AGREEMENT AND PLAN OF MERGER

 

TABLE OF CONTENTS

				Page
ARTICLE I		Definitions		1
Section 1.1		Certain Definitions		1
Section 1.2		Other Definitions		9
ARTICLE II		THE MERGER		9
Section 2.1		The Merger		9
Section 2.2		Time and Place of Closing		10
Section 2.3		Effective Time		10
Section 2.4		Effects of Merger		10
Section 2.5		Articles of Incorporation and Bylaws		10
Section 2.6		Directors		10
Section 2.7		Officers		10
Section 2.8		Name		10
ARTICLE III		MERGER CONSIDERATION; ADJUSTMENTS		11
Section 3.1		Conversion of Company Common Stock		11
Section 3.2		Adjusted Merger Payment		11
Section 3.3		Distribution of Adjusted Merger Payment		11
Section 3.4		Statement of Closing Date Indebtedness		12
Section 3.5		Treatment of Company Stock Options		12
Section 3.6		Escrow Amount		12
Section 3.7		Initial Working Capital Adjustment		13
Section 3.8		Payment		13
Section 3.9		Post-Closing Working Capital Adjustment		13

 

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ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF THE COMPANY		14
Section 4.1		Organization		14
Section 4.2		Authorization		15
Section 4.3		Absence of Restrictions and Conflicts		16
Section 4.4		Required Consents		16
Section 4.5		Real Property		16
Section 4.6		Personal Property		17
Section 4.7		Title to Assets		17
Section 4.8		Inventory		17
Section 4.9		Financial Statements		18
Section 4.10		No Undisclosed Liabilities		18
Section 4.11		Absence of Certain Changes		18
Section 4.12		Legal Proceedings		18
Section 4.13		Compliance with Law		19
Section 4.14		Contracts		19
Section 4.15		Tax Returns; Taxes		21
Section 4.16		Officers, Employees and Independent Contractors		24
Section 4.17		Company Benefit Plans		24
Section 4.18		Labor Relations		27
Section 4.19		Insurance Policies		28
Section 4.20		Environmental, Health and Safety Matters		28
Section 4.21		Intellectual Property		29

 

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Section 4.22		Software		30
Section 4.23		Related Party Transactions		31
Section 4.24		Customer and Supplier Relations		31
Section 4.25		Accounts Receivable		31
Section 4.26		Licenses		31
Section 4.27		Ethical Practices with Governmental Entities		32
Section 4.28		Product Warranties		32
Section 4.29		Brokers, Finders and Investment Bankers		32
ARTICLE V		REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS		32
Section 5.1		Authorization and Validity of Agreement		32
Section 5.2		Absence of Restrictions and Conflicts		33
Section 5.3		Ownership of Equity		33
Section 5.4		Legal Proceedings		33
Section 5.5		Amounts Owed to Shareholders		33
ARTICLE VI		REPRESENTATIONS AND WARRANTIES OF PARENT		33
Section 6.1		Organization		33
Section 6.2		Authorization		34
Section 6.3		Absence of Restrictions and Conflicts		34
Section 6.4		Brokers		34
Section 6.5		Availability of Funds		34
ARTICLE VII		CERTAIN COVENANTS AND AGREEMENTS		35
Section 7.1		Conduct of Business by the Company		35

 

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Section 7.2		Inspection and Access to Information		37
Section 7.3		Notices of Certain Events		38
Section 7.4		Interim Financials		39
Section 7.5		No Solicitation of Transactions		39
Section 7.6		Reasonable Efforts; Further Assurances; Cooperation		39
Section 7.7		Public Announcements		40
Section 7.8		Employee Matters		40
Section 7.9		Transfer Taxes; Expenses		41
Section 7.10		Non-Competition		41
Section 7.11		Tax Matters		43
Section 7.12		Customer Visits		46
Section 7.13		Director and Officer Liability and Indemnification		46
Section 7.14		Accounts and Notes Receivable		46
Section 7.15		Release		47
Section 7.16		Termination of Certain Agreements		47
Section 7.17		HSR Act		47
Section 7.18		Additional Obligations and Performance Payments		48
ARTICLE VIII		CONDITIONS TO CLOSING		49
Section 8.1		Conditions to Each Party’s Obligations		49
Section 8.2		Conditions to Obligations of the Parent		49
Section 8.3		Conditions to Obligations of the Shareholders		50
ARTICLE IX		CLOSING		52

 

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Section 9.1		Closing Location		52
Section 9.2		Company and Shareholder Closing Deliveries		52
Section 9.3		Parent Closing Deliveries		52
ARTICLE X		TERMINATION		53
Section 10.1		Termination		53
Section 10.2		Specific Performance and Other Remedies		53
Section 10.3		Effect of Termination		54
ARTICLE XI		INDEMNIFICATION		54
Section 11.1		Indemnification Obligations of the Key Shareholders and the Company		54
Section 11.2		Indemnification Obligations of Shareholders		54
Section 11.3		Indemnification Obligations of the Parent		55
Section 11.4		Indemnification Exclusive Remedy		55
Section 11.5		Indemnification Procedure		55
Section 11.6		Survival Period		57
Section 11.7		Liability Limits		57
Section 11.8		Investigations		58
Section 11.9		Calculation of Losses		58
ARTICLE XII		MISCELLANEOUS PROVISIONS		58
Section 12.1		Shareholder Representative		58
Section 12.2		Notices		59
Section 12.3		Schedules and Exhibits		60
Section 12.4		Assignment; Successors in Interest		60

 

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Section 12.5		Captions		60
Section 12.6		Controlling Law		60
Section 12.7		Severability		61
Section 12.8		Counterparts		61
Section 12.9		No Third Party Beneficiaries		61
Section 12.10		Waiver; Amendment		61
Section 12.11		Integration		61
Section 12.12		Interpretation		61
Section 12.13		Cooperation Following the Closing		61
Section 12.14		Transaction Costs		62

 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of April 24, 2007, is made and entered into by and among SCIELE PHARMA, INC., a Delaware corporation (the “ Parent ”), SP ACQUISITION CORP., a Georgia corporation (the “ Merger Sub ”), ALLIANT PHARMACEUTICALS, INC., a Georgia corporation (the “ Company ”), the shareholders of the Company set forth on the signature pages hereto (collectively the “ Shareholders ” and individually, a “ Shareholder ”),  and John N. Kapoor, Ph.D., as representative of the Company and the Shareholders (the “ Shareholder Representative ”).

RECITALS

WHEREAS, the Company is engaged in the business of marketing, selling and developing pharmaceutical products (the “ Business ”);

WHEREAS, the respective Boards of Directors of each of Parent, Merger Sub and the Company have determined that it is advisable and in the best interests of their respective corporations and their shareholders that Merger Sub be merged with and into the Company in accordance with the Georgia Business Corporation Code (the “ GBCC ”), and the terms of this Agreement, pursuant to which the Company will be the surviving corporation and will remain a wholly owned subsidiary of Parent (the “ Merger ”);

WHEREAS, prior to or concurrently with the execution hereof, pursuant to the written consent of the Shareholders made in accordance with Section 14-2-1103 of the GBCC, the requisite holders of the Company’s issued and outstanding shares of voting and nonvoting common stock (the “ Company Common Stock ”) have approved the Merger; and

WHEREAS, the parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger.

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements herein contained, and upon and subject to the terms and the conditions hereinafter set forth, the parties do hereby agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1             Certain Definitions .  The following terms, as used herein, have the  meanings set forth below:

“ Affiliate ” of any specified Person means any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.

“ Alternative Arrangements ” means, with respect to any Losses, (i) any proceeds received or receivable from insurance policies covering the damage, loss, liability or expense that is the subject of the claim for indemnity, less any increase in premiums resulting from any such insurance claim or (ii) any proceeds actually received from third parties, through

 

indemnification, counterclaim, reimbursement arrangement, contract or otherwise in compensation for the subject matter of an indemnification claim by such indemnitee.

“ Applicable Benefit Laws ” means all Laws applicable to any Company Benefit Plan or ERISA Affiliate Plan.

“ Business Day ” means any day except Saturday, Sunday or any day on which banks are generally not open for business in the City of New York, New York.

“ CERCLA ” means the United States Comprehensive Environmental Response, Compensation and Liability Act.

“ Closing Date Indebtedness ” means any indebtedness of the Company with respect to borrowed money or other long term indebtedness, including any interest accrued thereon and prepayment, change of control or similar penalties and expenses, as of the Closing Date.

“ Code ” means the United States Internal Revenue Code of 1986.

