AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of April 5, 2007 (the “ Agreement Date ”) by and among Agilent Technologies , Inc., a Delaware corporation (“ Acquiror ”), Jackson Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Acquiror (“ Merger Sub ”), and Stratagene Corporation, a Delaware corporation (the “ Company ”).

RECITALS

A.      The parties intend that, subject to the terms and conditions hereinafter set forth, Merger Sub shall merge with and into the Company (the “ Merger ”), with the Company to be the surviving corporation of the Merger (the “ Surviving Corporation ”), on the terms and subject to the conditions of this Agreement and pursuant to the Certificate of Merger substantially in the form attached hereto as Exhibit A (the “ Certificate of Merger ”) and the applicable provisions of the laws of the State of Delaware.

B.      The Boards of Directors of Acquiror, Merger Sub and the Company (including an independent special committee of the Board of Directors of the Company (the “ Special Committee ”)) have determined that the Merger and the related transactions contemplated by this Agreement are in the best interests of their respective companies and stockholders and have approved and declared advisable the Merger, this Agreement and the other transactions contemplated by this Agreement.  The Board of Directors of the Company, following the unanimous recommendation of the Special Committee, has determined to recommend to the stockholders of the Company the adoption of this Agreement.

C.      Concurrently with the execution and delivery of this Agreement, and as a material inducement to Acquiror’s willingness to enter into this Agreement, the Principal Stockholder is executing and delivering to Acquiror Voting Agreements substantially in the form attached hereto as Exhibit B (the “ Voting Agreement ”) under which such Principal Stockholder agrees to vote all shares of the Company’s capital stock beneficially owned by it in favor of adoption of this Agreement and the other transactions contemplated hereby and to give Acquiror an irrevocable proxy to do the same.

D.      Concurrently with the execution and delivery of this Agreement, the Company and Catalyst Assets LLC, a Delaware limited liability company (“ Catalyst ”), are entering into (i) an Asset Purchase Agreement substantially in the form attached hereto as Exhibit C (including all schedules and exhibits attached thereto, the “ Asset Purchase Agreement ”), pursuant to which the Surviving Corporation will sell, transfer and assign to Catalyst and Catalyst will purchase and assume from the Surviving Corporation certain assets and liabilities relating to the Transferred Business, to become effective at 12:01 a.m., Pacific Standard Time, on the first Business Day following the Effective Time, (ii) the license agreement substantially in the form attached hereto as Exhibit D (including all schedules and exhibits attached thereto, the “ License Agreement ”) pursuant to which the Surviving Corporation and Catalyst will each license to the other the right to use certain intellectual property, to become effective at 12:01 a.m., Pacific Standard Time, on the first Business Day following the Effective Time (the agreements and

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transactions described in clauses (i) through (ii) being referred to herein collectively as the “ Divestiture ”).

E.       Acquiror, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and conditions contained herein, the parties hereby agree as follows:

ARTICLE 1
CERTAIN DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below.

“ Acquiror Common Stock ” means the Common Stock, $0.0001 par value per share, of Acquiror.

“ Affiliate ” means with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person, where “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise.

“ Alternative Transaction ” means with respect to the Company, any of the following transactions (other than the Merger):  (a) any acquisition or purchase from the Company by any Person or Group of more than a 20% interest in the total outstanding voting securities of the Company or any tender offer or exchange offer that if consummated would result in any Person or Group beneficially owning securities representing 20% or more of the total outstanding voting power of the Company, or any merger, consolidation, business combination, share exchange or similar transaction involving the Company pursuant to which the stockholders of the Company immediately preceding such transaction hold securities representing less than 80% of the total outstanding voting power of the surviving or resulting entity of such transaction (or parent entity of such surviving or resulting entity); (b) any sale, lease, exchange, transfer, license or disposition of assets (including capital stock or other ownership interests in Subsidiaries) representing 20% or more of the aggregate fair market value of the consolidated assets of the Company and its Subsidiaries taken as a whole; (c) any liquidation or dissolution of the Company; or (d) any extraordinary dividend, whether of cash or other property.

“ Alternative Transaction Proposal ” means any offer, inquiry, proposal or indication of interest (whether binding or non-binding), or any public announcement of an intention to make any offer, inquiry, proposal or indication of interest, to the Company or Company Stockholders relating to an Alternative Transaction.

“ Antitrust Filings ” means notification and report forms relating to the transactions contemplated by this Agreement filed with the United States Federal Trade Commission and the Antitrust Division of the United States Department of Justice as required by

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the HSR Act, as well as comparable pre-merger notification forms required by the merger notification or control laws and regulations of any other applicable jurisdiction.

“ Antitrust Laws ” means federal, state or foreign statutes, rules, regulations, orders or decrees that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

“ Applicable Law ” means with respect to any Person, any federal, state, foreign, local, municipal or other law, statute, constitution, resolution, ordinance, code, permit, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Authority and any orders, writs, injunctions, awards, judgments and decrees applicable to such Person or its Subsidiaries, their business or any of their respective assets or properties.

“ Balance Sheet Date ” means December 31, 2006, the date of the Company Balance Sheet.

“ Business Day ” shall mean a day (A) other than Saturday or Sunday, and (B) on which commercial banks are open for business in San Francisco, California.

“ Cash Amount Per Share ” means $10.94.

“ Change of Recommendation ” means the withholding or withdrawal of, or the amendment, qualification or modification in a manner or in substance adverse to Acquiror or Merger Sub, of any of the Company Board’s, the Special Committee’s or any other Company Board committee’s recommendation in favor of adoption of this Agreement, and, in the case of a tender or exchange offer made by a third party directly to the Company Stockholders, a failure of the Company Board, the Special Committee and any other Company Board committee to recommend that Company Stockholders reject such tender or exchange offer.

“ Closing ” means the closing of the transactions contemplated hereby.

“ Closing Date ” means a time and date to be specified by the parties after the satisfaction or waiver of the conditions set forth in Article 8 (excluding conditions that by their terms are to be satisfied on the Closing Date, but subject to the satisfaction or waiver of such conditions).

“ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

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

“ Company Balance Sheet ” means the Company’s audited balance sheet as of December 31, 2006 included in the Company Financial Statements.

“ Company Board ” means the board of directors of the Company.

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“ Company Business ” means the business of the Company and the Company Subsidiaries, taken as a whole, as presently conducted and presently proposed to be conducted.

“ Company Capital Stock ” means the capital stock of the Company.

“ Company Charter Documents ” means the Certificate of Incorporation (including any Certificates of Designation) and Bylaws of the Company, each as amended to date.

“ Company Common Stock ” means the Common Stock, $0.0001 par value per share, of the Company.

“ Company Employee Plan ” shall mean any plan, program, policy, practice, contract, agreement or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits, pensions, lump-sum death benefits or other employee benefits of any kind, whether written or unwritten or otherwise, funded or unfunded, including without limitation, each “employee benefit plan,” within the meaning of Section 3(3) of ERISA which is or has been maintained, contributed to, or required to be contributed to, by the Company or any ERISA Affiliate for the benefit of any Employee, or with respect to which the Company or any ERISA Affiliate has or may have any liability or obligation.

“ Company ESPP ” means Stratagene Corporation Employee Stock Purchase Plan of the Company.

“ Company Optionholders ” means the holders of Company Options.

“ Company Option Plans ” means the Stratagene Corporation 2006 Equity Incentive Award Plan, The Year 2000 Stock Option Plan of Stratagene Corporation, as amended and restated, The 2004 Independent Directors Option Plan of Stratagene Corporation, the Hycor Biomedical Inc. 2001 Stock Option Plan, the Hycor Biomedical Inc. 1992 Incentive Stock Plan and the Hycor Biomedical Inc. Nonqualified Stock Option Plan for Non-Employee Directors, collectively.

“ Company Options ” means options to purchase shares of Company Common Stock granted or assumed by the Company, whether or not under the Company Option Plans.

“ Company Preferred Stock ” means the Preferred Stock, par value $0.0001 per share, of the Company.

“ Company Product or Service ” means each of the products and services currently produced, manufactured, marketed, licensed, sold, distributed or performed by or on behalf of the Company and the Company Subsidiaries and each product and service currently under development by the Company or any Company Subsidiary.

“ Company Securityholders ” means the Company Stockholders and Company Optionholders, collectively.

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“ Company Stockholders ” means the holders of shares of Company Common Stock.

“ Confidentiality Agreement ” means that Mutual Confidential Disclosure Agreement between Acquiror and the Company, dated as of December 15, 2006.

“ Contract ” means any written or oral legally binding contract, agreement, instrument, commitment, obligation or undertaking (including subcontracts, leases, subleases, licenses, sublicenses, mortgages, notes, guarantees, indentures, warranties, guarantees, insurance policies, benefit plans and purchase orders).

“ Debt ” means the outstanding amount of (a) indebtedness for borrowed money, (b) amounts owing as deferred purchase price for the purchase of any property, (c) indebtedness evidenced by any bond, debenture, note, mortgage, indenture or other debt instrument or debt security, (d) accounts payable to trade creditors and other accrued expenses, in each case not arising in the ordinary course of business, (e) amounts owing under any capitalized or synthetic leases, (f) obligations secured by any Encumbrances, (g) commitments or obligations to assure a Person against loss (including contingent reimbursement obligations under letters of credit), and (h) guarantees or sureties with respect to any indebtedness or obligation of a type described in clauses (a) through (g) above of any Person, in each case, of the Company and/or any Company Subsidiary.

“ Delaware Law ” means the Delaware General Corporation Law.

“ delivered ” means, with respect to any statement in Article 2 of this Agreement to the effect that any information, document or other material has been “delivered” to Acquiror or its representatives, that such information, document or material was:  (A) made available for review by Acquiror or its representatives in the virtual data room set up by the Company in connection with this Agreement no later than 5:00 p.m. Pacific Time on the date two Business Days prior to the Agreement Date; (B) following advance written notice to Acquiror or its representatives that such information, document or material would not be made available pursuant to the foregoing clause (A), made available for review by Acquiror or its representatives in the physical data room set up by the Company in connection with this Agreement no later than 5:00 p.m. Pacific Time on the date two Business Days prior to the Agreement Date; or (C) actually delivered (whether by physical or electronic delivery) to Acquiror or its representatives no later than 5:00 p.m. Pacific Time on the date two Business Days prior to the Agreement Date.

