AGREEMENT AND PLAN OF MERGER

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

among

BRISTOL-MYERS SQUIBB COMPANY,

KB ACQUISITION CORP.

and

KOSAN BIOSCIENCES INCORPORATED

dated as of May 28, 2008

TABLE OF CONTENTS

ARTICLE I

The Offer

ARTICLE II

The Merger

ARTICLE III

Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of Certificates

ARTICLE IV

Representations and Warranties

ARTICLE V

Covenants Relating to Conduct of Business

ARTICLE VI

Additional Agreements

ARTICLE VII

Conditions Precedent

ARTICLE VIII

Termination, Amendment and Waiver

ARTICLE IX

General Provisions

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GLOSSARY

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•         AGREEMENT AND PLAN OF MERGER dated as of May 28, 2008 (this " Agreement "), by and among Bristol-Myers Squibb Company, a Delaware corporation (" Parent "), KB Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (" Sub "), and Kosan Biosciences Incorporated, a Delaware corporation (the " Company ").

        WHEREAS Parent desires to acquire the Company on the terms and subject to the conditions set forth in this Agreement;

        WHEREAS, in furtherance of the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement, Parent proposes to cause Sub to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the " Offer ") to purchase all the outstanding shares of common stock, par value $0.001 per share, of the Company (the " Company Common Stock "), including the associated Company Rights, at a price per share of Company Common Stock (including the associated Company Rights) of $5.50 (such amount, or any other amount per share paid pursuant to the Offer and this Agreement, the " Offer Price "), net to the seller in cash, without interest, on the terms and subject to the conditions set forth in this Agreement;

        WHEREAS the Boards of Directors of each of the Company and Sub have approved the merger of Sub with and into the Company (the " Merger "), on the terms and subject to the conditions set forth in this Agreement;

        WHEREAS Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger; and

        WHEREAS concurrently with the execution and delivery of this Agreement Parent, Sub and certain stockholders of the Company (the " Specified Stockholders ") are entering into an agreement (the " Stockholder Agreement " and, together with this Agreement, the " Transaction Agreements ") pursuant to which the Specified Stockholders will agree to take specified actions in furtherance of the Offer and the Merger.

        NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE I

The Offer

        SECTION 1.01.     The Offer.     (a) Subject to the conditions of this Agreement, as promptly as practicable (but in no event later than ten (10) business days) after the date of this Agreement, Sub shall, and Parent shall cause Sub to, commence, within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the " Exchange Act "), the Offer. The obligations of Sub to, and of Parent to cause Sub to, commence the Offer and accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer are subject to the conditions set forth in Exhibit A (the " Offer Conditions "). The initial expiration date of the Offer shall be midnight, New York City time, on the 20th business day following the commencement of the Offer (determined pursuant to Rule 14d-1(g)(3) under the Exchange Act). Sub expressly reserves the right to, in its sole discretion, waive, in whole or in part, any Offer Condition or modify the terms of the Offer; provided, however, that, without the prior written consent of the Company (unless the Company takes any action contemplated by Section 5.02(b)), Sub shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the Offer Price, (iii) change, modify or waive the Minimum Tender Condition, (iv) add to the conditions set forth in Exhibit A or modify or change any Offer Condition in a manner materially adverse to any holders of Company Common Stock, (v) except as otherwise provided in this Section 1.01(a), extend or otherwise change the expiration date of the Offer, (vi) change the form of consideration payable in the Offer or (vii) otherwise amend, modify or supplement any of the terms of the Offer in any manner materially adverse to any holders of Company Common Stock. Notwithstanding anything in this Agreement to the contrary, Sub may, in its discretion, without consent