“ Company Benefit Plan ” means each Employee Benefit Plan sponsored or maintained or required to be sponsored or maintained at any time by the Company or to which the Company makes or has made, or has or has had an obligation to make, contributions at any time, or with respect to which the Company has any material liability or material obligation.

“ Company Common Stock ” means the shares of common stock of the Company, no par value per share.

“ Company Contracts ” means those Contracts to which the Company is a party.

“ Company Intellectual Property ” means any Intellectual Property that is owned by or licensed to the Company.

“ Company Licensed Software ” means all Software licensed to the Company, other than off the shelf software.

“ Company Proprietary Software ” means all Software owned by the Company.

“ Company Registered Intellectual Property ” means all of the Registered Intellectual Property owned by, filed in the name of, or licensed to the Company.

“ Company Software ” means the Company Licensed Software and the Company Proprietary Software.

“ Company Stock Option ” means any option to acquire capital stock of the Company, including any such option granted under any Company Benefit Plan.

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“ Confidential Information ” means any data or information concerning the Company (including trade secrets), without regard to form, regarding (for example and including) (a) business process models; (b) proprietary software; (c) research, development, products, services, marketing, selling, business plans, budgets, unpublished financial statements, licenses, prices, costs, Contracts, suppliers, customers, and customer lists; (d) the identity, skills and compensation of employees, contractors, and consultants; (e) specialized training; and (f) discoveries, developments, trade secrets, processes, formulas, data, lists, and all other works of authorship, mask works, ideas, concepts, know-how, designs, and techniques, whether or not any of the foregoing is or are patentable, copyrightable, or registrable under any intellectual property Laws in the United States or elsewhere.  Notwithstanding the foregoing, no data or information constitutes “Confidential Information” if such data or information is publicly known through means that do not involve a breach by any Party of any covenant or obligation set forth in this Agreement.

“ Contract ” means any contract, sub-contract, agreement, lease, license, commitment, sale and purchase order, note, loan agreement or binding commitment or instrument, whether oral or written, to which the Company is a party.

“ Control ” means, when used with respect to any specified Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by Contract or otherwise.

“ Customer ” means a customer of the Company that paid the Company more than $50,000 in the aggregate during the 24-month period ended December 31, 2006, or a customer that is expected to pay the Company more than $50,000 in the aggregate during the twelve (12)-month period ended December 31, 2007.

“ Disclosure Schedules ” means the Disclosure Schedules delivered by the Company to Parent concurrently with the execution and delivery of this Agreement.

“ Employee Benefit Plan ” means, with respect to any Person, each plan, fund, program, agreement, arrangement or scheme, including each plan, fund, program, agreement, arrangement or scheme maintained or required to be maintained under applicable Laws, that is at any time sponsored or maintained or required to be sponsored or maintained by such Person or to which such Person makes or has made, or has or has had an obligation to make, contributions providing benefits to the current and former employees, directors, managers, officers, consultants, independent contractors, contingent workers or leased employees of such Person or the dependents of any of them (whether written or oral), including (a) each deferred compensation, bonus, incentive compensation, pension, retirement, employee stock ownership, stock purchase, stock option, profit sharing or deferred profit sharing, stock appreciation, phantom stock plan and other equity compensation plan, “welfare” plan (within the meaning of Section 3(1) of ERISA, determined without regard to whether such plan is subject to ERISA), (b) each “pension” plan (within the meaning of Section 3(2) of ERISA, determined without regard to whether such plan is either subject to ERISA or is tax-qualified under the Code), (c) each severance plan or agreement, and each other plan providing health, vacation, supplemental unemployment benefit, hospitalization insurance, medical, dental, disability, life insurance, death

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or survivor benefits, fringe benefits or legal benefits and (d) each other employee benefit plan, fund, program, agreement or arrangement, but excluding any plan (y) the terms of which are contained primarily in statutes, regulations or rulings of a Governmental Entity, or (z) the funding of which is effected primarily through a trust or other funding vehicle (including a book reserve account), maintained directly or indirectly by a Governmental Entity.

“ Employees ” means all individuals employed by the Company as of the date hereof.

“ Employment Agreement ” means any employment contract, consulting agreement, termination or severance agreement, salary continuation agreement, change of control agreement or any other Contract, including offers for any of the above, respecting the terms and conditions of employment or payment of compensation in respect to any current or former officer or employee.

“ Environmental Laws ” means all Laws and common law relating to pollution or protection of health, safety or the environment, including the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), Safe Drinking Water Act (42 U.S.C. §3000(f) et seq.), Toxic Substances Control Act (15 U.S.C. §2601 et seq.), Clean Air Act (42 U.S.C. §7401 et seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601 et seq.) and other similar federal, state and local environmental statutes.

“ Equity Plan ” means the Alliant Pharmaceuticals 2006 Equity Incentive Plan, dated July 1, 2006, as amended.

“ ERISA ” means the United States Employee Retirement Income Security Act of 1974, as amended and in effect from time to time.

“ ERISA Affiliate ” means any Person that together with the Company would be deemed a “single employer” within the meaning of Section 414 of the Code.

“ ERISA Affiliate Plan ” means each Employee Benefit Plan sponsored or maintained or required to be sponsored or maintained at any time by any ERISA Affiliate, or to which such ERISA Affiliate makes or has made, or has or has had an obligation to make, contributions at any time, or with respect to which such ERISA Affiliate has any liability or obligation.

“ FDA ” means the United States Food & Drug Administration.

“ Financial Statements ” means (a) the audited balance sheet of the Company as of December 31, 2005, and the audited statements of income and cash flows of the Company for the year then ended, (b) the unaudited balance sheet of the Company as of December 31, 2006, and the unaudited statements of income and cash flow of the Company for the year then ended, and (c) the unaudited balance sheet of the Company as of March 31, 2007, and the unaudited statements of income and cash flow of the Company for the quarter then ended.

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“ FLSA ” means the United States Fair Labor Standards Act.

“ FMLA ” means the United States Family and Medical Leave Act.

“ GAAP ” means United States generally accepted accounting principles.

“ GMPs ” shall mean Good Manufacturing Practices, Good Laboratory Practices and Good Clinical Practices as defined in Parts 11, 50, 54, 56, 210, 211, 312, 314, and 601 and of Title 21 of the Code of Federal Regulations, as amended from time to time, or any successor thereto.

“ Governmental Entity ” means any (i) nation, state, commonwealth, county, city, town, village, district, or other jurisdiction of any nature, (ii) federal, state, local, municipal, foreign, or other government, (iii) federal, state, local or foreign governmental or quasi-governmental authority of any nature (including any agency, branch, department, board, commission, court or tribunal, e.g. the FDA and Office of Medical Policy, Division of Drug Marketing, Advertising, and Communications), (iv) multi-national or supra-national organization or body with jurisdiction over the Parties, (v) body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power, including any court or arbitrator, (vi) self-regulatory organization to which a Party has submitted or (vii) official of any of the foregoing.

“ Hazardous Materials ” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, or chemical compound, or hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under any Environmental Laws, including any quantity of friable asbestos, urea formaldehyde, polychlorinated biphenyls, radon gas, crude oil or any fraction thereof, all forms of natural gas, petroleum products or by-products or derivatives.

“ HSR Act ” means the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“ Indemnified Party ” means a Parent Indemnified Party or a Shareholder Indemnified Party.

“ Initial Working Capital Adjustment ” means the variance in the calculation of Net Working Capital between the Target Working Capital and the Net Working Capital on the Initial Working Capital Schedule.

“ Intellectual Property ” means any or all of the following and all rights, arising out of or associated therewith: (a) all United States, international and foreign patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof; (b) all inventions (whether patentable or not), invention disclosures, improvements, proprietary information, know-how, technology, technical data and customer lists, and all documentation relating to any of the foregoing throughout the world; (c) all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto throughout the world; (d) NDAs, (e) all internet uniform resource locators,

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domain names, trade names, logos, slogans, designs, common law trademarks and service marks, trademark and service mark registrations and applications therefor throughout the world; and (f) all databases and data collections and all rights therein throughout the world.

“ Key Shareholders ” means Mark Pugh, Michael Stresser, Arthur Deas, John N. Kapoor Trust dated 9/20/89, and Kapoor Children’s 1992 Trust.

“ Knowledge ” means, with respect to the Company, (i) all facts known by Mark Pugh, Michael Stresser, William Bucher, and Arthur Deas, following reasonable inquiry and diligence with respect to the matters at hand, and (ii) the actual and specific knowledge of John N. Kapoor.