“ Dissenting Shares ” shall mean any shares of Company Capital Stock that are issued and outstanding immediately prior to the Effective Time and in respect of which appraisal rights shall have been perfected in accordance with Delaware Law in connection with the Merger.

“ Dissenting Stockholder ” means any stockholder of the Company exercising appraisal rights pursuant to Section 262 of the Delaware Law in connection with the Merger.

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“ Divestiture Valuation ” means the written valuation report relating to the Transferred Business and the rights granted to Catalyst in the Divestiture prepared by Navigant Capital Advisors, LLC.

“ Documentation ” means, collectively, laboratory notebooks, prototypes, samples, studies, summaries, research notes or logs, programmers’ notes or logs, source code annotations, user guides, manuals, instructions, software architecture designs, layouts, any know-how, and any other data, designs, plans, drawings, documentation, materials, supplier lists, software source code and object code, net lists, photographs, development tools, blueprints, media, memoranda and records that are primarily related to or otherwise necessary for the use and exploitation of any products of the Company or Company Subsidiaries, whether in tangible or intangible form, whether owned by the Company or Company Subsidiaries or held by the Company or Company Subsidiaries under any licenses or sublicenses or similar grants of rights.

“ DOL ” shall mean the Department of Labor.

“ Effective Time ” means the time of the filing of the Certificate of Merger (or such later time as may be mutually agreed in writing by the Company and Acquiror and specified in the Certificate of Merger).

“ Employee ” shall mean any current or former or retired employee, consultant or director of the Company or any Subsidiary of the Company.

“ Employment Agreement ” shall mean each management, employment, severance, consulting, relocation, repatriation, expatriation, visas, work permit or other agreement or contract between the Company or any Subsidiary of the Company and any Employee.

“ Encumbrance ” means, with respect to any asset, any mortgage, deed of trust, lien, pledge, charge, security interest, title retention device, collateral assignment, adverse claim, restriction or other encumbrance of any kind in respect of such asset (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

“ Environmental Law ” means any means any federal, state or local statute, law, regulation or other legal requirement (including without limitation principles of common law, directives, statutes, their implementing laws and regulations, related judicial and administrative orders and binding legal interpretations thereof) applicable to the Company or any of its Subsidiaries relating to pollution or protection of the environment, natural resources, human health or safety, including without limitation Applicable Laws relating to the generation, handling, use, presence, transportation, recycling, take-back, disposal, release or threatened release of any Hazardous Substance.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

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“ ERISA Affiliate ” means any entity which is a member of:  (a) a “controlled group of corporations,” as defined in Section 414(b) of the Code; (b) a group of entities under “common control,” as defined in Section 414(c) of the Code; or (c) an “affiliated service group,” as defined in Section 414(m) of the Code, or treasury regulations promulgated under Section 414(o) of the Code, any of which includes the Company.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder.

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

“ FMLA ” shall mean the Family Medical Leave Act of 1993, as amended.

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis.

“ Governmental Authority ” shall mean any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or similar self-regulatory organization or any quasi-governmental or private body exercising any regulatory, Taxing or other governmental or quasi-governmental authority.

“ Group ” means the definition ascribed to such term under Section 13(d) of the Exchange Act, the rules and regulations thereunder and related case law.

“ Hazardous Substance ” means any substances, mixtures, chemicals, products, materials or wastes that, pursuant to Environmental Law, are listed, classified, characterized, defined or regulated as hazardous, biohazardous, dangerous, infectious, toxic, a pollutant or a contaminant, including without limitation petroleum, petroleum products or by-products, friable asbestos, biological agents, genetically engineered or modified materials, blood-borne pathogens, bacterial or fungal materials, medical waste, unused or “off-spec” products, any material or equipment containing radon or other radioactive materials or polychlorinated biphenyls.

“ Hazardous Substances Activities ” means the use, handling, transportation, distribution, sale, release or threatened release of, or remedial action concerning any Hazardous Substance, performed in connection with any of the Owned Real Property or Leased Real Property.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Intellectual Property ” means, collectively, all industrial and intellectual property rights, throughout the world, including patents, patent applications, patent rights (including rights in or relating to registrations, renewals, extensions, combinations, divisions, continuations, continuations-in-part, additions, provisionals, substitutes, utility models, reexaminations, patents of addition, improvements and reissues), trademarks, trademark registrations and applications therefor, trade dress rights, trade names, service

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marks, service mark registrations and applications therefor, and any and all goodwill associated with and symbolized by the foregoing items, Internet domain name registrations, Internet and World Wide Web URLs or addresses, copyrights, copyright registrations and applications therefor, franchises, licenses, inventions, trade secrets, know-how, methods, clinical data, chemical compositions or structures, proprietary processes and formulae, protocols, databases and data collections, customer lists, supplier lists, technology, software source code and object code, algorithms, assay components, biological materials, cell lines, apparatus, architectures, structures, images, layouts, development tools, research tools, designs, blueprints, specifications, technical drawings (or similar information in electronic format) and all tangible embodiments of the foregoing, including manuals, laboratory notebooks, prototypes, samples, studies, summaries, programmers’ notes, memoranda and records.

“ International Employee Plan ” shall mean each Company Employee Plan that has been adopted or maintained by the Company or any ERISA Affiliate, whether informally or formally, or with respect to which the Company or any ERISA Affiliate will have, has had or may have any liability , for the benefit of Employees who perform services outside the United States and their dependents.

“ IRS ” shall mean the Internal Revenue Service.

“ knowledge ”, (i) when used with respect to the Company, means, with respect to any fact, circumstance, event or other matter in question, the knowledge of such fact, circumstance, event or other matter of Joseph Sorge, John Pouk, Nelson Thune, Steve Martin, Gavin Fischer and Dennis Fergusen and each of the directors of the Company after making reasonable inquiry of the other officers of the Company or its Subsidiaries charged with senior administrative or operational responsibility for such matters, and (ii) when used with respect to the Acquiror, means, with respect to any fact, circumstance, event or other matter in question, the knowledge of such fact, circumstance, event or other matter of the executive officers of Acquiror after making reasonable inquiry of the other officers of Acquiror charged with senior administrative or operational responsibility for such matters.

“ Liabilities ” means debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, determined or determinable, known or unknown, including those arising under any law, action or governmental order and those arising under any Contract.

“ Material Adverse Change ” and “ Material Adverse Effect ” when used in connection with an entity means, with respect to such entity, any change, event, circumstance, development or occurrence (each, an “ Effect ”) that is or is reasonably likely to be, individually or in the aggregate, materially adverse in relation to the condition (financial or otherwise), assets (including intangible assets), business, operations or results of operations of such entity and its subsidiaries, taken as a whole; provided however that any adverse Effect to the extent arising out of or resulting from the following shall not be deemed, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect:  (a) changes in conditions in the United States or global economy or in capital or financial markets generally, including changes in interest or exchange rates (provided that such changes do not affect such entity disproportionately as

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compared to such entity’s competitors); (b) changes in general legal, regulatory, political, economic or business conditions or changes in generally accepted accounting principles that, in each case, generally affect industries in which such entity and its subsidiaries conduct business (provided that such changes do not affect such entity disproportionately as compared to such entity’s competitors); (c) changes proximately resulting from the announcement or pendency of the Merger, including changes with respect to the relationships, contractual or otherwise, of the Company with customers, suppliers, distributors, partners or employees; (d) any action taken by such entity with the prior written consent of the other parties; (e) changes in the trading volume or declines in the market prices of such entity’s capital stock or any failure to meet publicly announced revenue or earnings projections, in and of themselves (provided that such exclusion shall not in any way apply to any underlying Effect that may have caused any such change, decline or failure); (f) the existence of, or the terms of any settlement or judgment or license with respect to the pending litigation disclosed in the table in Schedule 3.7 of the Company Disclosure Letter, including the following pending cases: Applera Corp. v. Bio-Rad Laboratories, Inc. and MJ Research, Inc. and Stratagene Corporation (U.S. District Court for the District of Connecticut, Civil Action No. 3:04—cv—01881-RNC); Applera Corporation v. Stratagene Corporation (Landgericht Dusseldorf Regional Court, Dusseldorf, Germany, Case Number: 4 b O 418/04; Invitrogen Corporation v. Stratagene Corporation (U.S. District Court, Southern District of Maryland, Greenbelt Division — Civil Action No. 01-3566 DKC); Invitrogen Corporation v. BioCrest Manufacturing, L.P., Stratagene Holding Corp., and Stratagene (U.S. District Court, Western District of Texas, Austin Division — Civil Action No. A 01 CA 167 SS); Invitrogen Corporation v. Stratagene Holding Corp., and Stratagene, Inc., and BioCrest Manufacturing, L.P. (U.S. District Court for District of Maryland — Civil Action No. AW-01-1168) (previously 00-620), Invitrogen Corporation v. Stratagene (U.S. District Court for District of Maryland — Civil Action No. AW-94-2777), Stratagene California v. Bio-Rad Laboratories, Inc. et al (United States District Court for the Southern District of California - Civil Action No. 3:06-cv-02553) and Stratagene Corporation v. Bio-Rad Laboratories, Inc. (U.S. District Court for the District of Connecticut, Civil Action No. 3:04—cv—01881-RNC) (such pending cases, collectively, the “ Current Litigation ”); (g) any ability or failure of the Acquiror to obtain sufficient rights to the Intellectual Property that is the subject matter of the Current Litigation if such rights are necessary for the conduct of the Company Business; (h) the payment by the Company of amounts due or the provision of benefits to any officers or employees under the severance arrangements or employee benefit plans disclosed in Schedule 3.16(g) of the Company Disclosure Letter, which payment or provision of benefits arises from the consummation of the transactions contemplated by this Agreement; and (i) acts of war or terrorism or natural disasters, or fires or floods caused by any such natural disasters.

“ Merger Sub Common Stock ” means the Common Stock, $0.0001 par value per share, of Merger Sub.

“ Multiemployer Plan ” shall mean any “Pension Plan” (as defined below) which is a “multiemployer plan,” as defined in Section 3(37) of ERISA.

“ NASDAQ ” means the Nasdaq Stock Market.

