Document:

Agreement & Plan of Merger 2/2/06 Adheris, Inc.

     

    ______________________________________________________________________________

    

     

    AGREEMENT
      AND PLAN OF MERGER

     

    among

     

    VENTIV
      HEALTH, INC.

     

    ACORN
      ACQUISITION CORP.

     

    ADHERIS,
      INC.

     

    and

     

    THE
      STOCKHOLDER REPRESENTATIVE

     

    

     

     

    _____________________________________________________________________________

     

    

    
      
        
          {NY001821;1}

           

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    EXECUTION
      COPY

     

    

    AGREEMENT
      AND PLAN OF MERGER

    

    

    AGREEMENT
      AND PLAN OF MERGER,
      dated
      as of February 2, 2006 (the “Agreement”),
      by
      and among (a) Ventiv Health, Inc., a Delaware corporation (“Parent”);
      (b)
      Acorn Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
      of
      Parent (“Merger
      Sub”);
      (c)
      Adheris, Inc., a Delaware corporation (the “Company”);
      and
      (d) Eugene W. Williams II, solely in his capacity as stockholder representative
      (the “Stockholder
      Representative”).

     

    W
      I T N E
      S S E T H

     

    WHEREAS,
      Parent has offered to acquire the Company for consideration consisting of (i)
      a
      combination of cash and Parent Common Stock (as defined in Section 1.2 below)
      having an aggregate value of $60 million (the "Base
      Purchase Price"),
      subject to adjustment as provided herein, and (ii) additional consideration
      contingent upon the performance of the Company during 2006, 2007 and 2008,
      as
      more fully set forth herein (together with the Base Purchase Price, the
“Purchase
      Price”)

     

    WHEREAS,
      the respective boards of directors of Parent, Merger Sub and the Company have
      approved this Agreement and have determined that it is advisable that Merger
      Sub
      be merged with and into the Company (the “Merger”)
      on the
      terms and conditions set forth herein and in accordance with the provisions
      of
      the General Corporation Law of the State of Delaware (the “DGCL”);

     

    WHEREAS,
      Parent, Merger Sub and the Company desire to make certain representations and
      warranties and other agreements in connection with the Merger; 

     

    WHEREAS,
      the Company’s capital stock consists of common stock, $.01 par value (the
“Common
      Stock”),
      Series A Convertible Preferred Stock, $.10 par value (the “Series
      A Preferred Stock”),
      Series C Convertible Preferred Stock, $.10 par value (the “Series
      C Preferred Stock”),
      Series D Convertible Preferred Stock, $.10 par value (the “Series
      D Preferred Stock”),
      and
      Series E Convertible Preferred Stock, $.10 par value (the “Series
      E Preferred Stock”);
      and

     

    WHEREAS,
      in order to induce Parent and Merger Sub to enter into this Agreement, (i)
      the
      holders of a majority of the voting power represented by the Company Stock
      are
      entering into (a) a Consent, Waiver and Voting Agreement with Parent and (b)
      a
      written consent to the execution and delivery by the Company of this Agreement
      and the consummation by the Company of the transactions contemplated hereby,
      (ii) certain key employee-stockholders of the Company are entering into Joinder
      Agreements (the “Joinder
      Agreements”)
      with
      the Company and (iii) certain key employees of the Company (the “Key
      Employees”)
      are
      entering into Employment Agreements (the “Key
      Employee Employment Agreements”)
      with
      the Company, in each case concurrently with the execution hereof. 

     

    NOW,
      THEREFORE, Parent, Merger Sub, the Company and the Stockholder Representative
      hereby agree as follows:

     

    ARTICLE
      1.  DEFINITIONS

     

    1.1  Certain
      Matters of Construction

     

    A
      reference to an Article, Section, Exhibit or Schedule shall mean an Article
      of,
      a Section in, or Exhibit or Schedule to this Agreement unless otherwise
      expressly stated. The titles and headings herein are for reference purposes
      only
      and shall not in any manner limit the construction of this Agreement which
      shall
      be considered as a whole. The words “include,” “includes” and “including” when
      used herein shall be deemed in each case to be followed by the words “without
      limitation.” 

     

    1.2  Certain
      Definitions

     

    As
      used
      herein, the following terms shall have the following meanings: 

     

    Additional
      Merger Consideration:
      any
      funds or shares of Parent Common Stock that become available for distribution
      with respect to the Company Stock pursuant to Section 2.4, 2.5, 8.1 or 8.2
      or as
      a result of the release of any portion of the Escrow Fund or the Expense Reserve
      or otherwise pursuant to this Agreement. 

     

    Affiliate

     

    :
      with
      respect to any Person, any Person which, directly or indirectly, controls,
      is
      controlled by, or is under common control with, such Person where control
      (including with correlative meaning controlled by and under common control
      with)
      as used with respect to any Person, means the possession, directly or
      indirectly, of the power to direct or cause the direction of the management
      and
      policies of such Person, whether through the ownership of voting securities,
      by
      contract or otherwise.

     

    Agreement:
      the
      meaning set forth in Recitals hereto.

     

    Applicable
      Conversion Ratio:
      with
      respect to each series of Preferred Stock, the sum of the Fixed Conversion
      Ratio
      and the Variable Conversion Ratio applicable to each such series. 

    

    Applicable
      Series A Accretion Amount:
      the
      Series A-1 Accretion Amount for shares of Series A Preferred Stock issued on
      January 11, 1995 or the Series A-2 Accretion Amount for shares of Series A
      Preferred Stock issued on July 11, 1995.

    

    Applicable
      Series C Accretion Amount:
      the
      Series C-1 Accretion Amount for shares of Series C Preferred Stock issued on
      May
      19, 1997, the Series C-2 Accretion Amount for shares of Series C Preferred
      Stock
      issued on September 30, 1997, or the Series C-3 Accretion Amount for shares
      of
      Series C Preferred Stock issued on December 31, 1997.

    

    Assumed
      Closing Date:
      February 28, 2006.

     

    Balance
      Sheet:
      the
      meaning set forth in Section 3.5 hereof.

     

    Balance
      Sheet Date:
      the
      meaning set forth in Section 3.5 hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Blackstone:
      The
      Blackstone Group, L.P.

    

    Blackstone
      Agreement:
      the
      engagement letter agreement between Blackstone and the Company dated September
      8, 2004, as amended as of the date of this Agreement. 

    

    Blackstone
      Fee:
      the
      investment banking fees payable to Blackstone at the Closing in connection
      with
      the consummation of the Merger pursuant to the Blackstone
      Agreement.

    

    Business
      Day:
      any day
      which is neither a Saturday, nor a Sunday nor a public holiday under the laws
      of
      United States of America or the State of New York applicable to a national
      banking association.

    

    Certificate:
      the
      meaning set forth in Section 2.6 hereof.

     

    Certificate
      of Incorporation:
      the
      Certificate of Incorporation, as amended, of the Company (including the
      Certificate of Designation of each series of the Preferred Stock).

     

    Certificate
      of Merger:
      the
      meaning set forth in Section 2.1 hereof.

     

    Claim:
      the
      meaning set forth in Section 8.3 hereof.

     

    Closing:
      the
      meaning set forth in Section 2.9 hereof. 

     

    Closing
      Consideration per Share:
      the
      quotient obtained by dividing (i) an amount equal to 97.67% of the Net Closing
      Date Cash Distribution by (ii) the number of shares of Common Stock outstanding
      at the Effective Time (calculated on a Fully Diluted Basis).

     

    Closing
      Date:
      the
      meaning set forth in Section 2.9 hereof. 

     

    Closing
      Date Balance Sheet:
      the
      meaning set forth in Section 2.4(c) hereof.

     

    Closing
      Date Cash Distribution:
      the
      meaning set forth in Section 2.3(a) hereof.

     

    Closing
      Net Assets:
      the
      difference, determined in accordance with GAAP, between the total assets
      reflected on the Closing Date Balance Sheet and the total Liabilities of the
      Company reflected on the Closing Date Balance Sheet (including accrued and
      unpaid vacation to the extent required in accordance with GAAP).

     

    Closing
      Net Assets Statements:
      the
      meaning set forth in Section 2.4(c). 

     

    Code:
      the
      United States Federal Internal Revenue Code of 1986, as amended.

     

    Common
      Stock:
      the
      meaning set forth in Recitals hereto.

     

    Company:
      the
      meaning set forth in Recitals hereto.

     

    Company
      Disclosure Schedule:
      the
      meaning set forth in Article 3 hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Company
      Option:
      an
      option to purchase Common Stock granted under the Company Option
      Plans.

     

    Company
      Option Plans:
      the
      Company’s 1994 Incentive and Non-Statutory Stock Option Plan and the Company’s
      2004 Stock Incentive Plan.

     

    Company
      Stock:
      all
      Common Stock and Preferred Stock outstanding at the Effective Time.

     

    Company
      Stock Percentage:
      100
      minus the Designated Option Share Percentage.

     

    Contract:
      any
      contract, agreement, indenture, note, bond, loan, mortgage, license, instrument,
      lease, commitment or other arrangement or agreement.

     

    Designated
      Option:
      an
      Outstanding Option held by a person who is not an accredited investor within
      the
      meaning of Rule 501 under the Securities Act and is set forth on Schedule
      6.5.

     

    Designated
      Option Share:
      a share
      of Company Stock issued upon exercise of a Designated Option.

     

    Designated
      Option Share Earnout Amount:
      the
      Designated Option Share Percentage of each Earnout Amount.

     

    Designated
      Option Share Percentage:
      the
      percentage, determined on a Fully Diluted Basis, of the outstanding shares
      of
      Common Stock issued upon exercise of Designated Options.

     

    Designated
      Stockholder:
      a
      Stockholder who is party to a Joinder Agreement.

     

    DGCL:
      the
      meaning set forth in Recitals hereto.

     

    Dissenting
      Shares:
      the
      meaning set forth in Section 2.8(a) hereof.

     

    EBIT:
      the
      meaning set forth in Schedule 1.2(A).

     

    Effective
      Date:
      the
      meaning set forth in Section 2.1 hereof.

     

    Effective
      Time:
      the
      meaning set forth in Section 2.1 hereof.

     

    Encumbrance:
      any
      mortgage, pledge, lien, claim, charge, security interest, lease or other
      encumbrance.

     

    Environmental
      Law:
      means
      any foreign, federal, state or local statute, regulation, ordinance, or rule
      of
      common law as now or hereafter in effect in any way or any other legally binding
      requirement relating to the environment, natural resources or protection of
      human health and safety including, without limitation, the Comprehensive
      Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601
et seq.),
      the
      Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.),
      the
      Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.),
      the
      Clean Water Act (33 U.S.C. § 1251 et seq.),
      the
      Clean Air Act (42 U.S.C. § 7401 et seq.)
      the
      Toxic Substances Control Act (15 U.S.C. § 2601 et seq.),
      the
      Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136
et seq.),
      and
      the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.),
      and
      the regulations promulgated pursuant thereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Escrow
      Agreement:
      the
      meaning set forth in Section 2.3 hereof.

     

    Escrow
      Fund:
      the
      meaning set forth in Section 2.3 hereof.

     

    Escrowed
      Cash:
      the
      meaning set forth in Section 2.3 hereof.

     

    Estimated
      Closing Net Assets:
      the
      meaning set forth in Section 2.4(b) hereof.

    

    Estimated
      Closing Net Assets Statement:
      the
      meaning set forth in Section 2.4(b) hereof.

    

    Exchange
      Agent:
      the
      meaning set forth in Section 2.3(a) hereof.

     

    Exchange
      Agreement:
      the
      meaning set forth in Section 2.3(a) hereof.

     

    Execution
      Date:
      the
      date of execution of this Agreement.

     

    Expense
      Reserve:
      the
      meaning set forth in Section 2.3(a) hereof.

     

    Fair
      Market Value:
      the
      average closing bid price of Parent Common Stock quoted on NASDAQ over a period
      of 20 consecutive trading days the latest of which shall be the trading day
      immediately preceding the date as of which "Fair Market Value" is being
      determined.

     

    Financial
      Statements:
      the
      meaning set forth in Section 3.5 hereof.

     

    Fixed
      Conversion Ratio:
      with
      respect to a share of Series A Preferred Stock, 10.870; with respect to a share
      of Series C Preferred Stock, 8.889; with respect to a share of Series D
      Preferred Stock, 10.235; and with respect to a share of Series E Preferred
      Stock, 10.235.

    

    Fully
      Diluted Basis:
      for the
      purpose of any calculation, the performance of such calculation taking into
      account (a) all shares of Common Stock actually issued and outstanding at the
      time of such determination and (b) all shares of Common Stock that are then
      issuable upon the exercise or conversion of all outstanding securities or rights
      exercisable for or convertible into Common Stock at the time of determination,
      including Dissenting Shares and outstanding shares of Preferred Stock (based
      on
      the Applicable Conversion Ratios) and outstanding Company Options that are
      exercisable at such time of determination, including by virtue of the
      acceleration thereof as provided in Section 6.5, but excluding Company Options
      that are cancelled pursuant to Section 6.5.

    

    GAAP:
      United
      States generally accepted accounting principles.

     

    Governmental
      Entity:
      any
      court or other governmental or public body or authority.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Hazardous
      Material:
      means
      any substance, material or waste which is regulated by the United States, the
      foreign jurisdictions in which Company conducts business, or any state, local
      or
      foreign governmental authority including, without limitation, petroleum and
      its
      by-products, asbestos, and any material or substance which is defined as a
      “hazardous waste,” “hazardous substance,” “hazardous material,” “restricted
      hazardous waste,” “industrial waste,” “solid waste,” “contaminant,” “pollutant,”
“toxic waste” or “toxic substance” under any provision of Environmental
      Law.

     

    HSR
      Act:
      the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

    Indemnitee:
      the
      meaning set forth in Section 8.3 hereof.

     

    Indemnitor:
      the
      meaning set forth in Section 8.3 hereof.

     

    Initial
      Cash Payment:
      $45
      million, increased dollar-for-dollar (but not in excess of $13,000,000) by
      the
      amount by which Estimated Closing Net Assets exceeds the Net Tax Benefit
      reflected on the Estimated Closing Net Assets Statement or decreased
      dollar-for-dollar by the amount by which Estimated Closing Net Assets are less
      than the Net Tax Benefit reflected on the Estimated Closing Net Assets
      Statement.

    

    Initial
      Share Number:
      the
      number of Initial Shares.

     

    Initial
      Shares:
      shares
      of Parent Common Stock having an aggregate Fair Market Value as of the Closing
      Date equal to the difference between $15,000,000 and the amount of the Escrowed
      Cash.

     

    Intellectual
      Property:
      means
      (a) all inventions (whether patentable or unpatentable and whether or not
      reduced to practice), all improvements thereto, and all patents, patent
      applications, and patent disclosures, together with all reissuances,
      continuations, continuations-in-part, revisions, extensions, and reexaminations
      thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
      and
      corporate names, together with all translations, adaptations, derivations,
      and
      combinations thereof and including all goodwill associated therewith, and all
      applications, registrations and renewals in connection therewith, (c) all
      copyrightable works, all copyrights, and all applications, registrations and
      renewals in connection therewith, (d) all mask works and all applications,
      registrations and renewals in connection therewith, (e) all trade secrets and
      confidential information (including ideas, research and development, know-how,
      formulas, compositions, manufacturing and production processes and techniques,
      technical data, designs, drawings, specifications, customer and supplier lists,
      pricing and cost information, and business and marketing plans and proposals),
      (f) all computer software (including data and related documentation), (g) all
      other proprietary rights, and (h) all copies and tangible embodiments thereof
      (in whatever form or medium).

     

    Investment
      Agreements:
      the
      Amended and Restated Investor Rights Agreement dated July 30, 1998 by and among
      the Company and the parties listed therein, as amended and the Amended and
      Restated Stockholders Agreement dated May 9, 1997 by and among the Company
      and
      the parties listed therein. 

     

    Joint
      Information Statement/Private
      Placement Memorandum:
      the
      joint information statement and private placement memorandum to be prepared
      by
      the Company and Parent for the purpose of soliciting the consent of the
      Stockholders to the transactions contemplated by this Agreement and effecting
      a
      private placement of the Shares.  

     

    Law:
      any
      federal, state, local or foreign law (including common law), statute, code,
      ordinance, rule, regulation or binding administrative
      pronouncement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Knowledge:
      with
      respect to the Company, the actual subjective knowledge of each individual
      party
      to a Joinder Agreement or a Key Employee Employment Agreement and matters that
      an individual in the position of such individual, in light of the relevant
      circumstances, reasonably would be expected to know upon due
      inquiry.

     

    Liabilities:
      liabilities or obligations, fixed, accrued, contingent or otherwise (whether
      known or unknown, asserted or unasserted), including liabilities for Taxes
      or
      other governmental charges and any penalties, interest or fines thereon or
      in
      respect thereof.

     

    Losses:
      the
      meaning set forth in Section 8.1(a) hereof.

     

    Market
      Price:
      the
“market price of a common share” determined by the Board of Directors of the
      Company pursuant to the Certificate of Incorporation for purposes of determining
      the conversion ratios applicable to the Preferred Stock.

     

    Material
      Adverse Effect:
      with
      respect to any Person, any materially adverse change in or effect on the
      condition (financial or otherwise), business, operations, assets, properties,
      prospects, results of operations, capitalization, cash flows or employee, client
      or customer relations of such Person except for (a) the direct effects of
      compliance with this Agreement on the operating performance of such Person,
      including expenses reasonably incurred by such Person in entering into this
      Agreement and consummating the transactions contemplated by this Agreement
      and
      (b) any change proximately caused by the public announcement of this
      Agreement or the Merger. 

     

    Merger:
      the
      meaning set forth in Recitals hereto.

     

    Merger
      Consideration:
      collectively, the Net Closing Date Cash Distribution and any Additional Merger
      Consideration. 

     

    Merger
      Sub:
      the
      meaning set forth in Recitals hereto.

     

    Net
      Tax Benefit:
      at any
      time, the amount (positive or negative) by which (i) the difference between
      "Prepaid Tax" and "Accrued Tax" on the Closing Date Balance Sheet exceeds (ii)
      the difference between "Prepaid Tax" and "Accrued Tax" on Company's December
      31,
      2005 balance sheet.

     

    Neutral
      Accountant:
      Grant
      Thornton LLP or, if Grant Thornton LLP is not independent in the reasonable
      determination of Parent or the Stockholder Representative, then an independent
      auditing firm of nationally or regionally recognized standing selected by the
      mutual agreement of Parent and the Stockholder Representative within 15 days
      of
      the date on which the Neutral Accountant is proposed to begin serving or, if
      Parent and the Stockholder Representative are unable to agree within such
      period, an independent auditing firm of nationally or regionally recognized
      standing selected jointly by two other such firms, one of which shall be
      specified by Parent and one of which shall be specified by the Stockholder
      Representative, within 15 days after the expiration of such period.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    NOL
      Realization:
      the
      realized value of the net operating losses reported on the Company's 2005
      Massachusetts tax return assuming that Parent has adequate profits during 2006
      to fully utilize such net operating losses.

     

    Option
      Loans:
      the
      loans made to Company employees prior to the date hereof, and the loans to
      be
      made to Company employees pursuant to Section 6.5, in connection with the
      exercise by such employees of Company Options.

     

    Option
      Exercise Prices:
      the
      exercise prices of any Company Options that are or have been exercised prior
      to
      the Effective Time that have not been paid in full at the Effective Time, to
      the
      extent of such non-payment.

    
       

    

    Option
      Share:
      a share
      of Company Stock issued upon exercise of an Outstanding Option.

     

    Order:
      any
      order, injunction, judgment, decree, ruling, writ, assessment or arbitration
      award.

     

    Outstanding
      Option:
      a stock
      option outstanding as of the date of this Agreement under either of the Company
      Option Plans.

     

    Parent:
      the
      meaning set forth in Recitals hereto.

     

    Permit:
      a
      governmental franchise, easement, permit, right, application, filing,
      registration, license or other authorization.

     

    Permitted
      Encumbrances:
      (a)
      liens for current taxes not yet due and payable, (b) liens, pledges or deposits
      incurred or made in connection with workmen’s compensation, unemployment
      insurance and other social security benefits incurred in the ordinary course
      of
      business that are listed on Schedule 1.2(C) and (c) liens under Article 9 of
      the
      Uniform Commercial Code that are purchase money security interests that are
      listed on Schedule 1.2(C), none of which liens described in (a) through (c)
      are
      material in the aggregate or individually.

     

    Person:
      an
      individual, a corporation, an association, a partnership, an estate, a limited
      liability company, a trust and any other entity or organization.

     

    Preferred
      Stock:
      all of
      the Company’s Series A Preferred Stock, Series C Preferred Stock, Series D
      Preferred Stock and Series E Preferred Stock.

     

    Pro
      Rata Portion:
      a
      fraction equal to (i) (a) with respect to each series of Preferred Stock, the
      Applicable Conversion Ratio, and (b) with respect to a share of Common Stock,
      1.000, divided by (ii) the total number of shares of Common Stock outstanding
      at
      the Effective Time determined on a Fully Diluted Basis. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Proceedings
      and Expenses:
      the
      meaning set forth in Section 8.1(b) hereof.

     

    Purchase
      Price:
      the
      meaning set forth in Recitals hereto.

     

    Release:
      means
      any release, spill, emission, leaking, pumping, injection, deposit, disposal,
      discharge, dispersal, migration or leaching into the indoor or outdoor
      environment, or into or out of any property.

     

    Remedial
      Action:
      means
      all actions to (x) clean up, remove, treat or in any other way address any
      Hazardous Material; (y) prevent the Release of any Hazardous Material so it
      does
      not endanger or threaten to endanger public health or welfare or the indoor
      or
      outdoor environment; or (z) perform pre-remedial studies and investigations
      or
      post-remedial monitoring and care.

     

    Response
      Notice:
      the
      meaning set forth in Section 8.4 hereof.

     

    Securities
      Act:
      The
      Securities Act of 1933, as amended.

     

    Series
      A Preferred Stock:
      the
      meaning set forth in Recitals hereto.

     

    Series
      A-1 Accretion Amount:
      an
      amount with respect to each share of Series A Preferred Stock originally issued
      on January 11, 1995 equal to $155.10, plus an additional amount equal to $0.060
      per share for each day from and after the Assumed Closing Date to but excluding
      the Closing Date.

     

    Series
      A-2 Accretion Amount:
      an
      amount with respect to each share of Series A Preferred Stock originally issued
      on July 11, 1995, equal to $144.60, plus an additional amount equal to $0.057
      per share for each day from and after the Assumed Closing Date to but excluding
      the Closing Date.

     

    Series
      C Preferred Stock:
      the
      meaning set forth in Recitals hereto.

     

    Series
      C-1 Accretion Amount:
      an
      amount with respect to each share of Series C Preferred Stock originally issued
      on May 19, 1997, equal to $109.69, plus an additional amount equal to $0.049
      per
      share for each day from and after the Assumed Closing Date to but excluding
      the
      Closing Date.

     

    Series
      C-2 Accretion Amount:
      an
      amount with respect to each share of Series C Preferred Stock originally issued
      on September 30, 1997, equal to $102.95, plus an additional amount equal to
      $0.048 per share for each day from and after the Assumed Closing Date to but
      excluding the Closing Date.

     

    Series
      C-3 Accretion Amount:
      an
      amount with respect to each share of Series C Preferred Stock originally issued
      on December 31, 1997, equal to $98.73, plus an additional amount equal to $0.047
      per share for each day from and after the Assumed Closing Date to but excluding
      the Closing Date.

     

    Series
      D Accretion Amount:
      an
      amount with respect to each share of Series D Preferred Stock equal to $89.16,
      plus an additional amount equal to $0.044 per share for each day from and after
      the Assumed Closing Date to but excluding the Closing Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Series
      D Certificate of Designation:
      Certificate of the Voting Powers, Designation, Preferences and Relative,
      Participating, Optional or Other Special Rights, and Qualifications, Limitations
      or Restrictions Thereof, of the Series D Convertible Preferred Stock of the
      Company. 

    

    Series
      D Closing Payment:
      an
      amount equal to the product of the Series D Payment Percentage and the Net
      Closing Date Cash Distribution.

    

    Series
      D Closing Payment Per Share:
      an
      amount equal to the Series D Closing Payment divided by the number of shares
      of
      Series D Preferred Stock issued and outstanding at the Effective
      Time.

    

    Series
      D Payment Percentage:
      2.33%,
      representing the aggregate percentage interest of the former holders of Series
      D
      Preferred Stock in each distribution of Merger Consideration arising under
      (x)
      Section 6(c) of the Series D Certificate of Designation and (y) Section 5(a)(i)
      of the Series D Purchase Agreement.

    

    Series
      D per Share Payment Percentage:
      the
      Series D Payment Percentage divided by the number of shares of Series D
      Preferred Stock issued and outstanding at the Effective Time.

     

    Series
      D Preferred Stock:
      the
      meaning set forth in Recitals hereto.

     

    Series
      D Purchase Agreement:
      the
      Purchase Agreement dated July 29, 1998 between the Company and Grey Ventures,
      Inc. 

     

    Series
      E Accretion Amount:
      an
      amount per share with respect to each share of Series E Preferred Stock equal
      to
      $77.47, plus an additional amount equal to $0.042 per share for each day after
      the Assumed Closing Date to and including the Closing Date.

     

    Series
      E Preferred Stock:
      the
      meaning set forth in Recitals hereto.

     

    Specified
      Liabilities:
      the
      meaning set forth in Section 2.4(b) hereof.

    

    Specified
      Liabilities Schedule:
      the
      meaning set forth in Section 2.4(b) hereof.

    

    Stockholder
      Approval:
      a
      majority of the shares of Company Stock, voting together as a single class
      on an
      as converted basis in accordance with the Certificate of Incorporation and
      the
      DGCL.

     

    Stockholders:
      all
      holders of Company Stock at the Effective Time (including all holders
      of Company Stock issued upon exercise of Outstanding Options prior to the
      Effective Time).

     

    Stockholder
      Representative:
      the
      meaning set forth in Recitals hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Straddle
      Period:
      the
      meaning set forth in Section 9.2 hereof.

    

    Survival
      Period:
      the
      meaning set forth in Section 8.5 hereof.

    

    Surviving
      Corporation:
      the
      meaning set forth in Section 2.1 hereof.

     

    Tax
      Refund Payment:
      the
      Company's 2005 federal tax refund payment.

    

    Tax
      Returns:
      the
      meaning set forth in Section 3.9(d) hereof.

    

    Taxes:
      the
      meaning set forth in Section 3.9(d) hereof.

     

    Third-party
      Parent Claims:
      the
      meaning set forth in Section 8.6 hereof.

     

    Transaction
      Documents:
      with
      respect to any Person, this Agreement, together with any other agreements,
      instruments, certificates and documents executed by such Person in connection
      herewith or therewith.

     

    Variable
      Conversion Ratio:
      the
      quotient obtained by dividing (i) with respect to a share of Series A Preferred
      Stock, the Applicable Series A Accretion Amount; with respect to a share of
      Series C Preferred Stock, the Applicable Series C Accretion Amount; with respect
      to a share of Series D Preferred Stock, the Series D Accretion Amount; and
      with
      respect to a share of Series E Preferred Stock, the Series E Accretion Amount,
      by (ii) the Market Price.

    

    ARTICLE
      2.  THE
      MERGER

     

    2.1  Procedure
      for the Merger.
      The
      Merger Sub shall be merged, in accordance with the applicable provisions of
      the
      DGCL, with and into the Company, which shall be the surviving corporation and
      is
      sometimes referred to herein as the “Surviving
      Corporation.”
The
      Merger shall be effected by filing a certificate of merger substantially in
      the
      form attached as Exhibit
      A
      hereto
      (the “Certificate
      of Merger”)
      with
      the Secretary of State of the State of Delaware in accordance with the
      applicable provisions of the DGCL. The effective date of the Merger (the
“Effective
      Date”)
      shall
      be the date upon which the Certificate of Merger shall have been filed with
      the
      Secretary of State of the State of Delaware and the effective time of the Merger
      (the “Effective
      Time”)
      shall
      be the time of the filing of the Certificate of Merger with the Secretary of
      State of the State of Delaware. The Certificate of Merger will be filed within
      three (3) Business Days after the satisfaction of the conditions precedent
      set
      forth in Article 7.

     

    2.2  Surviving
      Corporation. 

     

    (1)  Corporate
      Existence.
      The
      Surviving Corporation shall continue its corporate existence under the laws
      of
      the State of Delaware. The separate corporate existence of the Merger Sub shall
      cease at the Effective Time.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (2)  Certificate
      of Incorporation and By-Laws.
      The
      Certificate of Incorporation of the Surviving Corporation shall be amended
      and
      restated to read the same as the Certificate of Incorporation of Merger Sub
      as
      in effect immediately prior to the Effective Time (except that such Certificate
      of Incorporation shall continue to reflect the name of the Surviving Corporation
      as “Adheris, Inc.”) until the same may be further amended thereafter in
      accordance with the DGCL and such Certificate of Incorporation.
      The
      by-laws of Merger Sub, as in effect immediately prior to the Effective Time,
      shall be amended and restated to read the same as the by-laws of the Surviving
      Corporation, except that all references to the Merger Sub in the by-laws of
      the
      Surviving Corporation shall be changed to refer to “Adheris, Inc.”, until the
      same shall be amended thereafter in accordance with the DGCL, the Certificate
      of
      Incorporation and such by-laws.

     

    (3)  Directors
      and Officers.
      As of
      the Effective Time, (i) the directors of Merger Sub shall be the sole directors
      of the Surviving Corporation and (ii) the officers of the Company shall remain
      officers of the Surviving Corporation until such time as they are removed in
      accordance with the governing documents of the Surviving Corporation, in each
      case to hold office in accordance with the Certificate of Incorporation and
      the
      by-laws of the Surviving Corporation.

     

    (4)  Effect
      of the Merger.
      As of
      the Effective Time, the effect of the Merger shall be as provided in this
      Agreement and the applicable provisions of the DGCL. Without limiting the
      generality of the foregoing, at the Effective Time, all the property, rights,
      privileges, powers and franchises of the Company and Merger Sub shall vest
      in
      the Surviving Corporation, and all the debts, liabilities and duties of the
      Company and Merger Sub shall become the debts, liabilities and duties of the
      Surviving Corporation.