“ Labor Laws ” means all Laws governing or concerning labor relations, unions and collective bargaining, conditions of employment, employee classification, employment discrimination and harassment, wages, hours or occupational safety and health, including (as amended and as in effect from time to time) ERISA, the United States Immigration Reform and Control Act of 1986, the United States National Labor Relations Act, the United States Civil Rights Acts of 1866 and 1964, the United States Equal Pay Act, United States Age Discrimination in Employment Act, United States Americans with Disabilities Act, FMLA, WARN, OSHA, the United States Davis Bacon Act, the United States Walsh-Healy Act, the United States Service Contract Act, United States Executive Order 11246, FLSA and the United States Rehabilitation Act of 1973.

“ Laws ” means all laws, statutes, common law, rules, codes, regulations (including, without limitation, GMPs), restrictions, ordinances, orders, decrees, approvals, directives, judgments, rulings, injunctions, writs and awards of, or issued or entered by, all Governmental Entities.

“ Leased Real Property ” means the parcels of real property of which the Company is the lessee or sublessee (together with all fixtures and improvements thereon).

“ Licenses ” means all notifications, licenses, permits (including environmental, construction and operation permits), franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations issued by any Governmental Entity, and applications therefor.

“ Liens ” means all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any nature whatsoever.

“ Loss ” or “ Losses ” shall mean any and all claims, obligations, losses, liabilities,  fines, costs, damages, penalties and expenses (including amounts paid in settlement, costs of investigation and reasonable attorneys’ fees and expenses), but not including speculative, punitive, indirect, incidental, or consequential damages or damages relating to business interruption or lost profits (even if advised of the possibility thereof) (collectively, “ Extraordinary Damages ”) except to the extent such Extraordinary  Damages are paid or payable

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to third parties.  All Losses shall be net of any other recoveries realized by an indemnitee and its Affiliates pursuant to Alternative Arrangements.

“ Material Adverse Effect ” means any change, event, effect or occurrence after the date hereof (when taken together with all other changes, events, effects or occurrences after the date hereof) that has had or is reasonably likely to have a materially adverse effect on the financial condition, results of operations, assets or liabilities (including contingent liabilities) of the Company.  A Material Adverse Effect shall also include any change, event or occurrence that shall have occurred that (when taken together with all other states of facts, changes, events, effects or occurrences that have occurred) has prevented the performance by the Company or the Shareholders of their obligations hereunder or the consummation of the transactions contemplated hereby.  Notwithstanding the foregoing, in determining whether there has been a Material Adverse Effect, any adverse change, event, effect or occurrence principally attributable to any of the following shall be disregarded:  (i) general economic, business, industry or financial market conditions (whether in the United States or internationally); (ii) the taking of any action required or permitted by this Agreement or the Seller Ancillary Documents; (iii) the announcement or pendency of the transactions contemplated hereby, (iv) the breach of this Agreement or any Parent Ancillary Documents by Parent, (v) any changes in accounting rules, including GAAP; or (vi) any adverse change in or effect on the business of the Company that is cured by or on behalf of the Company before the earlier of the Closing Date and termination of this Agreement as set forth in Article IX.

“ NDAs ” means all new drug applications, abbreviated new drug applications and other registrations and approvals of any Governmental Entity associated with the sale of pharmaceutical products.

“ Net Working Capital ” means the current assets of the Company less the current liabilities of the Company, as reflected on the Working Capital Schedule prepared in accordance with GAAP, and to the extent consistent therewith, on a basis consistent with the methodologies, practices, estimation techniques, assumptions and principles of the Company, provided , however , that “current liabilities” shall exclude (A) all amounts, fees and expenses payable in accordance with Section 3.2(a) and including any related accruals or reserves therefor, and (B) all income Tax obligations and liabilities, including deferred income Tax items, and (C) Closing Date Indebtedness.  An example of the Net Working Capital calculated from the Company’s December 31, 2006 balance sheet is attached hereto as Schedule 1.1 .

“ Noncompete Business ” means pharmaceutical products for the following therapeutic classes and/or treatment indications, as applicable: reduction of inflammation treated by prednisolone-based products; short-acting treatment of attention deficit/hyperactivity disorder (ADHD); pediculosis; and congestion and cough resulting from allergy and the common cold.

“ Noncompete Period ” means the period beginning on the Closing Date and continuing for a period of three (3) years from the Closing Date.

“ Option Releases ” has the meaning set forth in Section 7.8(a).

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“ OSHA ” means the United States Occupational Safety and Health Administration.

“ Party ” or “ Parties ” means, individually, the Parent, the Company, each Shareholder and the Shareholder Representative and, collectively, the Parent, the Company, the Shareholders and the Shareholder Representative.

“ Permitted Liens ” means (a) Liens for Taxes not yet due and payable or being contested in good faith, (b) Liens of carriers, warehousemen, mechanics, materialmen and repairmen incurred in the ordinary course of business consistent with past practice and not yet delinquent, and (c) Liens on assets which are leased and Intellectual Property which is licensed.

“ Person ” means any individual, corporation, partnership, joint venture, limited liability company, trust, unincorporated organization or Governmental Entity.

“ Product ” means the Company’s proprietary pharmaceutical product Rondec-DM.

“ Parent Ancillary Documents ” means any certificate, agreement, document or other instrument, other than this Agreement, to be executed and delivered by the Parent in connection with the transactions contemplated hereby, including, without limitation, the Escrow Agreement.

“ Parent Indemnified Parties ” means the Parent and its Affiliates (including, after the Closing, the Company), their respective officers, directors, employees, agents and representatives and the heirs, executors, successors and assigns of any of the foregoing.

“ Pro Rata Share ” means the percentage of Company Common Stock held by a Shareholder in the Company as of the Closing Date.

“ Receivables ” means the Company’s accounts receivable, notes receivable and other receivables as of the close of business on the Closing Date.

“ Reference Balance Sheet ” means the audited balance sheet of the Company at December 31, 2006.

“ Registered Intellectual Property ” means all United States and international: (a) patents and patent applications (including provisional applications); (b) registered trademarks and service marks, applications to register trademarks and service marks, intent-to-use applications, or other registrations or applications related to trademarks and service marks; (c) registered copyrights and applications for copyright registration; (d) domain name registrations; (e) NDAs, and (f) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued, filed with or recorded with any Governmental Entity.

“ Release ” means, with respect to any Hazardous Material, any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or

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disposing into any surface or ground water, drinking water supply, soil, surface or subsurface strata or medium or the ambient air.

“ Seller Ancillary Documents ” means any certificate, agreement, document or other instrument, other than this Agreement, to be executed and delivered by the Company, the Shareholders or any Affiliate of the Shareholders in connection with the transactions contemplated hereby, including, without limitation the Escrow Agreement.

“ Shareholder Indemnified Parties ” means the Shareholders and their respective heirs, executors, successors and assigns.

“ Software ” means any computer software program, together with any error corrections, updates, modifications or enhancements thereto, in both machine-readable form and human-readable form, including all comments and any procedural code.

“ Supplier ” means any supplier of goods or services to which the Company paid more than $50,000 in the aggregate during the 24-month period ended December 31, 2006, or expects to pay more than $50,000 in the aggregate during the twelve (12)-month period ended December 31, 2007.

“ Target Working Capital ” means an amount equal to negative $6,500,000.

“ Tax ” or “ Taxes ” means all taxes, assessments, duties, fees, levies and other charges of a Governmental Entity, including income, franchise, capital stock, real property, personal property, tangible, withholding, employment, payroll, social security, social contribution, unemployment compensation, disability, transfer, sales, use, excise, gross receipts, value-added and all other taxes of any kind for which the Company or the Parent may have any liability imposed by any Governmental Entity, whether disputed or not, and any related charges, interest or penalties imposed by any Governmental Entity.

“ Tax Return ” means any report, return, declaration or other information statement relating to Taxes required to be supplied to a Governmental Entity, including any schedule or attachment thereto, and including any amendment thereof.

“ Termination Date ” means the date prior to the Closing when this Agreement is terminated in accordance with Article X.

“ Territory ” means the United States.

“ Treasury Regulations ” means the temporary and final income tax regulations, promulgated under the Code.

“ WARN ” means the United States Worker Adjustment and Retraining Notification Act, as amended and as in effect from time to time.

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“ Working Capital Schedule ” means a statement of the current assets of the Company and the current liabilities of the Company as of the close of business on the Closing Date.

Section 1.2             Other Definitions .  Terms not defined in Section 1.1 shall have the meaning ascribed in the body of this Agreement.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP.

ARTICLE II
THE MERGER

Section 2.1             The Merger .  Upon the terms and subject to the conditions hereof, and in accordance with the GBCC, at the Effective Time, (a) Merger Sub shall be merged with and into the Company, (b) the separate corporate existence of Merger Sub shall cease, and (c) the Company shall continue as the surviving corporation (the “ Surviving Corporation ”) in the Merger under the laws of the State of Georgia.