“ Pension Plan ” shall mean each Company Employee Plan which is an “employee pension benefit plan,” within the meaning of Section 3(2) of ERISA.

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“ Permitted Encumbrances ” means:  (a) statutory liens for Taxes that are not yet due and payable or that are being contested in good faith by appropriate proceedings; (b) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by Applicable Law; (c) statutory or common law liens to secure obligations to landlords, lessors or renters under lease or rental agreements incurred in the ordinary course of business, consistent with past practice, in each case for sums not yet due and payable, or due but not delinquent, or being contested in good faith by appropriate proceedings; (d) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen to secure claims for labor, materials or supplies incurred in the ordinary course of business, consistent with past practice, in each case for sums not yet due and payable, or due but not delinquent, or being contested in good faith by appropriate proceedings; (e) encumbrances that do not materially impair the ownership or use of the assets to which they relate; and (e) with respect to securities, limitations on transfer imposed by federal or state securities laws.

“ Person ” means any natural person, corporation, company, limited liability company, general partnership, limited liability partnership, trust, estate, proprietorship, joint venture, association, organization, entity or Governmental Authority.

“ Principal Stockholder ” means, collectively, Joseph A. Sorge, the J. A. Sorge Trust I, the J. A. Sorge Trust II, the J. A. Sorge Trust III, the J. A. Sorge Trust IV, the Joseph A. Sorge Charitable Remainder Trust and Biosense Partners, LP.

“ Proxy Statement ” means the proxy statement to be filed by the Company with the SEC in connection with the solicitation of proxies from Company Stockholders for the Company Stockholder Approval, as amended or supplemented.

“ Sarbanes Act ” means the Sarbanes-Oxley Act of 2002.

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder.

“ Subsidiary ” means any corporation, association, business entity, partnership, limited liability company or other Person of which the Company or Acquiror, as the case may be, either alone or together with one or more Subsidiaries or by one or more other Subsidiaries (a) directly or indirectly owns or controls securities or other interests representing more than 50% of the voting power of such Person, or (b) is entitled, by Contract or otherwise, to elect, appoint or designate directors constituting a majority of the members of such Person’s board of directors or other governing body.

“ Superior Proposal ” means with respect to the Company, an unsolicited, written bona fide Alternative Transaction Proposal, which the Special Committee and the Company Board have each in good faith determined (after consultation with its outside legal counsel and financial advisor), taking into account, amongst other things, all legal, financial, regulatory, timing and other aspects of the proposal, the need for and contingency of any financing, the conditions to consummation of the proposal and the Person making the proposal, (a) is more

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favorable, from a financial point of view, to the Company Stockholders (in their capacities as stockholders) than the terms of this Agreement (after giving effect to any adjustments to the terms of this Agreement proposed by Acquiror in response to such Alternative Transaction Proposal), and (b) is reasonably likely to be consummated on the terms proposed; provided that, for purposes of this definition of “Superior Proposal” each reference to “20%” or “80%” in the definition of “Alternative Transaction” shall be deemed to be a reference to “50%”.

“ Tax ” (and, with correlative meaning, “ Taxes ” and “ Taxable ”) shall mean (a) any income, alternative or add-on minimum tax, gross income, estimated, gross receipts, sales, use, ad valorem, value added, transfer, franchise, capital stock, profits, license, registration, withholding, payroll, social security (or equivalent), employment, unemployment, disability, excise, severance, stamp, occupation, premium, property (real, tangible or intangible), environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount (whether disputed or not) imposed by any Governmental Authority responsible for the imposition of any such tax (domestic or foreign) (each, a “ Tax Authority ”), (b) any liability for the payment of any amounts of the type described in clause (a) of this sentence as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group for any Taxable period, and (c) any liability for the payment of any amounts of the type described in clause (a) or (b) of this sentence as a result of being a transferee of or successor to any Person or as a result of any express or implied obligation to assume such Taxes or to indemnify any other Person.

“ Tax Return ” shall mean any return, statement, report or form (including estimated Tax returns and reports, withholding Tax returns and reports, any schedule or attachment, and information returns and reports) required to be filed with respect to Taxes.

“ Transaction Expenses ” means all costs and expenses incurred in connection with the Merger and this Agreement and the transactions contemplated hereby (including any fees and expenses of legal counsel, financial advisors, investment bankers and accountants).

“ Transferred Business ” means the business of the Company being transferred to Catalyst, as reflected in the Asset Purchase Agreement and License Agreement.

“ Unvested Company Option ” means any Company Option that is not vested or exercisable under the terms of the Contract with the Company (including, without limitation, any stock option agreement) governing such Company Option and the terms of the applicable Company Option Plan.

“ Vested Company Option ” means any Company Option that is vested and exercisable under the terms of the Contract with the Company (including, without limitation, any stock option agreement) governing such Company Option and the terms of the applicable Company Option Plan.

Other capitalized terms defined elsewhere in this Agreement and not defined in this Article 1 shall have the meanings assigned to such terms in this Agreement.

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ARTICLE 2

THE MERGER

2.1           Conversion of Shares .

(a)         Conversion of Merger Sub Common Stock .  At the Effective Time, each share of Merger Sub Common Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and nonassessable share of Common Stock, $0.0001 par value per share, of the Surviving Corporation, and the shares of the Surviving Corporation into which the shares of Merger Sub Common Stock are so converted shall be the only shares of Company Common Stock that are issued and outstanding immediately after the Effective Time.

(b)         Conversion of Company Securities .

(i)            Company Common Stock .  Subject to the terms and conditions of this Agreement, at the Effective Time, each share of Company Common Stock that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof (except as expressly provided herein), be converted into and represent the right to receive an amount of cash, without interest, equal to the Cash Amount Per Share.  The amount of cash each Company Stockholder is entitled to receive for the shares of Company Common Stock held by such Company Stockholder shall be rounded to the nearest cent and computed after aggregating cash amounts for all shares of Company Common Stock held by such Company Stockholder.

(ii)           Vested Company Options with an Exercise Price Less than the Cash Amount Per Share .  Subject to the terms and conditions of this Agreement, at the Effective Time, each Vested Company Option with an exercise price per share of Company Common Stock that is less than the Cash Amount Per Share and that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without the need for any further action on the part of the holder thereof, be converted into and represent the right to receive an amount of cash, without interest, equal to the product of (A) the number of shares of Company Common Stock subject to such Vested Company Option multiplied by (B) the Cash Amount Per Share, less the exercise price per share of Company Common Stock subject to such Vested Company Option; provided, however, that the Surviving Corporation and Acquiror shall be entitled to deduct and withhold from such payment made to such holder the amount of withholding for Taxes required to be deducted and withheld as a result of the transactions contemplated by this Section 2.1(b)(ii) .  The amount of cash each Company Optionholder is entitled to receive for the Company Options (other than Company Options with an exercise price equal to or greater than the Cash Amount Per Share) held by such Company Optionholder shall be rounded to the nearest cent and computed after aggregating cash amounts for all Company Options (other than Company Options with an exercise price equal to or in excess of the Cash Amount Per Share) held by such Company Optionholder.

(iii)          Vested Company Options with an Exercise Price Equal to or Greater than the Cash Amount Per Share . Subject to the terms and conditions of this Agreement, immediately prior to the Effective Time, each Vested Company Option with an exercise price

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per share of Company Common Stock that is equal to or greater than the Cash Amount Per Share and that is issued and outstanding immediately prior to the Effective Time (an “ Underwater Option ”) by virtue of the Merger and without the need for any further action on the part of the holder thereof (except as expressly provided herein), shall be cancelled and extinguished without any payment or other consideration or the issuance of any securities in exchange or substitution therefor.

(iv)          Unvested Company Options . Acquiror will not assume any Unvested Company Option.  Subject to the terms and conditions of this Agreement, immediately prior to the Effective Time, each Unvested Company Option regardless of the exercise price of such Unvested Company Option, that is issued and outstanding as of immediately prior to the Effective Time, by virtue of the Merger and without the need for any further action on the part of the holder thereof , shall be cancelled and extinguished without any payment or other consideration or the issuance of any securities in exchange or substitution therefor.

(v)           The Company shall cause the administrator of each of the Company Option Plans to take any actions necessary under the terms of such Company Option Plans to enable the treatment of the Company Options in the Merger as set forth in subclauses (ii) through (iv) of this Section 2.1(b) .

(c)         Cancellation of Company-Owned Stock .  Notwithstanding Section 2.1(b) , each share of Company Capital Stock held by the Company or any Company Subsidiaries immediately prior to the Effective Time shall, at the Effective Time, be cancelled and extinguished without any conversion thereof.

(d)         Adjustments .  In the event of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into capital stock), reorganization, reclassification, combination, recapitalization or other like change with respect to the Company Capital Stock occurring after the date hereof and prior to the Effective Time, all references in this Agreement to specified numbers of shares of any class or series affected thereby, and all calculations provided for that are based upon numbers of shares of any class or series (or trading prices therefor) affected thereby, shall be equitably adjusted to the extent necessary to provide the parties the same economic effect as contemplated by this Agreement prior to such stock split, reverse stock split, stock dividend, reorganization, reclassification, combination, recapitalization or other like change.

2.2           Effects of the Merger .  At and upon the Effective Time:

(a)         the separate existence of Merger Sub shall cease and Merger Sub shall be merged with and into the Company, and the Company shall be the surviving corporation of the Merger pursuant to the terms of this Agreement and the Certificate of Merger;

(b)         the Certificate of Incorporation of the Surviving Corporation shall be amended in its entirety to read as set forth in the Certificate of Merger, until thereafter amended as provided by Delaware Law;

(c)         the Bylaws of the Surviving Corporation shall be amended in their entirety to read as the Bylaws of Merger Sub, until thereafter amended as provided by Delaware Law;

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(d)         the officers of Merger Sub immediately prior to the Effective Time shall be appointed as the officers of the Surviving Corporation immediately after the Effective Time until their respective successors are duly appointed;

(e)         the members of the Board of Directors of Merger Sub immediately prior to the Effective Time shall be appointed as the members of the Board of Directors of the Surviving Corporation immediately after the Effective Time until their respective successors are duly elected or appointed and qualified; and

(f)          the Merger shall, from and after the Effective Time, have all of the effects provided by Delaware Law.

