2 Time is of the Essence. All dates and times in this Agreement are of
the essence.

      20.3 Remedies Cumulative. The remedies under this Agreement are cumulative
and shall not exclude any other remedies to which any person may be lawfully
entitled.

      20.4 Expenses. Except as otherwise agreed to in writing, each party hereto
shall bear its own expenses incurred for the furtherance of this Agreement. The
reasonable expenses for the formation of the Company and other expenses
incidental thereto shall be chargeable to the Company's account.

      20.5 Notices. All notices which are given hereunder shall be in writing
and shall be addressed as follows (or to such other address as any party may
notify to the other party):

    To Alliance:         Alliance Pharmaceutical Corp.
                         6175 Lusk Boulevard
                         San Diego, CA  92121
                         Attention: Theodore D. Roth
                                    President and Chief Operating Officer
                                    Lloyd A. Rowland
                                    Vice President and General Counsel
                         Facsimile: (858) 410-5306

    with a copy to:      Stroock & Stroock & Lavan LLP
                         180 Maiden Lane
                         New York, NY  10038
                         Attention: Melvin Epstein, Esq.
                         Facsimile: (212) 806-6006

                                       51
<PAGE>

    To Baxter:           Baxter Healthcare Corporation
                         Route 120 & Wilson Road
                         Round Lake, IL  60073
                         Attention: General Manager, Global Anesthesia
                         Facsimile: (847) 270-2016

    with a copy to:      Baxter Healthcare Corporation
                         One Baxter Parkway
                         Deerfield, IL  60015
                         Attention: General Counsel
                         Facsimile: (847) 948-2450

    and with a copy to:  Gibson, Dunn & Crutcher LLP
                         Jamboree Center
                         4 Park Plaza
                         Irvine, California  92614
                         Attention: Thomas D. Magill, Esq.
                         Facsimile: (949) 451-4220

      Unless otherwise specified, any such notice may be delivered personally or
by certified or registered mail or recognized overnight courier, postage
prepaid, or facsimile transmission and shall be deemed to have been received if
by personal delivery when delivered; if by certified or registered mail, five
days after having been deposited in U.S. mail; if by recognized overnight
courier, one day after posting; and if by facsimile transmission when dispatched
and acknowledged.

      20.6 Assignability. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any rights hereunder shall be assignable
directly or indirectly by either party without the prior written consent of the
other party, except as expressly permitted by any other provision of this
Agreement.

      20.7 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters dealt with herein and
supersedes any previous agreement between the parties in relation to such
matters. No modification of this Agreement shall be valid or effective unless
made by an instrument in writing and signed by the parties hereto.

      20.8 Headings. The headings contained in this Agreement are for
convenience and reference only and in no way define, describe, extend, or limit
the scope or intent of this Agreement or any provision contained herein.

      20.9 Severability. The invalidity of one or more of the phrases,
sentences, clauses, sections or articles contained in this Agreement shall not
effect the validity of the remaining

                                       52
<PAGE>

portions so long as and to the extent that the material purposes of this
Agreement can be determined and effectuated.

      20.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without taking into
consideration conflicts of law principles.

      20.11 Entire Agreement. This Agreement and the other agreements referenced
herein and all exhibits attached hereto and thereto constitute the complete and
exclusive statement of agreement among the Members.

      20.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

      20.13 Exhibits. All Exhibits attached to this Agreement are incorporated
and shall be treated as if set forth herein.

      20.14 Public Announcements. No party to this Agreement shall issue or seek
the publication of any press release or other public announcement with respect
to the transactions contemplated hereby without the consent of the other party,
except where such release or announcement is required by law or applicable
regulation (each a "Permitted Announcement"); provided, that, prior to making
any Permitted Announcement, such party will use commercially reasonable efforts
to give the other party advance notice thereof and to consult with the other
party regarding the timing and contents thereof.

                             [Signatures to follow.]

                                       53
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Operating Agreement to be
signed by their duly authorized representatives as of the Effective Date first
set forth above.

                                        ALLIANCE PHARMACEUTICAL CORP.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                        BAXTER HEALTHCARE CORPORATION

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

<PAGE>

                                    Exhibit A
            Sample Calculation of Net Present Value of Net Cash Flows
        Note: Certain terms used in this Exhibit are defined in Annex I.

*

<PAGE>

                              ANNEX I TO EXHIBIT A

               ACCOUNTING DEFINITIONS FOR LLC OPERATING AGREEMENT

      "ASP" means the average selling price of Product in the Territory
expressed in U.S. dollars calculated by dividing the Net Sales to Trade Customer
for all countries in the Territory by the total Units sold in the Territory
during the relevant Fiscal Year.

      "Commercialization Bonus" means the amount payable by the Company to
Alliance pursuant to Section 6.6 of this Agreement.

      "Cost of Goods Allowance" means the sum of (i) Cost of Goods Allowance
less RM, and (ii) Raw Material Active Cost.

      "Cost of Goods Allowance less RM" means a fixed allowance to reflect the
cost of manufacturing the Product excluding the Raw Material Active Cost.

      "Distribution Allowance" means the allocated amount represented by the sum
of the Distribution Fee and the Market Development Fee.

      "Distribution Fee" means the * pursuant to Section 6.2of the Marketing and
Distribution Agreement.

      "General Expenses" means the fixed projected general expenses of Alliance
in support of the project equal in the aggregate to amount of the
Commercialization Bonus.

      "Investments" means (i) the aggregate *  (ii) the contribution by
Baxter pursuant to Section 3.1(b) of this Agreement ("Baxter Equity
Investment in LLC"), and (iii) the contribution by Alliance pursuant to
Section 3.1(g) of this Agreement ("Alliance Equity Investment in LLC).

      "Intellectual Property (IP) Royalty" means the royalty payable by the
Company to Alliance pursuant to Section 3.1 of the License Agreement.

      "Market Development Fee" means the amount payable by the Company to Baxter
pursuant to Section 2.8 of the Marketing and Distribution Agreement.

      "Net Profit" means Net Sales to Baxter Affiliates less (i) *, (ii) *,
(iii) *, (iv)*, and (v) *.

      "Net Sales to Baxter Affiliates" means the sales of Product from Company
to Baxter and its Affiliates pursuant to the Marketing and Distribution
Agreement.

<PAGE>

      "Net Sales to LLC" shall mean the Sales of Product to Company pursuant to
the Baxter Manufacturing and Supplier Agreement or the Alliance Manufacturing
and Supplier Agreement, as appropriate.

      "Net Sales to Trade Customer" shall be calculated in accordance with
Baxter's prevailing accounting practices in accordance with U.S. GAAP in effect
from time to time and shall mean the total amount invoiced in U.S. dollars, or ,
if in another currency, as converted by Baxter according to the procedure set
forth below in this definition, or, if greater, received from a Third Party by
Baxter and its Affiliates, for the sale or transfer of the Product after
deducting the following costs: (i) discounts allowed and taken, in amounts
customary in the trade, for reasons such as quantity purchases and prompt
payment by wholesalers and subdistributors, (ii) taxes, including but not
limited to, sales, use, turnouver, excise, import and other taxes or duties,
imposed by a governmental agency on such sale or transfer, and (iii) credits or
allowances actually given or made for products returned or not accepted by
purchasers of the Product. For purposes of converting amounts invoiced in
currency other than U.S. dollars, the following procedure shall be followed:

            (1) First for each country in the Territory, determine the average
of the exchange rate of the local currency into U.S. dollars at the end of the
15th day of each month as published in the Wall Street Journal during the
relevant Fiscal Year (the "Average Exchange Rate"). The Management Board will
reevaluate the method of calculating Average Exchange to determine whether any
changes should be made based upon significant fluctuations throughout the
relevant Fiscal Year.

            (2) Second, convert the invoiced amounts in each country in the
Territory to U.S. dollars using the Average Exchange Rate for such country.

      "R & D Expense" means the amount projected to be spent by Alliance to
obtain Regulatory Approval for the First Indication.

      "Raw Material Active Cost" means the acquisition cost of * from a third
party supplier or suppliers.