Section 2.2             Time and Place of Closing .  Subject to the terms and conditions of this Agreement, the Closing of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at 10:00 a.m. local time on (a) the third business day following the date on which all of the conditions to the obligations of the parties set forth in Article VIII have been satisfied or waived as provided therein, or (b) at such other time, date or place as the Company and Parent may agree in writing.  The date on which the Closing occurs is referred to herein as the “ Closing Date .”

Section 2.3             Effective Time .  Simultaneously with the Closing, the parties hereto shall file a certificate of merger (or other appropriate documentation) with the Georgia Secretary of State in such form as required by, and executed in accordance with, the relevant provisions of the GBCC and acceptable to the parties hereto (the “ Certificate of Merger ”).  The Merger shall become effective at the time of filing of the Certificate of Merger, or at such later time which the parties hereto shall have agreed upon and designated in such filing as the effective time of the Merger (the “ Effective Time ”).

Section 2.4             Effects of Merger .  The Merger shall, from and after the Effective Time, have the effects set forth in the GBCC.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the properties, rights, privileges, powers, immunities and franchises of the Merger Sub and the Company shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Merger Sub and the Company shall become the debts, liabilities and duties of the Surviving Corporation.  If at any time after the Effective Time, any further action is deemed necessary or desirable to carry out the purposes of this Agreement, the parties hereto agree that the Surviving Corporation and its proper officers and directors shall be authorized to take, and shall take, any and all such action.

Section 2.5             Articles of Incorporation and Bylaws .  At the Effective Time, the Articles of Incorporation and the Bylaws of the Company shall become the Articles of Incorporation and the Bylaws of the Surviving Corporation.

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Section 2.6             Directors .  The directors of Merger Sub shall be the directors of the Surviving Corporation until their earlier death, resignation or removal in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation.

Section 2.7             Officers .  The officers of Merger Sub shall be the officers of the Surviving Corporation until their earlier death, resignation or removal in accordance with the Articles of Incorporation and Bylaws of the Surviving Corporation.

Section 2.8             Name .  The name of the Surviving Corporation shall be Alliant Pharmaceuticals, Inc.

ARTICLE III
MERGER CONSIDERATION; ADJUSTMENTS

Section 3.1             Conversion of Company Common Stock .  At the Effective Time, by virtue of the Merger and without any further action on the part of the Parent, Merger Sub, the Company or the Shareholders, all issued and outstanding shares of the Company Common Stock and any other equity security of the Company (including preferred stock, options, warrants or debt convertible into stock, options or warrants) shall be cancelled and retired and shall cease to exist, and shall be converted into the right to receive, cash in an amount equal to $122,250,000 (the “ Merger Payment ”), subject to adjustment as provided in Section 3.2 hereof (as so adjusted, the “ Adjusted Merger Payment ”).

Section 3.2             Adjusted Merger Payment .  At the Effective Time, the Parent shall pay or cause to be paid to the Shareholder Representative the Merger Payment (for distribution to each Shareholder based on such Shareholder’s Pro Rata Share):

(a)           minus the amount, if any, of the Closing Date Indebtedness, as set forth in the Closing Date Indebtedness Statement;

(b)           minus an amount equal to $12,500,000 (the “ Escrow Amount ”) deposited with LaSalle Bank (the “ Escrow Agent ”), to be held in escrow as further provided in Section 3.6 below;

(c)           minus the amounts payable to the holders of Company Stock Options in accordance with the provisions of Section 3.5 below; and

(d)           plus or minus any Initial Working Capital Adjustment in accordance with the provisions of Section 3.7 below; provided, however, that any positive Working Capital Adjustment hereunder shall be capped at an amount equal to $1,000,000.

Section 3.3             Distribution of Adjusted Merger Payment .  At the Closing, the Shareholders shall receive the Adjusted Merger Payment for the Company Common Stock promptly upon surrender to Parent by the Shareholder Representative of the certificate or certificates evidencing such outstanding Company Common Stock, duly endorsed in blank or accompanied by duly executed stock transfer powers.  In any event, notwithstanding whether such certificates representing all of the Company Common Stock have been so surrendered, (i)

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no dividend payable to holders of record of stock of the Surviving Corporation shall be paid to the holder of such outstanding certificate of Company Common Stock and (ii) the holder of such outstanding certificate of Company Common Stock shall not have any voting or other rights in the Surviving Corporation.

Section 3.4             Statement of Closing Date Indebtedness .  Not less than two (2) Business Days prior to the Closing Date, the Company shall deliver to the Parent a statement (the “ Closing Date Indebtedness Statement ”), signed by the Chief Financial Officer of the Company, which sets forth, by creditor, the aggregate amount of the Closing Date Indebtedness.  Copies of the Payoff Letters, delivered in accordance with Section 8.2(f) hereof, shall be attached to the Closing Date Indebtedness Statement.

Section 3.5             Treatment of Company Stock Options .

(a)           At the Effective Time, by virtue of the Merger and without any further action on the part of the Parent, Merger Sub, the Company or the Shareholders, each Company Stock Option outstanding immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, in exchange for a cash payment by the Company payable on such date of an amount equal to (i) the excess, if any, of (A) $6.50 per share of Company Common Stock over (B) the exercise price per share of Company Common Stock subject to such Company Stock Option, multiplied by (ii) the number of shares of Company Common Stock for which such Company Stock Option shall not theretofore have been exercised.

(b)           All amounts payable pursuant to this Section 3.5 shall be subject to any required withholding of Taxes and shall be paid without interest.  The Company shall use its commercially reasonable efforts to obtain all consents of the holders of the Company Stock Options as shall be necessary to effectuate the foregoing.

(c)           The Company’s board of directors shall, prior to the Effective Time, adopt such resolutions or take such other actions as are required so that the Equity Plan shall terminate as of the Effective Time, and the provisions in any other benefit plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time, and to ensure that following the Effective Time no holder of a Company Stock Option or any participant in any Company Benefit Plan shall have any right thereunder to acquire any capital stock of the Company, the Surviving Corporation or the Parent.

(d)           The Parties acknowledge that it shall be a condition precedent to delivery of the cash payment contemplated by subsection (a) above to any holder of Company Stock Options, that such holder shall have delivered an Option Release, and Parent shall be entitled to withhold payment to any such Company Stock Option holder until such Option Release has been given.

Section 3.6             Escrow Amount .  The Escrow Amount shall be deposited with the Escrow Agent into an interest-bearing escrow account.  The Escrow Agent shall hold the aggregate

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Escrow Amount in accordance with the terms and conditions of an escrow agreement, by and among the Parent, the Shareholder Representative and the Escrow Agent, in substantially the form attached hereto as Exhibit 3.6 (the “ Escrow Agreement ”).  The Escrow Amount shall remain in escrow following the Closing for disbursement in accordance with the working capital adjustment set forth below and to cover any indemnification claims of Parent, in each case in accordance with the terms of the Escrow Agreement, until: (i) twelve (12) months from the Closing Date, at which time 50% of the remaining and undisputed balance of the Escrow Amount (inclusive of any investment earnings thereon) shall be released to the Shareholder Representative, and (ii) the remaining and undisputed balance of the Escrow Amount (inclusive of any investment earnings thereon) shall be released to the Shareholder Representative on the date which is eighteen (18) months from the date of Closing (the “ Escrow Termination Date ”).

Section 3.7             Initial Working Capital Adjustment .  At least four (4) Business Days prior to the Closing Date, the Company shall deliver to the Parent a certificate, executed by the Company, setting forth a good faith calculation of its estimate of Net Working Capital (the “ Initial Working Capital Schedule ”) and a determination of the Adjusted Merger Payment, which shall be calculated in accordance with Section 3.2.  The Parent shall have the right to review and comment upon such Initial Working Capital Schedule, and the Company shall provide Parent and its representatives reasonable access to all books, records, and employees of the Company for purposes consistent therewith.

Section 3.8             Payment .  All payments required under this Article III or any other provision hereof shall be made in cash by wire transfer of immediately available funds to such bank account as shall be designated in writing by the Parent or the Shareholder Representative, as applicable.

Section 3.9             Post-Closing Working Capital Adjustment .

(a)           Within ninety (90) days following the Closing Date, the Parent shall prepare and deliver to the Shareholder Representative a schedule (the “ Parent Working Capital Schedule ”) setting forth its good faith calculation of the Net Working Capital.  The Parent Working Capital Schedule shall be prepared in accordance with GAAP and the calculation of the Initial Working Capital Schedule.