of the Company, (A) without limiting Parent's or Sub's obligations under the following sentence, extend the Offer on one or more occasions for any period ending no later than the Termination Date, if on any then-scheduled expiration date of the Offer any of the Offer Conditions shall not be satisfied, until such time as such conditions are satisfied or waived and (B) extend the Offer for any period ending no later than the Termination Date required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer. Parent and Sub agree that if not all of the Offer Conditions are satisfied or, in Sub's sole discretion, waived on any then-scheduled expiration date of the Offer, then, provided that all such conditions are reasonably capable of being satisfied by the Termination Date and subject to the rights of Parent under Article VIII, Sub shall, and Parent shall cause Sub to, extend the Offer on one or more occasions, in consecutive increments of up to ten (10) business days each, for an aggregate period of time ending no later than the Termination Date that Parent reasonably believes is necessary for such conditions to be satisfied, until such time as such conditions are satisfied; provided, however, that Sub shall not be required to extend the Offer beyond the Termination Date. In any event, the Offer may not be terminated prior to its expiration date (as such expiration date may be extended and re-extended in accordance with this Section 1.01(a)), unless this Agreement is validly terminated in accordance with Article VIII. On the terms and subject to the conditions of the Offer and this Agreement, Sub shall, and Parent shall cause Sub to, accept and pay for (subject to any withholding of tax pursuant to Section 1.01(d)) all shares of Company Common Stock validly tendered and not validly withdrawn pursuant to the Offer that Sub becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration date of the Offer (as it may be extended and re-extended in accordance with this Section 1.01(a)). Acceptance for payment of shares of Company Common Stock pursuant to and subject to the conditions of the Offer is referred to in this Agreement as the "Offer Closing", and the date on which the Offer Closing occurs is referred to in this Agreement as the "Offer Closing Date". Sub expressly reserves the right to, in its sole discretion, extend the Offer for a "subsequent offering period" in accordance with Rule 14d-11 under the Exchange Act following the Offer Closing, and the Offer Documents may, in Sub's sole discretion, provide for such a reservation of right.

        (b) On the date of commencement of the Offer, Parent and Sub shall file with the SEC a Tender Offer Statement on Schedule TO with respect to the Offer, which shall contain an offer to purchase and a related letter of transmittal and summary advertisement (such Schedule TO and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the " Offer Documents "). The Company shall promptly furnish to Parent and Sub all information concerning the Company required by the Exchange Act to be set forth in the Offer Documents. Each of Parent, Sub and the Company shall promptly correct any information supplied by it for inclusion or incorporation by reference in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect, and each of Parent and Sub shall take all steps necessary to amend or supplement the Offer Documents and to cause the Offer Documents as so amended or supplemented to be filed with the SEC and disseminated to the stockholders of the Company, in each case as and to the extent required by applicable Federal securities Laws. Parent and Sub shall promptly notify the Company upon the receipt of any comments from the SEC, or any request from the SEC for amendments or supplements, to the Offer Documents, and shall provide the Company with copies of all correspondence between them and their representatives, on the one hand, and the SEC, on the other hand. Prior to the filing of the Offer Documents (including any amendment or supplement thereto) with the SEC or dissemination thereof to the stockholders of the Company, or responding to any comments of the SEC with respect to the Offer Documents, Parent and Sub shall provide the Company a reasonable opportunity to review and comment on such Offer Documents or response (including the proposed final version thereof), and Parent and Sub shall give reasonable consideration to any such comments.

        (c) Parent shall provide or cause to be provided to Sub on a timely basis the funds necessary to pay for any shares of Company Common Stock that Sub becomes obligated to accept for payment, and

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pay for, pursuant to the Offer, and shall cause Sub to perform, on a timely basis, all of Sub's obligations under this Agreement.

        (d) Sub shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Offer to any holder of shares of Company Common Stock such amounts as Sub is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the " Code "), or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld and paid over by Sub to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Sub.

        SECTION 1.02.     Company Actions.     (a) The Company hereby approves of and consents to the Offer, the Merger and the other transactions contemplated by the Transaction Agreements.