      "Tax Expense" means the deemed tax rate of * of Net Profits.

      "Total Net Equity Investments" means the aggregate amount of Investments
less the amount redeemed by Alliance.

<PAGE>

                                    Annex II
                           Base Financial Assumptions

*

<PAGE>

                                    Annex III
                           Financial Model Components

 The "Initial Model shall contain the following components. The "Initial Model"
               shall be the basis for the future "Revised Model."

*

<PAGE>

                                    Exhibit B
                        First Indication Plan and Budget

Regulatory Strategy and Clinical Plan

*

European Clinical Plan

*

U.S./Canadian Clinical Plan

*

Manufacturing Strategy and CMC Plan

*<PAGE>

                                                                Exhibit 10(uu)

                       PREFERRED STOCK PURCHASE AGREEMENT

         This PREFERRED STOCK PURCHASE AGREEMENT (this "Purchase Agreement" or
the "Agreement") is made as of this 11th day of May, 2000 by and between
Alliance Pharmaceutical Corp., a New York corporation (the "Company"), and
Baxter Healthcare Corporation, a Delaware corporation ("Baxter").

THE PARTIES AGREE AS FOLLOWS:

      1. Authorization of Purchase and Sale of Preferred Stock.

      1.1 Authorization of Preferred Stock. The Company has authorized the
issuance and sale of up to 500,000 shares of its Series F Preferred Stock, $.01
par value (such Series F Preferred Stock being hereinafter referred to as the "F
Stock") to be issued under this Purchase Agreement. The rights, privileges, and
preferences of the F Stock are as set forth in the Company's Certificate of
Amendment of Certificate of Incorporation (the "Certificate of Amendment") in
the form attached to this Purchase Agreement as Exhibit A.

      1.2 Purchase and Sale of the Preferred Stock. Subject to the terms and
conditions of this Purchase Agreement and on the basis of the representations
and warranties set forth herein, the Company agrees to sell to Baxter, and
Baxter agrees to purchase from the Company, 500,000 shares of F Stock (the "F
Shares") at a purchase price of $40.00 per share or an aggregate purchase price
of $20,000,000.

      1.3 The Closing. The purchase and sale of the F Shares will take place at
the offices of Gibson, Dunn & Crutcher LLP, 4 Park Plaza, Irvine, California
92614-8557 at 10:00 a.m. local time on May 19, 2000 or at such other time and
place as the parties shall mutually agree (the "Closing"). At the Closing, the
Company will deliver to Baxter a certificate, registered in Baxter's name,
representing the F Shares to be purchased by Baxter against payment of the
purchase price thereof in lawful money of the United States of America by wire
transfer or check payable to the Company.

      2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Baxter that:

      2.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and is qualified to do business as a foreign corporation in each
jurisdiction where failure to qualify would have a Materially Adverse Effect (as
defined in Section 2.13) on the business or properties of the Company. The
Company has full power and authority to own its property, to carry on its
business as presently conducted and to carry out the transactions contemplated
hereby. The copies of the Certificate of Incorporation, Certificate of Amendment
and Bylaws of the Company, as amended to date, which have been furnished to
Baxter by the Company, are correct and complete.
<PAGE>

      2.2 Authorization. The Company has full power to execute, deliver and
perform this Purchase Agreement, the License Agreement between the Company and
PFC Therapeutics, LLC ("PFC") attached hereto as Exhibit B (the "License
Agreement"), the Deferred Stock Purchase Agreement attached hereto as Exhibit C
(the "Deferred Stock Purchase Agreement"), the Limited Liability Company
Agreement of PFC Therapeutics, LLC between the Company and Baxter attached
hereto as Exhibit D (the "Operating Agreement"), the Marketing and Distribution
Agreement between the Company, Baxter and PFC attached hereto as Exhibit E (the
"Marketing and Distribution Agreement"), the Alliance Manufacturing and Supplier
Agreement between the Company and PFC attached hereto as Exhibit F (the
"Alliance Manufacturing and Supplier Agreement") and the Baxter Manufacturing
and Supplier Agreement between Baxter and PFC attached hereto as Exhibit G (the
"Baxter Manufacturing and Supplier Agreement") (collectively, the "Transaction
Agreements"), and each such agreement has been duly executed and delivered by
the Company and is the legal, valid and, assuming due execution by the other
parties hereto and thereto, binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting creditors' rights
generally, and to general equitable principles. The execution, delivery and
performance of this Purchase Agreement, including the sale, issuance and
delivery of the F Shares, and the License Agreement, and each other agreement
entered into by the Company in connection with this Purchase Agreement, has been
duly authorized by all necessary corporate action of the Company.

      2.3 Capitalization. The entire authorized capital stock of the Company
consists of 75,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), of which 47,167,083 shares are issued and outstanding on May 5,
2000, and 5,000,000 shares of preferred stock, $.01 par value, of which (i)
500,000 have been designated as Series F Preferred Stock, all of which are to be
issued at the Closing, (ii) 1,500,000 have been designated Series A Preferred
Stock and are not issued or outstanding; (iii) 13,637 have been designated
Series G Preferred Stock and are not issued or outstanding and (iv) 13,636 have
been designated Series H Preferred Stock and are not issued or outstanding. None
of the remaining 2,972,727 shares of such preferred stock are issued or
outstanding. The shares of Common Stock outstanding are duly authorized, validly
issued, fully paid and nonassessable. No shares of Common Stock or preferred
stock are held in the Company's treasury. The Company has authorized and
reserved 500,000 shares of F Stock for issuance hereunder. When issued in
accordance with the terms of this Purchase Agreement, the F Shares will be duly
authorized, validly issued and outstanding, fully paid and nonassessable, and
the

                                       2
<PAGE>

certificates representing the same will be duly and validly authorized, executed
and delivered by the Company. The Company has authorized and reserved for
issuance upon conversion of the F Shares shares of its Common Stock or such
other number as may be necessary to be issued upon such conversion (such shares,
until sold to the public generally pursuant to a registration statement or Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "1933
Act"), are referred to herein as "Conversion Shares"). The Conversion Shares and
any shares of Common Stock issued upon the exercise of an Option (as hereinafter
defined) (such shares being referred to herein as the "Option Shares") will,
upon such issuance in accordance with the terms of the Company's Certificate of
Incorporation, as amended, be duly authorized, validly issued and outstanding,
fully paid and nonassessable, and the certificates representing the same will be
duly and validly authorized, executed and delivered by the Company. There are no
outstanding warrants, rights of first refusal, options or other rights to
purchase or acquire, or exchangeable for or convertible into, any shares of
Common Stock or preferred stock, except as disclosed on Schedule 2.3 or as
otherwise disclosed in writing. The Company has reserved Common Stock for
issuance upon exercise of outstanding options and warrants as set forth in
Section 2.3 of the disclosure schedule to this Purchase Agreement. Except as
provided herein, there are no preemptive rights with respect to the issuance or
sale by the Company of any of its securities. Except as provided in this
Purchase Agreement or as imposed by applicable securities laws, there are no
restrictions on the transfer or voting of any shares of the Common Stock or F
Stock. There are no existing rights with respect to registration under the 1933
Act of any of the Company's securities except as set forth herein or as
disclosed on Schedule 2.3. Upon consummation of the transactions contemplated
hereby, good and valid title to the F Shares will pass to Baxter, free and clear
of any encumbrances, liens, claims, charges or assessments of any nature
whatsoever. Upon their issuance in accordance with the Company's Certificate of
Incorporation, as amended, and, with respect to the Option Shares, this
Agreement, good and valid title to the Conversion Shares and the Option Shares
will pass to Baxter, free and clear of any encumbrances, liens, claims, charges
or assessments of any nature whatsoever.