2.3           Tax Consequences and Withholding .

(a)         The parties intend that the Merger shall be treated as a Taxable purchase of securities of the Company pursuant to the Code.  However, Acquiror makes no representations or warranties to the Company or to any Company Securityholder regarding (i) the Tax treatment of the Merger or (ii) any of the Tax consequences to the Company or any Company Securityholder of this Agreement, the Merger or any of the other transactions or agreements contemplated hereby.  The Company and, by virtue of the Company Stockholders approving the Merger, this Agreement and the other transactions or agreements contemplated hereby, the Company Stockholders, acknowledge that the Company and the Company Stockholders are relying solely on their own Tax advisors in connection with the Merger, this Agreement and the other transactions or agreements contemplated hereby.

(b)         Acquiror or Acquiror’s agent shall be entitled to deduct and withhold from the amounts payable pursuant to this Agreement to any Company Securityholder, the amounts required to be deducted and withheld under the Code, or any other provision of Applicable Law, with respect to the making of such payment.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Company Securityholder in respect of whom such deduction and withholding was made.

2.4           Further Assurances .  If, at any time before or after the Effective Time, Acquiror reasonably believes or is advised that any further instruments, deeds, assignments or assurances are reasonably necessary or desirable to consummate the Merger or to carry out the purposes and intent of this Agreement at or after the Effective Time, then the Company, Acquiror, the Surviving Corporation and their respective officers and directors shall execute and deliver all such proper deeds, assignments, instruments and assurances and do all other things reasonably necessary or desirable to consummate the Merger and to carry out the purposes and intent of this Agreement.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in a numbered or lettered section of the disclosure letter of the Company addressed to Acquiror, dated as of the Agreement Date and delivered to Acquiror concurrently with the parties’ execution of this Agreement (the “ Company Disclosure Letter ”)

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referencing a representation or warranty herein (each of which exceptions, in order to be effective, shall clearly indicate the section and, if applicable, the subsection of this Article 3 to which it relates unless and to the extent the relevance to other representations and warranties is reasonably apparent from the actual text of the disclosed exception), the Company represents and warrants to Acquiror as follows:

3.1           Organization and Good Standing .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The Company has the requisite corporate power and authority to own, operate and lease its properties and to carry on the Company Business.  The Company is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified and in good standing, individually or in the aggregate with any such other failures, would not reasonably be expected to have a Material Adverse Effect.  The Company has delivered to Acquiror true and complete copies of the Company Charter Documents.  The Company is not in violation of the Company Charter Documents.

3.2           Company Subsidiaries .

(a)         Organization and Good Standing .  Schedule 3.2(a) of the Company Disclosure Letter sets forth a true, correct and complete list of all Company Subsidiaries.  Each Company Subsidiary is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.  Each Company Subsidiary has the requisite corporate, limited liability company or partnership power and authority, as applicable, to own, operate and lease its properties and to carry on its business as currently conducted and as presently proposed to be conducted.  Each Company Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so qualified and in good standing or licensed to do business, individually or in the aggregate with any such other failures, would not reasonably be expected to be material to the Company and its Subsidiaries taken as a whole; without limiting the foregoing, each respective Company Subsidiary is so qualified or licensed and in good standing in each jurisdiction listed on Schedule 3.2(a) of the Company Disclosure Letter.  The Company has delivered to Acquiror true and complete copies of the currently effective Certificate of Incorporation and Bylaws (or other comparable charter documents) of each Company Subsidiary, each as amended to date.  Each Company Subsidiary is not in violation of its Certificate of Incorporation or Bylaws (or other comparable charter documents), each as amended to date.

(b)         Ownership .  The Company is the direct or indirect owner of all of the issued and outstanding shares of capital stock of, or other equity interests in, each Company Subsidiary and all such shares or other equity interests are duly authorized, validly issued, fully paid and nonassessable.  All of the issued and outstanding shares of capital stock or other equity interest of each Company Subsidiary are owned by the Company free and clear of all Encumbrances (other than Permitted Encumbrances) and are not subject to any preemptive right or right of first refusal created by statute, the Certificate of Incorporation and Bylaws (or other comparable charter documents), as applicable, of such Company Subsidiary or any agreement to

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which such Company Subsidiary is a party or by which it is bound.  There are no stock appreciation rights, options, warrants, calls, rights, commitments, conversion privileges or preemptive or other rights or agreements outstanding to purchase or otherwise acquire any shares of capital stock of a Company Subsidiary or any securities or debt convertible into or exchangeable for capital stock of a Company Subsidiary or obligating the Company or any Company Subsidiary to grant, extend or enter into any such option, warrant, call, right, commitment, conversion privilege or preemptive or other right or agreement.  Other than the Company Subsidiaries set forth in Schedule 3.2(a) of the Company Disclosure Letter, the Company does not have any Subsidiaries or any equity or ownership interest (or any interest convertible or exchangeable or exercisable for, any equity or ownership interest), whether direct or indirect, in any Person.  The Company is not obligated to make nor is it bound by any agreement or obligation to make any investment in or capital contribution to or on behalf of any other Person.

3.3           Power, Authorization and Validity .

(a)         Power and Authority .  The Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement and, subject to adoption of this Agreement by holders of a majority of the outstanding shares of Company Common Stock (the “ Company Stockholder Approval ”), to perform its obligations under this Agreement and to consummate the Merger and other transactions contemplated hereby. The Special Committee, by resolutions duly adopted (and not thereafter modified or rescinded) by the unanimous vote of the members thereof, and following consideration of the terms and conditions of the Merger and this Agreement in conjunction with consideration of the terms of the Divestiture, the Divestiture Valuation and the Fairness Opinion, viewing such transactions as a whole, has (i) determined that this Agreement and the terms and conditions of the Merger and this Agreement are fair to, advisable and in the best interests of the Company and the Company Stockholders, (ii) approved and adopted this Agreement and the Merger, (iii) recommended the adoption of this Agreement by the Company Board, and (iv) recommended that the adoption of this Agreement be submitted to the Company Stockholders for consideration and that the Company Stockholders adopt this Agreement. The Company Board, by resolutions duly adopted (and not thereafter modified or rescinded) by the unanimous vote of all members of the Company Board, other than Joseph Sorge who abstained from such vote, has (i) determined that this Agreement and the terms and conditions of the Merger and this Agreement are fair to, advisable and in the best interests of the Company and the Company Stockholders, (ii) approved and adopted this Agreement and the Merger, and (iii) directed that the adoption of this Agreement be submitted to the Company Stockholders for consideration and recommended that the Company Stockholders adopt this Agreement.  The Company Stockholder Approval is the only vote of the holders of any class or series of Company Capital Stock necessary to adopt this Agreement and consummate the Merger and the other transactions contemplated hereby under the Company Charter Documents, Applicable Law and any Contract to which such stockholders or the Company is a party.

(b)         No Consents .  No consent, approval, order, authorization, release or waiver of, or registration, declaration or filing with, any Governmental Authority, or any other Person (governmental or otherwise), is necessary or required to be made or obtained by the Company to enable the Company to lawfully execute and deliver, enter into, and perform its obligations under this Agreement or to consummate the Merger or the Divestiture, except for (i) the filing of the

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Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, (ii) the Company Stockholder Approval, (iii) such filings and notifications as may be required to be made by the Company in connection with the Merger under the HSR Act and other applicable Antitrust Laws and the expiration or early termination of applicable waiting periods under the HSR Act and such Antitrust Laws, (iv) the filing of a Notification of a Concentration pursuant to Sec 39 Para 1 of the German Act Against Restraints of Competition in connection with the Merger, (v) the filing with the SEC of the Proxy Statement and such reports and filings under the Exchange Act and the rules and regulations thereunder as may be required in connection with this Agreement and the transactions contemplated hereby, (vi) such other filings and notifications as may be required to be made by the Company under federal, state or foreign securities laws or the rules and regulations of NASDAQ, and (vii) such other consents, approvals, orders, authorizations, releases, waivers, registrations, declarations or filings that if not made or obtained would not, individually or in the aggregate, materially affect the Company and its Subsidiaries taken as a whole or the Company’s ability to consummate the Merger or the Divestiture.

(c)         Enforceability .  This Agreement has been duly executed and delivered by the Company.  Assuming the due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement constitutes the valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to the effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to rights of creditors generally and (ii) rules of law and equity governing specific performance, injunctive relief and other equitable remedies (whether considered in a proceeding at law or in equity).

(d)         Takeover Laws .  The adoption of this Agreement and the approval of the Merger and the transactions contemplated hereby by the Company Board referred to in Section 3.3(a) constitute all of the approvals that are necessary to render inapplicable to this Agreement, the Merger, and the transactions contemplated hereby the provisions of Section 203 of Delaware Law and represent the only actions necessary to ensure that Section 203 of Delaware Law do not and will not apply to the execution, delivery, or performance of this Agreement or the consummation of the Merger or other transactions contemplated hereby.  No other state takeover or other similar statute or regulation is applicable to this Agreement, the Merger or the other transactions contemplated hereby.

3.4           Capital Structure of the Company .

(a)         As of the Agreement Date, the authorized capital stock of the Company consists solely of Fifty Million (50,000,000) shares of Company Common Stock, and Four Million (4,000,000) shares of Company Preferred Stock.  A total of 22,471,395 shares of Company Common Stock and no shares of Company Preferred Stock are issued and outstanding as of the Agreement Date.  As of the Agreement Date, the Company has reserved (i) an aggregate of 4,714,318 shares of Company Common Stock for issuance pursuant to the Company Option Plans (including shares subject to outstanding Company Options) and (ii) an aggregate of 1,000,000 shares of Company Common Stock for issuance pursuant to the Company ESPP.  As of the Agreement Date, (i) a total of 2,623,671 shares of Company

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Common Stock are subject to outstanding Company Options, (ii) no shares of Company Capital Stock are subject to outstanding warrants, (iii) a total of 1,932,768 shares of Company Common Stock are reserved for future grant and issuance under the Company Option Plans (excluding shares subject to outstanding Company Options), and (iv) a total of 840,311 shares of Company Common Stock are reserved for future grant and issuance under the Company ESPP.  Except for such Company Options as set forth above (and any Company Options granted under the Company ESPP after the Agreement Date), there are no stock appreciation rights, stock units, options, warrants, calls, commitments, conversion privileges or preemptive or other rights or Contracts outstanding to purchase or otherwise acquire any shares of Company Capital Stock or Company Voting Debt or any securities or debt convertible into or exchangeable for Company Capital Stock or Company Voting Debt or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment, conversion privilege or preemptive or other right or Contract.