        (b) On or as promptly as practicable after the date the Offer Documents are filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, together with any supplements or amendments thereto, the " Schedule 14D-9 ") containing the recommendation described in Section 4.01(d) and shall mail the Schedule 14D-9 to the stockholders of the Company. Parent and Sub shall promptly furnish to the Company all information concerning Parent and Sub required by the Exchange Act to be set forth in the Schedule 14D-9. Each of the Company, Parent and Sub shall promptly correct any information supplied by it for inclusion or incorporation by reference in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect, and the Company shall take all steps necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and disseminated to the stockholders of the Company, in each case as and to the extent required by applicable Federal securities Laws. The Company shall promptly notify Parent upon the receipt of any comments from the SEC, or any request from the SEC for amendments or supplements, to the Schedule 14D-9, and shall provide Parent with copies of all correspondence between the Company and its representatives, on the one hand, and the SEC, on the other hand. Prior to the filing of the Schedule 14D-9 (including any amendment or supplement thereto) with the SEC or mailing thereof to the stockholders of the Company, or responding to any comments of the SEC with respect to the Schedule 14D-9, the Company shall provide Parent a reasonable opportunity to review and comment on such Schedule 14D-9 or response (including the proposed final version thereof), and the Company shall give reasonable consideration to any such comments. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Board of Directors of the Company contained in the Schedule 14D-9.

        (c) In connection with the Offer and the Merger, the Company shall cause its transfer agent to furnish Parent and Sub promptly with mailing labels containing the names and addresses of the record holders of Company Common Stock as of a recent date and of those persons becoming record holders subsequent to such date, together with copies of all lists of stockholders, security position listings and computer files and all other information in the Company's possession or control regarding the beneficial owners of Company Common Stock, and shall furnish to Sub such information and assistance (including updated lists of stockholders, security position listings and computer files) as Parent may reasonably request in communicating the Offer to holders of Company Common Stock. Subject to the requirements of applicable Law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the transactions contemplated by the Transaction Agreements, Parent and Sub shall hold in confidence the information contained in any such labels, listings and files in accordance with the requirements of the Confidentiality Agreement dated April 9, 2008 between Parent and the Company (as it may be amended from time to time, the " Confidentiality Agreement "), shall use such information only in connection with the Offer and the

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Merger and, if this Agreement shall be terminated, shall, upon request, destroy all copies of such information then in their possession or control.

        SECTION 1.03.     Top-Up Option.     (a) The Company hereby grants to Sub an irrevocable option (the " Top-Up Option "), exercisable only on the terms and conditions set forth in this Section 1.03, to purchase at a price per share equal to the Offer Price paid in the Offer up to that number of newly issued shares of Company Common Stock (the " Top-Up Shares ") equal to the lowest number of shares of Company Common Stock that, when added to the number of shares of Company Common Stock directly or indirectly owned by Parent at the time of exercise of the Top-Up Option, shall constitute one share more than ninety percent (90%) of the shares of Company Common Stock outstanding immediately after the issuance of the Top-Up Shares (determined on a fully diluted basis for all outstanding stock options, restricted stock units and any other rights to acquire Company Common Stock outstanding on the date of determination); provided , however , that (i) the Top-Up Option shall not be exercisable for a number of shares of Company Common Stock in excess of the shares of Company Common Stock authorized and unissued at the time of exercise of the Top-Up Option (giving effect to the shares of Company Common Stock issuable pursuant to all then-outstanding stock options, restricted stock units and any other rights to acquire Company Common Stock as if such shares were outstanding) and (ii) the issuance of the Top-Up Shares shall not require approval of the Company's stockholders under applicable Law (including the rules of NASDAQ). The Top-Up Option shall be exercisable at any one time following the Offer Closing and prior to the earlier to occur of (a) the Effective Time and (b) the termination of this Agreement in accordance with its terms. The obligation of the Company to issue and deliver the Top-Up Shares upon the exercise of the Top-Up Option is subject only to the condition that no Legal Restraint that has the effect of preventing the exercise of the Top-Up Option or the issuance and delivery of the Top-Up Shares in respect of such exercise shall be in effect.