      2.4 Financial Statements. The Company has delivered to Baxter a copy of
the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999
(the "1999 10-K"), containing audited consolidated balance sheets and statements
of operations and cash flow for the fiscal years ended June 30, 1997, June 30,
1998 and June 30, 1999 and a copy of the Company's Quarterly Report on Form 10-Q
for the quarters ended September 30, 1999 and December 31, 1999 and the
Company's draft 10-Q for the quarter ended March 31, 2000 (the Forms 10-Q, the
draft 10-Q and the financial statements therein and in the 1999 10-K,
collectively, are referred to as the "Financial Statements"). The Financial
Statements are in accordance with the books and records of the Company, have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present, in all material respects, the
financial position, results of operations and cash flows of the Company as of
each such date and for each of the periods covered thereby, except that such
interim statements are subject to normal year-end adjustments.

      2.5 Absence of Undisclosed Liabilities. Except as and to the extent
reflected or stated in the Financial Statements, neither the Company nor its
subsidiaries has any debts, liabilities or obligations of any nature, whether
accrued, absolute, assigned or otherwise, whether due or to become due, other
than those incurred in the ordinary course of business.

      2.6 Absence of Certain Developments. Since June 30, 1999, except as
disclosed in the Financial Statements or the disclosure schedules to this
Purchase Agreement or as otherwise expressly contemplated therein or by the
transaction Agreements to which it is a party, and except for continuing
operating losses, the Company has not:

            (a) changed or amended its Articles of Incorporation or By-Laws (or
similar governing documents);

                                       3
<PAGE>

            (b) incurred any obligation or liability (fixed or contingent),
except normal trade or business obligations incurred in the ordinary course of
business and consistent with past practice, none of which individually or in the
aggregate would cause a Material Adverse Effect;

            (c) discharged or satisfied any material lien, security interest,
charge or other encumbrance or paid any material obligation or liability (fixed
or contingent), other than in the ordinary course of business and consistent
with past practice;

            (d) mortgaged, pledged or subjected to any lien, security interest,
charge or other encumbrance any of its material assets or properties (other than
liens permitted pursuant to Section 2.7 below);

            (e) transferred, leased or otherwise disposed of any of its material
assets or properties, except for fair consideration in the ordinary course of
business and consistent with past practice, or acquired any material assets or
properties, except in the ordinary course of business and consistent with past
practice;

            (f) declared, set aside or paid any distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock or
redeemed or otherwise acquired any of its capital stock or split, combined or
otherwise similarly changed its capital stock or authorized the creation or
issuance of or issued or sold any capital stock or any securities or obligations
convertible into or exchangeable therefor, or gave any person any right to
acquire any capital stock from the Company, or agreed to take any such action
(other than upon the exercise of outstanding warrants or stock options, and the
issuance and exercise of stock options issued under the Company's existing stock
option plans);

            (g) made any investment of a capital nature, whether by purchase of
stock or securities, contributions to capital, property transfers or otherwise,
in any other partnership, corporation or any other entity, or purchase any
material property or assets;

            (h) canceled or compromised any debt or claim other than in the
ordinary course of business;

            (i) waived or released any rights of material value, including,
without limitation, any material patents, trademarks and trade names, trademark
and trade name registrations, logos, servicemark registrations, copyright
registrations, applications pending the date hereof for patent or for trademark,
trade name, servicemark or copyright registrations, and other material
proprietary intellectual property rights (including, but not limited to,
know-how, information, proprietary rights and information) ("Intangible
Rights");

            (j) transferred or granted any material rights under or with respect
to any Intangible Rights other than on reasonable business terms, or permitted
any license, permit or other form of authorization relating to a material
Intangible Right to lapse;

                                       4
<PAGE>

            (k) suffered any casualty loss or damage (whether or not such loss
or damage shall have been covered by insurance) which affects in any material
respect its ability to conduct business;

            (l) made or granted any wage or salary increase applicable to any
group or classification of employees generally, entered into any employment
contract with or made any loan to, or entered into any material transaction of
any other nature with, any officer, or employee of Company, except in the
ordinary course of business; or

            (m) suffered a Material Adverse Effect.

      2.7 Title to Properties. Except as stated in the 1999 10-K, each of the
Company and its subsidiaries has good and marketable title to all material
properties and assets (excluding intellectual property which is covered by
Section 2.10 hereof) necessary to its business as presently conducted and as
proposed to be conducted, and to all of its properties and assets, free and
clear of all mortgages, security interests, liens, restrictions or encumbrances
other than (i) those disclosed on Schedule 2.7, (ii) the lien of current taxes
not yet due and payable and (iii) possible minor liens and encumbrances which do
not in any case, individually or in the aggregate, materially detract from the
value of the property subject thereto or materially impair the operations of the
Company or its subsidiaries, and would not result in the occurrence of a
Material Adverse Effect, and which have not arisen otherwise than in the
ordinary course of business.

      2.8 Tax Matters. All taxes, including, without limitation, income, excise,
property, sales, transfer, use, franchise, payroll, employees' income
withholding and social security taxes imposed or assessed by the United States
or by any foreign country or by any state, municipality, subdivision or
instrumentality of the United States or of any foreign country, or by any other
taxing authority, which are due or payable by the Company, and all interest,
penalties and additions thereon, whether disputed or not, have been paid in
full, and all tax returns or other documents required to be filed in connection
therewith have been accurately prepared and duly and timely filed. The Company
has not been delinquent in the payment of any foreign or domestic tax,
assessment or governmental charge or deposit and has no tax deficiency or claim
outstanding, assessed or, to the best of its knowledge, proposed against it. The
provisions for taxes in the Financial Statements are sufficient for the payment
of all accrued and unpaid federal, state, county and local taxes of the Company.

      2.9 No Defaults. The Company is not in violation, nor will the execution
of this Agreement or any of the Transaction Agreements to which it is a party
cause a violation, of any term or provision of (a) its Certificate of
Incorporation or Bylaws or any material note, indenture, mortgage, lease,
agreement, contract, purchase order or other material instrument, document or
agreement to which the Company is a party or by which it or any of its
properties or assets is bound or affected or (b) any order, writ, injunction or
decree of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign.

                                       5
<PAGE>

      2.10 Intellectual Property. To the best of the Company's knowledge;

            (a) The Company has good title to and ownership of or licensed
rights to, free and clear of all liens, claims and encumbrances of any nature,
Intangible Rights licensed by the Company to PFC under the License Agreement,
and the conduct by the Company of its business in connection with the Intangible
Rights neither conflicts with or constitutes, or is expected to conflict with or
constitute, an infringement of the rights of others.

            (b) The Company has sufficient title to and ownership of, or license
rights to, or has applied for, all Intangible Rights necessary to the proper
conduct of its business as described in the Financial Statements. The
consummation of the transactions contemplated hereby will not alter or impair
any such Intangible Rights.

            (c) The Company has not received any communications alleging that,
and has no knowledge that the Company has violated or, by conducting its
business, would violate any of the Intangible Rights of any other person or
entity.

      2.11 Effect of Transactions. The execution, delivery and performance of
this Purchase Agreement and the transactions contemplated hereby, and compliance
with the provisions hereof by the Company, do not and will not, with or without
the passage of time or the giving of notice or both, (i) violate any current
law, statute, rule, regulation, ruling, writ, injunction, order, judgment or
decree of any court, administrative agency or other governmental body or (ii)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company under the Certificate of Incorporation or Bylaws of the
Company or any material note, indenture, mortgage, lease, agreement, contract,
purchase order or other instrument, document or agreement to which the Company
is a party or by which it or any of its properties or assets is bound or
affected.

      2.12 No Governmental Consent or Approval Required. Based in part on the
representations made by Baxter in Section 3 of this Purchase Agreement, and
except as contemplated herein, no authorization, consent, approval or other
order of, declaration to, or registration, qualification, designation or (other
than the Certificate of Amendment) filing with any federal, state or local
governmental agency or body is required for or in connection with the valid and
lawful authorization, execution and delivery by the Company of this Purchase
Agreement or any other Transaction Agreement to which it is a party, and
consummation of the transactions contemplated hereby or thereby, or for or in
connection with the valid and lawful authorization, issuance, delivery of the F
Shares or for or in connection with the valid and lawful authorization,
reservation, issuance and delivery of the Conversion Shares other than (a) the
qualification (or taking of such action as may be necessary to secure an
exemption from qualification if available) of the offer and sale of the F Shares
under the California Corporate Securities Law of 1968, as amended, and other
applicable state securities laws, which filings and qualifications, if required,
will be accomplished in a timely manner so as to comply with such qualification
or exemption from qualification requirements, or (b) compliance with the
applicable

                                       6
<PAGE>

requirements of the HSR Act and stockholder approval pursuant to Nasdaq
requirements, in each case if required in connection with the issuance of the
Conversion Shares.