     

    2.3  Payment
      of Merger Consideration; Status and Conversion of
      Securities.

     

    (a)  Payment
      of Merger Consideration.
      At the
      Closing, (i) the difference between the Initial Cash Payment and the amount
      of
      the Specified Liabilities set forth on the Specified Liabilities Schedule (the
      "Closing
      Date Cash Distribution"),
      reduced by the Net Tax Benefit reflected on the Estimated Net Assets Statement,
      shall be paid by Parent to the non-interest bearing IOLTA account of The
      Feinberg Law Group, LLC, as exchange agent (the “Exchange
      Agent”),
      by
      wire transfer of immediately available funds pursuant to an exchange agreement
      by and among Parent, the Company, the Stockholder Representative and the
      Exchange Agent in the form attached hereto as Exhibit
      B
      (the
“Exchange
      Agreement”)
      and
      (ii) (A) the Initial Shares and (B) cash in an amount equal to the Designated
      Option Percentage of $15 million (the “Escrowed
      Cash”
and,
      together with the Initial Shares and any additions thereto or substitutions
      therefor in accordance with the terms of the Escrow Agreement, the “Escrow
      Fund”)
      shall
      be deposited by Parent with Bank of New York, as escrow agent (the "Escrow
      Agent")
      pursuant to an escrow agreement among Parent, the Stockholder Representative
      and
      the Escrow Agent in the form attached hereto as Exhibit
      C
      (the
“Escrow
      Agreement”),
      which
      shall include, among other things, provisions permitting (x) Parent at the
      conclusion of the escrow period contemplated by the Escrow Agreement, to request
      that all or a portion of the Escrow Fund be maintained in escrow to secure
      indemnity claims in favor of Parent Indemnities and (y) the Stockholder
      Representative, at the conclusion of the escrow period contemplated by the
      Escrow Agreement, to seek arbitration of the reasonableness of withholding
      any
      portion of the Escrow Fund in respect of then pending indemnity claims in favor
      of Parent Indemnitees, all as more fully set forth in the Escrow Agreement.
      The
      Initial Shares shall be represented by a single stock certificate in the name
      of
      the Stockholder Representative, as nominee for the Stockholders at the time
      the
      Initial Shares are deposited with the Escrow Agent, and any portion of the
      Initial Shares that become distributable as Additional Merger Consideration
      shall be re-registered in the names of the Stockholders to whom such Initial
      Shares are to be released.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    A
      $200,000 portion of the Closing Date Cash Distribution shall be held in reserve
      by the Exchange Agent to fund the fees and expenses of the Stockholder
      Representative (together with any amounts retained by the Exchange Agent on
      behalf of the Stockholder Representative, following receipt by the Exchange
      Agent of written instructions from the Stockholder Representative, (i) from
      amounts available for distribution to Stockholders in accordance with the Escrow
      Agreement or (ii) pursuant to Section 8.7(b), the “Expense
      Reserve”).
      The
      Closing Date Cash Distribution less the Expense Reserve (the "Net
      Closing Date Cash Distribution")
      shall
      be distributed by the Exchange Agent to the holders of Company Stock (other
      than
      Dissenting Shares) pursuant to the exchange procedures set forth in Section
      2.6
      and the Exchange Agreement. The fees and expenses of the Exchange Agent shall
      be
      borne by the Stockholder Representative. The fees and expenses of the Escrow
      Agent shall be paid 50% by the Stockholder Representative from the Expense
      Reserve and 50% by Parent. 

     

    (b)  Effect
      on Company Stock.
      At the
      Effective Time, by virtue of the Merger and without any action on the part
      of
      Parent, Merger Sub, the Company or the holders of any of the following
      securities:

     

    (i)  Each
      share of Common Stock held by the Company as a treasury share shall be canceled
      and retired and no consideration shall be delivered in exchange
      thereof.

     

    (ii)  Each
      share of Series A Preferred Stock issued and outstanding immediately prior
      to
      the Effective Time (other than any Dissenting Shares) shall be converted into
      the right to receive (A) an amount of cash equal to the product of the
      Applicable Conversion Ratio and the Closing Consideration Per Share and (B)
      a
      Pro Rata Portion of 97.67% of any Additional Merger Consideration. As of the
      Effective Time, all such shares of Series A Preferred Stock shall cease to
      be
      outstanding, and each holder of a certificate representing any such share or
      shares of Series A Preferred Stock shall cease to have any rights with respect
      thereto except the right to receive the foregoing consideration in respect
      thereof. 

     

    (iii)  Each
      share of Series C Preferred Stock issued and outstanding immediately prior
      to
      the Effective Time (other than any Dissenting Shares) shall be converted into
      the right to receive (A) an amount of cash equal to the product of the
      Applicable Conversion Ratio and the Closing Consideration Per Share and (B)
      a
      Pro Rata Portion of 97.67% of any Additional Merger Consideration. As of the
      Effective Time, all such shares of Series C Preferred Stock shall cease to
      be
      outstanding, and each holder of a certificate representing any such share or
      shares of Series C Preferred Stock shall cease to have any rights with respect
      thereto except the right to receive the foregoing consideration in respect
      thereof.

     

    (iv)  Each
      share of Series D Preferred Stock issued and outstanding immediately prior
      to
      the Effective Time (other than any Dissenting Shares) shall be converted into
      the right to receive (A) an amount of cash equal to the product of the
      Applicable Conversion Ratio and the Closing Consideration Per Share, (B) the
      Series D Closing Payment per Share, (C) a Pro Rata Portion of 97.67% of any
      Additional Merger Consideration and (D) the Series D per Share Payment
      Percentage of any Additional Merger Consideration. As of the Effective Time,
      all
      such shares of Series D Preferred Stock shall cease to be outstanding, and
      each
      holder of a certificate representing any such share or shares of Series D
      Preferred Stock shall cease to have any rights with respect thereto except
      the
      right to receive the foregoing consideration in respect thereof. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (v)  Each
      share of Series E Preferred Stock issued and outstanding immediately prior
      to
      the Effective Time (other than any Dissenting Shares) shall be converted into
      the right to receive (A) an amount of cash equal to the product of the
      Applicable Conversion Ratio and the Closing Consideration Per Share and (B)
      a
      Pro Rata Portion of 97.67% of any Additional Merger Consideration. As of the
      Effective Time, all such shares of Series E Preferred Stock shall cease to
      be
      outstanding, and each holder of a certificate representing any such share or
      shares of Series E Preferred Stock shall cease to have any rights with respect
      thereto except the right to receive the foregoing consideration in respect
      thereof.

     

    (vi)  Each
      share of Common Stock issued and outstanding immediately prior to the Effective
      Time (other than any Dissenting Shares) shall be converted into the right to
      receive (A) an amount of cash equal to the Closing Consideration Per Share
      and
      (B) a Pro Rata Portion of 97.67% of any Additional Merger Consideration. As
      of
      the Effective Time, all such shares of Common Stock shall cease to be
      outstanding and shall automatically be canceled and retired and shall cease
      to
      exist, and each holder of a certificate representing any such share or shares
      of
      Common Stock shall cease to have any rights with respect thereto, except the
      right to receive the foregoing consideration in respect thereof.

     

    (c)  Capital
      Stock of Merger Sub.
      At the
      Effective Time, by virtue of the Merger and without any action on the part
      of
      Parent, Merger Sub, the Company or the holders of any of the following
      securities, each share of the common stock, $.01 par value of the Merger Sub
      issued and outstanding immediately prior to the Effective Time shall be
      converted into one share of common stock of the Surviving Corporation and each
      certificate evidencing ownership of any shares of Merger Sub shall evidence
      ownership of the same number of shares of common stock of the Surviving
      Corporation. 

     

    (d)  Form
      of Additional Merger Consideration.
      Additional Merger Consideration consisting of all or any portion of the Escrowed
      Cash shall be paid solely to former holders of Designated Options in respect
      of
      the Designated Option Shares formerly held by them. The Designated Option Share
      Percentage of any Additional Merger Consideration that is an Earnout Amount
      shall be paid in cash solely to former holders of Designated Options in respect
      of the Designated Option Shares formerly held by them. 

     

    (e)  Required
      Withholding.
      Parent,
      the Company and the Exchange Agent shall be entitled to deduct and withhold
      from
      any Merger Consideration payable under this Agreement such amounts as may be
      required to be deducted or withheld therefrom under (i) the Code,
      (ii) any applicable state, local or foreign Tax Laws or (iii) any
      other applicable Laws. To the extent that any amounts are so deducted and
      withheld, those amounts shall be treated as having been paid to the Person
      in
      respect of whom such deduction or withholding was made for all purposes under
      this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f)  Interests
      in Merger Consideration.
      Schedule 2.3 sets forth the allocation of cash and Initial Shares among the
      Stockholders (including holders of Designated Option Shares) on the Closing
      Date
      and the Pro Rata Portion of each Stockholder in any Additional Merger
      Consideration assuming that (i) the Closing occurs on the Assumed Closing Date,
      (ii) all Designated Options are exercised, (iii) the Specified Liabilities
      total
      $2,019,557, (iv) the "market value of a share common stock" as determined in
      accordance with the Certificate of Incorporation is $65.61 per share and (v)
      the
      other assumptions set forth therein. 

     

    2.4  Net
      Asset Adjustment

     

    (a)  (I)
      The
      Base Purchase Price shall be (i) increased dollar-for-dollar by the amount
      by
      which the Final Closing Net Assets exceeds the Net Tax Benefit as determined
      taking into account the Final Closing Net Assets Statement (after the completion
      of the procedures specified in Sections 2.4(c) and (d)) (the "Final
      Net Tax Benefit")
      or
      (ii) decreased dollar-for-dollar by the amount by which Final Closing Net Assets
      are less than the Final Net Tax Benefit. The payment in respect of any such
      adjustment described in paragraph (III) of this Section 2.4(a) shall not be
      due
      until the later of (x) the date the Company receives the Tax Refund Payment
      and
      (y) August 15, 2006. If (A) the difference between the sum of (x) the Tax Refund
      Payment and (y) the value of the net operating losses reflected on the Company's
      filed 2005 Massachusetts income tax return varies by more than 5% (positively
      or
      negatively) from (B) the Final Net Tax Benefit, each of Parent and the
      Stockholder Representative shall have the right to require the Final Closing
      Net
      Assets Statement to be adjusted so that the amounts accrued thereon in respect
      of the Final Net Tax Benefit reflect the Company's actual experience, and such
      statement as so adjusted shall thereafter be the "Final Closing Net Assets
      Statement" of paragraphs (II) and (III) of this Section 2.4(a) and the Final
      Net
      Tax Benefit set forth in paragraph 1 of Schedule 2.5. 

     

    (II)
      If
      Final Closing Net Assets are less than Estimated Closing Net Assets, Parent
      shall have the right to recover an amount equal to the amount of such shortfall
      either (i) reduced by two times the amount by which the Final Net Tax Benefit
      exceeds the Net Tax Benefit determined on the basis of the Estimated Closing
      Net
      Assets Statement or (ii) increased by two times the amount by which the Net
      Tax
      Benefit determined on the basis of the Estimated Closing Net Assets Statement
      exceeds the Final Net Tax Benefit. The difference between (x) the amount
      determined in accordance with the preceding sentence and (y) the amount, if
      any,
      by which the Final Net Tax Benefit exceeds the Net Tax Benefit determined on
      the
      basis of the Estimated Closing Net Assets Statement, may be recovered by Parent
      (A) from the Tax Refund Payment, (B) by reflecting a reduction of net operating
      losses available to the Company on the Final Closing Net Assets Statement or
      (C)
      in the same manner in which Parent may seek recourse with respect to an
      indemnifiable Loss pursuant Article VIII and the Escrow Agreement (without
      application of Section 8.7(a)). Except to the extent of any such recovery,
      the
      Tax Refund Payment (or, if less, a portion of the Tax Refund Payment equal
      to
      the Final Net Tax Benefit) shall be distributed to the Exchange Agent within
      five business days of the final determination of the Final Closing Net Assets
      Statement (whether pursuant to Sections 2.4(c) and (d) or Section
      2.4(a)(I)).

     

    (III)
      In
      the event that Final Closing Net Assets exceed Estimated Closing Net Assets,
      Parent shall make a payment to the Exchange Agent within five business days
      of
      the final determination of the Final Closing Net Assets Statement (whether
      pursuant to Sections 2.4(c) and (d) or Section 2.4(a)(I)) equal to such excess
      either (i) reduced by two times the amount by which the Final Net Tax Benefit
      exceeds the Net Tax Benefit determined in accordance with the Estimated Closing
      Net Assets Statement or (ii) increased by two times the amount by which the
      Net
      Tax Benefit determined in accordance with the Estimated Closing Net Assets
      Statement exceeds the Final Net Tax Benefit.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)  Not
      less
      than three business days prior to the Closing Date, the Company will prepare
      and
      deliver to Parent and the Stockholder Representative (i) a good faith estimate
      (the "Estimated
      Closing Net Assets Statement")
      of
      Closing Net Assets (the “Estimated
      Closing Net Assets”)
      and
      (ii) a schedule (the "Specified
      Liabilities Schedule")
      of (A)
      the amount of fees owed at Closing by the Company to its or his attorneys and
      accountants (which amount will be paid directly by Parent to such attorneys
      and
      accountants at the Closing) and (B) the amount of the Blackstone Fee (which
      amount shall be paid directly by Parent to Blackstone at the Closing)
      (collectively, the "Specified
      Liabilities").
      The
      Estimated Net Assets Statement and the Specified Liabilities Schedule shall
      be
      reasonably acceptable to Parent. 

     

    (c)  Within
      sixty (60) days after the Closing, Parent shall prepare or cause to be prepared
      and delivered to the Stockholder Representative (a) a balance sheet of the
      Company immediately prior to the Effective Time (the “Closing
      Date Balance Sheet”),
      (b) a
      statement of Closing Net Assets (together with the Closing Date Balance Sheet,
      the "Closing
      Net Assets Statement").
      The
      Closing Date Balance Sheet shall not give effect to the transactions
      contemplated by this Agreement other than (i) the payment on behalf of the
      Company of the Specified Liabilities set forth on the Specified Liabilities
      Schedule (with the result that the Specified Liabilities set forth on the
      Specified Liabilities Schedule shall not appear on the Closing Date Balance
      Sheet) and (ii) the reflection thereon in the changes in the Company's tax
      assets and liabilities attributable to compensation deductions related to the
      exercise of Company Options (to the extent attributed to pre-Closing periods
      in
      accordance with Section 6.5). The Closing Date Balance Sheet and the statement
      of Closing Net Assets included in the Closing Net Assets Statement will be
      prepared and determined in accordance with GAAP and the accounting policies
      and
      practices of the Company and consistent with the balance sheet attached hereto
      as Exhibit
      D.
      Parent
      shall provide the Stockholder Representative and a single accounting firm for
      the Stockholder Representative reasonable access to all (i) work papers and
      written procedures used to prepare the Closing Net Assets Statement and (ii)
      books and records and personnel to the extent reasonably necessary to enable
      the
      Stockholder Representative and such accounting firm to conduct a sufficient
      review of the Closing Net Assets Statement and verify the calculation of Closing
      Net Assets. If the Stockholder Representative disputes the Closing Net Assets
      as
      shown on the Closing Net Assets Statement prepared by Parent, the Stockholder
      Representative shall deliver to Parent within sixty (60) days after receipt
      of
      the Closing Net Assets Statement a statement (the “Dispute
      Notice”)
      setting forth the Stockholder Representative’s calculation of the Closing Net
      Assets and describing in reasonable detail the basis for the dispute. The
      parties shall use reasonable efforts to resolve such differences regarding
      the
      determination of the Closing Net Assets within a period of sixty (60) days
      after
      the Stockholder Representative has given the Dispute Notice. If the parties
      resolve such differences, Closing Net Assets agreed to by Parent and the
      Stockholder Representative shall be deemed to be the “Final
      Closing Net Assets”
and
      the
      Closing Net Assets Statement agreed to by Parent and the Stockholder
      Representative shall be deemed to be the “Final
      Closing Net Assets Statement.”

     

    (d)  If
      Parent
      and the Stockholder Representative do not reach a final resolution on the
      Closing Net Assets within sixty (60) days after the Stockholder Representative
      has given the Dispute Notice, the Neutral Accountant shall resolve such
      differences, pursuant to an engagement agreement among Parent, the Stockholder
      Representative and the Neutral Accountant (which Parent and the Stockholder
      Representative agree to execute promptly), in the manner provided below. Parent
      and the Stockholder Representative shall each be entitled to make a presentation
      to the Neutral Accountant, pursuant to procedures to be agreed to among Parent,
      the Stockholder Representative and the Neutral Accountant (or, if they cannot
      agree on such procedures, pursuant to procedures determined by the Neutral
      Accountant) regarding the calculation of Closing Net Assets, as applicable;
      and
      the Neutral Accountant shall be required to resolve the differences between
      Parent and the Stockholder Representative and determine Closing Net Assets
      within forty (40) days after the engagement of the Neutral Accountant. Closing
      Net Assets Amount determined by the Neutral Accountant shall be deemed to be
      the
      Final Closing Net Assets and the Closing Net Assets Statement, as adjusted
      to
      reflect such determination, shall be deemed to be the Final Closing Net Assets
      Statement. Such determination by the Neutral Accountant shall be conclusive
      and
      binding upon the parties absent fraud or manifest error. In the event either
      Parent or the Stockholder Representative believes the determination of the
      Neutral Accountant reflects a manifest error, Parent or the Stockholder
      Representative shall be entitled to specify the error to the Neutral Accountant
      in writing, in reasonable detail (with a copy to the other), within ten business
      days of the date of delivery to the parties of the Neutral Accountant’s
      determination, and any correction made by the Neutral Accountant (which the
      Neutral Accountant shall be requested to make within ten business days after
      such date of delivery) shall supersede the Neutral Accountant’s initial
      determination. Nothing in this Section 2.4(d) shall be construed to authorize
      or
      permit the Neutral Accountant to:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (i)  determine
      any questions or matters whatsoever under or in connection with this Agreement
      except for the resolution of differences between Parent and the Stockholder
      Representative regarding the determination of Closing Net Assets;
      or

     

    (ii)  resolve
      any such differences by making an adjustment to the Closing Net Assets Statement
      that is outside of the range(s) defined by amounts as finally proposed by Parent
      and the Stockholder Representative.

     

    (e)  Parent
      and the Stockholder Representative shall each pay one half of the fees and
      expenses of the Neutral Accountant. 

     

    2.5  Earnout

     

    (a)  The
      Stockholders will be entitled to additional consideration from Parent as
      provided in Schedule 2.5 (any such additional consideration, an "Earnout
      Amount").
      

     

    (b)  At
      Parent's option, to the extent set forth in Schedule 2.5, each Earnout Amount
      may be satisfied by the delivery to the Exchange Agent of unregistered shares
      of
      Parent Common Stock having a Fair Market Value, determined as of the applicable
      Final Earnout Amount Determination Date (the "Value
      Date"),
      equal
      to such portion of such Earnout Amount that Parent determines to satisfy by
      delivery of Parent Common Stock. The amount of each Earnout Amount that may
      be
      so satisfied, expressed as a percentage, is referred to herein as the
      "Share
      Percentage."
      Shares
      of Parent Common Stock issued in satisfaction of any portion of an Earnout
      Amount are referred to as "Earnout
      Shares"
      and,
      together with the Initial Shares, as the "Shares."
      In no
      event will any Shares be issued hereunder if the issuance of such Shares would
      cause (i) the total number of Shares issued pursuant to this Agreement to exceed
      19.9% of the number of shares of Parent Common Stock outstanding immediately
      prior to the Closing or (ii) the voting power of the Shares issued pursuant
      to
      this Agreement to exceed 19.9% of the voting power of the voting securities
      of
      Parent outstanding immediately prior to the Closing. Any portion of the Purchase
      Price that would otherwise be satisfied by the issuance of Shares in excess
      of
      such amount, and any other portion of an Earnout Amount that is not satisfied
      through the issuance of Earnout Shares, will be paid in cash by wire transfer
      of
      immediately available funds to the Exchange Agent. Furthermore, no portion
      of
      any Designated Option Share Earnout Amount shall be satisfied by the delivery
      of
      Earnout Shares. Neither Parent nor any other Person makes any guarantee or
      representation to the Stockholder Representative or any other Stockholder that
      any Earnout Amount will be realized. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)  Parent
      will at its expense deliver to the Stockholder Representative within 15 days
      after the completion of the audit of Parent’s consolidated financial statements
      (which may include an audit of the financial statements of the Surviving
      Corporation on a non-consolidated basis) with respect to each of calendar year
      2006, calendar year 2007 and calendar year 2008 (each, an "Earnout
      Period")
      its
      calculation of EBIT for such period (each, an "Initial
      EBIT Amount")
      and
      the Earnout Amount, if any, payable under this Section 2.5. Parent will
      provide the Stockholder Representative and the Stockholder Representative's
      independent auditors with reasonable access to all books and records and working
      papers to the extent reasonably necessary to enable the Stockholder
      Representative and such accounting firm to verify such calculations after the
      delivery thereof. Such calculations will be binding on the parties, absent
      fraud
      or manifest error, unless the Stockholder Representative, within 60 days after
      the delivery of the calculations by Parent to the Stockholder Representative,
      notifies Parent in writing that it objects to any item or computation in
      connection with the calculations of the Initial EBIT Amount or the Earnout
      Amount and specify in reasonable detail the basis for such objection. If Parent
      and the Stockholder Representative are unable to agree upon the calculations
      within forty (40) days after any notice of objection has been given by the
      Stockholder Representative to Parent, then at the election of either the
      Stockholder Representative or Parent, the dispute will be submitted to the
      Neutral Accountant for a final determination. Such determination by the Neutral
      Accountant shall be conclusive and binding upon the parties absent fraud or
      manifest error. In the event either Parent or the Stockholder Representative
      believes the determination of the Neutral Accountant reflects a manifest error,
      Parent or the Stockholder Representative shall be entitled to specify the error
      to the Neutral Accountant in writing, in reasonable detail (with a copy to
      the
      other), within ten business days of the date of delivery to the parties of
      the
      Neutral Accountant’s determination, and any correction made by the Neutral
      Accountant (which the Neutral Accountant shall be requested to make within
      ten
      business days after such date of delivery) shall supersede the Neutral
      Accountant’s initial determination. Nothing in this Section 2.5(c) shall be
      construed to authorize or permit the Neutral Accountant to:

     

    (i)  determine
      any questions or matters whatsoever under or in connection with this Agreement
      except for the resolution of differences between Parent and the Stockholder
      Representative regarding the determination of the Final EBIT Amount and any
      applicable Earnout Amount; or

     

    (ii)  resolve
      any such differences by making an adjustment to the Final EBIT Amount and any
      applicable Earnout Amount that is outside of the range(s) defined by amounts
      as
      finally proposed by Parent and the Stockholder Representative.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)
      In
      the event a Neutral Accountant is engaged pursuant to Section 2.5(c), the
      Neutral Accountant shall have the authority to award to the substantially
      prevailing party its reasonable expenses (including reasonable fees and
      disbursements of counsel) incurred in connection with the proceeding before
      the
      Neutral Accountant. Absent such an award, each party shall bear its own expenses
      and Parent and the Stockholder Representative will each bear one-half of the
      fees, costs and expenses of the Neutral Accountant. 

     

    (e)
      For
      purposes of this Agreement, with respect to any Earnout Period, (i) the
      "Final
      EBIT Amount"
      for
      such period means the Initial EBIT Amount for such period, or such other amount
      as is agreed to by the Stockholder Representative and Parent following a timely
      notice of objection as contemplated under this Section 2.5(c), or such
      other amount as is determined by the Neutral Accountant, and (ii) the
      "Final
      Earnout Amount Determination Date"
      for
      such period means: (x) the date that is sixty-one (61) days after the delivery
      of Parent's calculation of the Initial EBIT Amount for such period to the
      Stockholder Representative, (y) such earlier date on which the Stockholder
      Representative delivers an irrevocable notice to Parent in writing that it
      agrees with Parent's calculation of such Initial EBIT Amount, or (z) if the
      Stockholder Representative timely objects to such Initial EBIT Amount, such
      date
      on which the Final EBIT Amount in respect thereof is otherwise determined
      pursuant to this Section 2.5.

     

    (f) In
      the
      event of a merger, consolidation or other transaction (a “Conversion
      Transaction”)
      as a
      result of which substantially all of the outstanding shares of Parent Common
      Stock are converted into the right to receive, in whole or in part, equity
      securities, if such equity securities are traded on the New York Stock Exchange,
      the American Stock Exchange, The Nasdaq Stock Market or another securities
      exchange or interdealer quotation system (“Listed
      Equity Securities”),
      (i)
      any issued Shares, including shares held pursuant to the Escrow Agreement,
      shall
      be eligible to participate in any Conversation Transaction on the same basis
      as
      other outstanding shares of Parent Common Stock and (ii) any portion of an
      Earnout Amount that would otherwise be permitted to be satisfied through the
      issuance of Parent Common Stock shall thereafter be permitted to be satisfied
      through the issuance of such Listed Equity Securities. For such purpose, such
      Listed Equity Securities shall be valued at their aggregate Fair Market Value
      as
      of the applicable Value Date. In the event that, in any Conversion Transaction,
      substantially all of the outstanding shares of Parent Common Stock are converted
      into the right to receive equity securities that are not Listed Equity
      Securities (or are converted into the right to receive a combination of such
      equity securities and cash), then, until such equity securities constitute
      Listed Equity Securities, any Earnout Amount that thereafter becomes due shall
      be required to be satisfied entirely in cash. In the event of a merger,
      consolidation or other transaction as a result of which substantially all of
      the
      outstanding shares of Parent Common Stock are converted into the right to
      receive only cash, any Earnout Amount that thereafter becomes due shall be
      required to be satisfied entirely in cash, provided that if the surviving or
      transferee entity in such transaction (or an Affiliate thereof) has a class
      of
      Listed Equity Securities, any portion of an Earnout Amount that would otherwise
      be permitted to be satisfied through the issuance of Parent Common Stock shall
      thereafter be permitted to be satisfied through the issuance of such Listed
      Equity Securities, valued at their aggregate Fair Market Value as of the
      applicable Value Date.

     

    2.6  Closing
      of the Company's Transfer Books;
      Exchange of Certificates for Consideration

     

    (1)   At
      the Effective Time, the transfer books of the Company shall be closed and no
      transfer of shares of Company Stock shall thereafter be made. If, after the
      Effective Time, certificates representing shares of Company Stock are presented
      to the Exchange Agent they shall be canceled and exchanged for the right to
      receive the applicable portion of the Merger Consideration.

     

    (2)  Those
      persons who are, as of the Effective Time, record holders of a certificate
      representing Company Stock (a “Certificate”)
      may
      tender such Certificates to the Exchange Agent at any time after the Effective
      Time. Upon receipt of a Stockholder's Certificate, the Exchange Agent shall
      promptly deliver to such Stockholder that portion of the Merger Consideration
      payable or distributable in respect of the shares of Company Stock represented
      by such certificate as such Merger Consideration becomes available for payment
      or distribution in accordance with the terms hereof.

     

    (3)  Any
      Merger Consideration (other than the Expense Reserve) that remains undistributed
      by the Exchange Agent to the Stockholders for one year after the date for
      delivery of such Merger Consideration provided for herein or in the Exchange
      Agreement (or any earlier time agreed to by Parent and the Exchange Agent)
      shall
      be delivered to Parent by the Exchange Agent, upon demand, and any such holders
      who have not theretofore complied with this Article 2 shall thereafter look
      only
      to Parent for payment of their claims for Merger Consideration. 

     

    (4)  Section
      2.6(4) of the Company Disclosure Schedule sets forth (i) the amount of each
      Option Loan outstanding as of the date hereof, (ii) the amount of each Option
      Loan to be made available to Company employees between the date of this
      Agreement and the Effective Time and (iii) the aggregate value of the cash
      Merger Consideration that will become distributable on the Closing Date
      (exclusive of Escrowed Cash) to each obligor or prospective obligor with respect
      to an Option Loan. All principal and interest owing on any Option Loans shall
      be
      repaid by deduction from the first amounts payable on the Closing Date
      (exclusive of Escrowed Cash) to the obligors under such Option Loans, including
      holders of Designated Option Shares. The aggregate amount credited against
      the
      Merger Consideration with respect to Option Loans shall be retained by Parent.
      Notwithstanding the foregoing, no amounts shall be paid to holders of any
      Company Stock or Company Options until such holder has complied with the
      exchange procedures set forth in the Exchange Agreement, including the
      completion and delivery of the Letter of Transmittal attached thereto, and
      the
      amounts payable in respect of shares of Company Stock shall be held in reserve
      by the Exchange Agent until compliance with such procedures has occurred.

     

    (5)  Dissenting
      Shares shall be excluded from any such distributions of Merger Consideration
      and
      treated instead in accordance with Section 2.8 below.  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.8  No
      Further Ownership Rights in Company Stock. The
      Merger Consideration paid and distributed in respect of Certificates surrendered
      pursuant to Section 2.6 shall be deemed to have been paid and distributed in
      full satisfaction of all rights pertaining to the shares of Company Stock
      theretofore represented by such Certificates. If, after the Effective Time,
      Certificates are presented to the Surviving Corporation or Parent for any
      reason, they shall be exchanged as provided in this Article 2, except as
      otherwise provided by law.