(b)           The Shareholder Representative shall have thirty (30) days following receipt of the Parent Working Capital Schedule delivered pursuant to Section 3.9(a) during which to notify the Parent of any dispute of any item contained therein (the “ Objection Notice ”), which notice shall set forth in reasonable detail the basis for such dispute.  The Parent and the Shareholder Representative shall cooperate in good faith to resolve any such dispute as promptly as practicable, and upon such resolution, the Working Capital Schedule shall be prepared in accordance with the agreement of the Parent and the Shareholder Representative.  In the event the Shareholder Representative does not notify the Parent of any such dispute within such thirty (30)-day period or notifies the Parent within such period that it does not dispute any item contained therein, the Parent Working Capital Schedule delivered pursuant to Section 3.9(a) and the

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Parent’s calculation of the Working Capital Schedule, shall be final and binding upon the Parties.

(c)           In the event the Parent and the Shareholder Representative are unable to resolve any dispute regarding the Parent Working Capital Schedule delivered pursuant to Section 3.9(a) within thirty (30) days following the Parent’s receipt of notice of such dispute, such dispute shall be submitted to, and all issues having a bearing on such dispute shall be resolved by BDO Seidman, LLP, a nationally recognized accounting firm (the “ Accounting Referee ”).  Within fifteen (15) Business Days of the selection of the Accounting Referee, both the Shareholder Representative and Parent shall submit a calculation of Net Working Capital and any supporting documentation to the Accounting Referee.  Within twenty (20) Business Days of the timely receipt of the later of such submissions, the Accounting Referee shall choose the one of the two submissions that most accurately reflects what the actual Working Capital Schedule should be and that submission shall establish the adjustment to the Merger Payment.  If only one of the parties makes a timely submission, then that submission shall establish the adjustment to the Merger Payment.  The Accounting Referee’s determination of the Working Capital Schedule (the “ Final Working Capital Schedule ”) shall be final and binding on the Parties.  To the extent any facts and circumstances that constitute a breach of any representation or warranty contained in Article IV or V also constitute an adjustment that is reflected in the Final Working Capital Schedule, the Parent shall not be entitled to an additional remedy under Article XI to the extent of the adjustment in the Final Working Capital Schedule. The fees, costs and expenses of the Accounting Referee shall be shared equally by (A) the Shareholder Representative (on behalf of the Shareholders) on the one hand and (B) the Parent on the other hand, which such amount in the case of (A) shall be paid out of the Escrow Amount at the direction of the Shareholder Representative.

(d)           If the Net Working Capital as finally determined in the Final Working Capital Schedule pursuant to Section 3.9(c) is greater than that reflected in the Initial Working Capital Schedule, then Parent shall promptly (but in any event within five (5) Business Days of the final determination thereof) pay to the Shareholder Representative such excess; provided, however, that the total positive adjustment pursuant to this subsection (d) and the Initial Working Capital Schedule delivered pursuant to Section 3.7 shall not exceed $1,000,000 in the aggregate.  If the Net Working Capital as finally determined in the Final Working Capital Schedule pursuant to Section 3.9(c) above is less than the amount shown in the Initial Working Capital Schedule, then the Shareholder Representative shall promptly (but in any event within five (5) Business Days of the final determination thereof) cause to be paid to the Parent from the Escrow Amount an amount equal to such shortfall in accordance with Section 3.8.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY

Except as set forth on the Disclosure Schedules, the Company represents and warrants to the Parent and Merger Sub that, as of the date hereof:

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Section 4.1             Organization .

(a)           The Company is a corporation duly formed and validly existing under the Laws of the State of Georgia and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.  The Company is duly qualified or registered as a foreign corporation to transact business under the Laws of each jurisdiction where the character of its activities or the location of the properties owned or leased by it requires such qualification or registration.  Schedule 4.1(a) contains a true, correct and complete list of the jurisdictions in which the Company is qualified or registered and in good standing to do business as a foreign corporation.  The Company has heretofore made available to the Parent true, correct and complete copies of its articles of incorporation and bylaws as currently in effect and its corporate record books with respect to actions taken by its shareholders and board of directors

(b)           The Company does not own, directly or indirectly, any capital stock or other equity, securities or interests in any other corporation or in any limited liability company, partnership, joint venture or other Person.

(c)           The authorized capital stock of the Company consists of 40,000,000 shares of common stock, no par value per share, of which: (i) 30,000,000 shares are voting common stock, 15,172,452 of which are issued and outstanding, and (ii) 10,000,000 shares are nonvoting common stock, 15,500 shares of which are issued and outstanding.  Schedule 4.1(c) accurately and completely sets forth a list of the number and class of shares of capital stock of the Company held by each of the Shareholders, who collectively own all of the issued and outstanding shares of capital stock of the Company.  All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable.  Each Shareholder has full and exclusive power, right and authority to vote all of the shares of capital stock owned by it, and no Shareholder is bound by any agreement affecting or relating to its right to transfer or vote such shares.  Except as set forth on Schedule 4.1(c) , there are no outstanding options, warrants, conversion rights, subscriptions or other rights entitling any Person to acquire or receive, or requiring the Company to issue, any shares of its capital stock or securities convertible into, or exchangeable for, such shares of capital stock.  There are no outstanding Contracts of the Company or any Shareholder or any other Person to purchase, redeem, or otherwise acquire any of the shares of capital stock of the Company or securities or obligations of any kind convertible into any shares of capital stock of the Company.  There are no dividends which have accrued or been declared but are unpaid on the capital stock of the Company.

(d)           Except for the Business, the Company is not engaged in any other business or commercial activity.

Section 4.2             Authorization .  The Company has full corporate power and authority to execute and deliver this Agreement and the Seller Ancillary Documents and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby

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and thereby.  The execution and delivery of this Agreement and the Seller Ancillary Documents by the Company and the performance by the Company of its obligations hereunder and thereunder and the consummation of the transactions provided for herein and therein (including, without limitation, the Merger) have been duly and validly authorized by all necessary corporate action on the part of the Company.  This Agreement has been, and the Seller Ancillary Documents shall be as of the Closing Date, duly executed and delivered by the Company and do or shall, as the case may be, constitute the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect which affect the enforcement of creditors’ rights generally and by equitable principles.

Section 4.3             Absence of Restrictions and Conflicts .  The execution, delivery and performance by the Company of this Agreement and the Seller Ancillary Documents, as applicable, the consummation of the transactions contemplated hereby and thereby and the fulfillment of and compliance with the terms and conditions hereof and thereof do not or shall not (as the case may be), with the passing of time or the giving of notice or both, (a) contravene or conflict with any term or provision of the articles of incorporation or bylaws of the Company, (b) except as indicated on Schedule 4.3 , violate or conflict with, constitute a breach of or default under, result in the loss of any benefit under, permit the acceleration of any obligation under or create in any party the right to terminate, modify or cancel any Contract to which the Company is a party, (c) contravene or conflict with any judgment, decree or order of any Governmental Entity to which the Company is a party or by which the Company or any of its properties are bound, (d) contravene or conflict with any Law or arbitration award applicable to the Company, or the Business, or (e) result in the creation or imposition of any Lien on any property or asset of the Company.

Section 4.4             Required Consents .  Schedule 4.4 sets forth each action, consent, approval, notification, waiver, authorization, order or filing (each, a “ Required Consent ” and collectively, the “ Required Consents ”) under any Law, License or Contract to which the Company is or any of the Shareholders are a party that is necessary with respect to the execution, delivery and performance of this Agreement or the Seller Ancillary Documents to avoid a breach or violation of, or giving rise to any right of termination, cancellation or acceleration of any right or obligation or to a loss of any benefit under any such Law, License or Contract.  Except as may be required by the HSR Act or as set forth on Schedule 4.4 , no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required with respect to the Company or any of the Shareholders in connection with the execution, delivery or performance of this Agreement or the Seller Ancillary Documents.

Section 4.5             Real Property .

(a)           The Company does not own any real property.

(b)           Schedule 4.5(b) lists any Leased Real Property.  Except as set forth on Schedule 4.5(b) the leases with respect to the Leased Real Property are in full force and effect and, subject to application of any bankruptcy or creditor’s rights laws, are valid,

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binding and enforceable against the parties thereto in accordance with their respective terms. Copies of the leases with respect thereto have been provided to Parent.

(c)           Except for the Permitted Liens, no Leased Real Property is subject to any Liens arranged by or resulting from the action or inaction of the Company, in favor of any Person.

(d)           Except as set forth on Schedule 4.5(d) , the improvements and fixtures on the Leased Real Property are in good operating condition for the purposes for which they are presently being used and in a state of reasonable maintenance and repair, ordinary wear and tear excepted, and are reasonably adequate and suitable for the purposes for which they are presently being used.  There is no condemnation, expropriation or similar proceeding pending or, to the Knowledge of the Company, threatened against any of the Leased Real Property or any improvement thereon.  The Leased Real Property constitutes all of the real property utilized by the Company.