      2.13 Litigation. There is no claim, arbitration, action, suit, proceeding
or investigation pending, or to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries, which questions the validity of
this Purchase Agreement or any other Transaction Agreement to which it is a
party or the right of the Company or any of its subsidiaries to enter into any
such agreements or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate, in any
material adverse effect on the condition of the Company or its assets,
liabilities, properties, business, operations, or insofar as they may be
reasonably be foreseen, prospects generally (a "Material Adverse Effect"), or
any change in the current equity ownership of the Company. Neither the Company
nor any of its subsidiaries is a party to, or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or governmental agency
or instrumentality which would have a Material Adverse Effect.

      2.14 Securities Laws. Assuming that Baxter's representations and
warranties contained in Section 3 of this Purchase Agreement are and continue to
be true and correct, the offer, issuance and sale to Baxter of the F Shares, the
Conversion Shares and the Option Shares are and will be exempt from the
registration and prospectus delivery requirements of the 1933 Act, and have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. No person authorized by the Company as agent, broker,
dealer or otherwise in connection with the offering or sale of the F Shares, the
Conversion Shares or the Option Shares, or any similar securities, has taken or
will take any action (including, without limitation, any offer or sale of any
securities) under circumstances which would require the integration of such
securities with the F Shares being sold hereunder under the 1933 Act or the
rules and regulations of the Securities and Exchange Commission which would
subject such offer and sale to the registration provisions of the 1933 Act.

      2.15 Brokerage. There are no claims for brokerage commissions or finder's
fees or similar compensation in connection with the transactions contemplated by
this Purchase Agreement based on any arrangement made by or on behalf of the
Company other than the fee being paid by the Company to Burrill & Company. The
Company agrees to indemnify and hold Baxter harmless against any damages
incurred as a result of any such claim.

      2.16 Insurance. The Company maintains in full force such types and amounts
of insurance issued by issuers of recognized responsibility insuring the
Company, with respect to its liability, workers' compensation, business and
properties, in such amounts and against such losses and risks as are sufficient
for compliance with all requirements of law and are deemed appropriate by the
Company under its present circumstances.

      2.17 Compliance With Laws. Each of the Company and its subsidiaries are in
compliance in all material respects with every statute, law or regulation
applicable to the Company's business or operations, including (without
limitation) statutes, laws and regulations

                                       7
<PAGE>

relating to the environment or occupational health and safety, laboratory and
manufacturing practices (including current Good Manufacturing Practices
prescribed by the U.S. Food and Drug Administration), the experimental use of
animals and the use and disposal of hazardous or potentially hazardous
substances (including, with limitation, radioactive compounds and solvents),
and, to the best of the Company's knowledge and its subsidiaries' knowledge, no
material expenditures are required or currently anticipated in order to comply
with any such existing statute, law or regulation. Neither the Company nor its
subsidiaries has received any notice from any third party of any alleged
material violation of any of the foregoing.

      2.18 Retirement Obligations, etc. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974,
other than as disclosed in the 1999 10-K. The Company does not have any
employees that are represented by a union. The Company is not a party to any
collective bargaining agreement and, to the best of the Company's knowledge, no
organizational efforts are presently being made with respect to any of its
employees. Baxter will not incur through consummation of any of the transactions
contemplated by the Purchase Agreement any liability in respect of employees of
the Company or any of its employee benefit plans.

      2.19 Investment Company. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, and will not, as
a result of the transactions contemplated hereby, become an "investment
company."

      2.20 Disclosure. The Company has fully provided Baxter with all the
information that Baxter has requested for deciding whether to purchase the F
Shares. The 1999 10-K, the Forms 10-Q, this Purchase Agreement, and the other
exhibits or schedules delivered in connection herewith or therewith, taken
together, do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements herein or therein in
light of the circumstances under which they were made not misleading.

      3. Representations and Warranties and Other Agreements of Baxter.

      3.1 Representations and Warranties. Baxter hereby represents and warrants
that:

            (a) Authorization. Baxter is a Delaware corporation and has full
power and authority to execute, deliver and perform this Purchase Agreement and
each Transaction Agreement to which it is a party and to purchase the F Shares.
Assuming due execution by the Company hereof and thereof, this Purchase
Agreement and each other Transaction Agreement to which Baxter is a party
constitute the valid and legally binding obligation of Baxter, enforceable
against Baxter in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
creditors' rights generally, and to general equitable principles.

            (b) Purchase Entirely for Own Account. It is Baxter's intention to
acquire the F Shares, the Conversion Shares and the Option Shares (collectively,
the "Securities") for investment for Baxter's own account, not as a nominee or
agent and not with a view to the sale or

                                       8
<PAGE>

other disposition of any part thereof in violation of the 1933 Act. Baxter has
no present intention of selling, granting any participation in, or otherwise
disposing of the same in violation of the 1933 Act. Baxter does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person, with
respect to any of the Securities.

            (c) Restrictions on Disposition. Baxter covenants that in no event
will it dispose of any of the Securities (other than pursuant to Rule 144
promulgated under the 1933 Act ("Rule 144") or pursuant to a registration
statement filed with the Securities and Exchange Commission (the "SEC") pursuant
to the 1933 Act) unless and until (i) Baxter shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances setting forth the number of shares and price it proposes to
sell at, excluding the name of the transferee and other information unless
otherwise required in the written opinion of Company counsel to comply with the
1933 Act; and (ii) Baxter shall have furnished the Company with an opinion of
Baxter's counsel reasonably satisfactory in form and substance to the Company
and the Company's counsel to the effect that (A) such disposition will not
require registration under the 1933 Act or compliance with any applicable state,
local or foreign law, or (B) appropriate action necessary for compliance with
the 1933 Act and any applicable state, local or foreign law has been taken. The
restrictions on transfer imposed by this Section 3.1(c) shall cease and
terminate as to the Securities when: (i) such securities shall have been
effectively registered under the 1933 Act and sold by the owner thereof in
accordance with such registration; or (ii) an opinion of the kind described in
the preceding sentence states that all future transfers of such securities by
the holder thereof would be exempt from registration under the 1933 Act and
compliance with any applicable state, local or foreign law. Each certificate
evidencing the Securities shall bear an appropriate restrictive legend as set
forth in Section 3.3 below, except that such certificate shall not be required
to bear such legend after a transfer thereof if the transfer was made in
compliance with Rule 144 or pursuant to a registration statement or if the
opinion of counsel referred to above is issued and provides that such legend is
not required in order to establish compliance with any provisions of the 1933
Act.

            (d) Receipt of Information. Baxter has been furnished access to such
information and documents as Baxter has requested and has been afforded an
opportunity to ask questions of and receive answers from representatives of the
Company concerning the terms and conditions of this Purchase Agreement, the
other Transaction Agreements and the purchase of the F Shares.

            (e) Brokerage. There are no claims for brokerage commissions or
finder's fees or similar compensation in connection with the transactions
contemplated by this Purchase Agreement based on any arrangement or agreement
made by or on behalf of Baxter, and Baxter agrees to indemnify and hold the
Company harmless against any damages incurred as a result of any such claims.

                                       9
<PAGE>

      3.2 Further Provisions Regarding Disposition.

            (a) Transfer to Affiliates. Notwithstanding the provisions of
Section 3.1(c) above, no registration statement or opinion of counsel shall be
necessary for a transfer of the Securities by Baxter to a subsidiary or
affiliate (as defined pursuant to the 1933 Act) of Baxter which is an accredited
investor, if the transferee makes the warranties set forth in Sections 3.1 (b)
and (c) and agrees in writing to be subject to the terms hereof regarding the
transfer of the Securities, to the same extent as if such transferee were Baxter
hereunder.