     

    2.8  Dissenting
      Shares

     

    (1)  
      Notwithstanding any provisions of this Agreement to the contrary, any shares
      of
      Company Stock held by a holder who has demanded and perfected his, her or its
      demand for appraisal of such holder’s shares in accordance with Section 262 of
      the DGCL (the “Dissenting
      Shares”)
      shall
      not be converted into or represent a right to receive the applicable portion
      of
      the Merger Consideration, but shall be entitled only to such rights as are
      granted by Section 262 of the DGCL. Each such holder shall cease to be a
      Stockholder for all purposes of this Agreement upon perfection of such holder’s
      demand for appraisal pursuant to the DGCL. Notwithstanding anything to the
      contrary in this Agreement or the Exchange Agreement, Parent shall be entitled
      (i) withhold (or to direct the Exchange Agent to remit to Parent) any of the
      Merger Consideration not paid on account of such Dissenting Shares pending
      resolution of the claims of such holders, or (ii) to direct the Exchange Agent
      to hold any Merger Consideration attributable to such Dissenting Shares and
      apply such Merger Consideration towards resolution of the claims of such
      holders, with any deficiency in the amount of Merger Consideration available
      to
      resolve such closing being funded by Parent and any excess of Merger
      Consideration over the amount required to resolve such claims being remitted
      to
      Parent upon demand therefor. The remaining Stockholders shall not be entitled
      to
      any portion of the Merger Consideration attributable to Dissenting
      Shares.

     

    (2)  Notwithstanding
      the provisions of subsection (a) of this Section 2.8, if any holder of Company
      Stock who demands appraisal of his, her or its Company Stock under the DGCL
      shall effectively withdraw or lose (through the failure to perfect or otherwise)
      his, her or its right to appraisal, then as of the occurrence of such event
      such
      holder's shares shall automatically be converted into and represent only the
      right to receive the Merger Consideration, without interest thereon, upon
      surrender of the certificate or certificates representing such shares to the
      Exchange Agent pursuant to the Exchange Agreement.

     

    (3)  The
      Company shall give prompt notice to Parent of any demand received by the Company
      for payment or appraisal of the Common Stock, and Parent shall have the right
      to
      participate in all negotiations and proceedings with respect to such demands.
      The Company shall not, except with the prior written consent of Parent, which
      consent shall not be unreasonably withheld, settle or offer to settle any such
      demand.

     

    2.9  Closing

     

    .
      The
      Closing (the “Closing”)
      of the
      Merger shall take place at the offices of Akerman Senterfitt LLP, 335 Madison
      Avenue, Suite 2600, New York, New York 10017 at 10:00 a.m. (New York time)
      no
      later than three (3) business days following the satisfaction or waiver of
      the
      closing conditions set forth in Article 7 (the “Closing
      Date”)
      or at
      such other place or time and date as the parties hereto agree. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.10  Registration
      Covenants

     

    (a)(i)
      If
      (but without any obligation to do so) Parent proposes to register under the
      Securities Act of 1933, as amended (the "Securities
      Act"),
      shares of Parent Common Stock (other than a registration on Form S-4 or Form
      S-8
      or any successor forms, a registration in which the only Parent Common Stock
      being registered is Parent Common Stock issuable upon conversion of debt
      securities which are also being registered or a registration that does not
      contemplate a distribution of the securities being registered on a firmly
      underwritten basis; it being understood that the filing of a shelf registration
      statement that contemplates a possible future offering that would give rise
      to
      registration rights hereunder shall not give rise to such rights until the
      applicable “take-down” of securities occurs), then Parent will give the
      Stockholder Representative written notice at least twenty (20) days in advance
      of the anticipated effectiveness of the related registration statement. Upon
      the
      written request of any Stockholder given within ten (10) days after giving
      of
      such notice by Parent (specifying the number of Shares proposed to be offered
      and sold by such Stockholder and setting forth the agreement of such Stockholder
      to comply with the provisions of this Section 2.10), Parent will, subject to
      the
      provisions of Section 1.8(b), include in such registration statement all of
      the Shares that each such Stockholder ("Registrable
      Shares")
      has
      requested to be registered (other than Shares then subject to a contractual
      lock-up pursuant to a Joinder Agreement unless otherwise consented to by Parent
      in its sole discretion); provided,
      however,
      that
      Parent will have the right to postpone or withdraw any registration statement
      pursuant to this Section 2.10 without obligation to any Stockholder, and
      Parent will not be required to disclose the reason for any such postponement
      or
      withdrawal or the anticipated duration of any such postponement (and each
      Stockholder will agree in its written request to include Registrable Shares
      in
      any registration to maintain in confidence the pendency of any registration
      statement that has not been filed and any postponement or withdrawal of a
      proposed registration). All expenses of such registration, other than
      underwriting commissions and discounts and legal and other advisory expenses
      of
      the Stockholders (with the exception of up to $25,000 in fees and disbursements
      of a single counsel retained to represent all selling stockholders (including
      any Stockholders requesting the inclusion of Registrable Shares in such
      registration), which counsel will be selected by the holders of a majority
      of
      the shares of Parent Common Stock sought to be included in such registration),
      will be borne by Parent. 

     

    (ii)
      Parent may, at its option, but without any obligation to do so, include in
      any
      non-underwritten registration of shares of Parent Common Stock (including any
      shelf registration statement filed by Parent, in whole or in part, for such
      purpose) any or all shares of Parent Common Stock issued or to be issued for
      the
      account of the Stockholders hereunder. 

     

    (iii)
      Parent may, but shall not be required to, include in any registration statement
      to which this Section 2.10 is applicable shares of Parent Common Stock subject
      to a contractual lock-up pursuant to a Joinder Agreement or other agreement
      with
      Parent. The inclusion of any shares of Parent Common Stock in such a
      registration statement shall not affect the operation of any such contractual
      lock-up to which such shares are then subject except as otherwise agreed by
      Parent in its sole discretion.

     

    (b)  Parent
      will not be required under Section 2.10(a)(i) to include Registrable Shares
      in an underwriting subject thereto unless the Stockholders proposing to include
      such Registrable Shares accept the terms of the underwriting as agreed upon
      in
      good faith between Parent and the underwriters (and become parties to the
      related underwriting agreement and any other customary arrangements relating
      to
      the offering of securities by selling stockholders, including custody
      arrangements), and then only in such quantity as the underwriters determine
      in
      their sole discretion will not jeopardize the success of the offering by Parent.
      If the total number of shares of Parent Common Stock, including Registrable
      Shares, to be included in such offering exceeds, in the underwriters' sole
      discretion, the number of shares that can be included without adversely
      affecting the success of the offering, then Parent will be required to include
      in the offering only that number of shares of Parent Common Stock, including
      Registrable Shares, which the underwriters determine in their sole discretion
      will not adversely affect the success of the offering (the "Maximum
      Offering Size").
      In
      such event, Parent will include in the registration statement relating to the
      offering (i) first, all shares of Parent Common Stock to be offered by Parent
      and (ii) second, to the extent the Maximum Offering Size exceeds the number
      of
      shares to be offered by Parent, the shares of Parent Common Stock proposed
      to be
      included by the selling stockholders, including the Stockholders proposing
      to
      include Registrable Shares in such registration statement. The shares of Parent
      Common Stock to be included in such registration statement pursuant to the
      preceding clause (ii) (the "Remaining
      Availability")
      will
      be allocated pro rata among such selling stockholders according to the total
      number of shares of Parent Common Stock owned by such selling stockholders
      (or
      in such other proportions as are mutually agreed to by such selling
      stockholders). No Stockholder will be entitled to include in a registration
      statement pursuant to this Section 2.10 Registrable Shares that may be sold
      pursuant to Rule 144 under the Securities Act during the three months following
      the date such registration statement becomes effective (the "144
      Exception").
      Parent may require each Stockholder to promptly furnish to Parent, as a
      condition precedent to including such Stockholder's Registrable Shares in any
      registration, such information regarding the distribution of such Stockholder's
      Registrable Shares as Parent or the underwriters may from time to time
      reasonably request in writing, but in no event will any Stockholder be required
      to make representations or warranties, or provide any indemnity, in connection
      with any transaction contemplated by this Section 2.10 except as to its
      ownership of, and the absence of Liens or other restrictions on, shares it
      is
      including in an offering and the information referred to in the first clause
      of
      this sentence that has been furnished by such Stockholder in
      writing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)  In
      the
      event Parent effects a registration to which Section 2.10 is applicable, except
      to the extent such registration is postponed or withdrawn by Parent, Parent
      will, as expeditiously as reasonably possible:

     

    (i)  
      prepare
      and file with the Securities and Exchange Commission (the "SEC")
      such
      amendments and supplements to the related registration statement and the
      prospectus included therein as may be necessary to comply with the provisions
      of
      the Securities Act with respect to the disposition of the securities covered
      by
      such registration statement;

     

    (ii)  
      furnish
      to the Stockholders without charge such number of copies of a prospectus and
      other documents as they may reasonably request in order to facilitate the
      disposition of the Registrable Shares included in such
      registration;

     

    (iii)  
      notify
      the Stockholders at any time when a prospectus relating thereto is required
      to
      be delivered under the Securities 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 the light of the circumstances then existing and
      provide the Stockholders with such amendment or supplement to such prospectus
      as
      may be required to ensure that such prospectus does 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
      the
      light of the circumstances then existing; 

     

    (iv)  
      cooperate with the Stockholders to facilitate the timely preparation and
      delivery of certificates representing Registrable Shares to be sold, which
      certificates will not bear any restrictive legends; and

     

    (v)  
      cause
      the Registrable Shares included in such registration statement to be listed
      on
      the same principal securities exchange or interdealer quotation system on which
      Parent Common Stock is then listed.

     

    (d)  With
      a
      view to making available to each Stockholder the benefits of Rule 144 under
      the
      Securities Act to the extent Parent has not made available to such Stockholder
      the opportunity to dispose of such securities in a registered offering, Parent
      agrees, for so long as Parent Common Stock is registered under the Securities
      Exchange Act of 1934, as amended (the "Exchange
      Act"),
      to:

     

    (i)  make
      and
      keep public information available (as those terms are defined in Rule 144,
      including paragraph (c)(2) of such Rule);

     

    (ii)  file
      with
      the SEC in a timely manner reports and other documents, if any, required of
      Parent under the Exchange Act and comply with all other public information
      reporting requirements of the SEC that are conditions to the availability of
      Rule 144; 

     

    (iii)  furnish
      to the Stockholders promptly upon request a written statement by Parent as
      to
      its compliance with the reporting requirements of Rule 144, and of the
      Securities Act and the Exchange Act, a copy of the most recent annual or
      quarterly report of Parent filed with the SEC, if any, and such other reports
      and documents of Parent as the Stockholders may reasonably request in availing
      themselves of any rule or regulation of the SEC allowing the Stockholders to
      sell Shares without registration; and

     

    (iv)  from
      time
      to time, upon the request of any Stockholder, cause counsel to Parent promptly
      to issue, at the expense of Parent, an opinion to the transfer agent for the
      Parent Common Stock and the broker for the applicable Stockholder confirming
      that shares of Parent Common Stock issued hereunder may be sold without
      registration under the Securities Act pursuant to Rule 144 promulgated under
      the
      Securities Act.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

            To
      the extent that
      shares of Parent Common Stock issued to any Stockholder hereunder and held
      by
      such Stockholder are included in a registration statement filed pursuant to
      this
      Section 2.10, such Stockholder shall be prohibited from disposing of such shares
      of Parent Common Stock other than pursuant to such registration statement.
      During the period from the date on which Parent notifies a Stockholder of its
      intent to include any of such Stockholder’s shares of Parent Common Stock in a
      registration statement filed pursuant to this Section 2.10 through the earlier
      of the date Parent abandons its efforts to effect the related registration
      of
      shares (provided that Parent uses its reasonable best efforts to do so through
      the date of such registration) and the date such registration statement is
      formally withdrawn (or otherwise ceases to be effective other than on an interim
      basis related to the filing of a post-effective amendment), such Stockholder
      shall be prohibited from disposing of any shares of Parent Common Stock that
      are
      the subject of such notice, provided they are included in such registration
      statement upon filing, by any means other than (i) prior to the filing of such
      registration statement, pursuant to an exemption from registration other than
      the exemption provided by Rule 144 under the Securities Act or (ii) pursuant
      to
      such registration statement, and shall in no event file a Form 144 with respect
      to such shares of Parent Common Stock. Each Stockholder shall take any and
      all
      actions reasonably requested by Parent to facilitate the inclusion of such
      Stockholder’s shares in a registration to which this Section 2.10 is applicable.

     

    (e)  (i)Parent
      will indemnify and hold harmless, to the fullest extent permitted by law, each
      holder of Registrable Shares registered pursuant to this Section 2.10, the
      officers, directors and agents, affiliates, advisors, brokers and employees
      of
      each of them, each person who controls such holder (within the meaning of
      Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
      officers, directors, agents, affiliates, advisors, brokers and employees of
      any
      such controlling person, from and against all Losses, as incurred, arising
      out
      of or based upon any untrue or alleged untrue statement of a material fact
      contained in any registration statement, prospectus or form of prospectus or
      in
      any amendment or supplement thereto or in any preliminary prospectus, or arising
      out of or based upon any omission or alleged omission to state therein a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, except to the extent the same are based solely upon
      information with respect to such holder furnished in writing to Parent by such
      holder expressly for use therein; provided,
      however,
      that
      Parent will not be liable to any holder of Registrable Shares to the extent
      that
      any such Losses arise out of or are based upon an untrue statement or alleged
      untrue statement or omission or alleged omission made in any preliminary
      prospectus if either (A)(i) such holder failed to send or deliver a copy of
      the
      prospectus with or prior to the delivery of written confirmation of the sale
      by
      such holder of a Registrable Share to the person asserting the claim from which
      such Losses arise and (ii) the prospectus would have corrected such untrue
      statement or alleged untrue statement or such omission or alleged omission
      or
      (B) such untrue statement or alleged untrue statement or such omission or
      alleged omission is corrected in an amendment or supplement to the prospectus
      previously furnished by or on behalf of Parent with copies of the prospectus
      as
      so amended or supplemented delivered by Parent, and such holder thereafter
      fails
      to deliver such prospectus as so amended or supplemented prior to or
      concurrently with the sale of a Registrable Share to the person asserting the
      claim from which such Losses arise; provided,
      further,
      however,
      that
      the indemnity agreement contained in this Section 2.10(e)(i) will not apply
      to
      amounts paid in settlement of any such Loss if such settlement is effected
      without the consent of Parent (which consent will not be unreasonably withheld).
      The rights of any holder of Registrable Shares hereunder will not be exclusive
      of the rights of any holder of Registrable Shares under any other agreement
      or
      instrument of any holder of Registrable Shares to which Parent or one of its
      Affiliates is a party. 

     

    (ii)
      Each
      holder of Registrable Securities registered pursuant to this Section 2.10 will
      indemnify and hold harmless, to the fullest extent permitted by law, Parent
      and
      its Affiliates, the officers, directors and agents, affiliates, advisors,
      brokers and employees of each of them, each underwriter of securities covered
      by
      a registration statement subject to this Section 2.10, each person who controls
      any such Person (within the meaning of Section 15 of the Securities Act or
      Section 20 of the Exchange Act), the officers, directors, agents, affiliates,
      advisors, brokers and employees of any such underwriter or controlling person
      and each other holder of Registrable Securities, from and against all Losses,
      as
      incurred, arising out of or based upon any untrue or alleged untrue statement
      of
      a material fact contained in any registration statement, prospectus or form
      of
      prospectus or in any amendment or supplement thereto or in any preliminary
      prospectus, or arising out of or based upon any omission or alleged omission
      to
      state therein a material fact required to be stated therein or necessary to
      make
      the statements therein not misleading, but only to the extent the same are
      based
      upon information with respect to such holder furnished in writing to Parent
      by
      such holder expressly for use therein and was relied on by Parent in the
      preparation thereof; provided,
      however,
      that
      the indemnity agreement contained in this Section 2.10(e)(ii) will not apply
      to
      amounts paid in settlement of any such Loss if such settlement is effected
      without the consent of such holder of Registrable Securities (which consent
      will
      not be unreasonably withheld). The rights of Parent and its Affiliates hereunder
      will not be exclusive of the rights of Parent and its Affiliates under any
      other
      agreement or instrument Parent or any of its Affiliates to which any holder
      of
      Registrable Securities is a party. In no event will the liability of any selling
      holder of Registrable Securities hereunder be greater in amount than the dollar
      amount of proceeds (net of payment of all expenses and underwriters' discounts
      and commissions) received by such holder upon the sale of the Registrable
      Securities giving rise to such indemnification obligation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.11  Transferability;
      Legending of Shares

     

    .
      Except
      as provided in Section 2.10(d)(iv) above, no Stockholder will be permitted
      to
      transfer any Shares in the absence of an effective registration statement unless
      such Stockholder has furnished Parent with an opinion of counsel, reasonably
      satisfactory to Parent, that such disposition does not require registration
      of
      such Shares under the Securities Act, or Parent determines that such opinion
      of
      counsel is unnecessary. Parent will not require opinions of counsel for
      transfers of Shares made pursuant to Rule 144 if Parent is provided with any
      certificates or other evidence of compliance with Rule 144 reasonably required
      by it in connection with such transfer (including a copy of the relevant Form
      144). The certificates representing the Shares issued hereunder will be issued
      with customary legends substantially similar to those on certificates of
      unregistered shares issued to officers or directors of Parent. 

     

    2.12  Stockholder
      Representative. 

     

    (1)  The
      Stockholder Representative is hereby constituted and appointed as agent for
      and
      on behalf of the Stockholders (other than the holders of Dissenting Shares).
      The
      Stockholder Representative shall incur no liability to the Stockholders with
      respect to any action taken or suffered by a Stockholder Representative in
      reliance upon any note, direction, instruction, consent, statement or other
      documents believed by the Stockholder Representative to be genuinely and duly
      authorized, nor for other action or inaction except his, her or its own willful
      misconduct or gross negligence. The Stockholder Representative may, in all
      questions arising under this Agreement, rely on the advice of counsel and the
      Stockholder Representative shall not be liable to the Stockholders for anything
      done, omitted or suffered in good faith by the Stockholder Representative based
      on such advice.

     

    (2)  In
      the
      event of the death or permanent disability of the Stockholder Representative,
      or
      his resignation as Stockholder Representative, a successor Stockholder
      Representative shall be elected by a majority vote of the Stockholders (other
      than the holders of Dissenting Shares), with each such Stockholder (or his,
      her
      or its successors or assigns) to be given a vote equal to the number of votes
      represented by the shares of Common Stock held by such Stockholder (calculated
      on an Fully Diluted Basis) immediately prior to the Effective Time. Each
      successor Stockholder Representative shall have all of the power, authority,
      rights and privileges conferred by this Agreement upon the original Stockholder
      Representative, and the term “Stockholder Representative” as used herein shall
      be deemed to include any successor Stockholder Representative.

     

    (3)  The
      Stockholder Representative shall have full power and authority to represent
      the
      Stockholders (other than the holders of Dissenting Shares), and their
      successors, with respect to all matters arising under Article 2 and Article
      8
      and all actions taken by any Stockholder Representative hereunder shall be
      binding upon the Company Stockholders, and their successors, as if expressly
      confirmed and ratified in writing by each of them. Without limiting the
      generality of the foregoing, the Stockholder Representative shall have full
      power and authority to interpret all of the terms and provisions of this
      Agreement, to compromise any claims asserted hereunder and to authorize any
      release of the Merger Consideration to be made with respect thereto, on behalf
      of the Company Stockholders and their successors.

     

    (4)  The
      Stockholder Representative shall be reimbursed for all expenses incurred by
      him
      out of the Expense Reserve pursuant to the terms of the Exchange Agreement,
      unless such fees and expenses are to be reimbursed by Parent pursuant to Article
      8.

     

    2.13  Closing
      Receivables

     

    .
      In the
      event that any account receivable shown on the Final Closing Net Assets
      Statement has not been collected in full by the six-month anniversary of the
      Closing (each an “Unpaid
      Receivable”),
      the
      face amount thereof, net of any unused portion of the receivables reserve
      reflected on the Final Closing Net Assets Statement (up to the face amount
      of
      the receivable), shall be established as a credit in favor of Parent. Such
      credit may be satisfied in the same manner in which Parent may seek recourse
      with respect to an indemnifiable Loss pursuant Article VIII and the Escrow
      Agreement (without application of Section 8.7(a)). All Unpaid Receivables shall
      continue to be collected by the Company in the ordinary course and consistent
      with procedures employed in the Company's recent historical practice, and if
      a
      payment is received by the Company with respect to an Unpaid Receivable with
      respect to which a credit has been satisfied in accordance with the preceding
      sentence, the Company shall make a corresponding payment to the Exchange Agent
      (or, if such satisfaction was effected by a release from the Escrow Fund and
      the
      Escrow Fund has not been fully released, to the Escrow Agent) up to the amount
      of such credit that was so satisfied. In the event the Company receives funds,
      not designated as being in payment of a specific account receivable, from a
      customer that is an account debtor with respect to both Unpaid Receivables
      and
      other accounts receivable, such funds shall be allocated to the oldest balance
      (excluding any balance that is in dispute with the account debtor). Subject
      to
      compliance with the preceding sentence, neither Parent, the Company nor any
      of
      their respective Affiliates shall have any liability to the Stockholders for
      the
      collection of any Unpaid Receivable.

     

    2.14 Additional
      Actions.
      If, at
      any time after the Effective Time, any further action is necessary or desirable
      to carry out the purposes of this Agreement or to vest, perfect or confirm
      in
      the Surviving Corporation title to or ownership or possession of any property,
      right, privilege, power, franchise or other asset of either the Company or
      Merger Sub acquired or to be acquired by reason of, or as a result of, the
      Merger, the officers and directors of the Company and Merger Sub are fully
      authorized in the name of their respective corporations or otherwise to take,
      and will take, all such lawful and necessary action, so long as such action
      is
      consistent with this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      3.  REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    On
      or
      prior to the date hereof, the Company has delivered to Parent both a schedule
      to
      this Agreement and a schedule to a separate Confidential Disclosure Agreement
      (collectively, the “Company
      Disclosure Schedule”)
      setting forth, among other matters, items the disclosure of which is necessary
      or appropriate either in response to an express disclosure requirement contained
      in a provision hereof or as an exception to one or more representations or
      warranties contained in this Article 3; provided that (a) the
      Company Disclosure Schedule includes only such items as are necessary to result
      in providing true and correct representations and warranties and (b) the
      inclusion of an item in the Company Disclosure Schedule as an exception to
      a
      representation or warranty shall not be deemed an admission by the Company
      that
      such item represents a material exception or fact, event or circumstance or
      that
      such item is reasonably likely to result in a Material Adverse Effect. The
      Company Disclosure Schedule makes explicit reference to the particular
      representation or warranty as to which exception is taken, which in each case
      shall constitute the sole representation and warranty as to which such exception
      shall apply, provided that the disclosures in the Company Disclosure Schedule
      that are set forth expressly therein with particularity will apply to all
      representations and warranties. The disclosure of the existence of a contract
      on
      the Company Disclosure Schedule shall not, without more, constitute the
      disclosure of any particular provisions of such contract or the actual or
      potential consequences thereof.

     

    The
      Company hereby represents and warrants to Parent and Merger Sub that, except
      as
      set forth in the Company Disclosure Schedule:

     

    3.1  Organization
      and Good Standing of the Company.
      The
      Company is an corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has all requisite corporate power
      and authority to own, lease and operate its properties and to carry on its
      business. The Company is duly qualified or authorized to do business as a
      foreign corporation and is in good standing under the laws of each jurisdiction
      in which it owns or leases real property and each other jurisdiction in which
      the conduct of its business or the ownership of its properties requires such
      qualification or authorization, except where the failure to be so qualified
      or
      authorized would not have a Material Adverse Effect. Section 3.1 of the Company
      Disclosure Schedule sets forth a true, correct and complete list of each
      jurisdiction in which the Company is qualified or authorized to do business
      as a
      foreign corporation. 

     

    3.2  Capitalization;
      Stockholders

     

    (1)  The
      authorized capital stock of the Company consists of 5,000,000 shares of Common
      Stock, of which 664,440 are validly issued and outstanding, fully paid and
      nonassessable and 15,810 are registered in the name of the Company as treasury
      shares; 30,000 shares of Series A Preferred Stock, of which 14,450 shares are
      validly issued and outstanding, fully paid and nonassessable and are convertible
      at the Applicable Conversion Ratio into 190,432 shares of Common Stock; 10,000
      shares of Series B Preferred Stock, of which no shares are validly issued and
      outstanding; 20,000 shares of Series C Preferred Stock, of which 15,420 shares
      are validly issued and outstanding, fully paid and nonassessable and are
      convertible at the Applicable Conversion Ratio into 161,789 shares of Common
      Stock; 13,678 shares of Series D Preferred Stock, of which 13,678 shares are
      validly issued and outstanding, fully paid and nonassessable and are convertible
      at the Applicable Conversion Ratio into 158,582 shares of Common Stock; and
      36,051 shares of Series E Preferred Stock, of which 10,000 shares are validly
      issued and outstanding, fully paid and nonassessable and are convertible at
      the
      Applicable Conversion Ratio into 114,158 shares of Common Stock. There are
      no
      other shares of capital stock of the Company issued or outstanding. The Series
      D
      Payment Percentage, as determined in accordance with the Certificate of
      Incorporation and the Series D Purchase Agreement, is 2.33%. All of the
      outstanding shares of the Company’s capital stock (i) have been issued in
      compliance with any preemptive rights, rights of first refusal or similar rights
      of shareholders and the terms of any agreement or other understanding binding
      upon the Company or the Stockholders and (ii) have been offered and sold
      pursuant to a valid exemption from registration under the Securities Act and
      are
      otherwise in compliance with such securities laws, the rules and regulations
      thereunder and state securities or “blue-sky” laws and regulation.

     

    (2)  The
      Company has reserved 475,000 shares of Common Stock for issuance under its
      1994
      Incentive and Non-Statutory Stock Option Plan, of which options to purchase
      140,250 shares are outstanding as of the date of this Agreement and the Company
      has reserved 30,000 shares of Common Stock for issuance under its 2004 Stock
      Option Plan, of which options to purchase 24,500 shares are outstanding on
      the
      date of this Agreement. Section 3.2(2) of the Company Disclosure Schedule
      accurately sets forth, with respect to each Company Option that is outstanding
      as of the date hereof: (i) the name of the holder of such Company Option, (ii)
      the total number of shares of Common Stock that are subject to such Company
      Option and the number of shares of Common Stock with respect to which such
      Company Option is immediately exercisable; (iii) the date on which such Company
      Option was granted and the term of such Company Option; (iv) the vesting
      schedule of such Company Option; and (v) the exercise price per share of Common
      Stock purchasable under such Company Option. No consent is required from the
      holders of the Company Options in connection with the acceleration and
      cancellation of such Company Options as contemplated by Section 6.5. Section
      6.5
      of the Company disclosure Schedule includes a list of the Designated Options
      (including the exercise prices thereof and the number of shares of Common Stock
      subject thereto) and the holders thereof.

     

    (3)  Except
      for the Investment Agreements, there are no voting agreements, voting trusts
      or
      other agreements (including, but not limited to, contractual or statutory
      preemptive rights or cumulative voting rights), commitments or understandings
      with respect to the voting or transfer of the capital stock or other equity
      interests of the Company. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (4)  Except
      as
      described in paragraphs (1) through (3) above, the Company does not have
      outstanding (i) any stock or other securities convertible into or
      exchangeable for shares of its capital stock or other equity interests or
      containing profit participation features, (ii) any options, warrants,
      equity securities, calls, rights, commitments or agreements of any character
      to
      which the Company is a party or by which it is bound obligating the Company
      to
      issue, deliver or sell, or cause to be issued, delivered or sold, additional
      shares of capital stock of the Company or obligating the Company to grant,
      extend, accelerate the vesting of or enter into any such option, warrant, equity
      security, call, right, commitment or agreement or (iii) any other
      agreement, commitment or understanding (other than the agreements set forth
      in
      Section 6(c) of the Series D Certificate of Designation and Section 5(a)(i)
      of
      the Series D Purchase Agreement) of any character, including, but not limited
      to, participation rights, relating to the issued or unissued capital stock
      or
      other securities of the Company. The Company is not subject to any obligation
      (contingent or otherwise) to repurchase or otherwise acquire or retire any
      shares of its capital stock or other equity interests or any warrants, options
      or other rights to acquire its capital stock or other equity interests.

     

    (5)  The
      Company has no subsidiaries nor does the Company own any equity or debt interest
      in any other entity.

     

    (6)  The
      outstanding shares of Company Stock of each class or series are owned in the
      amounts and by the Persons listed in Section 3.2 of the Company Disclosure
      Schedule.

     

    (7) The
      parties acknowledge that the representations and warranties contained in
      paragraph (1) above assume that the Closing Date occurs on the Assumed Closing
      Date.

     

    3.3  Authorization;
      No Conflict. 
      The
      Company has the requisite corporate power and authority to enter into this
      Agreement and the other Transaction Documents and to consummate the transactions
      contemplated by this Agreement and the other Transaction Documents. The
      execution and delivery of this Agreement and the other Transaction Documents
      by
      the Company and the consummation by the Company of the transactions contemplated
      hereby and thereby have been duly authorized by all necessary corporate action
      on the part of the Company. This Agreement has been duly executed and delivered
      by the Company and the Stockholder Representative and, assuming the due
      authorization, execution and delivery by Parent and Merger Sub, constitutes
      the
      valid and binding obligation of the Company and the Stockholder Representative,
      enforceable against the Company and the Stockholder Representative in accordance
      with its terms. The execution and delivery of the Transaction Documents by
      the
      Company and the Stockholder Representative do not, and the consummation of
      the
      transactions contemplated by the Transaction Documents and compliance with
      the
      provisions of the Transaction Documents by the Company and the Stockholder
      Representative will not, (i) conflict with the Certificate of Incorporation
      or by-laws (or comparable organizational documents) of the Company,
      (ii) result in any breach, violation or default (with or without notice or
      lapse of time, or both) under, or give rise to a right of termination,
      cancellation or creation or acceleration of any obligation or right of a third
      party or loss of a benefit under, or result in the creation of any Lien upon
      any
      of the properties or assets of the Company or the Stockholder Representative
      under, any loan or credit agreement, note, bond, mortgage, indenture, lease
      or
      other agreement, instrument, permit, concession, franchise, license or other
      authorization applicable to the Company or Stockholder Representative or their
      respective properties or assets, or (iii) subject to the governmental
      filings and other matters referred to in the following sentence, conflict with
      or violate any Law applicable to the Company or the Stockholder Representative
      or their respective properties or assets or any judgment, order or decree to
      which the Company or the Stockholder Representative or their respective
      properties or assets are subject. No authorization, consent or approval of,
      or
      filing with or notice to, any Governmental Entity is necessary for the execution
      and delivery of the Transaction Documents by the Company or the consummation
      by
      the Company of the transactions contemplated hereby, except for (i) the filing
      of the Certificate of Merger with the Secretary of State of the State of
      Delaware and (ii) the filing of a pre-merger notification report under the
      HSR
      Act and any other documents or information requested by the United States
      Department of Justice or the United States Federal Trade Commission in
      connection therewith.