Section 4.6             Personal Property .  All equipment and other items of tangible personal property and assets of the Company (a) are free of defects and in good operating condition for the purposes for which they are presently being used and in a state of reasonable maintenance and repair, ordinary wear and tear excepted and (b) were acquired and are usable in the regular and ordinary course of business.  Except for laptop computers provided to employees, inventory, and as set forth on Schedule 4.5(d) , all tangible personal property and assets of the Company (whether owned, leased or licensed) are located at the Leased Real Property.  No Person other than the Company owns any equipment or other tangible personal property or asset that is necessary to the operation of the Business, except for the leased equipment, property or assets listed on Schedule 4.6(1) and such equipment, property or assets which is licensed.  Schedule 4.6(2) sets forth a true, correct and complete list and general description of each item of tangible personal property of the Company having a book value of more than $15,000.

Section 4.7             Title to Assets .

(a)           Except as set forth on Schedule 4.7(a) , there are no assets, properties or rights (whether real, personal or mixed and whether tangible or intangible), that are owned by the Company that are not related to or used in the Business.

(b)           Except as set forth on Schedule 4.7(b) , the Company has good title to or, in the case of the Leased Real Property or leased personal property, valid leasehold interests in, its properties and assets, free and clear of all Liens except Permitted Liens.

Section 4.8             Inventory .  The Company’s inventory consists of finished goods and work-in-process manufactured, packaged and stored in compliance with all applicable Laws (including any applicable NDA and requirements of any Governmental Entity associated with product dating), and is valued on the books and records of the Company at the lower of cost or market with the cost determined under the first-in-first-out inventory valuation method consistent with past practice.  The quantity of inventory held by the Company, in the aggregate, is adequate to meet the presently outstanding order fulfillment obligations of Company for a period of not

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less than four months nor more than six months following the Closing.  The Company does not have more than six weeks worth of inventory in stock at the wholesaler level (i.e. “in the trade”).  No previously sold inventory is subject to returns in excess of those historically experienced by the Company.  A true and accurate schedule of inventory, together with expiration dates for each of the inventory lots included therein, will be attached hereto as Schedule 4.8 at the Closing.

Section 4.9             Financial Statements .  Schedule 4.9 contains the Financial Statements.  The Financial Statements are in conformity with GAAP and have been prepared from, and are in accordance with, the books and records of the Company, which books and records have been maintained on a basis consistent with the past practice of the Company.  Each balance sheet included in the Financial Statements (including the related notes and schedules) fairly presents in all material respects the financial position of the Company as of the date of such balance sheet, and each statement of income and cash flows included in the Financial Statements (including the related notes and schedules) fairly presents in all material respects, the results of operations and cash flows, as the case may be, of the Company for the periods set forth therein; provided, however, that any Financial Statements that are not as of and for a year ended December 31 are subject to normal year-end adjustments and lack footnotes and other presentation items.  Since December 31, 2006, there has been no material change in any accounting policy, practice or procedure of the Company.  The Company maintains accurate books and records reflecting its assets, liabilities, revenues and expenses.

Section 4.10           No Undisclosed Liabilities .  There are no liabilities of the Company of the nature required to be reflected as a liability on a balance sheet prepared in accordance with GAAP or in the footnotes thereto, except for:

(a)           liabilities and obligations fully reflected or reserved against in the Reference Balance Sheet; and

(b)           liabilities and obligations incurred in the ordinary course of business, consistent with past practice, since the date of the Reference Balance Sheet.

Section 4.11           Absence of Certain Changes .  Except to the extent arising out of or relating to the transactions contemplated by this Agreement or as set forth on Schedule 4.11 , since the date of the Reference Balance Sheet, there has not been (a) any Material Adverse Effect, (b) any damage, destruction, loss or casualty to property or assets with a value in excess of $15,000 not covered by insurance, (c) any sale, transfer or disposition of any properties or assets, other than sales of inventory in the ordinary course of business, consistent with past practice, or (d) any action taken of the type described in Section 7.1, that, had such action occurred following the date hereof without the Parent’s prior approval, would be in violation of such Section 7.1.

Section 4.12           Legal Proceedings .  Except as set forth on Schedule 4.12 , there is no suit, action, claim, arbitration, proceeding or investigation pending or, to the Knowledge of the Company, threatened against the Company before any Governmental Entity.  No suit, action, claim, proceeding or investigation pending or, to the Knowledge of the Company, threatened against the Company before any Governmental Entity (including any of those set forth on

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Schedule 4.12 ), if finally determined adversely, is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect.  Except as set forth on Schedule 4.12 , the Company is not subject to any judgment, decree, injunction, rule or order of any court or arbitration panel

Section 4.13           Compliance with Law .  Except as set forth on Schedule 4.13 , the Company is (and has been at all times during the past five (5) years) in compliance with all applicable Laws (including applicable Laws relating to zoning and the safety and health of employees, but excluding applicable Environmental Laws, as to which the Company’s sole representations and warranties are set forth in Section 4.20, and Laws relating to Taxes, Company Benefit Plans and employment matters, as to which Seller’s sole representations and warranties are set forth in Section 4.15, Section 4.17 and Section 4.18, respectively).  Except as set forth on Schedule 4.13 , the Company (a) has not been charged with, and the Company has not received any written notice that it is under investigation with respect to, and, to the Knowledge of the Company, is not otherwise now under investigation with respect to, a violation of any applicable Law, (b) is not a party to, or bound by, any order, judgment, decree, injunction, rule or award of any Governmental Entity and (c) has filed all reports and has all Licenses required to be filed with any Governmental Entity on or prior to the date hereof. The Company has provided to Parent complete and accurate copies of all material written communications to or from any Governmental Entity and associated with the Company’s products, including, without limitation, any written communication to or from the FDA or the Office of Medical Policy, Division of Drug Marketing, Advertising, and Communications.  The Company has not made any material false statements on, or omissions from, the applications, approvals, reports and other submissions to any Governmental Entity.  The Company has not received any communication, written or oral, from any Governmental Entity indicating that any of its products are misbranded or adulterated as defined in the U.S. Food, Drug & Cosmetic Act, 21 U.S.C. 321, et seq., as amended, and the rules and regulations promulgated thereunder, or any other similar Law.  Except as set forth on Schedule 4.13 , no products of the Company have been recalled, suspended or discontinued as a result of any action by any Governmental Entity, or to the Knowledge of the Company, any licensee, distributor or marketer of such products.  The Company is not in receipt of notice of, and is not subject to, any adverse inspection, finding of deficiency, finding of non-compliance, compelled or voluntary recall, investigation, penalty for corrective or remedial action or other compliance or enforcement action, in each case relating to its products or to the facilities in which such products are manufactured, collected or handled.  Neither the Company nor, to the Knowledge of the Company, any officer, employee or agent of the Company has been convicted of any crime or engaged in any conduct that would reasonably be expected to result in (i) debarment under 21 U.S.C. Section 335(a) or any similar Law, or (ii) exclusion under 42 U.S.C. Section 1320(a)(7) or any similar Law.

Section 4.14           Contracts .  Each correspondingly lettered section of Schedule 4.14 sets forth a true, correct and complete list of the following Contracts currently in force, or under which the Company has continuing liabilities and/or obligations, related to the Business (other than the Company Benefit Plans set forth on Schedule 4.17 and the insurance policies on Schedule 4.19 ) (collectively, the “ Material Contracts ”):

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(a)           bonds, debentures, notes, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other Contracts relating to the borrowing of money or the deferred purchase price of property or binding upon any properties or assets (real, personal or mixed, tangible or intangible);

(b)           Contracts of an amount in excess of $25,000 that were not entered into in the ordinary course of business, consistent with past practice;

(c)           leases relating to the Leased Real Property, leases of any personal property and all other Contracts involving any properties or assets (whether real, personal or mixed, tangible or intangible), involving an annual commitment or payment of or performance having a value of more than $25,000 by the Company;

(d)           Contracts that (i) limit or restrict the Company or any officers, directors, employees, shareholders or other equity holders, agents or representatives of the Company (in their capacity as such) from engaging in any business or other activity in any jurisdiction, (ii) create or purport to create any exclusive or preferential relationship or arrangement, (iii) otherwise restrict or limit the Company’s ability to operate or expand the Business, or (iv) impose, or purport to impose, any obligations or restrictions on Affiliates of the Company with respect to the Shares;

(e)           Contracts for capital expenditures or the acquisition or construction of fixed assets requiring the payment by the Company of an amount in excess of $25,000;