            (b) New Certificates. Whenever the restrictions imposed by Section
3.1(c) above shall terminate as herein provided, the holder of the securities as
to which such restrictions have terminated shall be entitled to receive from the
Company, without expense, one or more new certificates not bearing restrictive
legends and not containing any reference to the restrictions imposed by this
Purchase Agreement.

      3.3 Legends. It is understood that, subject to Sections 3.1(c) and 3.2(b),
the certificates evidencing the F Shares, the Option Shares and the Conversion
Shares shall bear the following legend:

            (a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT.

            (b) Any legend required by the laws of any other applicable
jurisdiction.

      3.4 Notice of Certain Events. Baxter hereby covenants and agrees that
during the term of the License Agreement (including any extension thereof),
unless notice has been provided in accordance with Section 3.1 (c), it will
provide written notice to the Company of any sale or disposition, on the open
market or in private transactions, by Baxter or any of its affiliates (including
subsidiaries or other entities controlled by Baxter) of any shares of the Common
Stock or other equity securities of the Company (or if Baxter or such affiliates
shall direct any third party to take any such actions on behalf of Baxter or
such affiliates), provided that no such notice need be given if the relevant
transaction related to 1% or less of the outstanding common stock (on an as
converted basis) of the Company. Such notice shall be transmitted to the Company
by facsimile (with telephonic notice) within ten (10) days after any such
transaction, and shall specify the person or entity effecting the transaction,
the date of such transaction, and the number of securities with respect to such
transaction.

      3.5 Limitation on Notice of Certain Events. Baxter shall not be required
to comply with the provisions of Section 3.4 if, in connection with any
transaction referred to in Section 3.4, Baxter or its affiliate files with the
SEC and sends to the Company a statement on Schedule

                                       10
<PAGE>

13D or Schedule 13G in connection with such transaction and in compliance with
Rule 13d-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").

      4. Conditions to Baxter's Obligations at Closing. The obligations of
Baxter under Section 1.2 of this Purchase Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:

      4.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 2 shall be true in all material respects on and
as of the date of such Closing with the same effect as though such
representations and warranties had been made on and as of the date of such
Closing.

      4.2 Performance. The Company shall have performed and complied in all
material respects with all agreements, obligations, and conditions contained in
this Purchase Agreement and each other Transaction Agreement to which it is a
party that are required to be performed or complied with by it on or before the
Closing.

      4.3 Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to Baxter at the Closing a certificate certifying that the
conditions specified in Sections 4.1, 4.2, 4.4, 4.5, 4.6 and 4.7 have been
fulfilled and stating that there has been no Material Adverse Effect since March
31, 2000, except for continuing operating losses in the ordinary course of
business.

      4.4 Certificate of Amendment. The Company shall have filed with the
Secretary of State of New York the Certificate of Amendment in substantially the
form attached hereto as Exhibit A and the Secretary of State shall have accepted
such form for filing.

      4.5 Qualifications. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state or of any other country that are required in connection with the lawful
issuance and sale of the F Shares to Baxter pursuant to this Purchase Agreement
shall have been duly obtained and shall be effective on and as of the Closing.

      4.6 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Baxter and Baxter's counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.

      4.7 Transaction Agreements. The License Agreement, in substantially the
form attached hereto as Exhibit B, the Deferred Stock Purchase Agreement, in
substantially the form attached hereto as Exhibit C, the Operating Agreement, in
substantially the form attached hereto as Exhibit D, the Marketing and
Distribution Agreement, in substantially the form attached hereto as Exhibit E,
the Alliance Manufacturing and Supplier Agreement, in substantially the form
attached hereto as Exhibit F, and the Baxter Manufacturing and Supplier
Agreement, in

                                       11
<PAGE>

 substantially the form
attached hereto as Exhibit G shall have been executed and delivered by the
Company.

      4.8 Opinion of Company Counsel. Baxter shall have received from counsel
for the Company an opinion, dated as of the Closing and addressed to Baxter,
covering the matters set forth in Sections 2.1, 2.2, 2.3 (as to the due
authorization, valid issuance, full payment and non-assessability of the F
Shares, Conversion Shares and Option Shares), 2.11, 2.12 and 2.14.

      5. Conditions of the Company's Obligations at Closing. The obligations of
the Company under Section 1.2 of this Purchase Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:

      5.1 Representations and Warranties. The representations and warranties of
Baxter contained in Section 3 shall be true in all material respects on and as
of the date of such Closing with the same effect as though such representations
and warranties had been made on and as of the date of such Closing.

      5.2 Performance. Baxter shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Purchase Agreement and each other Transaction Agreement to which it is a party
that are required to be performed or complied with by it on or before such
Closing.

      5.3 Qualifications. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state or of any other country that are required in connection with the lawful
issuance and sale of the F Shares to Baxter pursuant to this Purchase Agreement
shall have been duly obtained and shall be effective on and as of the Closing.

      5.4 Transaction Agreements. The License Agreement, in substantially the
form attached hereto as Exhibit B, the Deferred Stock Purchase Agreement, in
substantially the form attached hereto as Exhibit C, the Operating Agreement, in
substantially the form attached hereto as Exhibit D, the Marketing and
Distribution Agreement, in substantially the form attached hereto as Exhibit E,
the Alliance Manufacturing and Supplier Agreement, in substantially the form
attached hereto as Exhibit F, and the Baxter Manufacturing and Supplier
Agreement, in substantially the form attached hereto as Exhibit G shall have
been executed and delivered by Baxter.

      6. Affirmative Covenants of the Company.

      6.1 Board Rights. So long as (i) Baxter owns at least 500,000 F Shares, or
(ii) Baxter owns all of the shares of Common Stock in which the F Shares are
converted into or (iii) until December 31, 2007, at Baxter's election the
Company shall give Baxter or its designated representative notice of each
meeting of its Board of Directors at the same time and in the same manner as
notice is given to the members of the Board of Directors, and the Company shall
permit such representative to attend and observe all meetings of the Company's
Board of Directors and to listen to all such meetings held telephonically. The
Company shall provide

                                       12
<PAGE>

Baxter's representative with copies of written materials and other information
given to directors in connection with such meetings at the same time and in the
same manner such materials and information are given to the directors. If the
Company takes any action by written consent in lieu of a meeting of its Board of
Directors, the Company shall give notice thereof to Baxter's representative at
the same time and in the same manner in which such consent is requested of
directors. Baxter's representative must be reasonably acceptable to the Company
and shall be knowledgeable and experienced in the operations of the healthcare
industry. Baxter's representative shall not be entitled to written materials or
other information and shall agree to excuse himself or herself from meetings or
portions thereof at the request of the Company or the Chairman of the Board of
Directors where such information or his or her attendance or continued presence,
at the discretion of the Company, might jeopardize the confidentiality of
proprietary information of the Company or of any competitor of Baxter or
otherwise create a conflict of interest. Baxter's representative will execute a
confidentiality agreement in form and substance similar to the Company's
standard form of confidentiality agreement with consultants and other third
parties.

      6.2 Reports under the Exchange Act. With a view to making available to
Baxter the benefits of Rule 144 promulgated under the 1933 Act and any other
rule or regulation of the SEC that may at any time permit a permitted holder of
Securities to sell securities of the Company to the public without registration,
and with a view to making it possible for any such holder to have the Securities
registered on Form S-3, the Company agrees to (subject to Section 8 in the case
of Section 6.2(b)):

            (a) make available adequate current public information as
contemplated by Rule 144 (c)(1) or (2);

            (b) take such action as is necessary to enable a holder to utilize
Form S-3 for the sale of Securities;

            (c) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the Exchange Act; and

            (d) furnish to a holder owning any Securities upon request (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 Act and the Exchange Act, or that it
qualifies as a registrant whose Securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably required to
permit any holder of Securities to avail itself of any rule or regulation of the
SEC which permits the selling of any such Securities without registration or
pursuant to such form.