     

    3.4  Corporate
      Records.

     

    (a)  The
      Company has delivered to Parent true, correct and complete copies of the
      Certificate of Incorporation (certified by the Secretary of State of the State
      of Delaware) and by-laws of the Company.

     

    (b)  The
      minute books of the Company previously made available to Parent contain all
      existing records of meetings and other corporate action of the stockholders
      and
      board of directors (including committees thereof) of the Company, and such
      records do not omit the disclosure of any corporate actions required to be
      referenced in the Company Disclosure Schedule. The stock certificate books
      and
      stock transfer ledgers of the Company previously made available to Parent are
      true, correct and complete. 

     

    (c)  The
      books, records and accounts of the Company accurately and fairly present in
      all
      material respects the financial condition, results of operations, members’
equity and cash flows of the Company. The Company has not engaged in any
      transaction with respect to its business, maintained any bank account for its
      business or used any of its funds, except for transactions, bank accounts and
      funds which have been and are reflected in the normally maintained books,
      records and accounts of the Company. The Company is not aware that any fraud,
      whether or not material, has occurred that involves or involved management
      or
      other employees who have a significant role in the Company’s system of internal
      accounting control. 

     

    3.5  Financial
      Statements.   Included
      in Section 3.5 of the Company Disclosure Schedule are the audited balance
      sheets of the Company as at December 31, 2003 and 2004, the unaudited balance
      sheet of the Company as at December 31, 2005 and the related statements of
      income, cash flow and stockholders’ equity of the Company for the periods then
      ended (such statements, including the related notes and schedules thereto,
      are
      referred to herein as the “Financial
      Statements”).
      The
      Financial Statements have been prepared from the books and records of the
      Company and fairly present in all material respects the financial position
      and
      results of operations, cash flows and shareholders’ equity of the Company as at
      the dates and for the periods reflected thereon in accordance with GAAP applied
      on a consistent basis throughout the periods indicated, subject in the case
      of
      the December 31, 2005 balance sheet, and the related statements of income,
      cash
      flow and stockholders’ equity for the period then ended, to normal year-end
      audit adjustments, which are not expected to be material individually or in
      the
      aggregate, and to the reconciliation of management statements to audited
      financial statements in accordance with past practice as set forth in Section
      3.5 of the Company Disclosure Schedule. The reserves reflected in the Financial
      Statements are adequate, appropriate and reasonable and have been calculated
      in
      a consistent manner. The Company does not have any Liabilities, including,
      without limitation, Liabilities on account of Taxes or governmental charges
      or
      penalties, interest or fines thereon or in respect thereof, except (i) to the
      extent specifically reflected and accrued for or specifically reserved against
      in the Financial Statements and (ii) for liabilities and obligations incurred
      in
      the ordinary and usual course of business consistent with past custom and
      practices since the Balance Sheet Date or incurred in connection with the
      transactions contemplated hereby, which, individually and in the aggregate,
      are
      not material. The financial forecast (the "2006
      Financial Projection")
      for
      the Company for the fiscal year 2006 included in Section 3.5 of the Company
      Disclosure Schedule was prepared by management in good faith based upon
      assumptions that management believes are reasonable. Parent acknowledges and
      agrees that (i) the Company makes no guarantee or representation that the
      results estimated in the 2006 Financial Projection will be realized, (ii) the
      factors upon which the assumptions and estimate were based may change after
      the
      date hereof and (iii) the results estimated in the 2006 Financial Projection
      may
      differ from actual results. For purposes hereof, the balance sheet of the
      Company as at December 31, 2005 included in the Financial Statements shall
      be
      the “Balance
      Sheet”
and
      December 31, 2005 shall be the “Balance
      Sheet Date.”
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.6  Compliance
      with Laws; Certain Regulatory Disclosures

     

    .
      (a) The
      Company is, and has at all times been, (i) to its Knowledge, in compliance
      with
      all state privacy, anti-kickback and similar Laws and (ii) in compliance in
      all
      material respects with all other Laws applicable to it or the operation, use,
      occupancy or ownership of its assets or properties or the conduct of its
      business, and the Company has not received notice (written or oral) from any
      Governmental Entity (including any state pharmacy board or comparable body)
      of,
      and has no Knowledge of, any failure to so comply. The Company holds all
      material Permits necessary under Law for the conduct of the Company’s business
      as currently conducted or proposed to be conducted, and the operations of the
      Company are not being conducted in violation of any Permit held by it. There
      is
      no investigation by a Governmental Entity pending against or, to the Knowledge
      of the Company, threatened against the Company.

     

    (b)
      The
      Company began conducting refill reminder programs in 1995 and currently conducts
      refill reminder programs in all 50 states of the United States. Included in
      Section 3.6 of the Company Disclosure Schedule are (i) a copy of every written
      communication (A) received by the Company or, to the extent a copy thereof
      was
      provided to the Company, by any other Person (including any pharmacy, pharmacy
      chain or pharmaceutical manufacturing client of the Company) since the Company's
      inception from any federal, state or local regulatory authority (including
      any
      board of pharmacy) having jurisdiction over the Company and relating directly
      to
      a regulatory inquiry or claimed violation of Law or (B) sent by the Company
      or,
      to the extent a copy thereof was provided to the Company, by any other Person
      (including any pharmacy, pharmacy chain or pharmaceutical manufacturing client
      of the Company) since the Company's inception to any federal, state or local
      regulatory authority (including any board of pharmacy) having jurisdiction
      over
      the Company and relating directly to a regulatory inquiry or claimed violation
      of Law and (ii) a copy of each material written communication from any
      consultant or advisor, including counsel, engaged in connection with any federal
      or state legal or regulatory matter involving privacy, anti-kickback or other
      health care-related regulation that includes substantive advice regarding
      compliance, enforcement risk or potential liability (whether to a Governmental
      Entity or a private party) that either (x) is inconsistent with the draft
      memorandum dated January 14, 2005 titled The Legal and Regulatory Environment
      for Adheris's Prescription Drug Patient Adherence and Educational Programs
      (the
“White
      Paper”)
      and
      was prepared later than January 14, 2005 or (y) addresses state law regulatory
      risks to any extent, regardless of the date of preparation. The Company has
      not
      received any advice from any such consultant or advisor, including counsel,
      that
      varies materially from or is in conflict or inconsistent with the statements,
      substantive assessments or conclusions set forth in the White Paper. The White
      Paper reflects the Company’s good faith assessment of the matters set forth
      therein and does not misstate any material fact or omit to state any material
      fact required to be stated therein in order to make the statements made therein,
      under the circumstances under which they were made, not misleading.

     

    3.7    Real
      Property. 

     

    (a)  The
      Company does not own in fee any real property or interest in real property.
      Section 3.7 of the Company Disclosure Schedule sets forth a complete list of
      all
      real property and interests in real property leased by the Company
      (individually, a “Real
      Property Lease”
and
      the
      real properties specified in such leases being referred to herein individually
      as a “Company
      Property”
and
      collectively as the “Company
      Properties”)
      as
      lessee. The Company Property constitutes all interests in real property
      currently used or currently held for use in connection with, or which are
      necessary for the continued operation of, the business of the Company as
      currently conducted or proposed to be conducted. The Company has a valid and
      enforceable leasehold interest under each of the Real Property Leases, subject
      to applicable bankruptcy, insolvency, reorganization, moratorium and similar
      laws affecting creditors’ rights and remedies generally and subject, as to
      enforceability, to general principles of equity (regardless of whether
      enforcement is sought in a proceeding at law or in equity). The Company has
      not
      received any notice of, and has no Knowledge of, any default or event that
      with
      notice or lapse of time, or both, would constitute a default under any of the
      Real Property Leases and the Company and each other party thereto is in
      compliance with the obligations of such party thereunder. All of the Company
      Property, buildings, fixtures and improvements thereon owned or leased by the
      Company are in good operating condition and repair (subject to normal wear
      and
      tear). The Company has delivered or otherwise made available to Parent true,
      correct and complete copies of the Real Property Leases, together with all
      amendments, modifications or supplements, if any, thereto. 

     

    (b)  The
      Company has all certificates of occupancy and Permits of any Governmental Entity
      necessary or useful for the current use and operation of each Company Property,
      and the Company has fully complied with all conditions of the Permits applicable
      to it. No default or violation, or event that with the lapse of time or giving
      of notice or both would become a default or violation, has occurred in the
      due
      observance of any Permit. 

     

    (c)  There
      does not exist any actual or, to the Knowledge of the Company, threatened or
      contemplated condemnation or eminent domain proceeding that affects Company
      Property or any part thereof, and the Company has not received any notice,
      oral
      or written, of the intention of any Governmental Entity or other Person to
      take
      or use all or any part thereof. 

     

    3.8  Tangible
      Assets.
      

     

    (a)
       Company
      Disclosure Schedule lists all leases of personal property (“Personal
      Property Leases”)
      relating to personal property used in the business of the Company as currently
      conducted or proposed to be conducted or to which the Company is a party or
      by
      which the properties of the Company are bound. The Company has delivered or
      otherwise made available to Parent true, correct and complete copies of the
      Personal Property Leases, together with all amendments, modifications or
      supplements thereto.

     

    (b)  The
      Company has a valid leasehold interest under each of the Personal Property
      Leases under which it is a lessee, subject to applicable bankruptcy, insolvency,
      reorganization, moratorium and similar laws affecting creditors’ rights and
      remedies generally and subject, as to enforceability, to general principles
      of
      equity (regardless of whether enforcement is sought in a proceeding at law
      or in
      equity), and there is no default under any Personal Property Lease by the
      Company or by any other party thereto, and no event has occurred that with
      the
      lapse of time or the giving of notice or both would constitute a default
      thereunder, and the Company and each other party thereto is in compliance with
      all obligations of the Company or such other party, as the case may be,
      thereunder. 

     

    (c)  The
      Company has good and marketable title to its property and assets as of the
      date
      hereof (which include, without limitation, all of the items of tangible personal
      property reflected in the Balance Sheet), free and clear of any and all Liens
      other than the Permitted Encumbrances. All tangible personal property of the
      Company, and all of the items of tangible personal property used by the Company
      under the Personal Property Leases, are in good condition and in a state of
      good
      maintenance and repair (ordinary wear and tear excepted) and are suitable for
      the purposes used. The Company's assets include all assets, rights and interests
      reasonably required for the continued conduct of the business of the Company
      as
      currently conducted or proposed to be conducted.

     

    3.9  Absence
      of Liabilities.
      The
      Company has no Liabilities except (a) to the extent specifically reflected
      and accrued for or specifically reserved against in the Balance Sheet, (b)
      for
      Liabilities incurred subsequent to the Balance Sheet Date in the ordinary course
      of business consistent with past custom and practice and (c) for
      liabilities specifically identified in Section 3.9 of the Company Disclosure
      Schedule. Without limitation of the foregoing, except as set forth on the
      Balance Sheet, the Company is not a party to any Contract for which the Company
      is liable for borrowed money either directly or indirectly, whether as
      principal, guarantor, indemnitor or otherwise, except for accounts payable
      incurred in the ordinary course of business.

     

    3.10  Litigation.
      Except
      as set forth in Section 3.10 of the Company Disclosure Schedule, there is no
      suit, action, proceeding, investigation, complaint or claim pending or, to
      the
      knowledge of the Company, threatened against the Company (or pending or
      threatened against any of the managers, officers, directors or key employees
      of
      the Company in relation to the Company or its business) before any court or
      other Governmental Entity or any arbitral tribunal, nor is there any basis
      for
      any such suit, action, proceeding, investigation, complaint or claim. Except
      as
      set forth in Section 3.10 of the Company Disclosure Schedule, the Company has
      not received any written opinion or memorandum or legal advice from legal
      counsel retained by the Company to the effect that it is exposed, from a legal
      standpoint, to any material Liability. The Company is not engaged in any legal
      action to recover monies due it or for damages sustained by it. Section 3.10
      of
      the Company Disclosure Schedule sets forth a list of all closed litigation
      matters to which the Company was a party during the five (5) years
      preceding the date hereof, the date such litigation was commenced or concluded,
      and the nature of the resolution thereof (including amounts paid in settlement
      or judgment). The Company is not subject to any Order of any Governmental
      Entity. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.11 Taxes.

     

    (1)  The
      Company has timely filed all Tax Returns (as defined below) that it was required
      to file. All such Tax Returns were correct and complete in all respects. All
      Taxes (as defined below) owed by the Company (whether or not shown on any Tax
      Return) have been paid or adequate reserves for the payment thereof have been
      established therefor. The Company is not the beneficiary of any extension of
      time within which to file any Tax Return. No written notice has been received
      from a taxing authority in a jurisdiction where the Company does not file Tax
      Returns that it is or may be subject to taxation by that jurisdiction. There
      are
      no Encumbrances on any of the assets of the Company that arose in connection
      with any failure (or alleged failure) to pay any Tax.

     

    (2)  The
      Company has withheld and paid to the appropriate taxing authority or other
      Governmental Entity all Taxes required to have been withheld and paid in
      connection with amounts paid or owing to any employee, independent contractor,
      creditor, stockholder, or other third party.

     

    (3)  The
      Company has not waived any statute of limitations in respect of Taxes or agreed
      to any extension of time with respect to a Tax assessment or
      deficiency.

     

    (4)  To
      the
      extent that the Company incurs Taxes after the date hereof with respect to
      periods ending on or prior to the Closing date, the Company shall pay all such
      Taxes on or prior to the Closing Date in compliance with all applicable laws
      and
      regulations, or if such Taxes are not yet due and payable on such date, the
      amount of such Taxes shall be accrued on the Closing Date Balance
      Sheet.

     

    (5)  With
      respect to each taxable period of the Company, either such taxable period has
      been audited by the relevant taxing authority or other relevant Governmental
      Entity or the time for assessing or collecting Taxes with respect to each such
      taxable period has closed and such taxable period is not subject to review
      by
      any relevant taxing authority or other relevant Governmental
      Entity.

     

    (6)  No
      deficiency or proposed adjustment which has not been settled or otherwise
      resolved for any amount of Taxes has been asserted or assessed by any taxing
      authority or other Governmental Entity against the Company.

     

    (7)  There
      is
      no action, suit, Governmental Entity proceeding, or audit or claim for refund
      in
      progress, pending or threatened against or with respect to the Company regarding
      Taxes.

     

    (8)  The
      Company will not be required (A) as a result of a change in method of accounting
      for a taxable period ending on or prior to the Closing Date, to include any
      adjustment under Section 481(c) of the Code in taxable income for any taxable
      period (or portion thereof) beginning after the Closing or (B) as a result
      of
      any “closing agreement,” as described in Section 7121 of the Code, to include
      any item of income or exclude any item of deduction from any taxable period
      (or
      portion thereof) beginning after the Closing.

     

    (9)  The
      Company has not been a member of an affiliated group (as defined in Section
      1504
      of the Code), filed or been included in a combined, consolidated or unitary
      income Tax Return, and is not a partner, member, owner or beneficiary of any
      entity treated as a partnership or a trust for Tax purposes. The Company has
      no
      liability for Taxes of any person under regulation 1.1502-6 of the Code or
      similar state or local laws or any successor or transferee liability for
      Taxes.

     

    (10)  The
      Company is not a party to or bound by any Tax allocation or Tax sharing
      agreement and has no contractual obligation to indemnify any other Person with
      respect to Taxes.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (11)  As
      a
      result of the Merger neither the Company nor Parent nor any Affiliate of either
      will be obligated to make a payment to a person that will be a “parachute
      payment” to a “disqualified individual” as those terms are defined in section
      280G of the Code.

     

    (12)  The
      Company is not and has not been a United States real property holding
      corporation within the meaning of Section 897(c)(2) of the Code during the
      applicable period specified in Section 897(c)(1)(A)(ii) of the
      Code.

     

    (13)  True,
      correct and complete copies of all income and sales Tax Returns filed by or
      with
      respect to the Company for taxable periods ending on or after December 31,
      2002
      have been furnished or made available to Parent.

     

    (14)  The
      Company has not participated in any reportable transaction as contemplated
      in
      Treasury Regulations Section 1.6011-4.

     

    (15)  The
      Company has not taken any action that is not in accordance with past practice
      that could defer a liability for Taxes of the Company from any taxable period
      ending on or before the Closing Date to any taxable period ending after such
      date.

     

    (16)  The
      Company is not subject to Tax, nor does it have a permanent establishment in,
      any foreign jurisdiction.

     

    (17)  There
      is
      currently no limitation on the utilization of net operating losses, capital
      losses, built-in losses, tax credits or similar items of the Company under
      Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury
      Regulations thereunder (and comparable provisions of state, local or foreign
      law).

     

    (18)  The
      Company has not been a party to any transaction governed by Section 355 of
      the
      Code.

     

    As
      used
      herein, “Tax
      Returns”
shall
      mean all returns and reports of or with respect to any Tax which are required
      to
      be filed by or with respect to the Company; “Taxes”
shall
      mean all taxes, charges, imposts, tariffs, governmental fees, levies or other
      similar assessments or liabilities, including income taxes, ad valorem taxes,
      excise taxes, withholding taxes, stamp taxes or other taxes of or with respect
      to gross receipts, premiums, real property, personal property, windfall profits,
      sales, use transfers, licensing, employment, payroll and franchises imposed
      by a
      taxing authority under any statute, law, rule or regulation, and such terms
      shall include any interest, fines, penalties, assessments or additions to tax
      resulting from, attributable to or incurred in connection with any such tax
      or
      any contest or dispute thereof “Taxes”
also
      includes any transferee or secondary liability for Taxes and any liability
      pursuant to an agreement or otherwise, including liability arising as a result
      of being or ceasing to be a member of any affiliated group, or being included
      or
      required to be included in any Tax Return relating thereto. 

     

    3.12  Employee
      Benefits.
      

     

    (a)  Section
      3.12 of the Company Disclosure Schedule sets forth a complete and correct list
      of (i) all “employee benefit plans,” as defined in Section 3(3) of the Employee
      Retirement Income Security Act of 1974, as amended (“ERISA”),
      and
      any other pension plans or employee benefit arrangements, programs or payroll
      practices (including without limitation severance pay, vacation pay, company
      awards, salary continuation for disability, sick leave, retirement, deferred
      compensation, bonus or other incentive compensation, stock purchase arrangements
      or policies, hospitalization, medical insurance, life insurance and scholarship
      programs) that is currently in effect or was maintained, sponsored or
      contributed to by the Company within the last six years to which the Company
      contributes or is obligated to contribute thereunder with respect to employees
      of the Company, or that has been approved before the date hereof but is not
      yet
      effective (“Employee
      Benefit Plans”)
      and
      (ii) all “employee pension plans,” as defined in Section 3(2) of ERISA,
      maintained by the Company or any trade or business (whether or not incorporated)
      which are under control of, or which are treated as a single employer with,
      the
      Company under Section 414(b), (c), (m) or (o) of the (“ERISA
      Affiliate”)
      or to
      which the Company or any ERISA Affiliate contributed or is obligated to
      contribute thereunder (“Pension
      Plans”)
      within
      the last six years. Section 3.12 of the Company Disclosure Schedule identifies,
      in separate categories, Employee Benefit Plans or Pension Plans that are
      (i) subject to Section 4063 and 4064 of ERISA (“Multiple
      Employer Plans”),
      (ii)
      multiemployer plans (as defined in Section 4001(a)(3) of ERISA) (“Multiemployer
      Plans”)
      or
      (iii) “benefit plans”, within the meaning of Section 5000(b)(1) of the Code
      providing continuing benefits after the termination of employment (other than
      as
      required by Section 4980B of the Code or Part 6 of Title I of ERISA and at
      the
      former employee’s or his beneficiary’s sole expense).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)  Neither
      the Company nor any ERISA Affiliate maintains, sponsors, or contributes, or
      has,
      within the past six years, maintained, sponsored or had any obligation to
      contribute to, for the benefit of current or former employees a defined benefit
      plan subject to Title IV of ERISA, (ii) any Multiemployer Plan or (iii) any
      Multiple Employer Plan.

     

    (c)  Each
      of
      the Employee Benefit Plans and Pension Plans intended to qualify under Section
      401 of the Code (“Qualified
      Plans”)
      so
      qualifies and has received a determination letter from the IRS to such effect
      and the trusts maintained thereto are exempt from federal income taxation under
      Section 501 of the Code and nothing has occurred or is expected to occur with
      respect to the operation of any such plan which caused or would cause the loss
      of such qualification or exemption or the imposition of any liability, penalty
      or tax under ERISA or the Code.

     

    (d)  All
      contributions and premiums required by Law or by the terms of any Employee
      Benefit Plan or Pension Plan or any agreement relating thereto have been timely
      made (without regard to any waivers granted with respect thereto) to any funds
      or trusts established thereunder or in connection therewith, and no accumulated
      funding deficiencies exist in any of such plans.

     

    (e)  There
      has
      been no violation of or failure to comply with ERISA or the Code with respect
      to
      the filing of applicable returns, reports, documents and notices regarding
      any
      of the Employee Benefit Plans or Pension Plans with the DOL, the IRS, the PBGC
      or any other Governmental Entity or the furnishing of such notices or documents
      to the participants or beneficiaries of the Employee Benefit Plans or Pension
      Plans.

     

    (f)  True,
      correct and complete copies of the following documents, with respect to
      each of the Employee Benefit Plans and Pension Plans, have been delivered to
      Parent: (A) any plans and related trust documents (all amendments thereto),
      investment management agreements, administrative service contracts, group
      annuity contracts, insurance contracts, collective bargaining agreements and
      employee handbooks, (B) the most recent Forms 5500 for the past three years
      and
      schedules thereto, (C) the most recent financial statements and actuarial
      valuations for the past three years, (D) the most recent IRS determination
      letter, (E) the most recent summary plan descriptions (including letters or
      other documents updating such descriptions) and (F) written descriptions of
      all
      non-written agreements relating to the Employee Benefit Plans and Pension
      Plans.

     

    (g)  There
      are
      no pending Legal Proceedings which have been asserted or instituted or, to
      the
      Knowledge of the Company, threatened against any of the Employee Benefit Plans
      or Pension Plans, the assets of any such plans or of any related trust or the
      Company, the plan administrator or any fiduciary of the Employee Benefit Plans
      or Pension Plans with respect to the operation of such plans (other than
      routine, uncontested benefit claims), and there are no facts or circumstances
      which could form the basis for any such Legal Proceeding. No Employee Benefit
      Plan or Pension Plan is under audit or investigation by the IRS, DOL, or any
      other Government Body and no such completed audit, if any, has resulted in
      the
      imposition of Tax, interest, or penalty.

     

    (h)  Each
      of
      the Employee Benefit Plans and Pension Plans complies with and has been
      maintained in accordance with its terms and all provisions of applicable Law,
      including ERISA and the Code, and all reporting and disclosure requirements
      have
      been satisfied on a timely basis.

     

    (i)  The
      Company and any ERISA Affiliate which maintains a “group health plan” within the
      meaning of Section 5000(b)(1) of the Code and each plan sponsor or administrator
      has complied with the COBRA reporting, disclosure, notice, election, and other
      benefit continuation and coverage requirements of Section 4980B of the Code
      or
      Part 6 of Title I of ERISA and the applicable regulations thereunder and any
      comparable state laws, and has not incurred any direct or indirect liability,
      and is not subject to any loss, assessment or excise tax, penalty, loss of
      federal income tax deduction or other sanction arising on account of or in
      respect of any direct or indirect failure at any time to comply with any such
      federal or state benefit continuation coverage requirements.

     

    (j)  Neither
      the Company nor a “party in interest” or “disqualified person” with respect to
      the Employee Benefit Plans or Pension Plans has engaged in a “prohibited
      transaction” within the meaning of Section 4975 of the Code or Section 406 of
      ERISA which has subjected or could subject the Company, any ERISA Affiliates,
      Parent, Parent or any trustee, administrator or other fiduciary to a tax penalty
      on prohibited transaction or any other liabilities with respect
      thereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (k)  Neither
      the execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will (i) result in any payment becoming due
      to
      any employee; (ii) increase any benefits otherwise payable under any Employee
      Benefit Plan or Pension Plan; or (iii) result in the acceleration of the time
      of
      payment or vesting of any such benefits.

     

    (l)  No
      membership interest or other security issued by the Company forms or has formed
      a material part of the assets of any Employee Benefit Plan or Pension
      Plan.

     

    (m)  The
      consummation of the transactions contemplated by this Agreement will not give
      rise to any liability for termination of any agreements related to any Employee
      Benefit Plan or Pension Plan.

     

    (n)  No
      amounts payable under any Employee Benefit Plan and Pension Plan will fail
      to be
      deductible for federal income tax purposes by virtue of Section 280G of the
      Code.

     

    (o)  Each
      Employee Benefit Plan or Pension Plan that purports to provide benefits which
      qualify for tax-favored treatment under Sections 79, 105, 106, 117, 120, 125,
      127, 129, and 132 of the Code satisfies the requirements of said
      Section(s).

     

    (p)  Each
      Employee Benefit Plan that purports to defer income complies with Section 409A
      of the Code, and the Company is not expected to have any future withholding
      tax
      obligations with respect to Code section 409A under any benefit
      plan.

     

    (q)  Each
      Employee Benefit Plan, or Pension Plan, its related trust and insurance
      agreement may be unilaterally amended or terminated on no more than 90 days
      notice.

     

    3.13  Labor.

     

    (a)  The
      Company is not a party to any labor or collective bargaining agreement and
      there
      are no labor or collective bargaining agreements which pertain to employees
      of
      the Company.

     

    (b)  No
      employees of the Company are represented by any labor organization. No labor
      organization or group of employees of the Company has made a pending demand
      for
      recognition, and there are no representation proceedings or petitions seeking
      a
      representation proceeding presently pending or, to the Knowledge of the Company,
      threatened to be brought or filed, with the National Labor Relations Board
      or
      other labor relations tribunal. There is no organizing activity involving the
      Company pending or, to the Knowledge of the Company, threatened by any labor
      organization or group of employees of the Company.

     

    (c)  There
      are
      no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
      grievances or other labor disputes pending or, to the Knowledge of the Company,
      threatened against or involving the Company. There are no unfair labor practice
      charges, grievances or complaints pending or, to the Knowledge of the Company,
      threatened by or on behalf of any employee or group of employees of the
      Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)  There
      are
      no complaints, charges or claims against the Company pending or, to the
      Knowledge of the Company, threatened which could be brought or filed, with
      any
      public or Governmental Entity based on, arising out of, in connection with,
      or
      otherwise relating to the employment or termination of employment by the
      Company, of any individual.

     

    (e)  The
      Company is in compliance with all Laws and Orders relating to the employment
      of
      labor, including all such Laws and orders relating to wages, hours, the Worker
      Adjustment and Retraining Notification Act and any similar state, local or
      foreign “plant closing” Law (“WARN”),
      collective bargaining, discrimination, civil rights, safety and health, worker’s
      compensation, payment of overtime wages and the collection and payment of
      withholding and/or social security taxes and any similar tax.

     

    (f)  There
      has
      been no “mass layoff” or “plant closing” as defined by WARN with respect to the
      Company within the six (6) months prior to making this
      representation.

     

    (g)  To
      the
      Knowledge of the Company, no executive, key employee, or group of employees
      currently has any plans to terminate employment with the Company independently
      of or as a result of this Agreement.