        (b) The parties shall cooperate to ensure that the issuance and delivery of the Top-Up Shares comply with all applicable Laws, including compliance with an applicable exemption from registration of the Top-Up Shares under the Securities Act. In the event Sub wishes to exercise the Top-Up Option, Sub shall give the Company at least three (3) business days prior written notice, specifying (i) the number of shares of the Company Common Stock directly or indirectly owned by Parent at the time of such notice and (ii) a place and a time for the closing of such purchase. The Company shall, as soon as practicable following receipt of such notice, deliver written notice to Sub specifying, based on the information provided by Sub in its notice, the number of Top-Up Shares. At the closing of the purchase of Top-Up Shares, the purchase price owed by Sub to the Company therefor shall be paid to the Company (i) in cash, by wire transfer or cashier's check or (ii) by issuance by Sub to the Company of a promissory note on terms reasonably satisfactory to the Company.

        (c) Parent and Sub acknowledge that the Top-Up Shares that Sub may acquire upon exercise of the Top-Up Option will not be registered under the Securities Act and will be issued in reliance upon an applicable exemption from registration under the Securities Act. Each of Parent and Sub hereby represents and warrants to the Company that Sub is, and will be, upon the purchase of the Top-Up Shares, an "accredited investor", as defined in Rule 501 of Regulation D under the Securities Act. Sub agrees that the Top-Up Option and the Top-Up Shares to be acquired upon exercise of the Top-Up Option are being and will be acquired by Sub for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof (within the meaning of the Securities Act).

ARTICLE II

The Merger

        SECTION 2.01.     The Merger.     Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the

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" DGCL "), Sub shall be merged with and into the Company at the Effective Time. At the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation and as a wholly-owned Subsidiary of Parent (the " Surviving Corporation ").

        SECTION 2.02.     Closing.     The closing of the Merger (the " Closing ") will take place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, unless another time, date or place is agreed to in writing by Parent and the Company, at 10:00 a.m., New York time, on a date to be specified by the parties, which shall be not later than the second business day after satisfaction or waiver of the conditions set forth in Article VII, other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions. The date on which the Closing occurs is referred to in this Agreement as the " Closing Date ".

        SECTION 2.03.     Effective Time of the Merger.     Upon the terms and subject to the conditions set forth in this Agreement, as soon as practicable on or after the Closing Date, the parties shall file a certificate of merger (the " Certificate of Merger ") in such form as is required by, and executed and acknowledged in accordance with, the relevant provisions of the DGCL. The Merger shall become effective on such date and at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such subsequent date and time as Parent and the Company shall agree and specify in the Certificate of Merger. The date and time at which the Merger becomes effective is referred to in this Agreement as the " Effective Time ".

        SECTION 2.04.     Effects of the Merger.     The Merger shall have the effects set forth in Section 259 of the DGCL.

        SECTION 2.05.     Certificate of Incorporation and Bylaws.     (a) The Amended and Restated Certificate of Incorporation of the Company (the " Company Certificate ") shall be amended at the Effective Time to read in the form of Exhibit B hereto and, as so amended, the Company Certificate shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

        (b) The Bylaws of Sub as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

        SECTION 2.06.     Directors.     The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

        SECTION 2.07.     Officers.     The officers of Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be.