      7. Anti-Dilution Provisions.

      7.1 Option. If, on or before the date of conversion of all of the F
Shares, the Company shall issue additional shares of its Common Stock in any
private placement or public offering (excluding issuance or sale as a result of
exercise or conversion of (i) outstanding

                                       13
<PAGE>

options, warrants or other convertible or exchangeable securities on the date
hereof, or (ii) stock options or warrants, granted to employees, directors or
consultants whenever granted under the Company's stock option programs,
incentive stock option plan or 401(k) program) (an "Issuance"), the Company
hereby grants to Baxter the right (an "Option") following any such Issuance, to
purchase a number of shares of Common Stock as set forth below. The
consideration for shares issued pursuant to an Issuance (the "Consideration")
shall be deemed to be the per share amount of cash and any other form of
consideration received by the Company, meaning, in the case of a public
offering, the public offering price. The amount of any non-cash Consideration
shall be deemed to be the fair value of such non-cash Consideration determined
in good faith by the Company's Board of Directors.

      Pursuant to the Option, Baxter shall have the right to purchase the number
of additional shares of Common Stock (the "Option Number") determined by the
following formula:

      NO = N(I) (.032)

      where NO is the Option Number and NI is the number of shares issued in the
Issuance. If the Option Number would include a fractional share, it shall be
rounded to the nearest whole share.

      7.2 Notice of Issuance. Within ten (10) days after any Issuance, the
Company shall give written notice thereof to Baxter of the terms thereof,
including the Issuance Number, the Consideration and the Option Number of shares
related to such Issuance.

      7.3 Purchase Price. The price for each share purchased pursuant to the
Option shall be an amount (payable in cash) equal to the Consideration for a
share purchased under the Issuance.

      7.4 Exercise of Option. The Option shall be exercised by written notice to
the Company, given within thirty (30) days following receipt of written notice
of an Issuance pursuant to Section 7.2 above stating that it is Baxter's intent
to exercise the Option. The notice shall specify the number of shares for which
the Option is being exercised (up to the Option Number) and shall be accompanied
by payment in full of the exercise price for such shares.

      7.5 Delivery of Certificates: Registration. Promptly after each exercise
of the Option, the Company shall cause to be delivered to Baxter a certificate
or certificates evidencing the shares purchased pursuant to the exercise of the
Option; provided, however, that Baxter shall be deemed to be the holder of
record of such shares as of the date of exercise of the Option with respect to
such shares. The Company may postpone the issuance and delivery of such shares
upon any exercise of the Option until (a) the admission of such shares to
listing on any stock exchange on which shares of the same class are then listed
and (b) the completion of such registration or other qualification of such
shares under any state or federal law, rule or regulation as the Company, in the
reasonable opinion of its counsel, shall determine to be necessary or advisable.
Nothing in this Section 7.5 shall be deemed to require that the Company file or
amend a registration statement under the 1933 Act.

                                       14
<PAGE>

      7.6 Dividends and Reclassification. If, following an Issuance but prior to
the exercise of, or expiration of the right to exercise, the Option relating to
such Issuance, there shall be declared payable to holders of record of the
Common Stock on a date prior to such exercise or expiration, or paid, a stock
dividend upon the Common Stock of the Company or if such stock shall be
split-up, combined, converted, exchanged (including by way of merger),
reclassified, or in any way substituted for (collectively, a "Dividend or
Reclassification"), the Option shall entitle Baxter upon the future exercise of
the Option relating to such Issuance to such number and kind of securities or
other property, subject to the terms of the Option, to which Baxter would have
been entitled had Baxter actually owned the Common Stock as to which the Option
is then exercised at the time of such Dividend or Reclassification; and the
aggregate purchase price upon the exercise of the Option relating to such
Issuance shall be the same as if the shares of Common Stock originally optioned
were being purchased as provided herein; provided that no fractions of shares
shall be issued, the aggregate purchase price shall be appropriately reduced on
account of any fractions not so issued and the purchase price shall in no event
be less than the par value of the Common Stock.

      7.7 Reservation of Common Stock. The Company hereby represents and
covenants with Baxter that it shall at all times reserve for issuance to Baxter
such number of shares of its Common Stock as will be sufficient to satisfy the
requirements of any Option.

      7.8 Successors to Option. The Option and all rights hereunder shall be
non-assignable and nontransferable, are intended solely for the benefit of
Baxter, and shall in no way inure to the benefit of its assignees or
transferees. Notwithstanding the foregoing, Baxter may assign or transfer the
Option to any corporation with which Baxter is merged or combined or to any
corporation which is a successor to or an affiliate of Baxter. The Company shall
have the right to require, as a condition precedent to such assignment or
transfer, that the assignee or transferee furnish such information as may in the
opinion of counsel for the Company be appropriate to permit such assignment or
transfer in light of the then applicable federal or state securities laws. As
used in this Agreement, the term "affiliate" shall have the meaning set forth in
Rule 12b-2 under the Exchange Act, and the term "person" or "entity" shall mean
any individual, company, partnership, joint venture, association, corporation,
trust, government or agency thereof, or any other entity.

      7.9 Information from Baxter. The Company shall have the right to require,
as a condition precedent to the exercise of the Option, that Baxter furnish such
information (and representations comparable to those in Section 3.1) as may in
the reasonable opinion of counsel for the Company be appropriate to permit the
Company, in light of the then existence or non-existence of an effective
registration statement under the 1933 Act with respect to such shares, to issue
the shares in compliance with the provisions of that or any comparable act.

      7.10 Senior Ranked Preferred Stock. As long as any F Shares are issued and
outstanding, the Company shall not issue any shares of the Series A Preferred
Stock and shall not designate and issue any preferred stock which is ranked
senior to the Series F Preferred Stock.

      8. Registration of Common Stock.

                                       15
<PAGE>

      8.1 Registration. The Company will use its best efforts to cause to become
effective, on or prior to the date on which the F Shares shall first be
convertible, a registration statement under the 1933 Act on Form S-3 or such
other registration form as counsel to the Company deems appropriate, covering
the issuance by the Company of all of the Conversion Shares and Option Shares,
or any shares issued pursuant to stock dividends, stock splits or similar
distributions upon such Common Stock, Conversion Shares and Option Shares
("Registrable Stock").

      8.2 Registration Expenses. The Company shall pay all expenses incurred in
effecting the registration of Registrable Stock pursuant to Section 8.1
including, without limitation, all federal and state registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration, but not including underwriting
discounts, commissions and expenses and fees of counsel to the participating
Holders.

      8.3 Registration Procedures. If and whenever the Company is required by
the provisions of Section 8.1 to effect the registration of the Registrable
Stock under the 1933 Act, the Company will, as expeditiously as possible:

            (a) prepare and file with the SEC a registration statement which
includes the Registrable Stock and use its best efforts to cause such
registration statement to become and remain effective until the distribution
described in the registration statement has been completed or until the
participating Holders can sell all such Registrable Stock pursuant to Rule 144;

            (b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the 1933 Act with respect to the sale or other
disposition of Registrable Stock covered by such registration statement whenever
a Holder shall desire to sell or otherwise dispose of the same, but only to the
extent provided in this Section 8;

            (c) furnish to each participating Holder (and to each underwriter,
if any, of Registrable Stock) such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the 1933 Act, and
such other documents, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Stock;

            (d) use its best efforts to register or qualify the Registrable
Stock covered by such registration statement under such state securities or blue
sky laws of such jurisdiction as each participating Holder shall reasonably
request and do any and all other acts and things which may be necessary under
such securities or blue sky laws to enable such Holder to consummate the public
sale or other disposition in such jurisdictions of the Registrable Stock, except
that the Company shall not for any purpose be required to consent generally to
service of process or qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;

                                       16
<PAGE>

            (e) before filing the registration statement prospectus or
amendments or supplements thereto, furnish to counsel selected by the
participating Holders copies of such documents proposed to be filed which shall
be subject to the reasonable approval of such counsel;

            (f) enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offer;

            (g) notify the participating Holders at any time when a prospectus
relating to any Registrable Stock covered by such registration statement is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing and promptly
file such amendments and supplements as may be necessary so that, as thereafter
delivered to such Holders, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing and use its best efforts to cause each such
amendment and supplement to become effective;

            (h) furnish at the request of the participating Holders on the date
that such Registrable Stock is delivered to the underwriters for sale in
connection with a registration pursuant to this Section 8 (i) an opinion, dated
such date, of the counsel representing the Company, for purposes of such
registration, in form and substance as is customarily given by company counsel
to the underwriters in an underwritten public offer addressed to the
underwriters, if any, and to such Holders, and (ii) a letter dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offer, addressed to the underwriters and
to such Holders;

            (i) notify the Holders of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement of the initiation of
any proceedings for that purpose. The Company will make every reasonable effort
to prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest time; and

            (j) use its best efforts to cause all such Registrable Stock to be
listed on the securities exchange or the Nasdaq National Market, if any, on
which the Company's Common Stock is then listed.