(b)         All issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of and are not subject to any right of rescission, right of first refusal, preemptive right, right of repurchase or vesting condition and have been offered, issued, sold and delivered by the Company in material compliance with all requirements of Applicable Law and all requirements set forth in applicable Contracts.  There is no Liability for dividends accrued and unpaid by the Company.  As of the Agreement Date, there are no shares of Company Common Stock held in treasury by the Company or any Company Subsidiaries.

(c)         Schedule 3.4(c) of the Company Disclosure Letter sets forth as of the Agreement Date, for each Company Option, (i) the name of the holder of such Company Option, (ii) the exercise price per share of such Company Option, (iii) each holder of outstanding Company Options that is not an employee of the Company or any Subsidiary (including non-employee directors, former employees, consultants, advisory board members, vendors, service providers or other similar persons), (iv) the number of shares covered by such Company Option, (v) the term of such Company Option, (vi) the vesting schedule for such Company Option, and (vii) the terms of any accelerated vesting or exercisability of any Company Options, or any change in the price, exercise period, or other modifications in the terms of any Company Option, either in connection with the Merger or any other transaction contemplated by this Agreement or upon termination of employment or service with the Company, the Surviving Corporation, Acquiror or any Subsidiary following the Merger or otherwise.  The terms of the Company Option Plans permit the conversion of the Vested Company Options into cash as provided in Section 2.1(b)(ii) of this Agreement, without the consent or approval of the holders of such Company Options, the Company Stockholders or otherwise.  The terms of the Company Option Plans permit the cancellation of Company Options as provided in Section 2.1(b)(iii) and Section 2.1(b)(iv) of this Agreement, without (A) the consent or approval of the holders of such Company Options, the Company Stockholders or otherwise, (B) the payment of any consideration to the holders of such Company Options and (C) acceleration of the exercise schedule or vesting provisions in effect for such Company Options.  All issued and outstanding Company Options were issued by the Company in material compliance with all requirements of Applicable Law and all requirements set forth in applicable Contracts and were not issued in material violation of and are not subject to any right of rescission, right of first refusal or

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preemptive right.  True and correct copies of the Company Option Plans and each agreement for each Company Option have been delivered by the Company to Acquiror, and such plans and agreements have not been amended, modified or supplemented since being delivered, and there are no agreements, understandings or commitments to grant additional Company Options or to amend, modify or supplement such plans or agreements in any case from those delivered.

(d)         Option Grant Practice .  All grants of Company Options are in material compliance with the terms of the applicable Company Option Plan under which such Company Options were granted and with Applicable Law. All Company Options have been properly accounted for in the Company’s financial statements and reported in compliance in all material respects with GAAP and applicable Tax requirements and the published rules and regulations of the SEC with respect thereto and, to the Company’s knowledge, there is no basis for any claim that the grant date of any Company Option is inaccurate or the exercise price thereof is improper.

(e)         Company Debt .  No bonds, debentures, notes or other Debt of the Company or any Company Subsidiaries (i) having the right to vote on any matters on which stockholders may vote (or which is convertible into, or exchangeable for, securities having such right) or (ii) the value of which is any way based upon or derived from capital or voting stock of the Company (collectively, “ Company Voting Debt ”), is issued or outstanding as of the Agreement Date.  Schedule 3.4(e) to the Company Disclosure Letter accurately lists all Debt of the Company and Company Subsidiaries, including, for each item of Debt, the agreement governing the Debt.  All Debt may be prepaid at the Closing without penalty under the terms of the agreements governing such Debt.

(f)          No Other Rights .   The Company Charter Documents do not provide, and the Company is not a party to or otherwise bound by any Contract providing, registration rights, rights of first refusal, preemptive rights, co-sale rights or other similar rights or other restrictions applicable to any securities of the Company or any Company Subsidiary presently issued and outstanding or that may be subsequently issued.  The Company is not a party to any Contract regarding the voting of any outstanding securities of the Company (other than the Voting Agreement).

3.5           No Conflict .  Neither the execution and delivery of this Agreement by the Company, nor the consummation of the Merger or the Divestiture or any other transaction contemplated hereby or thereby:  (a) conflicts with, or requires any consent, approval or waiver of any Person pursuant to, or (with or without notice or lapse of time, or both) results in a right of termination, cancellation or acceleration of any obligation or loss of any benefit under or a breach, or violation of, or constitutes a default under (i) any provision of the Company Charter Documents or other comparable charter documents of any Company Subsidiary, each as currently in effect, (ii) subject to the consents, authorizations and filings set forth in Section 3.3(b) , any Applicable Law applicable to the Company, any Company Subsidiary or any of their respective assets or properties, or (iii) any Company Material Contract (as defined in Section 3.12 ) to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary or any of their respective assets or properties are bound; or (b) will result in the creation of any material Encumbrance on any of the material properties or assets of the Company or any Subsidiary.

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3.6           SEC Filings .

(a)         SEC Reports .  The Company has filed with the SEC all registration statements, prospectuses, reports, forms, schedules, certifications and other documents (including exhibits and all other items incorporated by reference therein) required to be filed or furnished by Company since April 29, 2004 (all such required registration statements, prospectuses, reports, forms, schedules, certifications and other documents (and all exhibits thereto and all other items incorporated by reference therein), including those that the Company may file subsequent to the Agreement Date, are referred to herein as the “ Company SEC Documents ”).  As of their respective filing dates (or, in the case of registration statements, as of the date of effectiveness), the Company SEC Documents (i) complied in all material respects with the requirements of the Securities Act, the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Documents and the disclosure requirements of Rule 4350 of NASDAQ’s Corporate Governance Rules and (ii) did not at the time they were filed or became effective, as applicable (or if amended or superseded by a filing prior to the Agreement Date, then on the date of such filing or effectiveness, as applicable) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein or incorporated by reference therein, in the light of the circumstances under which they were made, not misleading, except to the extent corrected prior to the Agreement Date by a subsequently filed Company SEC Document.  None of the Company Subsidiaries is subject to the reporting requirements of the Exchange Act.

(b)         Financial Statements .  Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Documents (the “ Company Financial Statements ”), (i) complied, as of their respective dates of filing with the SEC, all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect as of the date of such filing, (ii) was prepared in accordance with GAAP (except in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor form under the Exchange Act) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), and (iii) fairly presented in all material respects the consolidated financial position of Company and the Company Subsidiaries as at the respective dates thereof and the consolidated results of Company’s and the Company Subsidiaries’ operations and cash flows for the periods indicated (except that the unaudited interim financial statements were subject to normal and recurring period-end adjustments and may not contain footnotes).  Except as reflected in the Company Balance Sheet (or described in the notes thereto), neither the Company nor any of its Subsidiaries has any Liabilities of any nature which are, individually or in the aggregate, material to the business, results of operations or financial condition of the Company and its Subsidiaries taken as a whole, except (i) Liabilities incurred since the Balance Sheet Date in the ordinary course of business consistent with past practice which are of the type which ordinarily recur and, individually or in the aggregate, are not material in nature or amount and do not result from any breach of Contract, tort or violation of any Applicable Law, (ii) Liabilities reserved against in the Company Balance Sheet (but only to the extent of such reserves), and (iii) Liabilities for the Company’s Transaction Expenses.  The books and records of the Company and each Subsidiary have been, and are being, maintained in all material respects in accordance with applicable legal and accounting requirements and the Company Financial Statements are consistent with such books and records.

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(c)         Sarbanes Act .  Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of the Sarbanes Act.  To the Company’s knowledge, there are no other violations of the Company’s code of conduct, adopted pursuant to NASDAQ Rule 4350(n).  The Company has delivered to Acquiror complete and correct copies of any written complaints, reports or allegations, and a reasonably detailed summary of any verbal complaints, reports or allegations, that have been submitted or made by any party to the Audit Committee of the Company Board since January 1, 2004 pursuant to the procedures established in accordance with Section 10A(m)(4) of the Exchange Act.  The Company has delivered to Acquiror complete and correct copies of any written complaints, reports or allegations, and a reasonably detailed summary of any verbal complaints, reports or allegations, made or submitted by any attorney representing the Company or any of its Subsidiaries to the Company’s chief executive officer, any supervising attorney or any committee of the Company Board, including any qualified legal compliance committee, as contemplated by the rules set forth in 17 CFR Part 205 with respect to any material violation.

(d)         Controls .  The Company has established and maintains and adheres to a system of internal accounting controls sufficient to provide reasonable assurances that except as would not be material to the Company and its Subsidiaries taken as a whole (i) transactions of the Company and the Company Subsidiaries are being executed only in accordance with appropriate authorizations of management and, where required by Applicable Laws or the Company’s code of conduct, by the Company Board, (ii) transactions are recorded as necessary (A) to permit preparation of financial statements in compliance with GAAP and (B) to maintain accountability for assets, (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries, and (iv) the amount recorded for assets on the books and records of the Company is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  There are no “significant deficiencies” or “material weaknesses” (as defined by the Public Company Accounting Oversight Board) in the design or operation of the Company’s internal controls and procedures which could adversely affect the Company’s ability to record, process, summarize and report financial data.  To the Company’s knowledge, there is no fraud, whether or not material, that involves management or other current or former employees of the Company or any of the Company Subsidiaries who have a role in the Company’s internal controls over financial reporting.  The Company has established and maintains “disclosure controls and procedures” (as defined in Rule 13a-15 promulgated under the Exchange Act) designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the “principal executive officer” and the “principal financial officer” of the Company required by Section 302 of the Sarbanes Act with respect to such reports, and such controls are reasonably effective for this purpose. Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Sections 302 and 906 of the Sarbanes Act and the rules and regulations promulgated

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thereunder with respect to the Company SEC Reports and the statements contained in such certifications are true and accurate as of the date hereof.  The Company has established and maintains “internal control over financial reporting” (as defined in Rule13a-15 promulgated under the Exchange Act) and such internal control over financial reporting are effective based on the criteria issued by the Committee on Sponsoring Organizations of the Treadway Committee on “Internal Control-Integrated Framework.”