(f)            Contracts that provide for any payment or benefit upon the execution hereof or the Closing or in connection with the transactions contemplated hereby, including accelerated vesting or other similar rights;

(g)           Contracts granting any Person a Lien on all or any part of any properties or assets of the Company;

(h)           Contracts for the cleanup, abatement or other actions in connection with any Hazardous Materials, the remediation of any existing environmental condition or relating to the performance of any environmental audit or study;

(i)            Contracts granting to any Person an option or a right of first refusal, first-offer or similar preferential right to purchase or acquire any assets of the Company;

(j)            Contracts with any agent, distributor or representative that is not terminable without penalty on thirty (30) days or less notice;

(k)           Contracts for the granting or receiving of a license, sublicense or franchise or under which any Person is obligated to pay or has the right to receive a royalty, license fee, franchise fee or similar payment;

(l)            Contracts (i) with respect to Company Intellectual Property licensed or transferred to any third party (other than end user Licenses in the ordinary course of

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business) or (ii) pursuant to which a third party has licensed or transferred any Company Intellectual Property to the Company;

(m)          Contracts providing for the indemnification or holding harmless by the Company of any officer, director, employee or other Person;

(n)           Joint venture or partnership Contracts or Contracts entitling any Person to any profits, revenues or cash flows of the Company or requiring payments or other distributions based on such profits, revenues or cash flows;

(o)           Contracts with Customers or Suppliers;

(p)           Outstanding powers of attorney empowering any Person to act on behalf of the Company;

(q)           Contracts with any Governmental Entity;

(r)            Employment Agreements;

(s)           Contracts with any independent contractor or consultant which involve annual payment in excess of $25,000; and

(t)            Contracts (other than those described in subsections (a) through (s) of this Section 4.14) to which the Company is a party or by which its properties or assets are bound (i) involving an annual commitment or annual payment to or from the Company of more than $25,000 individually or (ii) that are material to the Company, individually or in the aggregate.

True, correct and complete copies of all Material Contracts have been provided to the Parent.  The Material Contracts are legal, valid, binding and enforceable in accordance with their respective terms with respect to the Company, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in effect which affect the enforcement of creditors’ rights generally and by equitable principles and, to the Knowledge of the Company, each other party thereto.  There is no existing default or breach of the Company under any Material Contract (or event or condition that, with notice or lapse of time or both could constitute a default or breach) and, to the Knowledge of the Company, there is no such default (or event or condition that, with notice or lapse of time or both, could constitute a default or breach) with respect to any third party to any Material Contract.  There is no term, obligation, understanding or agreement that would modify any term of a Material Contract or any right or obligation of a party thereunder which is not reflected on the face of such Material Contract.  The Company is not participating in any discussions or negotiations regarding modification of or amendment to any Material Contract in a manner that would be adverse to the Company, or entry in any new Material Contract.

Section 4.15           Tax Returns; Taxes .  Except as set forth on Schedule 4.15 :

 

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(a)           All Tax Returns due to have been filed by the Company through the date hereof in accordance with all applicable Laws (pursuant to an extension of time or otherwise) have been duly filed and are true, correct and complete in all respects.

(b)           All Taxes for which the Company has liability through the date hereof (whether or not shown on any Tax Return) have been paid in full or are accrued as liabilities for Taxes on the books and records of the Company.

(c)           There are not now any extensions of time in effect with respect to the dates on which any Tax Returns were or are due to be filed by the Company.

(d)           All Tax deficiencies asserted as a result of any examination by a Governmental Entity of a Tax Return of the Company have been paid in full, accrued on the books of the Company or finally settled, and no issue has been raised in any such examination that, by application of the same or similar principles, reasonably could be expected to result in a proposed Tax deficiency for any other period not so examined.

(e)           No claims have been asserted and no proposals or deficiencies for any Taxes of the Company are being asserted, proposed or, to the Knowledge of the Company, threatened, and no audit or investigation of any Tax Return of the Company is currently underway, pending or, to the Knowledge of the Company, threatened.

(f)            No written claim has ever been made against the Company by any Governmental Entity in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation in such jurisdiction.

(g)           The Company has withheld and paid all Taxes required to have been paid by it in connection with amounts paid or owing to any employee, independent contractor, creditor or shareholder thereof or other third party.

(h)           There are no outstanding waivers or agreements between any Governmental Entity and the Company for the extension of time for the assessment of any Taxes or deficiency thereof, nor are there any requests for rulings, outstanding subpoenas or requests for information, notices of proposed reassessment of any property owned or leased by the Company or any other Tax related matter pending between the Company and any Governmental Entity.

(i)            Other than Permitted Liens, there are no Liens for Taxes with respect to the Company or the assets or properties of the Company, nor is there any such Lien that is pending or, to the Knowledge of the Company, threatened.

(j)            The Company is not a party to or bound by any Tax allocation or sharing agreement.

(k)           The Company has not been a member of an “affiliated group” of corporations (within the meaning of Code Section 1504 of the Code) filing a consolidated

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federal income tax return (other than a group the common parent of which was the Company).

(l)            The Company does not have any liability for the Taxes of any Person (other than for itself) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Tax law), as a transferee or successor, by contract or otherwise.

(m)          None of the Tax Returns described in Subsection (a) of this Section 4.15 contains any position which is or would be subject to penalties under Section 6662 of the Code (or any similar provision of provincial, state, local or foreign Tax law) and the Treasury Regulations issued thereunder.

(n)           The Company has not made any payments, is not obligated to make any payments, and is not a party to any contract, plan or arrangement that obligates it to make any payments of (1) any amounts that will be “excess parachute payments” under Section 280G of the Code (or any corresponding provision of state, local or foreign Tax law), (2) any amount that would trigger any excise tax under Section 4999 of the Code, and (3) any amount that will not be fully deductible as a result of Section 162(m) of the Code (or any corresponding provision of state, local or foreign Tax law);

(o)           The Company 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.

(p)           There is currently no limitation on the utilization of the net operating losses, built-in losses, capital losses, Tax credits or other similar items of the Company under Sections 382, 383, 384 or 1502 of the Code and Treasury Regulations promulgated thereunder.

(q)           The Company is currently, and has been since January 1, 2004 a valid “S corporation” within the meaning of Section 1361(a) of the Code (and will be up to the Closing Date), and no Governmental Entity has challenged, or is challenging, the S election of the Company.

(r)            The Company is, and has at all times been, in compliance with the provisions of Section 6011, 6111 and 6112 of the Code relating to tax shelter disclosure, registration and list maintenance and with the Treasury Regulations thereunder.

(s)           The Company has not at any time, engaged in or entered into a “listed transaction” within the meaning of Treasury Regulation Sections 1.6011-4(b)(2), 301.6111-2(b)(2) or 301.6112-1(b)(2)(A), and no IRS Form 8886 has been filed with respect to the Company nor has the Company entered into any tax shelter or listed transaction with the sole or dominant purpose of the avoidance or reduction of a Tax liability with respect to which there is a significant risk of challenge of such transaction by a Governmental Entity.

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(t)            The Company has not, directly or indirectly, transferred property to or acquired property from a Person with whom it was not dealing at arm’s length for consideration other than consideration equal to the fair market value of the property at the time of the disposition or acquisition thereof.

(u)           The Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any Tax period after the Closing Date as a result of any (i) change in method of accounting for a Tax period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) any installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to the Closing Date.

Section 4.16           Officers, Employees and Independent Contractors .  Schedule 4.16 contains a true, correct and complete list of (a) all of the officers of the Company, specifying their position, annual rate of compensation, date of hire, work location, and length of service, (b) all of the employees (whether full-time, part-time or otherwise) of the Company as of the date hereof, specifying their position, annual salary and other compensation, hourly wages, date of hire, work location, and length of service, and (c) all of the independent contractors used by the Company within the one-year period preceding the Closing Date whose fees from the Company during that period exceeded $25,000, specifying the name of the independent contractor, type of labor, fees paid to such independent contractor for the prior 12 months, work location and address.  All Persons classified by the Company as independent contractors have been properly classified in accordance with all applicable Laws and no such Person is eligible to participate in any Company Benefit Plan or would be eligible to participate if the Company’s classification of such Person as an independent contractor is subsequently determined to be incorrect.  Neither the Company nor the Shareholders have received a claim from any Governmental Entity to the effect that the Company has improperly classified any Person as an independent contractor, nor to the Knowledge of the Company has any such claim been threatened.  Neither the Company nor the Shareholders have made any verbal commitments to any officer, employee, former employee, consultant or independent contractor of the Company with respect to compensation, promotion, retention, termination, severance or similar matters in connection with the transactions contemplated hereby or otherwise.  The Company has heretofore delivered to the Parent true, correct and complete copies of each employee handbook applicable to employees of the Company.