      Upon receipt of any notice from the Company of the happening of any event
of the kind described in paragraph (g), the Holder will forthwith discontinue
disposition of such Registrable Stock covered by such registration statement or
prospectus until receipt of the copies of the supplemented or amended
prospectus, or until it is advised in writing by the Company that the use of the
applicable prospectus may be resumed, and has received copies of an additional
or supplemental filings which are incorporated by reference in such prospectus,
and, if so directed

                                       17
<PAGE>

by the Company, the Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in the Holder's
possession, of the prospectus covering such Registrable Stock current at the
time of receipt of such notice.

      8.4 Indemnification. In the event Registrable Stock is registered pursuant
to this Section 8:

            (a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder of Registrable Stock which is included in a
registration statement filed pursuant to the provisions of this Agreement and
any underwriter (within the meaning of the 1933 Act) with respect to the
Registrable Stock, and each officer, director, employee and agent thereof and
each person, if any, who otherwise controls such Holder or underwriter (within
the meaning of the 1933 Act), against any losses or claims, damages, expenses or
liabilities, joint or several, to which they may become subject under the 1933
Act, the Exchange Act or other federal or state law, or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or allegedly untrue statement
of any material fact contained in the registration statement for the Registrable
Stock, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or any document incident to
the registration or qualification of any Registrable Stock, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or allegedly necessary to make the statements
therein not misleading or arise out of any violation or alleged violation by the
Company of the 1933 Act, the Exchange Act, any state securities law or any rule
or regulation promulgated under the 1933 Act, the Exchange Act or any state
securities law; and will reimburse such Holder, any underwriter, officer,
director, employee, agent or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 8.4(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, expense, liability or action
if such settlement is effected without the written consent of the Company, which
shall not be unreasonably withheld, nor shall the Company be liable under this
Section 8.4(a) to such Holder, such underwriter, officer, director, employee,
agent or controlling person for any such loss, claim, damage, expense, liability
or action to the extent that it arises out of, or is based upon, an untrue
statement or allegedly untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with information furnished in writing expressly for use in connection
with such registration by such Holder, such underwriter, officer, director,
employee, agent or such controlling person.

            (b) To the extent permitted by law, each Holder of Registrable Stock
which is included in a registration statement filed pursuant to the provisions
of this Agreement will indemnify and hold harmless the Company, each of its
employees, agents, directors and officers, each person, if any, who controls the
Company within the meaning of the 1933 Act, and any underwriter (within the
meaning of the 1933 Act) against any losses, claims, damages, expenses or
liabilities to which the Company or any such person or underwriter may become
subject, under

                                       18
<PAGE>

the 1933 Act, the Exchange Act or other federal or state law or otherwise,
insofar as such losses, claims, damages, expenses or liabilities (or actions in
respect thereof) arise out of, or are based upon any untrue or allegedly untrue
statement of any material fact contained in a registration statement for the
Registrable Stock, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or any document
incident to the registration or qualification of any Registrable Stock, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or allegedly necessary to make the
statements therein not misleading; in each case to the extent that such untrue
statement or allegedly untrue statement or omission or alleged omission was made
in such registration statement, preliminary prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with information
furnished in writing by such Holder expressly for use in connection with such
registration; provided, however, that the indemnity agreement contained in this
Section 8.4(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, expense, liability or action if such settlement is effected
without the written consent of such Holder, which shall not be unreasonably
withheld; and such Holder will reimburse the Company or any such person or
underwriter for any legal or other expenses reasonably incurred by the Company
or any such person or underwriter in connection with investigating or defending
such loss, claim, damage, liability, expense or action.

            (c) Promptly after receipt by an indemnified party under this
Section 8.4 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 8.4, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense thereof with
counsel mutually satisfactory to the parties. An indemnifying party shall not
have the right to direct the defense of such an action on behalf of an
indemnified party if such indemnified party has reasonably concluded that there
may be defenses available to it that are different from or additional to those
available to the indemnifying party; provided, however, that in such event, the
indemnifying party shall bear the fees and expenses of only one (1) separate
counsel for all indemnified parties, such separate counsel to be reasonably
satisfactory to the indemnifying party. The failure to notify an indemnifying
party promptly of the commencement of any such action if prejudicial to the
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 8.4, but the omission so
to notify the indemnifying party will not relieve such party of any liability
that such party may have to any indemnified party otherwise than under this
Section.

            (d) To the extent permitted by law, the indemnification provided for
under this Section 8.4 will remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified party or any officer,
director or controlling person (within the meaning of the 1933 Act) of such
indemnified party and will survive the transfer of securities.

            (e) If for any reason the foregoing indemnity is unavailable to, or
is insufficient to hold harmless an indemnified party, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits

                                       19
<PAGE>

received by the indemnifying party on the one hand and the indemnified party on
the other or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations. Notwithstanding the foregoing, no underwriter, if any,
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The obligation of any underwriters to
contribute pursuant to this Section 8.4(e) shall be several in proportion to
their respective underwriting commitments and not joint.

      8.5 Information from Baxter. Baxter shall furnish to the Company in
writing any information regarding Baxter which the Company may reasonably
request in writing in connection with registration pursuant to this Section 8.

      8.6 Transferability. The right to have the Company register Registrable
Stock granted by the Company to the Holders under this Agreement may be assigned
by a Holder to a permitted transferee or assignee of at least one-half of the
Registrable Stock (subject to appropriate adjustment for stock splits, stock
dividends, reclassification and consolidations), provided that the Company must
receive written notice prior to or at the time of said transfer, stating the
name and address of said transferee or assignee. The limitations set forth in
this Article 8 with respect to registration rights shall apply to all
transferees or assignees of Registrable Stock.

      9. Miscellaneous.

      9.1 Incorporation by Reference. All exhibits and schedules appended to
this Purchase Agreement are herein incorporated by reference and made a part
hereof.

      9.2 Parties in Interest. All terms, covenants, agreements,
representations, warranties and undertakings in this Purchase Agreement made by
and on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not.

      9.3 Amendments and Waivers. Changes in or additions to this Purchase
Agreement may be made or compliance with any term, covenant, agreement,
condition or provision set forth herein may be omitted or waived, only upon the
written consent of the Company and Baxter.

      9.4 Governing Law. This Purchase Agreement shall be deemed a contract made
under the laws of the State of New York and, together with the rights or
obligations of the parties

                                       20
<PAGE>

hereunder, shall be construed under and governed by the laws of such State
without giving effect to principles of conflicts of laws.

      9.5 Notices. All notices, requests, consents and demands shall be in
writing and shall be deemed given when (i) personally delivered, (ii) mailed in
a registered or certified envelope, postage prepaid (iii) sent by Federal
Express or another nationally recognized overnight delivery service (paid by
sender), or (iv) sent by telex, facsimile, or telecopier upon receipt of the
correct answerback.