     

    3.14  Contracts.
      (a)
      Section 3.14 of the Company Disclosure Schedule sets forth all of the following
      Contracts to which the Company is a party or by which it is bound (collectively,
      the “Material
      Contracts”)
      and
      categorizes such Contracts by the types described below: (i) Contracts relating
      to the employment of any Person, or any bonus, deferred compensation, pension,
      profit sharing, stock option, employee stock purchase, retirement, retention,
      severance, change of control or other employee benefit plan or arrangement,
      (ii)
      Contracts other than those described in clause (i) with any current or former
      officer, director or employee of the Company, or any Affiliate of the Company
      or
      any such Person; (iii) Contracts with any employee or labor union or association
      representing any employee; (iv) Contracts relating to future capital
      expenditures other than Contracts not exceeding $25,000 individually or $75,000
      in the aggregate, (v) Contracts for the sale of any assets other than in the
      ordinary course of business; (vi) joint venture or partnership agreements;
      (vii)
      Contracts limiting the ability of the Company or any Subsidiary to engage in
      any
      line of business or to compete with any Person or to conduct business in any
      geographical area or to solicit any Person for employment, (viii) Contracts
      relating to the confidentiality or limitation on use of any information (other
      than confidentiality agreements executed in connection with the Company's
      exploration of strategic alternatives, including a possible sale or merger
      of
      the Company, with respect to which the Company has no material obligations
      other
      than standard confidentiality undertakings with respect to suitor-provided
      information); (ix) Contracts entered into within the last five years relating
      to
      the acquisition of any equity interests or assets of any other Person or the
      disposition of any assets other than in the ordinary course of business
      consistent with past practices; (x) Contracts relating to any indebtedness
      of
      the Company, including credit facilities, promissory notes, security agreements,
      and other credit support arrangements, (xi) Contracts relating to any loan
      (other than accounts receivable from trade debtors in the ordinary and usual
      course of business consistent with past custom and practice) or advance to
      (other than ordinary course travel allowances to the employees of the Company),
      or investments in, any Person; (xii) Contracts relating to any guarantee or
      other contingent Liability in respect of any indebtedness or obligation of
      any
      Person (other than the endorsement of negotiable instruments for collection
      in
      the ordinary and usual course of business consistent with past custom and
      practice), (xiii) (A) all customer Contracts currently in effect (listing all
      statements of work, task orders or similar documents currently in effect with
      respect to each such Contract) and (B) all currently outstanding written
      proposals to customers, (xiv) any license agreement relating in whole or in
      part
      to Intellectual Property (other than standard "off-the-shelf" or "shrink-wrap"
      license agreements), (xv) any Contract which involves aggregate payments of
      $25,000 or more or which is not cancelable without penalty within 120 days,
      (xvi) any Contracts not described above outside the ordinary and usual course
      of
      business consistent with past custom and practice and (xvii) any other
      Contracts, other than Real Property Leases and customer contracts, with respect
      to which the amount to be paid or received thereunder in the future could
      reasonably be expected to exceed $25,000 in any calendar year or $100,000 in
      the
      aggregate. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Correct
      and complete copies of the written Contracts required to be set forth in Section
      3.14 of the Company Disclosure Schedule have previously been furnished to
      Parent. For purposes of the preceding sentence, an agreement, proposal or
      statement of work being performed by the Company that has been reduced to
      writing but has not been signed by the counterparty shall be considered a
      written Contract. Except as set forth in Section 3.14 of the Company Disclosure
      Schedule, all of the Material Contracts and Real Property Leases shall,
      following the Closing, remain enforceable by the Company and binding on the
      other parties thereto, without the consent, approval, novation or waiver of
      any
      third party, except that enforceability may be limited by any applicable statute
      of frauds, conduct of the Company from and after the Effective Time and any
      bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
      similar law relating to or affecting the rights of creditors generally, which
      law may be in effect from time to time. The Company is not in default, nor
      has
      any event occurred which, with the giving of notice or the passage of time
      or
      both, would constitute a default, under any Material Contract or Real Property
      Lease or any other obligation owed by the Company, and, to the Knowledge of
      the
      Company, no event has occurred which, with the giving of notice or the passage
      of time or both, would constitute a default by any other party to any such
      Material Contract, Lease or obligation. Each of the Material Contracts and
      Real
      Property Leases is in full force and effect, is valid and enforceable in
      accordance with its terms, except that enforceability may be limited by any
      applicable statute of frauds, conduct of the Company from and after the
      Effective Time and any bankruptcy, insolvency, reorganization, fraudulent
      conveyance, moratorium or similar law relating to or affecting the rights of
      creditors generally, which law may be in effect from time to time, and is not
      subject to any claims, charges, setoffs or defenses.

     

    3.15  Intellectual
      Property.
      

     

    (a)  The
      Company owns, free and clear from all Liens (other than Permitted Encumbrances)
      or otherwise possesses legally enforceable rights to use all of the Intellectual
      Property reasonably necessary to the conduct of business of the Company as
      currently conducted or proposed to be conducted. The Intellectual Property
      owned
      by the Company (“Owned
      Intellectual Property”)
      and
      the Intellectual Property licensed to the Company comprise all of the
      Intellectual Property that is or has at any time been used in or is reasonably
      necessary to conduct the business of the Company as currently conducted or
      proposed to be conducted.

     

    (b)  Section
      3.15(b)(i) of the Company Disclosure Schedule sets forth a true, complete and
      correct list of all Owned Intellectual Property for which a registration or
      application has been filed with a Governmental Entity, including patents,
      trademarks, service marks and copyrights, issued by or registered with, or
      for
      which any application for issuance or registration thereof has been filed with,
      any Governmental Entity. Section 3.15(b)(ii) of the Company Disclosure Schedule
      sets forth a complete and correct list of all trademarks, service marks and
      other trade designations that are Owned Intellectual Property and not otherwise
      identified in Section 3.15(b)(i) of the Company Disclosure Schedule. Section
      3.15(b)(iii) of the Company Disclosure Schedule also sets forth a complete
      and
      correct list of all written or oral licenses and arrangements (other than
      ordinary course licenses of commercially available software), (i) pursuant
      to which the use by any Person of Intellectual Property is permitted by the
      Company, and (ii) pursuant to which the use by the Company of Intellectual
      Property is permitted by any Person (collectively, the “Intellectual
      Property Licenses”).
      The
      Intellectual Property Licenses are in full force and effect. 

     

    (c)  Nothing
      will interfere with, infringe upon, misappropriate, or otherwise come into
      conflict with, any Intellectual Property rights of third parties as a result
      of
      the continued operation of the business of the Company as currently conducted
      or
      proposed to be conducted. 

     

    (d)  To
      the
      Knowledge of the Company, no Intellectual Property that is Owned Intellectual
      Property or subject to any Intellectual Property License is being infringed
      by
      third parties. There is no claim or demand of any Person pertaining to, or
      any
      proceeding which is pending or, to the Knowledge of the Company, threatened,
      that challenges the rights of the Company in respect of any Owned Intellectual
      Property, or claims that any default exists under any Intellectual Property
      License.

     

    (e)  The
      Company has no Liability relating to (i) the creation by the Company or an
      employee or independent contractor of the Company of Intellectual Property
      in
      connection with the performance of services for a customer of the Company or
      (ii) any failure of the Company or any such employee or independent contractor
      to assign rights therein to such customer

     

    (f)  All
      computer programs and software, including source code, object code and
      databases, which are owned, used or licensed by the Company, and all computer
      programs and software, including source code, object code and databases,
      transferred by the Company to its respective customers or any other transferees,
      (i) conform with all specifications, representations, warranties, and other
      descriptions established by the Company or conveyed thereby to its customers
      or
      other transferees, (ii) are free of any defects, deficiencies, bugs, errors,
      viruses or other contaminants or corruptants which materially and adversely
      affect the principal functionalities as a whole, (iii) have been upgraded as
      necessary so that all thereof is functional on currently available platforms,
      and (iv) have been fully maintained by the Company on behalf of its customers
      and other transferees to their reasonable satisfaction; provided, however,
      this
      Section 3.15(f) does not apply to intellectual property that has been or is
      commercially available to the general public by third parties other than Company
      for ownership, license or use.

     

    (g)  All
      source and object codes relating to all of the products of the Company, and
      all
      modules, module works in process for new modules or derivative works or
      improvements on existing modules (collectively, the “Program
      Codes”)
      substantially conform to the principal functionalities intended for the end
      users of such Program Codes. No Person other than the Company possesses a copy,
      in any form (print, electronic or otherwise), of any of the Program
      Codes.

     

    3.16  Absence
      of Changes or Events.
      Except
      as specifically identified in Section 3.16 of the Disclosure Schedule as an
      event which is reasonably likely to give rise to a Material Adverse Effect,
      since December 31, 2004, there has been no Material Adverse Effect nor has
      there
      occurred any event which is reasonably likely to result in a Material Adverse
      Effect. Except as set forth in Section 3.16 of the Company Disclosure Schedule,
      since September 30, 2005, the Company has conducted its business and operations
      only in the ordinary and usual course of business consistent with past custom
      and practice and has incurred no Liabilities other than in the ordinary and
      usual course of business consistent with past custom and practice. Except as
      set
      forth in Section 3.16 of the Company Disclosure Schedule, since September 30,
      2005 (and, with respect to clauses (c), (e), (l), (m) and (o), December 31,
      2004), the Company has not:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)  sold,
      assigned or transferred any asset or property right (other than sales of assets
      in the ordinary and usual course of business consistent with past practice),
      or
      mortgaged, pledged or subjected them to any Lien, charge or other restriction,
      except for Permitted Encumbrances;

     

    (b)  sold,
      assigned, transferred, abandoned or permitted to lapse any Permit or any of
      the
      Intellectual Property or other intangible assets of the Company, disclosed
      any
      material confidential information or trade secret to any person or granted
      any
      license or sublicense of any rights under or with respect to any Intellectual
      Property or other intangible assets;

     

    (c)  made
      or
      granted any increase in, or amended or terminated, any existing plan, program,
      policy or arrangement, including, without limitation, any Employee Benefit
      Plan
      or arrangement or adopted any new Employee Benefit Plan or arrangement or
      entered into any new collective bargaining agreement or multi-employer
      plan;

     

    (d)  conducted
      the cash management customs and practices (including the timing of collection
      of
      receivables and payment of payables and other current liabilities) and
      maintained the books and records of the Company other than in the usual and
      ordinary and usual course of business consistent with past custom and
      practice;

     

    (e)  made
      any
      material loans or advances to, or guarantees for the benefit of, or entered
      into
      any transaction with any employee, officer or director of the
      Company;

     

    (f)  suffered
      any extraordinary loss, damage, destruction or casualty loss or waived any
      rights of material value, whether or not covered by insurance and whether or
      not
      in the ordinary and usual course of business consistent with past
      practice;

     

    (g)  received
      notification, and the Company has no Knowledge, that any client, customer or
      supplier will, except as reflected in the 2006 Projection, (i) stop or decrease
      in any respect the rate of business done with the Company, (ii) make any or
      seek
      to make any other alteration to its relationship with the Company or (iii)
      seek
      to have any agreement, arrangement, contract or commitment amended or otherwise
      modified in a manner that has the effect of reducing the margins of the Company
      or otherwise adversely affects the Company; 

     

    (h)  declared,
      set aside or paid any dividend or distribution of cash or other property to
      any
      stockholder or member or purchased, redeemed or otherwise acquired any Company
      Stock or made any other payments to any stockholder;

     

    (i)  amended
      or authorized the amendment of the organizational documents of the
      Company;

     

    (j)  waived
      any right or canceled or compromised any debt or claim, other than in the
      ordinary and usual course of business consistent with past
      practice;

     

    (k)  made
      (or
      incurred obligations to make) capital expenditures in an amount which
      exceeds $25,000 for any item or $100,000 in the aggregate;

     

    (l)  increased
      the compensation payable to any salaried employee except in the ordinary and
      usual course of business consistent with past practices;

     

    (m)  hired
      or
      terminated any senior management employee (whether or not in the ordinary and
      usual course of business consistent with past practice) who has an annual
      salary in excess of $100,000;

     

    (n)  borrowed
      any money (other than trade payables or other current expenses, all in the
      ordinary and usual course of business consistent with past practice) or issued
      any bonds, debentures, notes or other corporate securities evidencing money
      borrowed;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (o)  adopted
      or made any change in any financial or Tax accounting methods, principles or
      practices or made or changed any Tax elections;

     

    (p)  engaged
      in any merger or consolidation with any other entity (or any transaction having
      a similar effect) or any acquisition of any business unit or operation (however
      effected) of any other Person;

     

    (q)  purchased
      any asset outside the ordinary course of business (other than as set forth
      in
      Section 3.16(k));

     

    (r)  engaged
      in any sale, lease or other conveyance of all or any portion of (or any interest
      in) any property owned by the Company outside the ordinary course of business
      consistent with past custom and practice; or

     

    (s)  committed,
      whether in writing or otherwise, to any of the foregoing. 

     

    3.17  Environmental
      Matters. 

     

    (a)  The
      operations of the Company are in compliance with all applicable Environmental
      Laws and all Permits issued pursuant to Environmental Laws or otherwise
      (“Environmental
      Permits”);

     

    (b)  The
      Company has obtained and currently maintains all Environmental Permits required
      under all applicable Environmental Laws necessary to operate its
      business;

     

    (c)  The
      Company is not the subject of any outstanding written Order or Contract with
      any
      Governmental Entity or other Person respecting (i) Environmental Laws,
      (ii) Remedial Action or (iii) any Release or threatened Release of a
      Hazardous Material;

     

    (d)  The
      Company has not received any written communication alleging either that the
      Company may be in violation of any Environmental Law or Environmental Permit
      or
      that the Company may have any liability under any Environmental
      Law;

     

    (e)  The
      Company has not incurred, assumed or undertaken any current contingent liability
      in connection with any Release of any Hazardous Materials into the indoor or
      outdoor environment (whether on-site or off-site) and there are no facts,
      circumstances or conditions relating to, arising out of or attributable to
      the
      Company that could give rise to liability under Environmental Laws;

     

    (f)  There
      are
      no judicial or administrative proceedings pending or, to the Knowledge of the
      Company, threatened against the Company that allege a violation of, or seek
      to
      impose liability pursuant to, Environmental Laws or Environmental Permits and
      there are no investigations of the business, operations, or currently or
      previously owned, operated or leased property of the Company pending or, to
      the
      Company’s Knowledge, threatened which could result in the Company incurring any
      liability pursuant to any Environmental Law;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g)  There
      is
      not located at any of the properties of the Company any (i) underground storage
      tanks, (ii) asbestos-containing material or (iii) equipment containing
      polychlorinated biphenyls; and

     

    (h)  The
      Company has provided to Parent all environmentally related audits, studies,
      reports, analyses, and results of investigations that have been performed with
      respect to the currently or previously owned, leased or operated properties
      of
      the Company.

     

    3.18  Receivables;
      Payables.

     

    (a)  The
      accounts receivable of the Company reflected in the Financial Statements and/or
      Final Closing Net Assets Statement have arisen in bona fide arm’s-length
      transactions in the ordinary and usual course of business consistent with past
      custom and practice, and, subject to the allowance for doubtful accounts set
      forth in the Financial Statements or, if applicable, Final Closing Net Assets
      Statement, all such receivables are valid and binding obligations of the account
      debtors without any counterclaims, setoffs or other defenses thereto. All
      work-in-process or accrued billing reflected in the Financial Statements and/or
      Final Closing Net Assets Statement has been performed pursuant to a written
      or
      oral customer order or contract therefor and shall become accounts receivable
      in
      due course, except to the extent that any such order or contract fails to become
      an account receivable, in whole or in part, due to any action or inaction of
      the
      Company after the Effective Time.

     

    (b)  All
      accounts payable of the Company reflected on the Financial Statements and/or
      Final Closing Net Assets Statement are the result of bona fide transactions
      in
      the ordinary course of business and have been paid or are not yet due and
      payable, except for accounts payable that are being disputed in good faith
      in an
      appropriate manner.

     

    3.19  Related
      Party Transactions. Except
      as
      described in Section 3.19 of the Company Disclosure Schedule, the Company has
      not loaned or borrowed any amounts from and does not have outstanding any
      indebtedness or other similar obligations to or owing from any Affiliate of
      the
      Company. Neither the Company nor any Affiliate of the Company nor any officer
      or
      employee of any of them (i) owns any direct or indirect interest of any kind
      in,
      or controls or is a director, officer, employee or partner of, or consultant
      to,
      or lender to or borrower from or has the right to participate in the profits
      of,
      any Person which is (A) a competitor, supplier, customer, landlord, tenant,
      creditor or debtor of the Company, (B) engaged in a business related to the
      business of the Company, or (C) a participant in any transaction to which the
      Company is a party or (ii) is a party to any Contract with the Company other
      than any Contract related to the employment by the Company of such officer
      or
      employee of the Company. The Company does not have any Contract or understanding
      with any officer, director, employee or shareholder of the Company, or any
      Affiliate of any such Person, that is not disclosed in Section 3.14 of the
      Company Disclosure Schedule and that relates, directly or indirectly, to the
      subject matter of any Transaction Document or the consideration payable
      thereunder or that contains any terms, provisions or conditions relating to
      the
      Company’s entry into or performance of any Transaction Document (including any
      terms, provisions or conditions the consequences of which are dependent upon
      any
      of the matters addressed by Section 2.5).  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.20  Clients;
      Projects.
       A
      true
      and accurate matrix listing, by product, each program operated by the Company
      for each pharmaceutical manufacturer, pharmacy or pharmacy chain with which
      the
      Company does business (whether or not pursuant to a written Contract) is listed
      in Section 3.20 of the Company Disclosure Schedule. Except as set forth on
      Section 3.20 of the Company Disclosure Schedule, no client or customer has
      cancelled or otherwise terminated reduced, or threatened to cancel or terminate
      or reduce, its relationship with the Company except as a consequence of the
      expiration of statements of work, tasks orders and the like that were not
      contemplated by the 2006 Financial Projection to be renewed. All current
      programs are proceeding according to plan and budget in all material respects
      and are expected to be completed in a materially timely manner.

     

    3.21  Insurance.
      Section
      3.21 of the Company Disclosure Schedule includes a correct and complete list
      and
      description, including policy number, coverage and deductible, of all insurance
      policies owned by the Company, correct and complete copies of which policies
      have previously been delivered to Parent. Such policies are in full force and
      effect, all premiums due thereon have been paid and the Company is not in
      default thereunder. The Company has not received any notice of cancellation
      or
      intent to cancel or increase or intent to increase premiums with respect to
      such
      insurance policies nor is there any basis for any such action. All such
      insurance policies contain coverage that is reasonably adequate and prudent
      in
      light of the risks inherent in the Company’s and the Subsidiaries’ business.
      Section 3.21 of the Company Disclosure Schedule also contains a list of all
      pending claims and any claims in the past three (3) years with any
      insurance company by the Company and any instances within the previous
      three (3) years of a denial of coverage of the Company by any insurance
      company.

     

    3.22  Certain
      Agreements. 
      (a) The
      only broker or finder that has acted for the Company in connection with this
      Agreement or the transaction contemplated hereby or that may be entitled to
      any
      brokerage fee, finder’s fee or commission in respect thereof is Blackstone. The
      Company is fully responsible for the payment of any and all amounts due to
      Blackstone, including by way of indemnification, pursuant to the Blackstone
      Agreement and Blackstone’s fees and expenses thereunder through the Closing Date
      have been paid by the Company (to the extent such fees have been due and payable
      prior to the date hereof) or shall be paid as provided in Section
      2.4(b).

     

    (b)
      The
      Company is fully responsible for the payment of any and all amounts due to
      the
      Exchange Agent, including by way of indemnification, pursuant to the Exchange
      Agreement and the Exchange Agent's fees and expenses thereunder through the
      Closing Date have been paid by the Company (to the extent such fees have been
      due and payable prior to the date hereof). 

     

    3.23  No
      Misrepresentation.
      No
      representation or warranty of the Company contained in this Transaction
      Documents or in any exhibits or schedule thereto or in any certificate or other
      instrument furnished by the Company to Parent pursuant to the terms thereof,
      contains any untrue statement of a material fact or omits to state a material
      fact necessary to make the statements contained herein or therein not
      misleading.

     

      3.24     Joint
      Information Statement/Private Placement Memorandum.
      The
      information to be
      supplied by or on behalf of the Company for inclusion in the Joint Information
      Statement/Private
      Placement Memorandum shall not at the time the Joint Information
      Statement/Private
      Placement Memorandum is distributed to Stockholders contain any untrue statement
      of a material fact or omit to state any material fact required to be stated
      in
      the Joint Information Statement/Private
      Placement Memorandum or necessary in order to make the statements in the Joint
      Information Statement/Private
      Placement Memorandum, in light of the circumstances under which they were made,
      not misleading. The information supplied by or on behalf of the Company for
      inclusion in the Joint Information Statement/Private
      Placement Memorandum shall not, on the date the Joint Information
      Statement/Private
      Placement Memorandum is first mailed to Stockholders and at the Effective Time,
      contain any statement which, at such time and in light of the circumstances
      under which it shall be made, is false or misleading with respect to any
      material fact, or omit to state any material fact necessary in order to make
      the
      statements made in the Joint Information Statement/Private
      Placement Memorandum not false or misleading; or omit to state any material
      fact
      necessary to correct any statement in any earlier communication with respect
      to
      the Merger which has become false or misleading. If at any time prior to the
      Effective Time any event relating to the Company or any of its Affiliates,
      officers or directors should be discovered by the Company which should be set
      forth in an amendment to the Joint Information Statement/Private
      Placement Memorandum or a supplement to the Joint Information
      Statement/Private
      Placement Memorandum, the Company shall promptly inform Parent.  

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      4  REPRESENTATIONS
      AND WARRANTIES OF ARENT
      AND MERGER SUB

     

    Parent
      and Merger Sub jointly and severally represent and warrant to the Company and
      the Stockholders as follows:

     

    4.1  Corporate
      Status of Parent and Merger Sub.
      Parent
      and Merger Sub are each duly incorporated, validly existing and in good standing
      under the laws of the State of Delaware, with the requisite corporate power
      to
      own, operate and lease its properties and to carry on its business as now being
      conducted.

     

    4.2  Authority
      for Agreement.
      Parent
      and Merger Sub have the requisite corporate power and authority to enter into
      this Agreement and the other Transaction Documents and to consummate the
      transactions contemplated by this Agreement and the other Transaction Documents.
      The execution and delivery of this Agreement and the other Transaction Documents
      by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
      transactions contemplated hereby and thereby have been duly authorized by all
      necessary corporate action on the part of Parent and Merger Sub. This Agreement
      has been duly executed and delivered by Parent and Merger Sub and, assuming
      the
      due authorization, execution and delivery by the Company and the Stockholder
      Representative, constitutes the valid and binding obligation of Parent and
      Merger Sub, enforceable against Parent and Merger Sub and the Stockholder
      Representative in accordance with its terms. 

     

    4.3  No
      Conflict.
      The
      execution and delivery of the Transaction Documents by Parent and Merger Sub
      do
      not, and the consummation of the transactions contemplated by the Transaction
      Documents and compliance with the provisions of the Transaction Documents by
      Parent and Merger Sub will not, (i) conflict with the Certificate of
      Incorporation or by-laws (or comparable organizational documents) of Parent
      or
      Merger Sub, (ii) result in any breach, violation or default (with or
      without notice or lapse of time, or both) under, or give rise to a right of
      termination, cancellation or creation or acceleration of any obligation or
      right
      of a third party or loss of a benefit under, or result in the creation of any
      Lien upon any of the properties or assets of Parent or Merger Sub under, any
      loan or credit agreement, note, bond, mortgage, indenture, lease or other
      agreement, instrument, permit, concession, franchise, license or other
      authorization applicable to Parent or Merger Sub or their respective properties
      or assets, or (iii) subject to the governmental filings and other matters
      referred to in the following sentence, conflict with or violate any law
      applicable to Parent or Merger Sub or their respective properties or assets
      or
      any judgment, order or decree to which Parent or Merger Sub or their respective
      properties or assets are subject. No authorization, consent or approval of,
      or
      filing with or notice to, any Governmental Entity is necessary for the execution
      and delivery of the Transaction Documents by Parent or Merger Sub or the
      consummation by Parent or Merger Sub of the transactions contemplated hereby,
      except for (i) the filing of the Certificate of Merger with the Secretary of
      State of the State of Delaware and (ii) the filing of a pre-merger notification
      report under the HSR Act and any other documents or information requested by
      the
      United States Department of Justice or the United States Federal Trade
      Commission in connection therewith. 

     

    4.4  SEC
      Reports.
      Since
      January 1, 2005 Parent has filed all required reports, schedules, forms,
      statements and other documents with the SEC (such documents filed since January
      1, 2005, together with all exhibits and schedules thereto and documents
      incorporated by reference therein, collectively referred to herein as the
      "Parent
      SEC Documents").
      As of
      their respective dates, Parent SEC Documents complied (or will comply, in the
      case of Parent SEC Documents filed prior to the Closing) in all material
      respects with the requirements of the Securities Act, or the Securities Exchange
      Act of 1934, as amended (the "Exchange
      Act"),
      as
      the case may be, and the rules and regulations of the SEC promulgated thereunder
      applicable to Parent SEC Documents, and none of Parent SEC Documents contained
      (or will contain, in the case of Parent SEC Documents filed prior to the
      Closing) any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading. The financial statements of Parent included in Parent SEC Documents,
      as of their respective dates, complied (or will comply, in the case of Parent
      SEC Documents filed prior to the Closing) in all material respects with
      applicable accounting requirements and the published rules and regulations
      of
      the SEC with respect thereto, were prepared (or will be prepared, in the case
      of
      Parent SEC Documents filed during the Closing Period) in accordance with GAAP
      (except, in the case of unaudited statements, as permitted by Form 10-Q of
      the
      SEC) applied on a consistent basis during the periods involved (except as may
      be
      indicated in the notes thereto) and fairly present (or will fairly present,
      in
      the case of Parent SEC Documents filed prior to the Closing) the financial
      position of Parent and its consolidated subsidiaries as of the dates thereof
      and
      the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year-end audit
      adjustments and other adjustments described therein that are not expected by
      Parent to be material individually or in the aggregate). No
      Material Adverse Effect has occurred with respect to Parent since September
      30,
      2005.

     

    4.5  Availability
      of Funds.
      Parent
      has financial resources available to fund the payment of the Purchase Price
      hereunder. 

     

    4.6No
      Undisclosed Liabilities.
      Except
      as disclosed in the Parent SEC Documents filed prior to the date hereof, and
      except for liabilities incurred since September 30, 2005 in the ordinary course
      of business consistent with past practices, Parent and its subsidiaries do
      not
      have any liabilities, either accrued, contingent or otherwise (whether or not
      required to be reflected in financial statements in accordance with GAAP),
      and
      whether due or to become due, which individually or in the aggregate, are
      reasonably likely to have a Material Adverse Effect on Parent and its
      subsidiaries, taken as a whole.

     

    4.7
      Litigation.
      Except
      as described in the Parent SEC Documents filed prior to the date hereof, there
      is no action, suit or proceeding, claim, arbitration or investigation against
      Parent or any of its subsidiaries pending or as to which Parent or any such
      subsidiary has received any written notice of assertion, which, individually
      or
      in the aggregate, is reasonably likely to have a Material Adverse Effect on
      Parent and its subsidiaries, taken as a whole, or a material adverse effect
      on
      the ability of Parent to consummate the transactions contemplated by this
      Agreement.

     

    4.8Compliance
      With Laws.
      Parent
      and each of its subsidiaries has complied with, is not in violation of, and
      has
      not received any notices of violation with respect to, any federal, state,
      local
      or foreign statute, law or regulation with respect to the conduct of its
      business, or the ownership or operation of its business, except for failures
      to
      comply or violations which, individually or in the aggregate, have not had
      and
      are not reasonably likely to have a Material Adverse Effect on Parent and its
      subsidiaries, taken as a whole.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.9
      Joint
      Information Statement/Private Placement Memorandum.
      The
      information to be
      supplied by Parent for inclusion in the Joint Information Statement/Private
      Placement Memorandum shall not at the time the Joint Information
      Statement/Private
      Placement Memorandum is distributed to Stockholders contain any untrue statement
      of a material fact or omit to state any material fact required to be stated
      in
      the Joint Information Statement/Private
      Placement Memorandum or necessary in order to make the statements in the Joint
      Information Statement/Private
      Placement Memorandum, in light of the circumstances under which they were made,
      not misleading. The information supplied by Parent for inclusion in the Joint
      Information Statement/Private
      Placement Memorandum shall not, on the date the Joint Information
      Statement/Private
      Placement Memorandum is first mailed to Stockholders and at the Effective Time,
      contain any statement which, at such time and in light of the circumstances
      under which it shall be made, is false or misleading with respect to any
      material fact, or omit to state any material fact necessary in order to make
      the
      statements made in the Joint Information Statement/Private
      Placement Memorandum not false or misleading; or omit to state any material
      fact
      necessary to correct any statement in any earlier communication with respect
      to
      the Merger which has become false or misleading. If at any time prior to the
      Effective Time any event relating to Parent or any of its Affiliates, officers
      or directors should be discovered by Parent which should be set forth in an
      amendment to the Joint Information Statement/Private
      Placement Memorandum or a supplement to the Joint Information
      Statement/Private
      Placement Memorandum, Parent shall promptly inform the Company.

     

    4.10Status
      of the Shares of Parent Common Stock.
      The
      shares of Parent Common Stock to be issued hereunder have been duly authorized
      and, when issued in accordance with this Agreement, will be validly issued,
      fully paid and nonassessable shares of Parent Common Stock and will be free
      and
      clear of all Encumbrances created by or through Parent other than transfer
      restrictions arising as a matter of law. The issuance and delivery of the shares
      of Parent Common Stock issued hereunder are not subject to any preemptive right
      or right of first refusal arising under Parent’s charter documents.

     

    4.11
      No
      Brokers.
      Parent
      has no Liability or obligation to pay any fees or commissions to any broker,
      finder or agent with respect to the transactions contemplated by this Agreement
      for which the Company or its Stockholders shall have any Liability.

     

    4.12Exempt
      Issuance.
      Assuming the accuracy, as of the date of each issuance of shares of Parent
      Common Stock hereunder, of the information provided to Parent and the Exchange
      Agent by the Stockholders in the Accredited Status Questionnaires completed
      by
      the Stockholders in connection with the Merger, the issuance of shares of Parent
      Common Stock in the manner contemplated by this Agreement will be exempt from
      the registration requirements of the Securities Act, as in effect on the date
      hereof.

     

    ARTICLE
      5.  CONDUCT
      PRIOR TO THE EFFECTIVE TIME 

     

    5.1  Conduct
      of Business of the Company.
      Between
      the date hereof and the Effective Time or the date, if any, on which this
      Agreement is earlier terminated pursuant to its terms, the Company shall (a)
      conduct its business and operations only in the ordinary and usual course of
      business consistent with past custom and practice and incur no Liabilities
      other
      than in the ordinary and usual course of business consistent with past custom
      and practice, (b) pay its debts and taxes when due, subject to good faith
      disputes over such debts or taxes that are contested by appropriate proceedings
      that do not result in the forfeiture of, or the imposition of any Lien on,
      any
      property or rights of the Company, (c) use all reasonable efforts consistent
      with past practices and policies to preserve intact the Company’s present
      business organization, to keep available the services of its present officers
      and employees and to preserve its relationships with customers, suppliers and
      others having business relationships with it, to the end that the Company’s
      goodwill and ongoing business be unimpaired at the Effective Time, (d) promptly
      notify Parent of any event or occurrence (i) that is not in the ordinary course
      of business of the Company which will result or could reasonably be expected
      to
      result in costs to the Company, individually or in the aggregate, in excess
      of
      $25,000 or (ii) that could reasonably be expected to prevent or materially
      delay
      the consummation of the transactions contemplated hereunder, (e) not issue
      (i)
      any Company Stock other than shares of Common Stock issued upon exercise of
      Outstanding Options that are not cancelled pursuant to Section 6.5 or (ii)
      any
      options, warrants, equity securities, calls, rights, commitments or agreements
      obligating the Company to issue any Company Stock and (f) not take or omit
      to
      take any action the taking or omission of which would prevent cause any
      representation or warranty contained in Section 3.16 to be untrue.