Section 4.17           Company Benefit Plans .

(a)           Schedule 4.17(a) contains a true, correct and complete list of each Company Benefit Plan and ERISA Affiliate Plan.  Any special tax status or tax benefits for plan participants enjoyed or offered by a Company Benefit Plan or ERISA Affiliate Plan is noted on such schedule.

(b)           With respect to each Company Benefit Plan and ERISA Affiliate Plan identified on Schedule 4.17(a) , the Company has heretofore delivered to the Parent true,

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correct and complete copies of the plan documents and any amendments thereto (or, in the event the plan is not written, a written description thereof), any related trust, insurance contract or other funding vehicle, any summary plan descriptions, summaries of material modifications or prospectuses reports or summaries required under all applicable Laws, including ERISA or the Code, the most recent determination or opinion letter received from the Internal Revenue Service with respect to each current Company Benefit Plan or ERISA Affiliate Plan intended to qualify under Code Section 401, nondiscrimination and coverage tests for the most recent three (3) full plan years, the three most recent annual reports (Form 5500) and any related financial statements filed with the Internal Revenue Service (“ IRS ”) and the three most recent actuarial reports or valuations (if applicable).

(c)           The Company’s records accurately reflect the employment or service histories of its employees, independent contractors, contingent workers and leased employees, including their hours of service, in all respects material to the Company Benefits Plans.

(d)           With respect to each Company Benefit Plan, (i) there has not occurred any non-exempt “prohibited transaction” within the meaning of Section 4975(c) of the Code or Section 406 of ERISA that would subject the Company or the Parent to any material liability; and (ii) no fiduciary (within the meaning of Section 3(21) of ERISA) of any Company Benefit Plan that is subject to Part 4 of Title I of ERISA has committed a breach of fiduciary duty that would subject the Company or the Parent to any liability.  The Company has not been assessed any excise taxes under Chapter 43 of the Code and nothing has occurred with respect to any Company Benefit Plan that is expected to subject the Company or the Parent to any such taxes.  The transactions contemplated by this Agreement will not trigger any Taxes under Section 4978 of the Code.  No Company Benefit Plan or ERISA Affiliate Plan is or was subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code, and no Company Benefit Plan or ERISA Affiliate Plan is or within the last five years was a “multiemployer plan” (as defined in Section 3(37) of ERISA), a “multiple employer plan” (within the meaning of Section 413(c) of the Code), or a “multiple employer welfare arrangement” (as defined in Section 3(40)(A) of ERISA), nor has the Company or any of its ERISA Affiliates within the last five years sponsored, maintained, contributed to, or had any liability or obligation with respect to, any such Company Benefit Plan or ERISA Affiliate Plan of the type described in this sentence.

(e)           Each Company Benefit Plan or ERISA Affiliate Plan has been established, registered, qualified, invested, operated and administered in all respects in accordance with its terms and in compliance with all Applicable Benefit Laws.  The Company has performed and complied in all respects with all of its obligations under or with respect to the Company Benefit Plans.  The Company has not incurred, and no fact exists that reasonably could be expected to result in, any liability to the Company with respect to any Company Benefit Plan or any ERISA Affiliate Plan, including any liability, tax, penalty or fee under any Applicable Benefit Law (other than to pay premiums, contributions or benefits in the ordinary course of business consistent with past practice).

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There are no current or, to the Knowledge of the Company, threatened Liens on any assets of any Company Benefit Plan or ERISA Affiliate Plan.

(f)            No fact or circumstance exists that could reasonably be expected to cause a Company Benefit Plan or ERISA Affiliate Plan that is intended to be tax-exempt to lose its tax-exempt status.  Further, each such plan intended to be “qualified” within the meaning of Section 401(a) of the Code and the trusts maintained thereunder that are intended to be exempt from taxation under Section 501(a) of the Code has received a favorable determination or opinion letter with respect to all Applicable Benefits Laws on which the Internal Revenue Service will issue a favorable determination letter on its qualification, and nothing has occurred subsequent to the date of such favorable determination letter that could reasonably be expected to cause a Company Benefit Plan or ERISA Affiliate Plan to lose its qualified status.

(g)           There is no pending or, to the Knowledge of the Company, threatened (i) complaint, claim, charge, suit, proceeding or other action of any kind with respect to any Company Benefit Plan or ERISA Affiliate Plan (other than a routine claim for benefits in accordance with such Company Benefit Plan’s or ERISA Affiliate Plan’s claims procedures and that has not resulted in any litigation) or (ii) proceeding, examination, audit, inquiry, investigation, citation, or other action of any kind in or before any Governmental Entity with respect to any Company Benefit Plan or ERISA Affiliate Plan and there exists no state of facts that after notice or lapse of time or both reasonably could be expected to give rise to any such claim, investigation, examination, audit or other proceeding or to affect the registration of any Company Benefit Plan or ERISA Affiliate Plan required to be registered. All benefit claims have been paid in accordance with Applicable Benefit Laws and the terms of the applicable Company Benefit Plan or ERISA Affiliate Plan.

(h)           All contributions and premium payments (including all employer contributions and employee salary reduction contributions) that are due with respect to each Company Benefit Plan have been made within the time periods prescribed by ERISA and the Code, and all contributions and premium payments for any period ending on or before the Closing Date that are an obligation of the Company and not yet due have either been made to such Company Benefit Plan, or have been accrued on the Financial Statements.  Adequate reserves will be reflected on the Final Working Capital Schedule for any vacation, sick pay, and other paid time off (i) accrued but unearned or (ii) earned but unused, in each case as of the Closing Date by the Company’s employees.

(i)            With respect to each Company Benefit  Plan that is an employee welfare benefit plan (within the meaning of Section 3(1) of ERISA), all claims incurred by the Company are (i) insured pursuant to a contract of insurance whereby the insurance company bears any risk of loss with respect to such claims, (ii) covered under a contract with a health maintenance organization (an “ HMO ”), pursuant to which the HMO bears the liability for claims or (iii) reflected as a liability or accrued for on the Financial Statements.  Except as set forth on Schedule 4.17(i) , no Company Benefit Plan provides or has ever provided benefits, including death, medical or health benefits (whether or not

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insured), after an employee’s termination of employment, and the Company has no liabilities (contingent or otherwise) with respect thereto other than (A) continuation coverage required pursuant to Section 4980B of the Code and Part 6 of Title I of ERISA, and the regulations thereunder, and any other Applicable Benefit Laws, (B) death benefits or retirement benefits under any employee pension benefit plan, (C) deferred compensation benefits, reflected as liabilities on the Financial Statements, or (D) benefits the full cost of which is borne by the current or former employee (or the employee’s beneficiary).

(j)            The transactions contemplated by this Agreement will not result (either alone or in combination with any other event) in:  (i) any payment of, or increase in, remuneration or benefits, to any employee, officer, director or consultant of the Company; or (ii) any cancellation of indebtedness owed to the Company by any employee, officer, director or consultant of the Company; (iii) the acceleration of the vesting, funding or time of any payment or benefit to any employee, officer, director or consultant of the Company; or (iv) any “parachute payment” within the meaning of Section 280G of the Code (whether or not such payment is considered to be reasonable compensation for services rendered).

(k)           The Company has not announced or entered into any plan or binding commitment to (i) create or cause to exist any additional Company Benefit Plan, or (ii) adopt, amend or terminate any Company Benefit Plan, other than any amendment required by Applicable Benefit Laws.  Each Company Benefit Plan may be amended or terminated in accordance with its terms without liability to the Company or the Parent other than for benefits accrued up to the later of the effective date or adoption date of such amendment or termination.

(l)            Schedule 4.17(l) identifies each Company Benefit Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A of the Code (and the regulations thereunder) and associated Treasury Department guidance, including IRS Notice 2005-1 (each a “ NQDC Plan ”).  With respect to each NQDC Plan, it either (A) has been operated in good-faith compliance with Code Section 409A since January 1, 2005, or (B) does not provide for the payment of any benefits that have or will be deferred or vested after December 31, 2004 and since October 3, 2004, it has not been “materially modified” within the meaning of Section 409A of the Code and associated Treasury Department guidance, including IRS Notice 2005-1, Q&A 18.

Section 4.18           Labor Relations .

(a)           No employee of the Company, since becoming an employee of the Company, has been, or currently is, represented by a labor organization or group that was either certified or voluntarily recognized by any labor relations board (including the United States National Labor Relations Board) or certified or voluntarily recognized by any other Governmental Entity.  The Company is not and has never been a