(e)         Off-Balance Sheet Arrangements .  Neither the Company nor any Company Subsidiary is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract or arrangement (including without limitation any Contract or arrangement relating to any transaction or relationship between or among the Company and any of the Company Subsidiaries, on the one hand, and any unconsolidated Affiliate on the other hand), including without limitation any “off-balance sheet arrangement” (as defined in Item 303(a) of Regulation S-K promulgated by the SEC), where the result, purpose or intended effect of such contract or arrangement is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of the Company Subsidiaries in the Company’s or such Company Subsidiary’s published financial statements or other Company SEC Documents.

(f)          Amendments .  The Company has heretofore delivered to Acquiror a complete and correct copy of any amendments or modifications, which have not yet been filed with the SEC but which are required to be filed, to agreements, documents or other instruments which previously had been filed by the Company with the SEC pursuant to the Securities Act or the Exchange Act.  No “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC) filed as an exhibit to the Company SEC Documents has been amended or modified, except for amendments or modifications so furnished or which have been filed as an exhibit to a subsequently dated Company SEC Document.  The Company has heretofore delivered to Acquiror a complete and correct copy of any comment letters or similar correspondence received by the Company from the SEC for the Company’s three prior fiscal years and current fiscal year.  The SEC has not provided comments to the Company in connection with any Company SEC Documents that to the Company’s knowledge remain unresolved and are material.  No investigation by the SEC or any other Governmental Authority with respect to the Company or any of the Company Subsidiaries is pending or, to the knowledge of the Company, threatened.

(g)         Proxy Statement .  The information supplied by the Company for inclusion in the Proxy Statement shall not at the time the Proxy Statement is filed with the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein or incorporated by reference therein not misleading.  The information supplied by the Company for inclusion or incorporation by reference in the Proxy Statement shall not, on the date the Proxy Statement is mailed to Company Stockholders, at the time of the meeting of Company Stockholders to consider the Company Stockholder Approval (the “ Company Stockholders’ Meeting ”), or as of the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not false or misleading, or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the

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solicitation of proxies for the Company Stockholders’ Meeting which has become false or misleading.  The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.  Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Acquiror or Merger Sub that is contained in the Proxy Statement.

3.7           Litigation .  There is no action, suit, arbitration, mediation, proceeding or, to the Company’s knowledge, claim or investigation pending against the Company or any Company Subsidiary or any of their respective assets or properties (or against any officer, director, employee or agent of the Company or any Company Subsidiary in their capacity as such or relating to their employment, services or relationship with the Company or such Company Subsidiary) before any Governmental Authority, arbitrator or mediator that is, or is reasonably likely to be, material to the Company and its Subsidiaries, taken as a whole, nor, to the knowledge of the Company, has any such action, suit, arbitration, mediation, proceeding, claim or investigation been threatened.  There is no judgment, decree, injunction or order of any Governmental Authority, arbitrator or mediator outstanding against the Company or any Company Subsidiary (or to the knowledge of the Company, against any officer, director, employee or agent of the Company or any Company Subsidiary in their capacity as such or relating to their employment, services or relationship with the Company or such Company Subsidiary).  Neither the Company nor any Company Subsidiary has any action, suit, arbitration, mediation, proceeding, claim or investigation pending against any Governmental Authority or other Person.   There are currently pending no internal investigations or inquiries being conducted by the Company, the Company Board (or any committee thereof) or any third party at the request of any of the foregoing concerning any financial, accounting, option grant practices, Tax, conflict of interest, illegal activity, fraudulent or deceptive conduct or other misfeasance or malfeasance issues (each, an “ Internal Investigation ”). The Company has delivered to Acquiror complete and correct copies of any written reports, submissions, correspondence, findings or other documentation with respect to any Internal Investigation, or a reasonably detailed summary of any such Internal Investigation to the extent that a written report with respect thereto was not or has not been prepared, whether such Internal Investigation is currently pending or was conducted in the past since January 1, 2003. To the Company’s knowledge, there is no basis for any person to assert a claim against the Company based upon:  (a) the Company’s entering into this Agreement or consummating the Merger or any of the transactions contemplated by this Agreement; or (b) a claim of ownership of, or options, warrants or other rights to acquire ownership of, any shares of Company Capital Stock or any rights as a Company Securityholder, including any option, warrant, preemptive right or right to notice or to vote, other than the rights of the Company Stockholders with respect to the Company Capital Stock shown as being outstanding in Section 3.4(a) , the rights of Company Optionholders with respect to the Company Options shown as being owned by such Persons on Schedule 3.4(c) of the Company Disclosure Letter.

3.8           Compliance with Laws .

(a)         Applicable Laws .  The Company and each Company Subsidiary has materially complied, and is now in material compliance, with all material Applicable Laws.  Neither the Company nor any of the Company Subsidiaries has received any written notice from any Governmental Authority asserting that the Company or any of its Subsidiaries has failed to

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materially comply, or is not in material compliance, with material Applicable Law. To the Company’s knowledge, (i) no investigation or review of the Company or any of its Subsidiaries by any Governmental Authority is pending, and (ii) no such notification, investigation or review has been threatened in writing against the Company or any of its Subsidiaries and no reasonable basis therefor exists.

(b)         Governmental Permits .  The Company and each Company Subsidiary holds all material permits, licenses and approvals from, and has made all material filings with, government (and quasi-governmental) agencies and authorities, that are necessary and/or legally required to be held by it to conduct the Company Business without any material violation of Applicable Law (“ Governmental Permits ”).  The Company and each Company Subsidiary has materially complied, and is now in material compliance, with all Governmental Permits, and all such Governmental Permits are valid and in full force and effect.  The Company has delivered to Acquiror true, correct and complete copies of each Governmental Permit that is material to the business of the Company and its Subsidiaries.  Neither the Company nor any Company Subsidiary has received any notice or other communication from any Governmental Authority regarding (i) any actual or possible violation of any Governmental Permit or any failure to comply with any term or requirement of any Governmental Permit or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Permit.  None of the Governmental Permits that are material to the business of the Company and its Subsidiaries will be terminated or impaired, or will become terminable, in whole or in part, as a result of the Merger or transactions contemplated hereby.

(c)         Third Party Manufacturing .  With respect to all third party manufacturers and suppliers of key raw materials used by the Company or its Subsidiaries (each a “ Third Party Manufacturer ”), the Company has inspected all Third Party Manufacturers and to its knowledge, each such Third Party Manufacturer:

(i)            has complied and is complying, in each case in all material respects, with all Applicable Laws, including Laws enforced by the FDA and any similar state or foreign regulatory or Governmental Entities;

(ii)           has all material permits to perform its obligations as a Third Party Manufacturer and all such permits are in full force and effect; and

(iii)          has not been debarred under the Federal Food, Drug and Cosmetic Act or similar law of any other jurisdiction or otherwise excluded from or restricted in any material respect manner from participation in, any government program related to pharmaceutical products and does not employ or use the services of any individual or entity that is or, during the time when such person or entity was providing services as a Third Party Manufacturer to the Company or any of its Subsidiaries, was debarred or otherwise excluded or restricted.

(d)         Unlawful Payments .  Neither the Company nor any Company Subsidiary nor any director, officer, agent or employee of the Company or any Company Subsidiary has, for or on behalf of the Company or any Company Subsidiary, (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii)

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made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii) made any other payment in violation of Applicable Law.

(e)         Export Control Laws .  The Company and each Company Subsidiary has conducted its export transactions in accordance in all material respects with applicable provisions of United States export control laws and regulations, including but not limited to the Export Administration Act and implementing Export Administration Regulations.  Without limiting the foregoing:  (i) the Company and each Company Subsidiary has obtained all material export licenses and other approvals required for its exports of products, software and technologies from the United States; (ii) the Company and each Company Subsidiary is in compliance in all material respects with the terms of all applicable material export licenses or other approvals; (iii) there are no pending or, to the knowledge of the Company, threatened claims against the Company or any Company Subsidiary with respect to such material export licenses or other approvals; (iv) there are no actions, conditions or circumstances pertaining to the Company’s or any Subsidiary’s material export transactions that would reasonably be expected to give rise to any future claims; and (v) no consents or approvals for the transfer of material export licenses to Acquiror are required, except for such consents and approvals that can be obtained expeditiously without material cost.

(f)          NASDAQ .  The Company is in compliance in all material respects with the applicable criteria for continued listing of the Company Common Stock on NASDAQ, including all applicable corporate governance rules and regulations.

3.9           Taxes .

(a)         Each of the Company and its Subsidiaries has filed all Tax Returns required to be filed by it and paid all Taxes shown to be due on such Tax Returns.  All such Tax Returns are true, correct and complete in all material respects.  The Company has delivered, or will deliver to Acquiror prior to the Closing, correct and complete copies of all Tax Returns filed (including all supporting work papers and official foreign government receipts for any Taxes paid to foreign Tax authorities), all examination reports and statements of deficiencies assessed against or agreed to by the Company or any Company Subsidiary.

(b)         The Company and each of its Subsidiaries has made adequate provision (or adequate provision has been made on its behalf), in accordance with GAAP, for all accrued Taxes not yet due.

(c)         The Company and its Subsidiaries have withheld and paid over all Taxes required to have been withheld and paid over, and complied in all material respects with the rules and regulations relating to the withholding or remittance of Taxes.

(d)         None of the Company or any of its Subsidiaries has requested any extension of time within which to file any Tax Return, which Tax Return has not since been filed. There are no outstanding waivers or comparable consents that have been given by the Company or any of its Subsidiaries regarding the application of any statute of limitations with

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respect to any Taxes or Tax Returns of the Company or any such Subsidiary. There are no audits, administrative proceedings or court proceedings relating to Taxes or Tax Returns of the Company or any Subsidiary currently pending, or, to the knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries. There are no Liens on any assets of the Company or any Subsidiary with respect to Taxes, other than Permitted Encumbrances. To the knowledge of the Company, no claim has been made by a taxing authority in a jurisdiction where the Company or any of its Subsidiaries has not filed a Tax Return that the Company or such Subsidiary is required to file a Tax Return in such jurisdiction.