     

    5.2 Acquisition
      Proposals. The
      Company will not (and the Company will cause its Affiliates and any other Person
      acting on its behalf not to): 

    

    (i)  directly
      or indirectly, solicit, initiate or knowingly facilitate or encourage the making
      by any Person (other than Parent) of any inquiry, proposal or offer that
      constitutes or would reasonably be expected to lead to, a proposal for any
      merger, consolidation, recapitalization, reorganization, share exchange,
      business combination, liquidation, dissolution or similar transaction involving
      the Company and a third party, or any acquisition by a third party of any the
      Shares or any business or assets of the Company, or any combination of the
      foregoing, in a single transaction or a series of related transactions (in
      each
      case, an “Acquisition
      Proposal”);
      

    

    (ii)  directly
      or indirectly, participate or engage in discussions or negotiations concerning
      an Acquisition Proposal (and the Company shall immediately cease and cause
      to be
      terminated any existing discussions or negotiations with any third parties
      conducted heretofore with respect to any Acquisition Proposal), or furnish
      or
      disclose to any Person any information with respect to or in furtherance of
      any
      Acquisition Proposal, or provide access to its properties, books and records
      or
      other information or data to any Person with respect to or in furtherance of
      any
      Acquisition Proposal; or

    

    (iii)  execute
      or enter into any agreement, understanding or arrangement with respect to any
      Acquisition Proposal, or approve or recommend or propose to approve or recommend
      any Acquisition Proposal or any agreement, understanding or arrangement relating
      to any Acquisition Proposal (or resolve or authorize or propose to agree to
      do
      any of the foregoing actions).

    

    ARTICLE
      6.  ADDITIONAL
      AGREEMENTS

     

    6.1  Expenses.
      Each
      party hereto shall be responsible for its own costs and expenses in connection
      with the Merger, including fees and disbursements of consultants, investment
      bankers and other financial advisors, brokers and finders, counsel and
      accountants. If the Merger is consummated, all such costs and expenses will
      either be paid from the Initial Cash Amount as provided in Section 2.4 or
      reflected on the Final Closing Net Assets Statement.

     

    6.2  Access
      and Information.
      (a) The
      Company and Parent shall afford to the other and to the other’s officers,
      employees, accountants, counsel and other authorized representatives full and
      complete access, upon 24 hours advance telephone notice, during regular business
      hours, throughout the period prior to the earlier of the Effective Time or
      the
      termination of this Agreement, to its offices, properties, books and records,
      and shall use reasonable efforts to cause its representatives and independent
      public accountants to furnish to the other party such additional financial
      and
      operating data and other information as to its business, customers, vendors
      and
      properties as the other party may from time to time reasonably request. The
      Company and Parent shall exercise such rights in a manner so as not to interfere
      unreasonably with the normal business operations of the other.

     

    (b)
      During the period from the date of this Agreement through the Closing Date,
      the
      Company shall provide Parent, as soon as reasonably practicable, with (i) any
      communications, advice or other material information relevant to regulatory
      developments or legal compliance matters and (ii) information regarding any
      developments, positive or negative, that bear materially on the Company's
      projected financial results for 2006, in each case to the extent received by
      the
      Company, any member of senior management or the Stockholder Representative.
      

     

    6.3  Employment
      and Benefit Plans.
      If the
      Closing occurs, from the Closing Date until the earlier of January 1, 2009
      and
      the first Final Earnout Amount Determination Date on which it is determined
      that
      no Earnout Amount is payable, Parent will cause the Company to provide to
      Persons employed by the Company immediately prior to the Effective Time who
      continue such employment following the Effective Time (collectively, the
      "Employees"),
      except as otherwise consented to by the Stockholder Representative, (i)
      compensation at the general compensation levels prevailing as of the Effective
      Time and (ii) benefits that are substantially comparable in the aggregate to
      the
      benefits by the benefit plans listed in Section 6.3 of the Company Disclosure
      Schedule). If the Closing occurs, for all purposes under the employee benefit
      plans of Parent and its Affiliates providing benefits to any Employee after
      the
      Effective Time (the "New
      Plans"),
      each
      Employee will receive credit for his or her service with the Company and its
      Affiliates before the Effective Time (including predecessor or acquired entities
      or any other entities for which the Company and its Affiliates have given credit
      for prior service), for purposes of eligibility, vesting and benefit accrual
      (but not (i) for purposes of eligibility for subsidized early retirement
      benefits, (ii) for purposes of benefit accrual under defined benefit
      pension plans, and (iii) for any new program for which credit for benefit
      accrual for service prior to the effective date of such program is not given
      to
      similarly situated employees of Parent other than the Employees) to the same
      extent as such Employee was entitled, before the Effective Time, to credit
      for
      such service under any similar or comparable Company benefit plan (except to
      the
      extent such credit would result in a duplication of accrual of benefits).
      Notwithstanding the foregoing, if requested by Parent at least 5 days prior
      to
      the Closing Date, the Company agrees to adopt board resolutions terminating
      its
      401(k) plan immediately prior to Closing Date.  Parent agrees not to make
      such a request unless materials delivered by Company after the signing of this
      Agreement evidence previously undisclosed liabilities.

     

    6.4  Reasonable
      Efforts.
      (a)
      Subject to terms and conditions herein provided, each of the parties agrees
      to
      use all reasonable efforts to take, or cause to be taken, all action and to
      do,
      or cause to be done, all things necessary, proper or advisable under applicable
      laws and regulations to consummate and make effective the Merger and the other
      transactions contemplated by this Agreement. Without limiting the generality
      of
      the foregoing, the Company and Parent each will use all reasonable efforts
      to
      obtain all approvals, authorizations, consents and waivers from, and give all
      notices to, any public or private third parties that are necessary on its part
      in order to effect the transactions contemplated hereby.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)
      Parent and the Company will (i) not later than five (5) business days after
      the Agreement Date, make the filings required of such party under the HSR Act
      with respect to the Transaction and the other transactions contemplated by
      this
      Agreement, (ii) comply at the earliest practicable date with any request
      under the HSR Act for additional information, documents or other materials
      received by such party from the Federal Trade Commission or the Department
      of
      Justice or any other Governmental Entity in respect of such filings or the
      Transaction and the other transactions contemplated by this Agreement, and
      (iii) cooperate with the other party in connection with making any filing
      under the HSR Act and in connection with any filings, conferences or other
      submissions related to resolving any investigation or other inquiry by any
      such
      Governmental Entity under the HSR Act or other law with respect to the
      Transaction and the other transactions contemplated by this Agreement. Each
      of
      Parent and the Company will cause each of their respective Affiliates to use
      its
      reasonable best efforts to obtain (and will cooperate with each other in
      obtaining) the termination of all waiting periods under the HSR Act and not
      to
      extend any waiting period under the HSR Act. Prior to the termination of this
      Agreement, each party will prosecute, cooperate in and defend against any
      litigation instituted by the Federal Trade Commission or the Department of
      Justice or any other Governmental Entity that seeks to restrain or prohibit
      the
      consummation of the Transaction or that seeks to impose material limitations
      on
      the ability of Parent, the Company or any of their respective Affiliates to
      acquire, operate or hold, or to require Parent, the Company or any of their
      respective Affiliates to dispose of or hold separate, any material portion
      of
      their assets or business or the Company's assets or business after the Effective
      Time.

    

    6.5  Stock
      Options.
      Prior
      to the Closing, the Company shall issue a notice to each holder of Company
      Options of the acceleration, contingent upon the Closing, of the time for
      exercise of all unexercised and unexpired Company Options (including unvested
      Company Options) to the date that is ten (10) business days prior to the Closing
      and advising each holder of Company Options that the Company shall deem such
      Company Options exercised immediately prior to the Effective Time and the
      holders thereof to have accepted from the Company an Option Loan equal to the
      Option Exercise Prices of such Company Options. The Company shall provide the
      holders of all Company Options with any other notices required to be given
      to
      such holders in connection with the consummation of the Merger pursuant to
      the
      terms of the Company Options, except to the extent that such notice requirements
      have been waived by such holders. All Option Loans shall be paid out of the
      proceeds payable to the exercising holders of such Company Options as provided
      in Section 2.6(4) above, and any related security or pledge agreements covering
      the shares of Common Stock pledged in connection with such Option Loans shall
      be
      terminated upon payment of such loans as aforesaid. For
      Tax
      reporting purposes, compensation deductions arising from the initial exercise
      of
      the Company Options shall be reported as pre-Closing deductions and compensation
      deductions arising from the payment of Additional Merger Consideration shall
      be
      reported as post-Closing deductions.

     

    6.6   Conduct
      of the Business During the Earnout Period.
      (a)
      The
      Surviving Corporation shall be controlled by a Board of Directors, elected
      or
      appointed, directly or indirectly, by Parent (the "Board")
      and
      the operation of the Surviving Corporation shall be subject to the plenary
      control of the Board. Ultimate authority for all decisions affecting the
      Business shall rest with the Board or its designees.

    

    (b)
      Until
      January 1, 2009, except as expressly contemplated by this Agreement or consented
      to by the Stockholder Representative, (i) Parent will cause the business of
      the
      Surviving Corporation to be operated as a standalone business, (ii) Parent
      will
      act in good faith with respect to the operation of the Surviving Corporation’s
      business and the calculation of the Earnout Amounts and (iii) Parent will not,
      and will not cause the Surviving Corporation to, take any action or enter into
      any agreement or commitment with respect to the Surviving Corporation that
      artificially increases or decreases the amount of any Earnout Amount.

    

    (c)
      Without in any way limiting the provisions of Section 6.6(b) above, until
      January 1, 2009, except as expressly contemplated by this Agreement or consented
      to in writing by the Stockholder Representative:

    

    (i)  neither
      Parent nor the Stockholder Representative shall,
      or
      shall cause the Surviving Corporation to, enter into any agreements on terms
      inconsistent with past practices that has the effect of artificially shifting
      revenues or expenses into or out of the Surviving Corporation during any period
      with respect to which an Earnout Amount is calculated;

     

    (ii)  neither
      Parent nor the Stockholder Representative shall
      cause the Surviving Corporation to (A) sell, lease, spin off, or otherwise
      dispose of all or any material amount of the Surviving Corporation’s assets
      other than (1)
      in the
      ordinary course of business consistent with past practice or (2)
      non-performing assets or assets relating to operations discontinued or to be
      discontinued or (B) become a party to any merger or, consolidation, or commence
      voluntary liquidation proceedings with respect to the Surviving Corporation,
      except, in the case of Parent, for the purpose of reincorporating the Surviving
      Corporation in another jurisdiction; 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii)  neither
      Parent nor the Stockholder Representative shall cause the Surviving Corporation
      to make any investment outside of the ordinary course of business of the
      Surviving Corporation (consistent with past practices) involving an aggregate
      amount of $100,000 or more (which amount includes the amount of assumed
      Liabilities), including without limitation any creation or acquisition of a
      new
      line of business, whether by merger, joint venture, purchase of assets or
      securities or otherwise;

     

    (iv)  neither
      Parent nor any other controlled Affiliate of Parent (other than a wholly owned
      subsidiary of the Surviving Corporation) shall create any entity which competes
      with the pharmacy chain patient refill reminder business of the Surviving
      Corporation, as currently conducted by the Company, and neither Parent nor
      any
      other controlled Affiliate of Parent (other than a wholly owned subsidiary
      of
      the Surviving Corporation) shall assist any entity which Parent does not control
      to create any entity that competes with such business (it being understood
      that
      the conduct of a so-called “opt-in” program, including such a program involving
      patient persistence or compliance, will not be deemed to be competitive with
      such business if, and only if, such program does not access or otherwise use
      the
      Company’s pharmacy chain based data or data obtained directly from pharmacy
      chains; 

     

    (v)  neither
      Parent nor any other controlled Affiliate of Parent (other than a wholly owned
      subsidiary of the Surviving Corporation) shall cause or permit the Surviving
      Corporation to transfer all or any portion of the Surviving Corporation’
business with any client or customer to Parent or any of its other controlled
      Affiliates;

     

    (vi)  in
      the
      event Parent or nor any other controlled Affiliate of Parent (other than a
      wholly owned subsidiary of the Surviving Corporation) provides the Surviving
      Corporation with any business services, such services shall be charged to the
      Surviving Corporation at rates no higher than the Surviving Corporation would
      incur on a stand-alone basis in accordance with existing practice, provided
      that
      nothing herein shall prevent Parent from providing to the Surviving Corporation
      the services contemplated by paragraphs (b) through (e) of Schedule 1.2(A)
      or
      allocating the costs of such services to the Surviving Corporation in the manner
      contemplated by said paragraphs (b) through (e); 

     

    (vii)  except
      as
      contemplated by the preceding clause (vi) or Schedule 1.2(A), all agreements
      and
      transactions between Parent or any controlled Affiliate of Parent (other than
      a
      wholly owned subsidiary of the Surviving Corporation) and the Surviving
      Corporation shall be entered into solely on arm’s length and commercially
      reasonable terms; 

     

    (viii)  Parent
      shall not permit the Surviving Corporation to have insufficient capital for
      budgeted marketing, development, ordinary course capital expenditures and
      general operations or carrying out any business plans, provided that the
      applicable budget or business plan has been approved by the Board of Directors
      of Parent;
      and

     

    (ix)  Parent
      shall not cause the Surviving Corporation to bundle sales of the Surviving
      Corporation’ products and services with any products or services of Parent or
      any controlled Affiliate of Parent (other than a wholly owned subsidiary of
      the
      Surviving Corporation); 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (x)  Parent
      shall not permit the Surviving Corporation to make any changes to its
      Certificate of Incorporation or by-laws that affect the liability or
      indemnification rights of any officers or directors of the Surviving
      Corporation;
      and

     

    (xi)  Parent
      shall cause the Company to maintain insurance, including insurance covering
      regulatory liabilities, that is generally consistent with the Company's recent
      historical practice to the extent commercially available at a reasonable
      cost.

     

    (d)
      Notwithstanding the foregoing, in no event shall Parent or any Affiliate of
      Parent be prohibited from (A) engaging in transactions with the Surviving
      Corporation in the ordinary course of business of Parent or such Affiliate,
      including treasury operations, that do not affect the calculation of any Earnout
      Amount, or any other transactions on arms'-length terms or (B) requiring the
      Key
      Employees to devote a reasonable amount of time to Parent-level management
      coordination and review, including participation in inter-division meetings
      and
      preparation therefor.

     

    (e)
      During the Earnout Period, the executive bonus performance level and payment
      terms shall generally be in accordance with past practice, and the consent
      of Parent will be required for the payment of any executive bonus compensation
      other than up to $150,000 in bonuses to be paid with respect to the Company's
      2005 fiscal year, provided that Parent's consent to the payment of bonuses
      consistent with the 2006 bonus levels approved by the Company prior to the
      date
      hereof shall not be unreasonably withheld. The consent of Stockholder
      Representative will be required for any increases in aggregate bonus awards
      to
      executive officers outside the ordinary course of business prior to January
      1,
      2009. During the Earnout Period, the consent of Parent will be required for
      any
      capital expenditures materially in excess of (i) for 2006, the amount set forth
      in the Company's 2006 plan submitted to Parent prior to the date hereof and
      (ii)
      for 2007 and 2008, amounts consistent with past practice and the growth of
      the
      Business. 

     

    (f)
      The
      restrictions contained in clauses (ix) and (xi) of Section 6.6(b) may be waived
      by the Senior Officer. The restrictions contained in clauses (xi) shall cease
      to
      have any force or effect if there is no Senior Officer. The restrictions
      contained in clauses (ix) shall not apply if (I) there is no Senior Officer
      and
      (II) the effect of the bundling does not reduce the price of the Surviving
      Corporation’s products or services to below 90% of what would otherwise have
      been charged for such products or services. Except as provided in the three
      preceding sentences, any restriction on Parent or any of its Affiliates set
      forth in Section 6.6(b) may be waived or modified by the Stockholder
      Representative (including, with respect to clause (ix), where the conditions
      in
      the preceding sentence are not satisfied). As used herein, “Senior Officer”
means Mike Evanisko or, if Mike Evanisko is no longer serving as an executive
      officer of the Company, Dan Rubin or, if neither Mike Evanisko nor Dan Rubin
      is
      serving as an executive officer of the Company, Howie Rodenstein for so long
      as
      he is serving as an executive officer of the Company. 

     

    6.7  
      Public Announcements.
      Upon
      execution of this Agreement, Parent may issue a press release and/or other
      public announcement with respect thereto, provided that the Stockholder
      Representative is first provided with a reasonable opportunity to review and
      comment on such press release. Prior to the Closing, Parent may make any other
      public disclosure it believes in good faith is required by law or any listing
      or
      trading agreement or rules concerning its publicly traded securities, in each
      case after providing the Stockholder Representative with a reasonable
      opportunity to review and comment on such public disclosure and may make other
      external communications consistent with disclosure that has previously been
      so
      reviewed by the Stockholder Representative. From and after the execution of
      this
      Agreement (until such time as this Agreement is terminated), the Company will
      not, and will cause its Affiliates not to, issue any press release or otherwise
      make any similar public announcement with respect to the transactions
      contemplated by this Agreement without the prior written consent of Parent
      (not
      to be unreasonably withheld or delayed). 

    

    6.8No
      Code Section 338 Election. Neither
      Parent, Merger Sub or any of their Affiliates shall make any election under
      Code
      Section 338 with respect to the transactions contemplated by this
      Agreement.

    

    ARTICLE 
      7.   CONDITIONS
      TO CLOSING

     

    7.1  Closing
      Conditions of Merger Sub and Parent.
       The Closing and the obligations of Merger Sub and Parent hereto to effect
      the Merger shall be subject to the fulfillment of the following
      conditions:

     

    (a)  Stockholder
      Approval shall have been obtained for the Merger;

     

    (b)  no
      judgment or order shall have been entered by any Governmental Entity of
      competent jurisdiction and shall be in effect that prevents the consummation
      of
      the Merger, provided that the Company shall have used its reasonable best
      efforts to prevent the entry of any such a judgment or order and to appeal
      as
      promptly as possible any such judgment or order that may be
      entered;

     

    (c)  30
      days
      (or such lesser number of days as shall be permissible under the Certificate
      of
      Incorporation of the Company, including the Certificates of Designation of
      each
      series of Preferred Stock) shall have elapsed since the giving to the holders
      of
      each series of Preferred Stock of the written notice of the Merger required
      with
      respect to such series in accordance with the terms of the Certificate of
      Incorporation;

     

    (d)  the
      Board
      of Directors of the Company shall have adopted a resolution (which may be
      contingent upon the closing of the Merger) accelerating the time for exercise
      of
      all unexercised and unexpired Company Options (including unvested Company
      Options) and the notice to holders of Company Options required by Section 6.5
      shall have been timely given;

     

    (e)  the
      representations and warranties of the Company contained in this Agreement shall
      be true and correct in all material respects, except for representations and
      warranties of the Company that are qualified by materiality, Knowledge or
      Material Adverse Effect, which shall be true and correct, in each case when
      made
      and on and as of the Closing Date, as though made on and as of the Closing
      Date
      (provided that (i) the accuracy as of the Closing Date of the representations
      and warranties contained in fifth sentence of Section 3.5 and in the first
      sentence of Section 3.20 shall not be a condition to Closing and (ii) the
      accuracy as of the Closing Date of the representations and warranties contained
      in Section 3.16(g) and the second sentence of Section 3.20 shall not be a
      condition to Closing except to the extent any inaccuracy results, or could
      reasonably be expected to result, in a Material Adverse Effect); the Company
      shall have performed and complied in all material respects with the covenants
      and agreements required by this Agreement to be performed or complied with
      by
      the Company prior to or at the Closing; and Parent shall have been furnished
      with a certificate dated the Closing Date signed on behalf of the Company by
      an
      executive officer and on behalf of the Stockholders by the Stockholder
      Representative to the foregoing effect;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f)  the
      Company, the Stockholder Representative and the Exchange Agent shall have
      executed the Exchange Agreement; 

     

    (g)  the
      Company, the Stockholder Representative and the Escrow Agent shall have executed
      the Escrow Agreement;

     

    (h)  the
      Feinberg Law Group, LLC,
      counsel
      to the Company, shall have delivered its opinion in the form attached as
Exhibit
      E
      hereto;

     

    (i)  the
      total
      number of Dissenting Shares, exclusive of shares held by Grey Ventures, Inc.
      or
      any of its Affiliates (or any other person or entity acting in concert with
      Grey
      Ventures, Inc. or any such Affiliates) shall not be greater than or equal to
      2.5% of the total number of shares of Company Stock outstanding immediately
      prior to the Effective Time, calculated on an as converted basis; 

     

    (j)  the
      waiting period applicable to the consummation of the Merger under the HSR Act,
      if any, shall have expired or terminated, 

     

    (k)  the
      Investment Agreements shall have been terminated pursuant to instruments or
      actions reasonably satisfactory to Parent and its counsel;

     

    (l)  the
      Company shall have provided to Parent a statement, meeting the requirements
      of
      Treasury Regulation Section 1.1445-2(c)(3), certifying that none of the stock
      of
      the Company constitutes a United States real property interest within the
      meaning of Section 897; 

     

    (o) Parent
      shall have received a letter from Blackstone confirming (A) that it shall not
      seek to recover any amounts under or with respect to the engagement letter
      agreement between Blackstone and the Company dated September 8, 2004 from Parent
      or Merger Sub or, following the Closing, the Company or any of their respective
      Affiliates (other than the Shareholders) in excess of the Closing Date payment
      identified on the Specified Liabilities Schedule and (B) the waiver and release
      of any other post-closing obligation of the Company under such engagement
      letter; 

     

    (p) there
      shall be no more than 35 non-accredited investors included in the Persons who
      may be entitled to receive any portion of the non-cash Merger Consideration;
      

     

    (q) Parent
      shall have received from the Company a financial forecast for the Company’s 2006
      fiscal year prepared as of a date no earlier than five business days prior
      to
      the Closing Date and such financial forecast shall not reflect any Material
      Adverse Effect as compared to the 2006 Financial Projection; and

     

    (r) Parent
      shall have received from the Company a true and accurate matrix listing, by
      product, each program operated by the Company for each pharmaceutical
      manufacturer, pharmacy or pharmacy chain with which the Company does business
      (whether or not pursuant to a written Contract) prepared as of a date no earlier
      than five business days prior to the Closing Date and such financial forecast
      shall not reflect any Material Adverse Effect as compared to the matrix included
      in Section 3.20 of the Company Disclosure Schedule.

     

    7.2  Closing
      Conditions of the Company. The
      Closing and the obligations of the Company hereto to effect the Merger shall
      be
      subject to the fulfillment of the following conditions:

     

    (a)  no
      judgment or order shall have been entered by any Governmental Entity of
      competent jurisdiction and shall be in effect that prevents the consummation
      of
      the Merger, provided that the Company shall have used its reasonable best
      efforts to prevent the entry of any such a judgment or order and to appeal
      as
      promptly as possible any such judgment or order that may be
      entered;

     

    (b)  the
      representations and warranties of Parent and Merger Sub contained in this
      Agreement shall be true and correct in all material respects, except for
      representations and warranties of Parent and Merger Sub that are qualified
      by
      materiality, Knowledge or Material Adverse Effect, which shall be true and
      correct, in each case when made and on and as of the Closing Date, as though
      made on and as of the Closing Date; Parent and Merger Sub shall have performed
      and complied in all material respects with the covenants and agreements required
      by this Agreement to be performed or complied with by them prior to or at the
      Closing; and the Company shall have been furnished with a certificate dated
      the
      Closing Date signed on behalf of Merger Sub by an executive officer of Parent
      and on behalf of Parent by an executive officer of Merger Sub;

     

    (c)  Parent
      and the Exchange Agent shall have executed the Exchange Agreement;

     

    (d)  the
      Company and the Escrow Agent shall have executed the Escrow Agreement;

     

    (e)  Akerman
      Senterfitt LLP,
      counsel
      to Parent and Merger Sub, shall have delivered its opinion in the form attached
      as Exhibit
      F
      hereto;
      and

     

    (f)  the
      waiting period applicable to the consummation of the Merger under the HSR Act,
      if any, shall have expired or terminated.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      8.  INDEMNIFICATION

     

    From
      and
      after the Effective Time, the parties shall be indemnified as set forth
      below:

     

    8.1  Indemnification
      of Parent and the Surviving Corporation. 
      Parent,
      the Surviving Corporation and their respective Affiliates, the directors,
      officers, employees, affiliates, agents and representatives of the foregoing
      and
      the successors and assigns thereof (collectively, the "Parent
      Indemnitees")
      shall
      be entitled to reimbursement and indemnification by the Stockholders from and
      against any and all claims, liabilities, obligations, losses, fines, costs,
      proceedings or damages (whether absolute, accrued, conditional or otherwise
      and
      whether or not resulting from third party claims), including all reasonable
      fees
      and disbursements of counsel but excluding any allocation of internal
      compensation costs, incurred in the investigation or defense of any of the
      same
      or in asserting any of their respective rights hereunder (collectively,
“Losses”),
      resulting from or arising out of the following matters, regardless of any
      investigation made at any time by or on behalf of any Parent Indemnitee, or
      any
      information any Parent Indemnitee may have (including, with respect to
      paragraphs (3) and (4) below, any information disclosed in the Company
      Disclosure Schedule regarding regulatory matters or litigation or the risks
      and
      uncertainties relating thereto):

     

    (1)  any
      misrepresentation or breach of any warranty (other than breaches of Section
      3.11, which shall be governed by Article 9) of the Company or any Stockholder
      (whether or not in such Stockholder’s capacity as such) contained in the
      Transaction Documents; provided that in determining whether any such
      misrepresentation or breach occurred, any dollar amount thresholds, materiality
      qualifiers and Material Adverse Effect qualifier contained in any representation
      or warranty therein shall be disregarded;

     

    (2)  any
      breach by the Company or the Stockholder Representative of any covenant or
      agreement made or contained in the Transaction Documents; 

     

    (3)  except
      (A) as specifically set forth on the Final Net Assets Statement and (B)
      obligations of the Company to be paid or performed after the Closing Date under
      the existing Real Property Lease and the Material Contracts (except to the
      extent such obligations, but for a breach or default by the Company, would
      have
      been paid, performed or otherwise discharged on or prior to the Closing Date
      or
      to the extent the same arise out of any such breach or default), any Liabilities
      of the Company or any of its Affiliates of any kind or nature whatsoever,
      including (i) any Liabilities arising out of, relating to, resulting from,
      any
      failure of the Company or any of its Affiliates to comply in all respects with
      applicable Law (including the Health Insurance Portability & Accountability
      Act of 1996, the Federal Health Care Programs Antikickback Law and corresponding
      state Laws) at all times from the formation of the Company through the Effective
      Time or (ii) caused by any other transaction, status, event, condition,
      occurrence or situation existing, arising or occurring on or prior to the
      Closing Date;

     

    (4)  the
      matters disclosed or required to be disclosed in Section 3.10 of the Company
      Disclosure Schedule; 

     

    (5)  any
      and
      all amounts payable to Blackstone with respect to the Blackstone Agreement
      or to
      the Exchange Agent pursuant to the Exchange Agreement; and

     

    (6)  any
      and
      all Losses arising under Section 262 of the DGCL or required to be paid by
      any
      Parent Indemnitee as a consequence of or in connection with any proceeding
      brought pursuant thereto with respect to any Dissenting Shares. 

     

    For
      purposes of the preceding clause (4) only, “Losses” shall exclude any portion of
      a judgment or award attributable to the post-Closing conduct of the Company
      or
      any of its Affiliates and shall not include any claim for consequential damages
      arising from a change in the business operations of the Company in response
      to
      any such judgment or award (whether attributable to the pre-Closing or
      post-Closing conduct of the Company). For purposes of the preceding clause
      (5),
“Losses” shall consist of (x) any amount by which the aggregate awards to
      claimants in all proceedings under Section 262 of the DGCL exceeds the Merger
      Consideration allocable to the Company Stock held by such claimants and (y)
      all
      other expenses (reasonable attorneys’ fees and disbursements, court costs, etc.)
      incurred by any Parent Indemnitee in connection with such proceedings. In the
      event the aggregate awards to claimants in all proceedings under Section 262
      of
      the DGCL is less than the Merger Consideration allocable to the Company Stock
      held by such claimants, the difference will be offset against any Losses
      described in clause (y) of the preceding sentence and any excess over such
      Losses will be paid by Parent to the Stockholder Representative for the account
      of the Stockholders.