To the Company at:

         Alliance Pharmaceutical Corp.
         6175 Lusk Boulevard
         San Diego, CA  92121
         Attention: Theodore D. Roth
                    President and Chief Operating Officer
                    Lloyd A. Rowland
                    Vice President and General Counsel
         Facsimile: (858) 410-5306

with a copy to:

         Stroock & Stroock & Lavan LLP
         180 Maiden Lane
         New York, NY  10038
         Attention: Melvin Epstein, Esq.
         Facsimile: (212) 806-6006

To Baxter at:

         Baxter Healthcare Corporation
         Route 120 & Wilson Road
         Round Lake, Illinois  60073
         Attention: General Manager, Global Anesthesia
         Facsimile: (847) 270-2016

with a copy to:

         Baxter Healthcare Corporation
         One Baxter Parkway
         Deerfield, Illinois  60015
         Attention: General Counsel
         Facsimile: (847) 948-2450

                                       21
<PAGE>

with a copy to:

         Gibson, Dunn and Crutcher LLP
         4 Park Plaza, Suite 1800
         Irvine, California  92614
         Attention: Thomas Magill, Esq.
         Facsimile: (949) 451-4220

or such other address as may be furnished in writing to the other parties
hereto.

      9.6 Counterparts. This Purchase Agreement may be executed in counterparts,
all of which together shall constitute one and the same instrument.

      9.7 Effect of Headings. The section and paragraph headings herein are for
convenience only and shall not affect the construction hereof.

      9.8 Entire Purchase Agreement. This Purchase Agreement, the License
Agreement and the Exhibits and Schedules hereto and thereto constitute the
entire agreement among the Company and the Baxter with respect to the subject
matter hereof. There are no representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Purchase Agreement supersedes all prior
agreements between the parties with respect to the shares purchased hereunder
and the subject matter hereof.

      9.9 Publicity. Neither party shall originate any publicity, news release,
or other announcement, written or oral, relating to this Purchase Agreement, or
to performance hereunder or the existence of an arrangement between the parties
without the prior written approval of the other, except as may be otherwise
required by law.

      9.10 Severability. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provision.

      9.11 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto.

      9.12 Amendment and Waiver. Except as otherwise provided herein, any term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or an a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely), with the written consent of the Company and Baxter in the case of
an amendment or by the written waiver of the waiving party in the case of a
waiver. Any amendment or waiver effected in accordance with this Section 9.12
shall be binding upon any holder of any securities purchased under this
Agreement (including securities into which such securities have been converted),
each future holder of all such securities (so long as such securities are
restricted securities) and the Company.

      9.13 Fees and Expenses. The Company and Baxter shall bear their own
expenses and legal fees incurred on their behalf with respect to this Agreement
and the transactions

                                       22
<PAGE>

contemplated hereby, except for any expenses incurred in connection with the
registration of any of the securities sold pursuant to this Agreement which
shall be borne exclusively by Company; except as otherwise provided in this
Agreement.

                                       23
<PAGE>

         IN WITNESS WHEREOF, this Purchase Agreement has been executed as of the
date first above written, by the parties hereto.

                                 ALLIANCE PHARMACEUTICAL CORP.

                                 By:
                                    --------------------------------------------
                                    Name:
                                    Title:

                                 BAXTER HEALTHCARE CORPORATION

                                 By:
                                     -------------------------------------------
                                      Name:
                                      Title:

                                       24
<PAGE>

                                    Exhibit A

                            Certificate of Amendment
<PAGE>

                                    Exhibit B

                                License Agreement
<PAGE>

                                    Exhibit C
                        Deferred Stock Purchase Agreement
<PAGE>

                                    Exhibit D

     Limited Liability Company Operating Agreement of PFC Therapeutics, LLC
<PAGE>

                                    Exhibit E

                      Marketing and Distribution Agreement
<PAGE>

                                    Exhibit F

                  Alliance Manufacturing and Supplier Agreement
<PAGE>

                                    Exhibit G

                   Baxter Manufacturing and Supplier Agreement
<PAGE>

                                                                   Schedule 2.3

                       Preferred Stock Purchase Agreement

                                 CAPITALIZATION

A.   Authorized Capital Stock
     Authorized Common Stock, $.01 par value                       75,000,000
     Authorized Preferred Stock, $.01 par value
              1.5 million shares of Series A Preferred Stock        5,000,000
     Outstanding Securities as of May 5, 2000
              Common Stock                                         47,167,083
              Outstanding Options                                   6,770,390
              Outstanding Warrants                                  2,096,744
     Outstanding Convertible Debt                                 $15,000,000

B.   Other Rights to Acquire Capital Stock

      1.    Pursuant to Section 7.1 of a preferred stock purchase agreement, the
            holder of previously outstanding Series D Preferred Stock, Schering
            Berlin Venture Corp. ("SBVC"), has the right to acquire additional
            shares of Common Stock if the Company issues (an "Issuance")
            additional shares of Common Stock in a public or private offering
            (including upon the conversion of warrants of other convertible
            securities). The purchase price is to be equal to the price per
            share of Common Stock paid in such Issuance. The number of shares
            SBVC may purchase is equal to 1.59% of the Common Stock issued in
            the Issuance.

      2.    In November 1996, the Company acquired MDV Technologies, Inc.
            ("MDV") by a merger (the "MDV Merger") of a wholly owned subsidiary
            of the Company into MDV. The Company may pay up to $20 million to
            former shareholders of MDV if advanced clinical development or
            licensing milestones are achieved in connection with MDV's
            technology. The Company will also make certain royalty payments on
            the sales of products, if any, developed from such technology. The
            Company may buy out its royalty obligation for $10 million at any
            time prior to the first anniversary of the approval by U.S.
            regulatory authorities of any products based upon the MDV technology
            (the amount increasing thereafter over time). All of such payments
            to the former MDV shareholders may be made in cash or, at the
            Company's option, shares of the Company's common stock, except for
            the royalty obligations which will be payable only in cash. The
            Company has not determined whether subsequent payments (other than
            royalties) will be made in cash or in common stock.
<PAGE>

      3.    The holders of $15 million in principal amount of convertible
            debentures of the Company, convertible at $9.65 per share, subject
            to further adjustment, have the right to purchase an additional $15
            million in convertible debt, convertible at $12.06 per share,
            subject to further adjustment.

C. Registration Rights

      1.    The Company is in the process of registering 2,234,738 shares of
            outstanding common stock and 2,431,465 shares of common stock
            underlying certain convertible securities.

      2.    The holders of outstanding warrants for 2,096,744 shares of common
            stock issuable at prices ranging from $2.45 to $20 per share have
            demand and/or piggyback registration rights, of which warrants for
            877,061 shares are being registered pursuant to item C(1) above.

      3.    The Company has an obligation, if requested, to register the common
            stock received by SBVC upon conversion of the Series D Preferred
            Stock and other shares of Common Stock received by SBVC pursuant to
            a right to participate in Issuances (see item B(1) above).

      4.    In connection with the acquisition of a subsidiary, MDV
            Technologies, Inc., the Company registered the estimated number of
            shares to potentially be received by the former MDV shareholders.
            Under certain circumstances the Company could be required to issue
            and register additional shares of common stock.

<PAGE>

                                                                    Schedule 2.7

                       Preferred Stock Purchase Agreement

                                      TITLE

All California facilities are leased.

In connection with the purchase of the Otisville, New York facility in 1983, the
Company entered into a land use agreement with the New York City Development
Corporation, the provisions of which require the Company to care for retired
police horses. The provisions are "covenants running with the land" binding upon
the Company and subsequent owners.

The Company has a line of credit for up to $1.5 million with Wells Fargo Bank.
The loan is secured by certain cash and securities accounts.

In June 1998, Imperial Bank entered into a credit agreement providing for a loan
of up to $15 million to the Company. As security for the loan the Company
originally granted a security interest in all then existing or thereafter
acquired personal property of the Company, excluding certain specific equipment
and all intangible assets (including intellectual property, patents and patent
applications). On May 17, 1999, the Company granted the bank a security interest
on its trademarks, patents, trade secrets and license agreements and proceeds
thereof. A subsidiary has agreed to give similar security interest in its
assets. On March 31, 2000 the outstanding loan balance is approximately $9.9
million, $5 million of which is collateralized by cash. Oxygent related
trademarks, patents, patent applications and trade secrets will be released from
the lien to the bank prior to closing this preferred stock transaction.

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