(e)         Neither the Company nor any of its Subsidiaries has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) or has any liability for the Taxes of any Person other than a member of the Company Group under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) as a transferee or successor, by contract or otherwise. Neither the Company nor any of its Subsidiaries is a party to any Tax sharing or Tax indemnity agreement or any other agreement of a similar nature that remains in effect.

(f)          The Divestiture will not trigger the recognition of any deferred gain or loss arising out of any intercompany transaction within the meaning of Treasury Regulation Section 1.1502-13.

(g)         Neither the Company nor any Subsidiary has incurred a dual consolidated loss within the meaning of Section 1503 of the Code.

(h)         Neither the Company nor any of its Subsidiaries has entered into any material agreement with or received any ruling from any Governmental Authority relating to Tax incentives or Tax holidays.

(i)          Neither the Company not any of its Subsidiaries has engaged in (i) a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b), or (ii) a transaction where disclosure was required under the Code or Treasury Regulations (or similar provision of state, local or foreign law) in order to avoid the application of penalties.

3.10         Real and Personal Properties .

(a)         The Company and each Company Subsidiary has (i) good and valid title to, or valid leasehold or sublease interests in all of their respective real property, and (ii) good and valid title to, or valid leasehold or other comparable contract rights in, all of their respective tangible assets and other personal properties that are material to the conduct of the Company Business, in each case, free and clear of all Encumbrances, except (a) Permitted Encumbrances, and (b) mortgages, deeds of trust, security interests or other encumbrances on title related to indebtedness reflected on the consolidated financial statements of the Company included in the Company SEC Documents.  Such assets are sufficient for the continued operation of the Company Business.  All properties used in the operations of the Company Business are reflected on the Company Balance Sheet to the extent required under GAAP to be so reflected.

(b)         Schedule 3.10(b) to the Company Disclosure Letter is a complete and correct list of (i) all real property and interests in real property owned by the Company or any

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Company Subsidiary (each such property or interest, an “ Owned Real Property ”), and (ii) all real property leases, subleases, licenses, rights of entry or similar agreements related to the use or occupancy of real property to which the Company or any Company Subsidiary is a party (each such property or interest, a “ Leased Real Property ”). With respect to Owned Real Property, (A) the Company or the Company Subsidiary, as applicable, has good and valid fee title thereto, free and clear of all Encumbrances other than Permitted Encumbrances, (B) neither the Company nor such Company Subsidiary has leased or otherwise granted to any other Person the right to use or occupy such Owned Real Property or any portion thereof, (C) there are no outstanding options, rights of first offer or rights of first refusal to purchase any such Owned Real Property or any portion thereof of interest therein, and (D) there is no condemnation or other proceeding in eminent domain pending or, to the Company’s knowledge, threatened, affecting such Owned Real Property or any portion thereof or interest therein. With respect to Leased Real Property, (w) the Company or the Company Subsidiary, as applicable, has a valid leasehold/subleasehold interest in the respective real properties otherwise leased/subleased by it as lessee/sublessee, free and clear of all Encumbrances other than Permitted Encumbrances, and (x) neither the Company nor any Subsidiary has subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof or collaterally assigned or granted any other security interest in any such leasehold/subleasehold estate or any interest therein.  The Company has delivered to Acquiror true, correct and complete copies of all leases, subleases and other Contracts under which the Company and/or any Company Subsidiary uses or occupies or has the right to use or occupy, now or in the future, any Leased Real Property, including all modifications, amendments and supplements thereto.  Each of such leases, subleases and other Contracts under which the Company and/or any Company Subsidiary uses or occupies or has the right to use or occupy, now or in the future, any Leased Real Property is a legal, valid and binding agreement, enforceable in accordance with its terms, and no material default has occurred, nor has there occurred any event which with notice, the passage of time, or both, would constitute a material default under such leases, subleases or Contracts.

(c)         The Company and its Subsidiaries are not in violation in any material respect of any material Applicable Laws regarding the operation of its Owned Real Property or Leased Real Property, nor has the Company or any of its Subsidiaries received any notice of material violation of any such Applicable Laws. To the Company’s knowledge, there are no Applicable Laws, covenants or restrictions, or any change contemplated therein, or any judicial or administrative action, or action by adjacent landowners, or natural or artificial conditions upon any such real property or any other facts or conditions which would be reasonably likely to be material to the Company and its Subsidiaries, taken as a whole.

(d)         The personal property and equipment of each of the Company and each Company Subsidiary that are used in and material to the operations of their respective businesses are (i) in good operating condition and repair, subject to normal wear and tear, (ii) not obsolete or in need of renewal or replacement, except for renewal or replacement in the ordinary course of business, consistent with past practice, and (iii) free from any material defects,.

3.11         Absence of Certain Changes .  Since the Balance Sheet Date, the Company and its Subsidiaries have operated the Company Business in the ordinary course consistent with past practices, and since such date there has not been with respect to the Company or any Company Subsidiary any:

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(a)         Material Adverse Change or any change, event, circumstance, development or occurrence that would reasonably be expected to result in a Material Adverse Change;

(b)         amendment or change in its Certificate of Incorporation or Bylaws (or other comparable charter documents);

(c)         incurrence, creation or assumption of (i) any material Encumbrance on any of its assets or properties (other than Permitted Encumbrances) (ii) any Debt, and (iii) any Liability as guaranty or surety with respect to the obligations of any other Person;

(d)         payment or discharge of any Encumbrance on any of its assets or properties, or payment or discharge of any of its Liabilities, in each case that was not either shown on the Company Balance Sheet or incurred in the ordinary course of its business consistent with its past practices after the Balance Sheet Date in an amount not in excess of $150,000 for any single Liability to a particular creditor;

(e)         purchase, license, sale, grant, assignment or other disposition or transfer, or any agreement or other arrangement for the purchase, license, sale, assignment or other disposition or transfer, of any of its assets (including Company IP Rights (as defined in Section 3.14(a) ) and other intangible assets), properties or goodwill other than the sale or nonexclusive license of its products or services to its customers in the ordinary course of its business consistent with its past practices;

(f)          damage, destruction or loss of any material property or material asset, whether or not covered by insurance;

(g)         declaration, setting aside or payment of any dividend on, or the making of any other distribution in respect of, its capital stock, or any split, combination or recapitalization of its capital stock or any direct or indirect redemption, purchase or other acquisition of any of its capital stock or any change in any rights, preferences, privileges or restrictions of any of its outstanding securities (other than repurchases of stock in accordance with the Company Option Plans or applicable Contracts in connection with the termination of service of employees or other service providers);

(h)         material change or increase in the compensation payable or to become payable to any of its officers, directors, employees or consultants, or in any bonus, pension, severance, retention, insurance or other benefit payment or arrangement (including, without limitation, stock awards, stock option grants, or stock appreciation rights) made to or with any of such officers, directors, employees or consultants (other than increases in the base salaries of employees who are not officers in an amount that does not exceed 10% of such base salaries), any material modification of any “nonqualified deferred compensation plan” of the Company or any of its Subsidiaries within the meaning of Section 409A of the Code and Internal Revenue Service Notice 2005-1, or any new loans or extension of existing loans of the Company or any of its Subsidiaries to any such Persons (other than routine expense advances to employees of the Company or any Company Subsidiary consistent with past practice), and neither the Company nor any Company Subsidiary has entered into any Contract to grant or provide (nor has granted or provided any) severance, acceleration of vesting or other similar benefits to any such Persons;

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(i)          change or termination with respect to its management or other key personnel, any termination of employment of a material number of employees, or any labor dispute or claim of unfair labor practices;

(j)          Liability incurred by it to any of its officers, directors or stockholders, except for normal and customary compensation, benefits and expense allowances payable to officers in the ordinary course of its business consistent with its past practices;

(k)         execution of any Employment Agreements or service Contracts (other than employment offer letters for newly-hired employees and service Contracts, in each case in the ordinary course of business and that are immediately terminable by the Company or Company Subsidiary without cost or liability) or the extension of the term of any existing Employment Agreement or service Contract with any Person in the employ or service of the Company or any Company Subsidiary;

(l)          making by it of any loan, advance or capital contribution to, or any investment in, any of its officers, directors or stockholders or any firm or business enterprise in which any such person had a direct or indirect material interest at the time of such loan, advance, capital contribution or investment;

(m)        entering into, amendment of, relinquishment, termination or nonrenewal by it of any Contract (or any other right or obligation) other than in the ordinary course of its business consistent with its past practices, any material default by it under such Contract (or other right or obligation), or any written notice by the other party thereto of any material problems with its services or performance under such Contract (or other right or obligation) or such other party’s desire to so amend, relinquish, terminate or not renew any such Contract (or other right or obligation);

(n)         material change in the manner in which it extends discounts, credits or warranties to customers or otherwise deals with its customers;

(o)         entering into by it of any transaction, contract, agreement, arrangement, commitment or undertaking that by its terms requires or contemplates a current and/or future financial commitment, expense (inclusive of overhead expense) or obligation on its part that involves in excess of $150,000 or that is not entered into in the ordinary course of its business consistent with its past practices;

(p)         making or entering into any Contract with respect to any acquisition, sale or transfer of any material asset of the Company or any Subsidiary;

(q)         except as required by GAAP, any material change in accounting methods or practices (including any material change in depreciation or amortization policies or rates or revenue recognition policies) or any material revaluation of any of its assets;

(r)          any deferral of the payment of any accounts payable other than in the ordinary course of business, consistent with past practices, or in an amount in excess of $100,000, or any material discount, accommodation or other concession made other than in the

29

 

ordinary course of business, consistent with past practices, in order to accelerate or induce the collection of any receivable;

(s)         commencement or settlement of any material litigation;

(t)          entry into any Contract that would be required to be disclosed as an off-balance sheet arrangement under GAAP; or

(u)         announcement of, any negotiation by or any entry into any Contract to do any of the things described in the preceding clauses (a) through (u) (other than negotiations and agreements with Acquiror and its representatives regarding the transactions contemplated by this Agreement).