     

    8.2  Indemnification
      of the Stockholders. 
      Parent
      and Merger Sub, jointly and severally, covenant and agree with the Company
      that
      they shall reimburse and indemnify and hold the Stockholders and their
      respective directors, officers, employees, affiliates, agents, representatives,
      successors and assigns (the “Stockholder
      Indemnitees”)
      harmless from, against and in respect of Losses resulting from or arising out
      of
      the following matters, regardless of any investigation made at any time by
      or on
      behalf of any Stockholder Indemnitee, or any information any Stockholder
      Indemnitee may have:

     

    (2)  any
      misrepresentation or breach of any warranty of Parent or Merger Sub contained
      in
      the Transaction Documents; provided that in determining whether any such
      misrepresentation or breach occurred, any dollar amount thresholds, materiality
      qualifiers and Material Adverse Effect qualifier contained in any representation
      or warranty therein shall be disregarded;

     

    (3)  any
      failure of Parent or Merger Sub to perform any covenant or agreement made or
      contained in the Transaction Documents or fulfill any obligation in respect
      thereof; and

     

    (4)  except
      as
      provided in Section 8.1(3), any and all Losses arising solely from the
      post-closing conduct of the Company’s business.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    8.3  Method
      of Asserting Claims. 
      Other
      than with respect to Taxes, which shall be governed by Article 9, the following
      procedures shall apply to any claim for indemnification hereunder:

     

    (a)
      Third
      Party Claims.
      In the
      case of any claim asserted by a third party against a party entitled to
      indemnification under this Agreement (the “Indemnified
      Party”),
      notice shall be given by the Indemnified Party to the party required to provide
      indemnification (the “Indemnifying
      Party”)
      as
      soon as practicable after such Indemnified Party has actual knowledge of any
      claim as to which indemnity may be sought, and the Indemnified Party shall,
      so
      long as the Indemnifying Party has acknowledged in writing it liability for
      indemnification hereunder, permit the Indemnifying Party (at the expense of
      such
      Indemnifying Party) to assume control over the defense of any third party claim
      or any litigation with a third party resulting therefrom; provided,
      however,
      that
      (a) the counsel for the Indemnifying Party who shall conduct the defense of
      such claim or litigation shall be subject to the approval of the Indemnified
      Party (which approval shall not be unreasonably withheld or delayed),
      (b) the Indemnified Party may participate in such defense at such
      Indemnified Party’s expense (which shall not be subject to reimbursement
      hereunder except as provided below), and (c) the failure by any Indemnified
      Party to give notice as provided herein shall not relieve the Indemnifying
      Party
      of its indemnification obligation under this Agreement except and only to the
      extent that such Indemnifying Party is actually and materially damaged as a
      result of such failure to give notice. Except with the prior written consent
      of
      the Indemnified Party, no Indemnifying Party, in the defense of any such claim
      or litigation, shall consent to entry of any judgment or enter into any
      settlement that provides for injunctive or other nonmonetary relief affecting
      the Indemnified Party or that does not include as an unconditional term thereof
      the giving by each claimant or plaintiff to such Indemnified Party of a general
      release from any and all liability with respect to such claim or litigation.
      Notwithstanding the foregoing, if both the Indemnifying Party and the
      Indemnified Party are parties to an action (or to separate actions covering
      substantially the same claims and subject matter where a determination in one
      action would have a res judicata effect in the other action or to an action
      and
      a related claim for indemnification) and the Indemnified Party shall in good
      faith determine that the Indemnified Party may have available to it one or
      more
      defenses or counterclaims that are inconsistent with one or more of those that
      may be available to the Indemnifying Party in respect of such claim or any
      litigation relating thereto, the Indemnified Party shall have the right at
      all
      times to take over and assume control over the defense, settlement, negotiations
      or litigation relating to any such claim at the sole cost of the Indemnifying
      Party; provided,
      however,
      that
      (i) if the Indemnified Party does so take over and assume control, the
      Indemnified Party shall not settle such claim or litigation without the prior
      written consent of the Indemnifying Party, such consent not to be unreasonably
      withheld or delayed, (ii) the Indemnifying Party shall at all times have the
      right to participate in the defense of such claim or action and (iii) if the
      nature of the claim or any litigation related thereto is of a type as to which
      liability has been allocated hereunder between the Indemnifying Party and the
      Indemnified Party based on whether such claim is based on pre-Closing or
      post-Closing conduct or in any other specified manner, then the Indemnified
      Party’s right to take over and assume control of the defense of such claim or
      litigation shall relate only to the portion of the liability therefore that
      has
      been so allocated to the Indemnified Party. If the Indemnifying Party does
      not
      accept the defense of any matter as above provided within thirty (30) days
      after
      receipt of the notice from the Indemnified Party described above, the
      Indemnified Party shall have the full right to defend against any such claim
      or
      demand at the sole cost of the Indemnifying Party and shall be entitled to
      settle or agree to pay in full such claim or demand. In any event, the
      Indemnifying Party and the Indemnified Party shall reasonably cooperate in
      the
      defense of any claim or litigation subject to this Article 8 and the records
      of
      each shall be reasonably available to the other with respect to such
      defense.

     

    (b)
      Non-Third
      Party Claims.
      With
      respect to any claim for indemnification hereunder which does not involve a
      third party claim, the Indemnified Party will give the Indemnifying Party
      written notice of such claim. The Indemnifying Party may acknowledge and agree
      by notice to the Indemnified Party in writing to satisfy such claim within
      twenty (20) days of receipt of notice of such claim from the Indemnified Party.
      If the Indemnifying Party shall dispute such claim, the Indemnifying Party
      shall
      provide written notice of such dispute to the Indemnified Party within such
      twenty (20) day period, setting forth in reasonable detail the basis of such
      dispute. Upon receipt of notice of any such dispute, the Indemnified Party
      and
      the Indemnifying Party shall use reasonable efforts to resolve such dispute
      within thirty (30) days of the date such notice of dispute is received. If
      the
      Indemnifying Party shall fail to provide written notice to the Indemnified
      Party
      within twenty (20) days of receipt of notice from the Indemnified Party that
      the
      Indemnifying Party either acknowledges and agrees to pay such claim or disputes
      such claim, the Indemnifying Party shall be deemed to have acknowledged and
      agreed to pay such claim in full and to have waived any right to dispute such
      claim. Once (a) the Indemnifying Party has acknowledged and agreed to pay any
      claim pursuant to this Section 8.3, (b) any dispute under this Section 8.3
      has
      been resolved in favor of indemnification by mutual agreement of the
      Indemnifying Party and the Indemnified Party, or (c) any dispute under this
      Section 8.3 has been finally resolved in favor of indemnification by order
      of a
      court of competent jurisdiction or other tribunal (including an arbitrator
      contemplated by this agreement) having jurisdiction over such dispute, then
      the
      Indemnifying Party shall pay the amount of such claim to the Indemnified Party
      within twenty (20) days of the date of acknowledgement by the Indemnifying
      Party
      or final resolution in favor of indemnification, as the case may be, to such
      account and in such manner as is designated in writing by the Indemnified
      Party.

     

    18.4  
      Nature and Survival of Representations and Agreements. 
      The
      representations and warranties made by the parties pursuant to Article 3 (other
      than pursuant to Section 3.11, which shall be governed by Article 9, and other
      than pursuant to Sections 3.2, 3.3, 3.6, 3.8(c) (first sentence only), 3.12
      and
      3.17, which shall survive until 30 days after the applicable statute of
      limitations) and Article 4 (other than pursuant to Sections 4.2 and 4.3, which
      shall survive until thirty (30) days after the applicable statute of
      limitations) of this Agreement shall survive the Closing until fifteen (15)
      days
      after the completion of the audit of Parent’s consolidated financial statements
      (which may include an audit of the financial statements of the Surviving
      Corporation on a non-consolidated basis) with respect to 2006.

     

    8.5  Exclusive
      Remedy. 
      The
      indemnifications provided for in this Article 8 and in Article 9 shall be
      the sole and exclusive post-Closing remedies available to any party against
      the
      Company, Parent or Merger Sub for any claims for monetary damages under or
      based
      upon the Transaction Documents. The preceding sentence shall not limit the
      right
      of any party to seek injunctive or other equitable relief. 

     

    8.7  Limitations.
      (a) (i)
      Parent Indemnitees shall have no right to reimbursement and indemnification
      pursuant to this Article 8 with respect to any claim resulting from or arising
      out of matters described in clause (1) of Section 8.1 or, except for claims
      based on an inaccuracy of the Closing Date Balance Sheet or any failure of
      the
      Company or any of its Affiliates to comply in all respects with applicable
      Law
      (including the Health Insurance Portability & Accountability Act of 1996,
      the Federal Health Care Programs Antikickback Law and corresponding state Laws),
      with respect to any claim resulting from or arising out of matters described
      in
      clause (3) of Section 8.1 (and not resulting from or arising out of matters
      described in the remaining clauses of Section 8.1) unless and until the
      aggregate amount of all such claims exceeds $200,000 (the “Threshold
      Amount”),
      in
      which Parent Indemnitees may seek indemnification for the amount of all claims
      in excess of the Threshold Amount.

     

    (ii)
      In
      no event shall the aggregate liability of Parent and Merger Sub under Section
      8.2 for all claims thereunder exceed the maximum amount for which the
      Stockholders may be answerable in accordance with Section 8.7(b).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b)
      Parent Indemnitees may satisfy claims for indemnification pursuant to either
      this Article 8 or Article 9 solely (i) by set-off against any Additional Merger
      Consideration (exclusive of the Escrow Fund) and (ii) by asserting claims
      against the Escrow Fund in accordance with the terms of the Escrow Agreement.
      Parent Indemnitees shall be required to exhaust their rights of set-off pursuant
      to the preceding sentence prior to seeking collection of any claim from the
      Escrow Fund, provided that (x) no Parent Indemnitee shall be prevented from
      asserting a claim against the Escrow Fund prior to its release for the purpose
      of preserving its rights in the event the magnitude of any offset against
      currently available amounts is or may be insufficient to satisfy an
      indemnification claim of a Parent Indemnitee and (y) no Parent Indemnitee shall
      be required to defer either the assertion of a claim against the Escrow Fund
      or
      the collection of such claim from the Escrow Fund as a consequence of the
      potential subsequent accrual of an amount against which such right of set-off
      may be exercised. Parent Indemnitees shall be entitled to assert rights of
      set-off against the cash portion of any Additional Merger Consideration only
      if
      the Escrow Fund has been released or exhausted (including by reason of the
      magnitude of claims pending against the Escrow Fund equaling or exceeding its
      value (valuing Disputed Amounts (as defined in the Escrow Agreement) at their
      face amounts)) and rights of set-off have been asserted against all non-cash
      Additional Merger Consideration. To the extent set-off rights have not been
      asserted against any Additional Merger Consideration, the Stockholder
      Representative shall have the right to retain a reasonable portion thereof
      in
      the Expense Reserve prior to the distribution of such Additional Merger
      Consideration to the Stockholders.

     

    (c)
      For
      purposes of satisfying any indemnity claim by a Parent Indemnitee, shares of
      Parent Common Stock (whether Initial Shares or Earnout Shares) will be valued
      based on their Fair Market Value on the date liability for such claim is the
      subject of a final determination.  

     

    8.8  Treatment
      as Purchase Price Adjustment. Parent,
      the Stockholders and the Company each agree to report each indemnification
      payment under this Article 8 as an adjustment to the Purchase Price for federal
      income tax purposes to the extent permitted by applicable Law.

     

    ARTICLE
      9.  TAX
      INDEMNIFICATION AND PROCEDURES

     

    19.1  Indemnification
      of Parent and the Surviving Corporation for Taxes. Parent
      Indemnitees shall be entitled to reimbursement and indemnification by the
      Stockholders from and against following, regardless of any investigation made
      at
      any time by or on behalf of Parent or Merger Sub, or any information Parent
      and
      Merger Sub may have:

     

    (1)  any
      and
      all Losses incurred by Parent or the Surviving Corporation resulting from,
      or
      which exists or arises due to, any inaccuracy or breach of the representations
      and warranties made in Section 3.11 of this Agreement;

     

    (2)  Taxes
      payable by or with respect to the Company for any Tax year or Tax period ending
      on or before the Closing Date, and, in the case of a Straddle Period, to the
      extent apportioned to the period that ends at the close of the Closing Date
      under Section 9.2, in each case other than Taxes reflected as liabilities on
      the
      Closing Date Balance Sheet and taken into account in determining any adjustment
      to the Purchase Price under Section 2.4(a); and

     

    (3)  Taxes
      imposed on the Company pursuant to any obligation to contribute to the payment
      of a Tax determined on a consolidated, combined or unitary or other group basis
      with respect to a group of corporations that includes or included the Company
      at
      any time on or before the Closing Date, including, without limitation, any
      such
      obligation arising under Treasury Regulations Section 1.1502-6 or similar
      provision of state, local or foreign law. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    9.2  Straddle
      Periods. For
      the
      sole purpose of appropriately apportioning any Taxes relating to a Tax year
      or
      Tax period that begins before and ends after the Closing Date (a “Straddle
      Period”),
      such
      apportionment shall be made assuming that the Company had a taxable year that
      ended at the close of business on the Closing Date. In the case of property
      Taxes and similar Taxes which apply ratably to a taxable period, the amount
      of
      Taxes allocable to the portion of the Straddle Period ending on the Closing
      Date
      shall equal the Tax for the period multiplied by a fraction, the numerator
      of
      which shall be the number of days in the period up to and including the Closing
      Date, and the denominator of which shall be the total number of days in the
      period.

     

    9.3  Tax
      Return Preparation.
      Parent
      shall prepare and file, or cause to be prepared and filed, at its own expense,
      all Tax Returns for the Company or the Surviving Entity required to be filed
      after the Closing Date (including with respect to Straddle Periods), it being
      understood that all Taxes shown as due and payable on such Tax Returns shall
      be
      the responsibility of Parent, except for such Taxes required to be indemnified
      under Section 9.1.
      Parent
      shall permit the Stockholder Representative to review and comment on each such
      Tax Return that includes Taxes required to be indemnified under Section 9.1
      prior to filing and shall make such revisions to such Tax Returns as are
      reasonably requested by the Stockholder Representative. 

     

    9.4  Cooperation.
      After
      the
      Closing, Parent and the Stockholder Representative shall promptly make available
      or cause to be made available to the other, as reasonably requested, and to
      any
      taxing authority, all information, records or documents relating to Tax
      liabilities and potential Tax liabilities relating to the Company for all
      periods prior to or including the Closing Date and shall preserve all such
      information, records and documents until the expiration of any applicable
      statute of limitations or extensions thereof.  

     

    9.5 Treatment
      as Purchase Price Adjustment.
      Parent,
      the Stockholders and the Company each agree to report each indemnification
      payment under this Article 9 as an adjustment to the Purchase Price for federal
      income tax purposes to the extent permitted by applicable Law.

     

    9.6 Survival
      and Applicability.
      The
      indemnification obligations contained in this Article 9 shall be the sole remedy
      available to Parent and the Surviving Corporation in connection with Taxes,
      and
      nothing in Article 8 shall apply to Losses or claims with respect to Taxes.
      The
      obligations described in this Article 9 shall survive the Closing and shall
      continue in full force and effect until 30 days after the applicable statute
      of
      limitations, giving effect to extensions thereto, has expired with respect
      to
      each such Tax.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      10.  TERMINATION

     

    10.1  Termination
      Events.
      This
      Agreement may be terminated and the Merger abandoned at any time prior to the
      Effective Time:

     

    (1)  by
      mutual
      written consent of Parent, Merger Sub and the Company;

     

    (2)  by
      Parent
      if (i) there has been a material breach of any representation, warranty,
      covenant or agreement contained in this Agreement on the part of the Company,
      such breach has not been cured within ten business days after written notice
      to
      the Company or (ii) Stockholder Approval has not been obtained within thirty
      (30) days of the date of this Agreement;

     

    (3)  by
      the
      Company if there has been a material breach of any representation, warranty,
      covenant or agreement contained in this Agreement on the part of Parent or
      Merger Sub and such breach has not been cured within ten business days after
      written notice to Parent; 

     

    (4)  by
      any
      party hereto if (i) there shall be a final, non-appealable order of any federal
      or state court in effect preventing consummation of the Merger, or (ii) there
      shall be any final action taken, or any statute, rule, regulation or order
      enacted, promulgated or issued or deemed applicable to the Merger by any
      Governmental Entity which would make consummation of the Merger illegal or
      which
      would prohibit Parent’s or the Surviving Corporation’s ownership or operation of
      all or any portion of the business or assets of the Company, or compel Parent
      or
      the Surviving Corporation to dispose of or hold separate all or a material
      portion of the business or assets of the Company or Parent or Merger Sub as
      a
      result of the Merger; or

     

    (5)  by
      any
      party hereto if the Merger shall not have been consummated by May 1, 2006,
      provided that the right to terminate this Agreement under this Section shall
      not
      be available to any party whose failure to fulfill any material obligation
      under
      this Agreement has been the cause of, or resulted in, the failure of the
      Effective Time to occur on or before such date.

     

    10.2  Effect
      of Termination.
      In the
      event of termination of this Agreement as provided in Section 10.1 hereof,
      this
      Agreement shall forthwith become void and there shall be no liability or
      obligation on the part of Parent, Merger Sub, the Company or their respective
      officers, directors, stockholders or Affiliates, or the Stockholder
      Representative, except to the extent that a party hereto is in breach of any
      of
      its covenants or agreements set forth in this Agreement; provided,
      however,
      that
      the provisions of Section 10.3 of this Agreement and the Confidentiality
      Agreement dated as of October 11, 2005 between Parent and the Company shall
      remain in full force and effect and survive any termination of this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
      11.  MISCELLANEOUS

     

    11.1  Amendments
      and Supplements.
      This
      Agreement may not be amended, modified or supplemented by the parties hereto
      in
      any manner, except (a) prior to the Effective Time, by an instrument in writing
      signed by Parent, Merger Sub, the Company and the Stockholder Representative
      and
      (b) after the Effective Time, by an instrument in writing signed by Parent,
      the
      Surviving Corporation and the Stockholder Representative.

     

    11.2  Waiver.
      The
      terms and conditions of this Agreement may be waived only by a written
      instrument signed by the party waiving compliance. The failure of any party
      hereto to enforce at any time any of the provisions of this Agreement shall
      in
      no way be construed to be a waiver of any such provision, nor in any way to
      affect the validity of this Agreement or any part hereof or the right of such
      party thereafter to enforce each and every such provision. No waiver of any
      breach of or non-compliance with this Agreement shall be held to be a waiver
      of
      any other or subsequent breach or non-compliance. The rights and remedies herein
      provided are cumulative and are not exclusive of any rights or remedies that
      any
      party may otherwise have at law or in equity.

     

    11.3  Governing
      Law.
      This
      Agreement shall be governed by, and construed and enforced in accordance with,
      the substantive laws of the State of New York, without regard to its principles
      of conflicts of laws. 

     

    11.4  Notice.
      All
      notices and other communications hereunder shall be in writing and shall be
      deemed given if delivered by hand, sent by electronic or facsimile transmission
      with confirmation of receipt, sent via a reputable overnight courier service
      with confirmation of receipt requested, or mailed by registered or certified
      mail (postage prepaid and return receipt requested) to the parties at the
      following addresses (or at such other address for a party as shall be specified
      by like notice), and shall be deemed given on the date on which delivered by
      hand or otherwise on the date of receipt as confirmed:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    To
      Parent or Merger Sub:

     

    Ventiv
      Health, Inc. 

    200
      Cottontail Lane

    Vantage
      North Court 

    Somerset,
      New Jersey 08873

    Facsimile:
      (732) 537-5033

    Attention: Chief
      Executive Officer 

    

    With
      a
      copy to:

    Akerman
      Senterfitt LLP

    335
      Madison Avenue

    Suite
      2600

    New
      York,
      New York 10017

    Facsimile:
      (212) 880-8965

    Attention:
      Kenneth G. Alberstadt, Esq.

    

    To
      the Company:

     

    Adheris,
      Inc.

    One
      Van
      de Graaff Drive, Suite 502

    Burlington,
      MA 01803

    Fax:
      781-229-8878

    Attn:
      Michael J. Evanisko, Chairman of the Board 

    

    With
      a
      copy to:

     

    The
      Feinberg Law Group, LLC

    57
      River
      Street, Suite 204

    Wellesley,
      MA 02481

    Facsimile:
      781-283-5776

    Attn:
      David H. Feinberg, Esq.

    

    To
      the Stockholder Representative:

     

    Eugene
      W.
      Williams II

    In
      care
      of Cambridge Healthtech Advisors, Inc.

    1000
      Winter Street

    Suite
      3000

    Waltham,
      MA 02451 

    Fax:
      781-547-0100

     

    With
      copies to:

     

    The
      Feinberg Law Group, LLC

    57
      River
      Street, Suite 204

    Wellesley,
      MA 02481

    Facsimile:
      781-283-5776

    Attn:
      David H. Feinberg, Esq.

    

    and,
      to
      the extent such notice or other communication does not contain any information
      deemed by the sender, in its sole discretion, to constitute confidential or
      proprietary information,

    

    Lance
      P.Maerov

    WPP
      Group
      USA, Inc.

    Senior
      Vice President, Corporate Development

    125
      Park
      Avenue

    4th
      Floor

    New
      York,
      NY 10017

    Fax:
      212-632-2453

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    11.5  Entire
      Agreement.
      This
      Agreement, and the documents and instruments and other agreements among the
      parties hereto executed pursuant to this Agreement, constitute the entire
      agreement among the parties with respect to the subject matter hereof and
      supersede all other prior agreements and understandings, both written and oral,
      between the parties with respect to the subject matter hereof, but excluding
      written nondisclosure agreements between Parent and the Company, which shall
      remain in effect in accordance with their terms. Each party hereto acknowledges
      that, in entering into this Agreement and completing the transactions
      contemplated hereby, such party is not relying on any representation, warranty,
      covenant or agreement not expressly stated in this Agreement, the Company
      Disclosure Schedule or the other agreements, certificates and other documents
      among or between the parties executed pursuant to this Agreement.

     

    11.6  Binding
      Effect; Assignability.
      This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective successors and permitted assigns. Except as provided in
      Articles II and VIII, nothing in this Agreement shall create or be deemed to
      create any third party beneficiary rights in any person or entity not a party
      to
      this Agreement. No assignment of this Agreement or of any rights or obligations
      hereunder may be made by any party hereto (by operation of law or otherwise)
      without the prior written consent of Parent, the Company and the Stockholder
      Representative and any attempted assignment without the required consents shall
      be void, provided that no such consent shall be required for any such assignment
      (i) of Parent’s rights and obligations hereunder (a) in connection with a sale
      or other transfer (whether directly or indirectly, including by merger or
      consolidation) of substantially all of the assets of Parent and its consolidated
      subsidiaries, so long as the surviving or transferee entity in such transaction
      undertakes to comply with Parent’s obligations under this Agreement or (b) to an
      Affiliate of Parent, provided that Parent remains liable therefor, (ii) of
      the
      Surviving Corporation’s rights and obligations hereunder in connection with a
      sale or other transfer (whether directly or indirectly, including by merger
      or
      consolidation) of the Company’s business or (iii) of Parent’s rights hereunder
      as security for the obligations of Parent or any Affiliate of Parent under
      a
      credit agreement entered into with a bank or other financial institution. .
      

     

    11.7  Legending
      of Shares.
      All
      certificates evidencing Shares issued hereunder shall bear a legend
      substantially to the following effect:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
      HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT WITH RESPECT THERETO OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION
      REQUIREMENTES OF SUCH ACT.

     

    The
      certificates evidencing the Shares may also bear any legends required by
      applicable blue sky laws. No holder of any Shares shall be permitted to transfer
      such Shares in the absence of an effective registration statement unless such
      holder has furnished Parent with an opinion of counsel, reasonably satisfactory
      to Parent, that such disposition does not require registration of such Shares
      under the Securities Act. Parent shall be entitled to issue stop transfer
      instructions to the foregoing effect to the transfer agent for the Parent Common
      Stock. 

     

    11.8  Validity.
      The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provisions of this Agreement,
      each of which shall remain in full force and effect.

     

    11.9  Counterparts.
      This
      Agreement may be executed by facsimile, and in one or more counterparts, all
      of
      which together shall constitute one and the same agreement.

     

    *
      * *

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

       IN
      WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger
      to be
      executed as an agreement under seal as of the date first above
      written.

     

    

     

    ADHERIS,
      INC.

    

    

    By:
      /s/
      Michael J. Evanisko   

    Name:
      Michael J. Evanisko

    Title:
      Chairman

    

    

    VENTIV
      HEALTH, INC.

    

    

    By:
      /s/
      John Emery    

    Name:
      John Emery

    Title:
      Chief Financial Officer 

    and
      Secretary

     

    

    ACORN
      ACQUISITION CORP.

    

    

    By:
      /s/
      John Emery    

    Name:
      John Emery

    Title:
      Vice President

    

    
 

    STOCKHOLDER
      REPRESENTATIVE:

    

    

    /s/
      Eugene W. Williams II          Name:
      Eugene W. Williams IIExhibit 10.38

 

SL GREEN REALTY CORP.

2005 LONG-TERM OUTPERFORMANCE PLAN

AWARD AGREEMENT

 

Name of
Grantee:                                                  (“Grantee”)

No. of LTIP
Units:                                                      

Participation Percentage:         .
    %(1)

Grant Date:  March     ,
2006

 

RECITALS

 

A.                                   The Grantee is an employee of SL Green
Realty Corp. (“SL Green” or the “Company”) and its subsidiary SL
Green Operating Partnership, L.P., through which SL Green conducts substantially
all of its operations (the “Partnership”).

 

B.                                     The
Company has adopted the 2005 Long-Term Outperformance Plan (the “Outperformance
Plan”) to provide the Company’s Senior Officers with incentive compensation. The Outperformance Plan was adopted effective as of December 15,
2005 by the Compensation Committee (the “Committee”) of the Board of
Directors of SL Green (the “Board”) pursuant to authority delegated to
it by the Board as set forth in the Committee’s charter, including authority to
make grants of equity interests in the Partnership which may, under certain
circumstances, become exchangeable for shares of SL Green common stock reserved
for issuance under the SL Green Realty Corp. 2005 Stock Option and Incentive
Plan (as amended, modified or supplemented from time to time, the “Option
Plan”). This award agreement (this “Agreement”) evidences an award
to the Grantee under the Outperformance Plan (the “Award”), which is
subject to the terms and conditions set forth herein.

 

C.                                     The
Grantee was selected by the Committee to receive the Award and the Board
effective as of March    , 2006, caused the Partnership to (1) issue
to the Grantee the number of LTIP Units(as defined herein) set forth above and (2) to
award the Grantee the percentage of the Outperformance Pool (as defined herein)
set forth above.

 

NOW, THEREFORE,
the Company, the Partnership and the Grantee agree as follows:

 

1.                                       Administration.
The Outperformance Plan and all awards thereunder, including this Award,
shall be administered by the Committee, which in the administration of the
Outperformance Plan shall have all the powers and authority it has in the
administration of the Option Plan as set forth in the Option Plan.

 

(1)                                  The
initial number of LTIP Units to equal the Participation Percentage multiplied
by 750,000.

 

 

2.                                       Definitions.
Capitalized terms used herein without definitions shall have the meanings given
to those terms in the Option Plan. In addition, as used herein:

 

“Additional Share Baseline Value” means, with respect to an Additional Share, the gross proceeds
received by SL Green or the Partnership upon the issuance of such Additional
Share, which amount shall be deemed to equal the price to the public if such
Additional Share is issued in a public offering or, if such Additional Share is
issued in exchange for assets or upon the acquisition of another entity, the
cash value imputed to such Additional Share for purposes of such transaction by
the parties thereto, as determined by the Committee, or, if no such value can
be imputed, the Common Stock Price on the date of issuance.

 

“Additional Shares” means the sum of (A) the
number of shares of Common Stock plus (B) the
product of the Conversion Factor then in effect multiplied by the number of
Units (other than those issued to SL Green), in the case of each (A) and
(B), to the extent issued after December 1, 2005 and on or before the
Valuation Date in a capital raising transaction, in exchange for assets or upon
the acquisition of another entity, but specifically excluding, without limitation,
shares of Common Stock issued upon exercise of stock options and restricted
shares of Common Stock issued to employees or other persons or entities in
exchange for services provided to SL Green.

 

“Award LTIP Units” has the meaning set forth
in Section 3.

 

“Baseline” means, as of the Valuation
Date, an amount representing (a) the Baseline Value multiplied by (I) the
Initial Shares, and (II) the sum of 100% plus the Target Return Percentage, plus
(b) with respect to each Additional Share, the product of (I) the
Additional Share Baseline Value of such Additional Share, multiplied by (II)
the sum of (A) 100% plus (B) the product of the Target Return
Percentage multiplied by a fraction the numerator of which is the number of
days prior to and including the Valuation Date during which such Additional
Share has been outstanding and the denominator of which is the number of days
from and including December 1, 2005 to and including the Measurement Date;
provided that if the Valuation Date occurs prior to November 30,
2008 (other than as a result of clause (iii) of the definition of the
Valuation Date), then for purposes of this definition in connection with the
calculation of the Outperformance Pool as of the Valuation Date, the
Measurement Date shall be the Valuation Date and the Target Return Percentage
shall equal 30% multiplied by the Fraction.

 

“Baseline Value” means $68.51, as determined by
the Committee as of the Effective Date.

 

“Change of Control” means:

 

(a)                                  any
“person,” including a “group” (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act, together with all “affiliates” and “associates”
(as such terms are defined in Rule 12b-2 under the Exchange Act) of such
person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of either (A) the combined voting power of the
Company’s then outstanding securities having the right to vote in an election
of the Board (“Voting

 

2

 

Securities”) or (B) the then
outstanding shares of all classes of stock of the Company (in either such case
other than as a result of the acquisition of securities directly from the
Company); or

 

(b)                                 the
members of the Board at the beginning of any consecutive 24-calendar-month
period commencing on or after the initial effective date of the Outperformance
Plan (the “Incumbent Directors”) cease for any reason including without
limitation, as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board; provided that any
person becoming a director of the Company whose election or nomination was
approved by a vote of at least a majority of the members of the Board then
still in office who were members of the Board at the beginning of such
24-calendar-month period, shall, for purposes hereof, be considered an
Incumbent Director; or

 

(c)                                  the
shareholders of the Company shall approve (A) any consolidation or merger
of the Company or any subsidiary where the shareholders of the Company,
immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, shares representing in the
aggregate at least 50% of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (B) any sale, lease, exchange or other transfer (in
one transaction or a series of transactions contemplated or arranged by
any party as a single plan) of all or substantially all of the assets of the
Company or (C) any plan or proposal for the liquidation or dissolution of
the Company.

 

Notwithstanding the foregoing clause (a), an
event described in clause (a) shall not be a Change of Control if
such event occurs solely as the result of an acquisition of securities by the
Company which, by reducing the number of shares of stock or other Voting
Securities outstanding, increases (x) the proportionate number of shares
of stock of the Company beneficially owned by any “person” (as defined above)
to 25% or more of the shares of stock then outstanding or (y) the
proportionate voting power represented by the Voting Securities beneficially
owned by any “person” (as defined above) to 25% or more of the combined voting
power of all then outstanding Voting Securities; provided, however, that if any
“person” referred to in clause (x) or (y) of this sentence shall
thereafter become the beneficial owner of any additional stock of the Company
or other Voting Securities (other than pursuant to a share split, stock
dividend, or similar transaction), then a Change of Control shall be deemed to
have occurred for purposes of the foregoing clause (a).

 

“Class A Units” has the meaning given to
that term in the Partnership Agreement.

 

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

 

“Common Stock” means SL Green’s Common Stock,
par value $.01 per share, either currently existing or authorized hereafter.