3.12         Contracts, Agreements, Arrangements, Commitments and Undertakings .  Schedules 3.12(a)-(u) of the Company Disclosure Letter set forth a list of each of the following Contracts to which the Company or any Company Subsidiary is a party or to which the Company or any Company Subsidiary or any of their respective assets or properties is bound (each a “ Company Material Contract ”):

(a)         any Contract that is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC);

(b)         any Contract providing for payments (whether fixed, contingent or otherwise) by or to it in an aggregate amount of $300,000 or more in any given 12-month period;

(c)         any dealer, distributor, OEM (original equipment manufacturer), VAR (value added reseller), sales representative or similar Contract under which any third party is authorized to manufacture, reproduce, sell, sublicense, lease, distribute, market or take orders for any of its products, services or technology generating, or that is reasonably likely to generate, over the 12-month period from the date of this Agreement more than $300,000 in revenues for the Company or any of its Subsidiaries or that is otherwise material to the Company and its Subsidiaries taken as a whole;

(d)         any license, sublicense and other Contract to which the Company is a party and pursuant to which the Company is authorized to use any Intellectual Property rights of a third party or has been assigned Intellectual Property developed for the Company by any third party (“ Third Party IP Rights ”), or receives the benefit of a license, covenant not to assert or other encumbrance of Third Party IP Rights, (i) (A) which Third Party IP Rights are used in, incorporated into, or integrated or redistributed with, any Company Product or Service, or (B) which Third Party IP Rights relate to, or are used in the development, manufacture, or compilation of any significant Company Product or Service, and, in either case, which results in, or is reasonably likely to result in, more than $300,000 in royalty, honoraria or license fee payments over the twelve month period from the date of this Agreement, (ii) where the failure of the Company to have such rights with respect to such third party Intellectual Property would, or would be reasonably likely to result in, Liabilities of the Company or subject the Company or its Subsidiaries to risk of claims or litigation which would be material to the Company and its Subsidiaries, taken as a whole, or (iii) that is otherwise material to the Company and its Subsidiaries, taken as a whole (a “ Material Inbound IP License ”);

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(e)         any license, sublicense and other Contract to which the Company is a party and pursuant to which Company has authorized any third party to use Company-Owned IP Rights which (i) (A) grants a license to, covenants not to assert or otherwise encumbers any material components of or a significant portion of the Company’s patent portfolio, or (B) grants any third party the right to sublicense any of such Company-Owned IP Rights, in either case, which results in, or is reasonably likely to result in, more than $300,000 in royalty, honoraria or license fee payments to the Company over the twelve month period from the date of this Agreement,  or (ii) that is otherwise material to the Company and its Subsidiaries, taken as a whole (a “ Material Outbound IP License ”);

(f)          any partnership Contract or any Contract relating to the establishment or operation of a joint venture entity under shared control with a third party in which the Company or any of its Subsidiaries has invested equity and pursuant to which the parties collaborate or integrate operations to achieve a commercial objective;

(g)         any Contract, other than a license of intellectual property, that has involved, or is reasonably expected to involve, a sharing of revenues, profits, cash flows, expenses or losses with any other party or a payment of royalties to any other party that (a) has resulted, or is reasonably likely to result, in payment(s) to or by the Company or any of its Subsidiaries of more than $300,000 in any given 12-month period or (b) is otherwise material to the Company and its Subsidiaries, taken as a whole;

(h)         any Contract for or relating to the employment by it of any director, officer, employee or consultant or any other type of Contract with any of its officers, employees or consultants that is not immediately terminable by it without cost or other Liability, including any contract requiring it to make a payment to any director, officer, employee or consultant on account of the Merger, any transaction contemplated by this Agreement or any Contract that is entered into in connection with this Agreement;

(i)          any indenture, mortgage, trust deed, promissory note, loan agreement, security agreement, guarantee or other Contract for or with respect to the borrowing of money, a line of credit, any currency exchange, commodities or other hedging arrangement, or a leasing transaction of a type required to be capitalized in accordance with GAAP;

(j)          any Contract that restricts it from (i) engaging in any aspect of its business, (ii) participating or competing in any line of business or market, (iii) freely setting prices for its products, services or technologies (including most favored customer and cost plus a percentage pricing provisions), (iv) engaging in any business in any market or geographic area or that grants any exclusive rights, rights of refusal, rights of first negotiation or similar rights to any party, or (v) soliciting potential suppliers or customers; provided, however, that such Contract (a)  has resulted, or is reasonably likely to result, in payment(s) to or by the Company or any of its Subsidiaries of more than $300,000 in any given 12-month period or (b) is otherwise material to the Company and its Subsidiaries, taken as a whole;

(k)         any Contract with any labor union or any collective bargaining agreement or similar Contract with its employees;

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(l)          any Contract of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment with respect to, the Liabilities of any other Person (other than licenses or other Contracts with customers entered into in the ordinary course of business providing for indemnification with respect to Intellectual Property or other customary business matters);

(m)        any Contract (i) in which its officers, directors, employees or stockholders or any member of their immediate families is directly or indirectly interested (whether as a party or otherwise) or (ii) with any Person with whom it does not deal at arm’s length;

(n)         any Contract pursuant to which it has acquired a business or entity, or a material portion of the assets of a business or entity, whether by way of merger, consolidation, purchase of stock, purchase of assets or otherwise since inception, or any Contract pursuant to which it has any material ownership interest in any other Person (other than the Company Subsidiaries); provided, however, that such Contract (a) has resulted, or is reasonably likely to result, in payment(s) to or by the Company or its Subsidiaries of more than $300,000 in any given 12-month period or (b) is otherwise material to the Company and its Subsidiaries, taken as a whole;

(o)         any Contract with a Governmental Authority or any Governmental Permit;

(p)         any Contract pursuant to which it has purchased any real property, or any Contract pursuant to which it is a lessor or lessee of any real property or personal property involving in excess of $75,000 per annum;

(q)         any Contract with any investment banker, broker, advisor or similar party, or any accountant, legal counsel or other Person retained by it in connection with this Agreement and the transactions contemplated hereby;

(r)          any settlement or litigation “standstill” agreement, or any tolling agreement, under which the Company or any other Person has outstanding obligations; or

(s)         any other Contract which does not constitute a Contract of the type listed in clauses (a) through (r) of this Section 3.12 and that is material to the Company and its Subsidiaries, taken as a whole.

A true and complete copy of each agreement or document required by these subsections (a)-(t) of this Section 3.12 to be listed on Schedule 3.12 of the Company Disclosure Letter has been delivered to Acquiror’s legal counsel.  All Company Material Contracts are in written form.

3.13         No Default; No Restrictions .

(a)         The Company or the applicable Company Subsidiary has performed all of the material obligations required to be performed by it and is entitled to all material benefits under each Company Material Contract.  Each of the Company Material Contracts is in full force and effect subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally and to general principles of equity (regardless of whether considered at a proceeding at law or in equity).  Neither the Company nor any

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Company Subsidiary is in default under any Company Material Contract and, to the Company’s knowledge, there is no event, occurrence, condition or act, with respect to the Company or any Company Subsidiary or to the knowledge of the Company, with respect to any other contracting party, which, with the giving of notice, the lapse of time or the happening of any other event or conditions, would reasonably be expected to (i) become a default or event of default under any Company Material Contract or (ii) give any third party (A) the right to exercise any remedy under any Company Material Contract, (B) the right to a material rebate, chargeback, refund, credit, penalty or change in performance schedule under any Company Material Contract, (C) the right to accelerate the maturity or performance of any material obligation of the Company or any of its Subsidiaries under any Company Material Contract, or (D) the right to cancel, terminate or materially modify any Company Material Contract.  Neither the Company nor any Company Subsidiary has received any written notice regarding any actual or alleged material violation or material breach of or material default under, or intention to cancel or modify, any Company Material Contract.

(b)         Except as listed in Schedule 3.12(j) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary is a party to, and no material asset or property of the Company or any Subsidiary is bound or affected by, any judgment, injunction, order or decree that restricts or prohibits, or purports to restrict or prohibit, the Company or any Company Subsidiary or, following the Effective Time, the Surviving Corporation or Acquiror, from freely engaging in the Company Business or from competing anywhere in the world (including any judgments, injunctions, orders or decrees restricting the geographic area in which the Company or any Company Subsidiary may sell, license, market, distribute or support any products or technology or provide services or restricting the markets, customers or industries that the Company or any Company Subsidiary may address in operating the Company Business or restricting the prices which the Company or any Company Subsidiary may charge for its products, technology or services (including most favored customer pricing provisions)), or includes any grants by the Company or any Company Subsidiary of exclusive rights or licenses, rights of refusal, rights of first negotiation or similar rights.

(c)         To the knowledge of the Company, with respect to any Contract with a Governmental Authority, there is neither an existing nor a reasonable basis for a: (i) civil fraud or criminal investigation by any Governmental Authority; (ii)  qui tam action brought against the Company or any of the Company Subsidiaries under the Civil False Claims Act; (iii) suspension or debarment proceeding (or equivalent proceeding) against the Company or any of the Company Subsidiaries; (iv) claim or request by a Governmental Authority for a contract price adjustment based on asserted defective pricing, disallowance of cost or non-compliance with statute, regulation or contract; (v) dispute involving the Company or any of the Company Subsidiaries on such Contract, or (vi) claim or equitable adjustment by the Company or any of the Company Subsidiaries relating to such Contract.  Neither the Company nor any of the Company Subsidiaries has any Liability for renegotiation of government contracts or subcontracts.

3.14         Intellectual Property .

(a)         The Company and each Company Subsidiary (i) owns or (ii) has the valid right or license to use, and, to the extent that it does any of the following, to develop, make, have

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made, offer for sale, sell, import, copy, modify, create derivative works of, distribute, license, and/or dispose of all Intellectual Property used in the conduct of the Company Business (such Intellectual Property being hereinafter collectively referred to as the “ Company IP Rights ”).  Such Company IP Rights are sufficient for such conduct of the Company Business.  As used in this Agreement, “ Company-Owned IP Rights ” means Company IP Rights that are or are purportedly owned or exclusively licensed to the Company or any Subsidiary; and “ Company-Licensed IP Rights ” means Company IP Rights that are not Company-Owned IP Rights.

(b)         Except as provided in Schedule 3.14(b) of the Company Discl