 

“Common Stock Price” means, as of a particular
date, the average of the Fair Market Value of one share of the Common Stock for
the forty-five (45) trading days ending on, and including,

 

3

 

such date (or, if such date is not a trading day, the
most recent trading day immediately preceding such date); provided, however,
that if such date is the date upon which a Transactional Change of Control
occurs, the Common Stock Price as of such date shall be equal to the fair
market value in cash, as determined by the Committee, of the total
consideration paid or payable in the transaction resulting in the Transactional
Change of Control for one share of Common Stock.

 

“Conversion Factor” has the meaning given to
that term in the Partnership Agreement.

 

“Disability” means, unless otherwise provided
in any Employment Agreement, a disability which renders the Grantee incapable
of performing all of his or her material duties for a period of at least 150
consecutive or non-consecutive days during any consecutive twelve-month period.

 

“Dividend Unit Equivalent” has the meaning set forth in Section 3.

 

“Dividend Value” means, as of a particular
date, the aggregate amount of dividends and other distributions paid on one
share of Common Stock between December 1, 2005 and such date (excluding
dividends and distributions paid in the form of additional shares of
Common Stock).

 

“Effective Date” means December 1, 2005.

 

“Employment Agreement” means, as of a
particular date, the Grantee’s employment agreement with the Company in effect
as of that date.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended.

 

“Fair Market Value” has the meaning given to
that term in the Option Plan.

 

“Family Member”, of a Grantee, means the
Grantee’s child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Grantee’s household (other than
a tenant of the Grantee), a trust in which these persons (or the Grantee) own
more than 50 percent of the beneficial interest, a foundation in which these
persons (or the Grantee) control the management of assets, and any other entity
in which these persons (or the Grantee) own more than 50 percent of the voting
interests.

 

“Fraction” means the number of whole calendar
months that have elapsed since the Effective Date divided by 36.

 

“Initial Shares” means the Total Shares less
the Additional Shares.

 

“LTIP Units” means Partnership Units, as such
term is defined in the Partnership Agreement, issued pursuant to Award
Agreements as profits interests under the Outperformance

 

4

 

Plan having the rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption set forth herein and in the Partnership Agreement.

 

“Maximum Outperformance Pool Amount” means, as
of the Valuation Date, the lesser of (a) $50,000,000 and (b) the
Common Stock Price on the Valuation Date multiplied by 1,337,337.

 

“Measurement Date” means November 30,
2008, except as otherwise defined for purposes of the definition of Baseline in
certain circumstances, as described in such definition.

 

“OPP Unit Equivalent” has the meaning set forth in Section 3.

 

“Outperformance Pool” means, as of the
Valuation Date, a dollar amount calculated as follows: subtract the Baseline
from the Total Return, in each case as of the Valuation Date, and multiply the
resulting amount (or, if the resulting amount would be negative, zero) by 10%; provided, however, that in no event shall the Outperformance
Pool as of the Valuation Date exceed the Maximum Outperformance Pool Amount as
of the Valuation Date. Notwithstanding the foregoing, if the Valuation Date as
of which the Outperformance Pool is being calculated is the date upon which a
Change of Control occurs and is on or after December 1, 2006, then
the Outperformance Pool shall be increased to equal (a) the amount of the
Outperformance Pool calculated in accordance with the preceding sentence
multiplied by (b) the lesser of (i) 200% or (ii) the sum of 100%
plus a fraction the numerator of which is 36 less the number of whole calendar
months that have elapsed since the Effective Date and the denominator of which
is the number of whole calendar months that have elapsed since the Effective
Date.

 

“Participation Percentage” means the Grantee’s
share of the Outperformance Pool as set forth above.

 

“Partnership Agreement” means the First Amended
and Restated Agreement of Limited Partnership of the Partnership dated as of August 20,
1997 among the Company and the limited partners party thereto, as amended from
time to time.

 

“Target Return Percentage” means 30%, except as
otherwise defined for purposes of the definition of Baseline in certain
circumstances, as described in such definition.

 

“Total Return” means, as of a particular date,
an amount equal to the sum of (a) the Total Shares multiplied by the
Common Stock Price as of such date plus (b) the Dividend Value, as of such
date, multiplied by the Initial Shares, plus (c) an amount equal to the
total of all dividends and other distributions in respect of Additional Shares
actually paid between December 1, 2005 and such date (excluding dividends
and distributions paid in the form of additional shares of Common Stock or
Units).

 

“Total Shares” means the sum of (a) the
number of shares of Common Stock plus (b) the product of the Conversion
Factor then in effect multiplied by the number of Units (other than those owned
by SL Green), in the case of each (a) and (b), to the extent outstanding
on the Valuation Date.

 

5

 

“Total Unit Equivalent” has the meaning set
forth in Section 3.

 

“Transactional Change of Control” means (a) a
Change of Control described in clause (a) of the definition thereof where
the “person” or “group” makes a tender offer for Common Stock, or (b) a
Change of Control described in clauses (c)(A) or (B) of the
definition thereof.

 

“Units” means all Class A Units, Class B
Units (as defined in the Partnership Agreement) and other Partnership Units (as
defined in the Partnership Agreement) with economic attributes substantially
similar to Class A Units or Class B Units as determined by the
Committee, outstanding or issuable upon the conversion, exercise, exchange or
redemption of any securities of any kind convertible, exercisable, exchangeable
or redeemable for Class A Units, Class B Units or such other
Partnership Units (other than LTIP Units issued under the Outperformance Plan
or LTIP Units issued under any similar outperformance program prior to the
determination of any performance based vesting hurdles with respect thereto).

 

“Valuation Date” means the earliest
of (i) the Measurement Date, (ii) the date upon which a Change of
Control shall occur, and (iii) the last day of a 30 consecutive calendar
day period during which, on each day in that period, the Outperformance Pool
would have reached the Maximum Outperformance Pool Amount if such day had been
the Valuation Date.

 

3.                                       Outperformance
Award.

 

(a)                                  Subject
to Section 8, the Grantee is hereby granted an Award consisting of
the number of LTIP Units set forth above (“Award LTIP Units”), which (A) will
be subject to forfeiture or increase to the extent provided in this Section 3
as set forth below and (B) will be subject to vesting as provided in Sections
4 and 8 hereof.

 

(b)                                 As
soon as practicable following the Valuation Date, but as of the Valuation Date,
the Committee will determine the Outperformance Pool (if any) and then perform the
following calculations with respect to this Award:

 

(i)                                     Multiply
(w) the Outperformance Pool calculated as of the Valuation Date by (x) the
Grantee’s Participation Percentage, then divide the result by the product of
(y) the Common Stock Price calculated as of the Valuation Date multiplied by
(z) the Conversion Factor on the Valuation Date; the resulting number is
hereafter referred to as the “OPP Unit Equivalent”;

 

(ii)                                  Multiply
(v) the OPP Unit Equivalent by (w) the Conversion Factor on the Valuation
Date and (x) the Dividend Value as of the Valuation Date, then divide the
result by the product of (y) the Common Stock Price calculated as of the
Valuation Date multiplied by (z) the Conversion Factor on the Valuation Date;
the resulting number is hereafter referred to as the “Dividend Unit
Equivalent”; and

 

(iii)                               Add the OPP Unit
Equivalent to the Dividend Unit Equivalent; the resulting number is hereafter
referred to as the “Total Unit Equivalent”.

 

6

 

(c)                                  If
the Total Unit Equivalent is smaller than the number of Award LTIP Units, then
the Grantee, as of the Valuation Date, shall forfeit a number of Award LTIP
Units equal to the difference and thereafter the term Award LTIP Units will
refer only to the remaining Award LTIP Units that were not forfeited. If the
Total Unit Equivalent is greater than the number of Award LTIP Units, then,
upon the performance of such calculation: 
(A) the Grantee, as of the Valuation Date, shall be automatically
granted a number of additional LTIP Units equal to the difference, and such
additional LTIP Units shall be added to the Award LTIP Units and thereby become
part of this Award, (B) the Company and the Partnership shall take
such corporate or partnership action as is necessary to accomplish the grant of
such additional LTIP Units, (C) the Grantee shall execute and deliver in
connection with such grant such documents, comparable to the documents executed
and delivered in connection with this Agreement, as the Company and/or the
Partnership reasonably request in order to comply with all applicable legal
requirements, including, without limitation, federal and state securities laws
and (D) thereafter the term Award LTIP Units will refer collectively to
the Award LTIP Units prior to such additional grant plus such additional LTIP
Units. If the Total Unit Equivalent is the same as the number of Award LTIP
Units, then there will be no change to this Award.

 

4.                                       Termination
of Grantee’s Employment; Vesting; Change of Control.

 

(a)                                  If
at any time the Grantee shall cease to be an employee of the Company for any
reason, then all Award LTIP Units that remain unvested at such time shall
automatically and immediately be forfeited by the Grantee, except that in the
case of the death or Disability of the Grantee, the provisions of Section 8
shall apply, and except as provided in Section 4(b) below.

 

(b)                                 If
at any time the Grantee shall cease to be an employee of the Company due to (i) a
termination without Cause (as defined in the Employment Agreement) by the
Company, or (ii) a termination with Good Reason (as defined in the
Employment Agreement), the Grantee shall be treated for all purposes of this
Agreement (including, without limitation, the provisions of this Agreement
relating to the vesting of the Award LTIP Units) as if he had remained as an
employee of the Company for 12 months after the date of termination.

 

(c)                                  Subject
to Section 8, the Award LTIP Units shall become vested as follows: (i) one-third
(1/3) of the Award LTIP Units shall become vested on the Measurement Date; and (ii) an
additional one-third (1/3) of the Award LTIP Units shall become vested on each
of the first (1st) and second (2nd)
anniversaries of the Measurement Date, provided that
all unvested Award LTIP Units that have not previously been forfeited shall
vest immediately upon the occurrence of a Change of Control.

 

5.                                       Payments
by Award Recipients. No amount shall be payable to the Company or the
Partnership by the Grantee at any time in respect of this Award.

 

6.                                       Distributions.
The holder of the Award LTIP Units shall be entitled to receive distributions
with respect to such Award LTIP Units to the extent provided for in the
Partnership Agreement. The Distribution Participation Date (as defined in the
Partnership Agreement) with

 

7

 

respect to Award LTIP Units in an amount equal to the Total Unit
Equivalent is the Valuation Date.

 

7.                                       Restrictions
on Transfer. None of the Award LTIP Units shall be sold, assigned,
transferred, pledged, hypothecated, given away or in any other manner disposed of,
encumbered, whether voluntarily or by operation of law (each such action a “Transfer”),
or redeemed in accordance with the Partnership Agreement (a) prior to
vesting, (b) for a period of two (2) years beginning on the date of
grant specified above other than in connection with a Change of Control, or (c) unless
such Transfer is in compliance with all applicable securities laws (including,
without limitation, the Securities Act of 1933, as amended (the “Securities
Act”)), and such Transfer is in accordance with the applicable terms and
conditions of the Partnership Agreement; provided that, upon the approval of,
and subject to the terms and conditions specified by, the Committee, unvested
Award LTIP Units that have been held for a period of at least two (2) years
beginning on the date of grant specified above may be Transferred to the
Grantee’s Family Members, provided that the transferee agrees in writing with
the Company and the Partnership to be bound by all of the terms and conditions
of this Agreement. In connection with any Transfer of Award LTIP Units, the
Partnership may require the Grantee to provide an opinion of counsel,
satisfactory to the Partnership, that such Transfer is in compliance with all
federal and state securities laws (including, without limitation, the
Securities Act). Any attempted Transfer of Award LTIP Units not in accordance
with the terms and conditions of this Section 7 shall be null and
void, and the Partnership shall not reflect on its records any change in record
ownership of any LTIP Units as a result of any such Transfer, shall otherwise
refuse to recognize any such Transfer and shall not in any way give effect to
any such Transfer of any LTIP Units. This Agreement is personal to the Grantee,
is non-assignable and is not transferable in any manner, by operation of law or
otherwise, other than by will or the laws of descent and distribution.

 

8.                                       Death or Disability.

 

(a)                                  Notwithstanding
any other provision herein, if, prior to the Valuation Date, the Grantee shall
cease to be an employee of the Company as a result of his death or Disability,
then (i) with respect to the Grantee the calculations provided in Section 3
shall be performed with respect to this Award immediately as if a Change of
Control had occurred (with respect to the Grantee only) on the date of his
death or Disability and (ii) all of the Award LTIP Units comprising this
Award (after giving effect to the issuance of additional LTIP Units or
forfeiture of Award LTIP Units pursuant to Section 3) shall
automatically and immediately vest.

 

(b)                                 Notwithstanding
any other provision herein, if, on or after the Valuation Date, the Grantee
shall cease to be an employee of the Company as a result of his death or
Disability, then all of the Grantee’s Award LTIP Units shall automatically and
immediately vest.

 

9.                                       Changes
in Capital Structure. If (i) the Company shall at any time be involved
in a merger, consolidation, dissolution, liquidation, reorganization, exchange
of shares, sale of all or substantially all of the assets or stock of the
Company or a transaction similar thereto, (ii) any

 

8

 

stock dividend, stock split, reverse stock split, stock combination,
reclassification, recapitalization, significant repurchases of stock or other
similar change in the capital structure of the Company, or any distribution to
holders of Common Stock other than regular cash dividends, shall occur or (iii) any
other event shall occur which in the judgment of the Committee necessitates
action by way of adjusting the terms of the Award, then the Committee may take
any such action as in its discretion shall be necessary to maintain the Grantee’s
rights hereunder so that they are substantially proportionate to the rights
existing under this Agreement prior to such event, including, without
limitation, adjustments in Award LTIP Units, Additional Shares, Baseline Value,
Dividend Value, Common Stock Price, Maximum Outperformance Pool Amount, Total
Shares and Total Return.

 

10.                                 Miscellaneous.

 

(a)                                  Amendments.
This Agreement may be amended or modified only with the consent of the
Partnership acting through the Committee; provided that
any such amendment or modification adversely affecting the rights of the
Grantee hereunder must be consented to by the Grantee to be effective as
against him.

 

(b)                                 Incorporation
of Option Plan. The provisions of the Option Plan are hereby incorporated
by reference as if set forth herein. If
and to the extent that any provision contained in this Agreement is
inconsistent with the Option Plan, this Agreement shall govern.

 

(c)                                  Effectiveness.
The Grantee shall be admitted as a partner of the Partnership with beneficial
ownership of the Award LTIP Units as of the grant date set forth above by (i) signing
and delivering to the Partnership a copy of this Agreement, and (ii) signing,
as a Limited Partner, and delivering to the Partnership a counterpart signature
page to the Partnership Agreement (attached hereto as Exhibit A).
The Partnership Agreement shall be amended to reflect the issuance to the
Grantee of the Award LTIP Units, whereupon the Grantee shall have all the
rights of a Limited Partner of the Partnership with respect to the number of
LTIP Units specified above, as set forth in the Partnership Agreement, subject,
however, to the restrictions and conditions specified herein and in the
Partnership Agreement.

 

(d)                                 Status
of LTIP Units under the Option Plan. The Award LTIP Units are not being
granted as equity securities under the Option Plan insofar as the
Outperformance Plan has been established as an incentive program of the
Partnership. The Company will have the right, as set forth in the Partnership
Agreement, to issue shares of Common Stock in exchange for Class A Units
into which such Award LTIP Units may have been converted pursuant to the
Partnership Agreement, subject to certain limitations set forth in the
Partnership Agreement, and such shares of Common Stock may be issued under
the Option Plan. The Grantee must be eligible to receive the Award LTIP Units
in compliance with applicable federal and state securities laws and to that
effect is required to complete, execute and deliver certain covenants,
representations and warranties (attached as Exhibit B). The
Committee may, in its sole and absolute discretion, seek to have the LTIP Units
become part of the Option Plan at a future time, whereby this Award may be
considered an award under the Option Plan. The Grantee

 

9

 

acknowledges that if the Committee so elects, in its sole discretion,
the Grantee will have no right to approve or disapprove such change.

 

(e)                                  Legend.
The records of the Partnership evidencing the Award LTIP Units shall bear an
appropriate legend, as determined by the Partnership in its sole discretion, to
the effect that such LTIP Units are subject to restrictions as set forth herein
and in the Partnership Agreement.

 

(f)                                    Compliance
With Law. The Partnership and the Grantee will make reasonable efforts to
comply with all applicable securities laws. In addition, notwithstanding any
provision of this Agreement to the contrary, no LTIP Units will become vested
or be paid at a time that such vesting or payment would result in a violation
of any such law.

 

(g)                                 Investment
Representation; Registration. The Grantee hereby makes the covenants,
representations and warranties and set forth on Exhibit B attached
hereto. All of such covenants, warranties and representations shall survive the
execution and delivery of this Agreement by the Grantee. The Partnership will
have no obligation to register under the Securities Act any LTIP Units or any
other securities issued pursuant to this Agreement or upon conversion or
exchange of LTIP Units.

 

(h)                                 Section 83(b) Election.
The Grantee hereby agrees to make an election to include in gross income in the
year of transfer the Award LTIP Units pursuant to Section 83(b) of
the Code substantially in the form attached hereto as Exhibit C
and to supply the necessary information in accordance with the regulations
promulgated thereunder.

 

(i)                                     Severability.
In the event that one or more of the provisions of this Agreement may be
invalidated for any reason by a court, any provision so invalidated will be
deemed to be separable from the other provisions hereof, and the remaining
provisions hereof will continue to be valid and fully enforceable.

 

(j)                                     Governing
Law. This Agreement is made under, and will be construed in accordance
with, the laws of the State of New York, without giving effect to the principle
of conflict of laws of such State.

 

(k)                                  No
Obligation to Continue Position as an Officer or to Employ. Neither the
Company nor any affiliate is obligated by or as a result of this Agreement to
continue to have the Grantee as an officer or to employ the Grantee and this
Agreement shall not interfere in any way with the right of the Company or any
affiliate to terminate the Grantee as an officer or employee at any time.

 

(l)                                     Notices.
Notices hereunder shall be mailed or delivered to the Partnership at its
principal place of business and shall be mailed or delivered to the Grantee at
the address on file with the Partnership or, in either case, at such other
address as one party may subsequently furnish to the other party in
writing.

 

10

 

(m)                               Withholding
and Taxes. No later than the date as of which an amount first becomes
includible in the gross income of the Grantee for income tax purposes or
subject to the Federal Insurance Contributions Act withholding with respect to
the Award, the Grantee will pay to the Company or, if appropriate, any of its
affiliates, or make arrangements satisfactory to the Committee regarding the
payment of, any United States federal, state or local or foreign taxes of any
kind required by law to be withheld with respect to such amount. The
obligations of the Company under this Agreement will be conditional on such
payment or arrangements, and the Company and its affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Grantee.

 

(n)                                 Successors
and Assigns. This Agreement shall be binding upon the Partnership’s
successors and assigns, whether or not this Agreement is expressly assumed.

 

[signature
page follows]

 

11

 

IN WITNESS WHEREOF, the
undersigned have caused this Award Agreement to be executed as of the
      day of March, 2006.

 

	
   

  	
  SL GREEN REALTY CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Marc Holliday

  
	
   

  	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SL GREEN OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  SL Green Realty Corp., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Marc Holliday

  
	
   

  	
   

  	
  Title: President and Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Grantee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  
								

 

12

 

EXHIBIT A

 

FORM OF
LIMITED PARTNER SIGNATURE PAGE

 

The Grantee, desiring to become one of the within
named Limited Partners of SL Green Operating Partnership, L.P., hereby accepts
all of the terms and conditions of (including, without limitation, the
provisions of Section 15.11 titled “Power of Attorney”), and becomes a
party to, the First Amended and Restated Agreement of Limited Partnership,
dated as of August 20, 1997, of SL Green Operating Partnership, L.P., as
amended through the date hereof (the “Partnership Agreement”). The
Grantee agrees that this signature page may be attached to any
counterpart of the Partnership Agreement.

 

 

	
   

  	
  Signature Line for Limited Partner:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Date: March    , 2006

  
	
   

  	
   

  
	
   

  	
  Address of Limited Partner:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
					

 

 

EXHIBIT B

 

GRANTEE’S
COVENANTS, REPRESENTATIONS AND WARRANTIES

 

The Grantee hereby represents, warrants and covenants
as follows:

 

(a)                                  The
Grantee has received and had an opportunity to review the following documents
(the “Background Documents”):

 

(i)                                     The
Company’s latest Annual Report to Stockholders;

 

(ii)                                  The
Company’s Proxy Statement for its most recent Annual Meeting of Stockholders;

 

(iii)                               The
Company’s Report on Form 10-K for the fiscal year most recently ended;

 

(iv)                              The
Company’s Form 10-Q for the most recently ended quarter filed by the
Company with the Securities and Exchange Commission since the filing of the Form 10-K
described in clause (iii) above;

 

(v)                                 Each
of the Company’s Current Report(s) on Form 8-K, if any, filed since the
end of the fiscal year most recently ended for which a Form 10-K has been
filed by the Company;

 

(vi)                              The
Partnership Agreement;

 

(vii)                           The
Option Plan; and

 

(viii)                        The
Company’s Certificate of Incorporation, as amended.

 

The Grantee also
acknowledges that any delivery of the Background Documents and other
information relating to the Company and the Partnership prior to the
determination by the Partnership of the suitability of the Grantee as a holder
of LTIP Units shall not constitute an offer of LTIP Units until such
determination of suitability shall be made.

 

(b)                                 The
Grantee hereby represents and warrants that

 

(i)                                     The
Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the “Securities Act”), or (B) by
reason of the business and financial experience of the Grantee, together with
the business and financial experience of those persons, if any, retained by the
Grantee to represent or advise him with respect to the grant to him of LTIP
Units, the potential conversion of LTIP Units into Class A Units of the
Partnership (“Common Units”) and the potential redemption of such Common
Units for shares of Common Stock (“REIT Shares”), has such knowledge,
sophistication and experience in financial and business matters and in making
investment decisions of this type that the Grantee (I) is capable of evaluating
the merits and risks of an investment in the Partnership and potential
investment in the Company and of making an informed investment decision, (II)
is capable of protecting his own

 

 

interest or has engaged representatives or advisors to
assist him in protecting his interests, and (III) is capable of bearing the
economic risk of such investment.

 

(ii)                                  The
Grantee understands that (A) the Grantee is responsible for consulting his
own tax advisors with respect to the application of the U.S. federal income tax
laws, and the tax laws of any state, local or other taxing jurisdiction to
which the Grantee is or by reason of the award of LTIP Units may become
subject, to his particular situation; (B) the Grantee has not received or
relied upon business or tax advice from the Company, the Partnership or any of
their respective employees, agents, consultants or advisors, in their capacity
as such; (C) the Grantee provides services to the Partnership on a regular
basis and in such capacity has access to such information, and has such
experience of and involvement in the business and operations of the
Partnership, as the Grantee believes to be necessary and appropriate to make an
informed decision to accept this Award of LTIP Units; and (D) an
investment in the Partnership and/or the Company involves substantial risks.
The Grantee has been given the opportunity to make a thorough investigation
of  matters relevant to the LTIP Units
and has been furnished with, and has reviewed and understands, materials
relating to the Partnership and the Company and their respective activities
(including, but not limited to, the Background Documents). The Grantee has been
afforded the opportunity to obtain any additional information (including any
exhibits to the Background Documents) deemed necessary by the Grantee to verify
the accuracy of information conveyed to the Grantee. The Grantee confirms that
all documents, records, and books pertaining to his receipt of LTIP Units which
were requested by the Grantee have been made available or delivered to the
Grantee. The Grantee has had an opportunity to ask questions of and receive
answers from the Partnership and the Company, or from a person or persons
acting on their behalf, concerning the terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its decision solely upon,
the Background Documents and other written information provided to the Grantee
by the Partnership or the Company.

 

(iii)                               The
LTIP Units to be issued, the Common Units issuable upon conversion of the LTIP
Units and any REIT Shares issued in connection with the redemption of any such
Common Units will be acquired for the account of the Grantee for investment
only and not with a current view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any participation
therein, without prejudice, however, to the Grantee’s right (subject to the
terms of the LTIP Units, the Option Plan and this Agreement) at all times to
sell or otherwise dispose of all or any part of his LTIP Units, Common
Units or REIT Shares in compliance with the Securities Act, and applicable
state securities laws, and subject, nevertheless, to the disposition of his
assets being at all times within his control.

 

(iv)                              The
Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the
Common Units issuable upon conversion of the LTIP Units, have been registered
under the Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws and, if such LTIP Units or Common Units are
represented by certificates, such certificates will bear a legend to such
effect, (B) the reliance by the Partnership and the Company on such
exemptions is predicated in part on the accuracy and completeness

 

 

of the representations and warranties of the Grantee
contained herein, (C) such LTIP Units, or Common Units, therefore, cannot
be resold unless registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is available, (D) there
is no public market for such LTIP Units and Common Units and (E) neither
the Partnership nor the Company has any obligation or intention to register
such LTIP Units or the Common Units issuable upon conversion of the LTIP Units
under the Securities Act or any state securities laws or to take any action
that would make available any exemption from the registration requirements of
such laws, except, that, upon the redemption of the Common Units for REIT
Shares, the Company may issue such REIT Shares under the Option Plan and
pursuant to a Registration Statement on Form S-8 under the Securities Act,
to the extent that (I) the Grantee is eligible to receive such REIT Shares
under the Option Plan at the time of such issuance, (II) the Company has filed
a Form S-8 Registration Statement with the Securities and Exchange
Commission registering the issuance of such REIT Shares and (III) such Form S-8
is effective at the time of the issuance of such REIT Shares. The Grantee
hereby acknowledges that because of the restrictions on transfer or assignment
of such LTIP Units acquired hereby and the Common Units issuable upon
conversion of the LTIP Units which are set forth in the Partnership Agreement
or this Agreement, the Grantee may have to bear the economic risk of his
ownership of the LTIP Units acquired hereby and the Common Units issuable upon
conversion of the LTIP Units for an indefinite period of time.

 

(v)                                 The
Grantee has determined that the LTIP Units are a suitable investment for the
Grantee.

 

(vi)                              No
representations or warranties have been made to the Grantee by the Partnership
or the Company, or any officer, director, shareholder, agent, or affiliate of
any of them, and the Grantee has received no information relating to an
investment in the Partnership or the LTIP Units except the information
specified in Paragraph (b) above.

 

(c)                                  So
long as the Grantee holds any LTIP Units, the Grantee shall disclose to the
Partnership in writing such information as may be reasonably requested
with respect to ownership of LTIP Units as the Partnership may deem
reasonably necessary to ascertain and to establish compliance with provisions
of the Code, applicable to the Partnership or to comply with requirements of
any other appropriate taxing authority.

 

(d)                                 The
Grantee hereby agrees to make an election under Section 83(b) of the
Code with respect to the LTIP Units awarded hereunder, and has delivered with
this Agreement a completed, executed copy of the election form attached
hereto as Exhibit C. The Grantee agrees to file the election (or to
permit the Partnership to file such election on the Grantee’s behalf) within
thirty (30) days after the award of the LTIP Units hereunder with the IRS
Service Center at which such Grantee files his personal income tax returns, and
to file a copy of such election with the Grantee’s U.S. federal income tax
return for the taxable year in which the LTIP Units are awarded to the Grantee.

 

(e)                                  The
address set forth on the signature page of this Agreement is the address
of the Grantee’s principal residence, and the Grantee has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such residence is sited.

 

 

EXHIBIT C

 

ELECTION
TO INCLUDE IN GROSS INCOME IN YEAR OF

TRANSFER
OF PROPERTY PURSUANT TO SECTION 83(B)

OF THE
INTERNAL REVENUE CODE

 

The undersigned hereby makes an election pursuant to Section 83(b) of
the Internal Revenue Code with respect to the property described below and
supplies the following information in accordance with the regulations
promulgated thereunder:

 

1.                                       The
name, address and taxpayer identification number of the undersigned are:

 

Name:                                                           (the
“Taxpayer”)

 

Address:                                                         

 

                                                                           

Social Security
No./Taxpayer Identification
No.:                            

 

2.                                       Description
of property with respect to which the election is being made:

 

The
election is being made with respect to
                      
LTIP Units in SL Green Operating Partnership, L.P. (the “Partnership”).

 

3.                                       The
date on which the LTIP Units were transferred is March      ,
2006. The taxable year to which this election relates is calendar year 2006.

 

4.                                       Nature
of restrictions to which the LTIP Units are subject:

 

(a)                                  With
limited exceptions, until the LTIP Units vest, the Taxpayer may not
transfer in any manner any portion of the LTIP Units without the consent of the
Partnership.

 

(b)                                 The
Taxpayer’s LTIP Units vest in accordance with the vesting provisions described
in the Schedule attached hereto. Unvested LTIP Units are forfeited in
accordance with the vesting provisions described in the Schedule attached
hereto.

 

5.                                       The
fair market value at time of transfer (determined without regard to any
restrictions other than restrictions which by their terms will never lapse) of
the LTIP Units with respect to which this election is being made was $0 per
LTIP Unit.

 

6.                                       The
amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit.

 

7.                                       A
copy of this statement has been furnished to the Partnership and SL Green
Realty Corp.

 

	
  Dated:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
					

 

 

SCHEDULE A

 

Vesting
Provisions of LTIP Units

 

The LTIP Units are subject to time-based and
performance-based vesting with the final vesting percentage equaling the
product of the time-based vesting percentage and the performance-based vesting
percentage. Performance-based vesting will be from 0-100% based on SL Green
Realty Corp.’s (the “Company’s”) per-share total return to shareholders for the
period from December 1, 2005 to November 30, 2008 (or earlier in
certain circumstances). Under the time-based vesting hurdles, one-third of the
LTIP Units will vest on the last day of the performance period and on each of
the first and second anniversaries thereof, provided that the Taxpayer remains
an employee of the Company through such dates, subject to acceleration in the
event of certain extraordinary transactions or termination of the Taxpayer’s
status as an employee under specified circumstances. Unvested LTIP Units are
subject to forfeiture in the event of failure to vest based on the passage of
time or the determination of the performance-based percentage.

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