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ARTICLE III

Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates

        SECTION 3.01.     Effect on Capital Stock.     At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock, or the holder of any shares of capital stock of Parent or Sub:

•         (a)     Capital Stock of Sub.     Each share of common stock of Sub, par value $0.001 per share, issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

          (b)     Cancellation of Treasury Stock and Parent-Owned Stock.     All shares of Company Common Stock that are owned as treasury stock by the Company or owned by Parent or Sub immediately prior to the Effective Time shall automatically be canceled and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

          (c)     Conversion of Company Common Stock.     Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than (i) shares to be canceled in accordance with Section 3.01(b) and (ii) except as provided in Section 3.01(d), the Appraisal Shares) shall be converted into the right to receive from the Surviving Corporation, in cash and without interest, the Offer Price paid in the Offer (the " Merger Consideration "). At the Effective Time such shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate, or evidence of shares held in book-entry form, that immediately prior to the Effective Time represented any such shares (a " Certificate ") shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with the terms of this Agreement. The right of any holder of any share of Company Common Stock to receive the Merger Consideration shall be subject to and reduced by the amount of any withholding that is required under applicable tax Law, such withholding to be pursuant to the terms of Section 3.02(f) and any applicable tax Law.

          (d)     Appraisal Rights.     Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares (the " Appraisal Shares ") pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (" Section 262 ") shall not be converted into the right to receive from the Surviving Corporation, in cash and without interest, the Merger Consideration as provided in Section 3.01(c), but instead such holder shall be entitled to payment of the fair value of such shares in accordance with the provisions of Section 262. At the Effective Time, the Appraisal Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate, or evidence of shares held in book-entry form, that immediately prior to the Effective Time represented Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such shares in accordance with the provisions of Section 262. Notwithstanding anything in this Agreement to the contrary, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262 or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262, then the right of such holder to be paid the fair value of such holder's Appraisal Shares under Section 262 shall cease and such Appraisal Shares shall be deemed to have been converted at the Effective Time into, and shall have become, the right to receive from the Surviving Corporation, in cash and without interest, the Merger Consideration as provided in Section 3.01(c). The Company shall serve prompt notice to Parent of any demands for appraisal of any shares of Company Common Stock, withdrawals of any such demands and any

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  other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do or commit to do any of the foregoing.

          (e)     Adjustment Events .    If, between the date of this Agreement and the Effective Time, the outstanding shares of Company Common Stock are changed into a different number or class of shares by reason of any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction, then the Merger Consideration shall be adjusted to the extent appropriate.

        SECTION 3.02.     Exchange of Certificates.     (a)  Paying Agent. Prior to the Effective Time, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as agent for the payment of the Merger Consideration upon surrender of Certificates (the " Paying Agent "), and, from time to time after the Effective Time, Parent shall make available, or cause the Surviving Corporation to make available, to the Paying Agent funds in amounts and at the times necessary for the payment of the Merger Consideration pursuant to Section 3.01(c) upon surrender of Certificates, it being understood that any and all interest or other amounts earned with respect to such funds shall be for the account of and turned over to Parent in accordance with Section 3.02(g).

        (b) Exchange Procedure.     As soon as reasonably practicable after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate, (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates held by such person shall pass, only upon proper delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor the amount of cash equal to the Merger Consideration that such holder has the right to receive pursuant to Section 3.01(c), and the Certificate so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Company Common Stock that is not registered in the stock transfer books of the Company, payment of the Merger Consideration in exchange therefor may be made to a person other than the person in whose name the Certificate so surrendered is registered if, upon presentation to the Paying Agent, such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such taxes have been paid or are not applicable. No interest shall be paid or shall accrue on the cash payable upon surrender of any Certificate.

        (c) No Further Ownership Rights in Company Common Stock.     All cash paid upon the surrender of a Certificate in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Certificate. At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares that were outstanding immediately prior to the Effective Time. If, after the close of business on the day on which the Effective Time occurs, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or any other reason, they shall be canceled and exchanged as provided in this Article III.

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        (d) No Liability.     None of Parent, Sub, the Company, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash that would otherwise have been payable in respect of any Certificate that is delivered to a public official in accordance with any applicable abandoned property, escheat or similar Law. If any Certificates shall not have been surrendered prior to one (1) year after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Entity), any such Merger Consideration in respect thereof shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto.

        (e) Lost Certificates.     If any Certificate shall have been lost, stolen, defaced or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen, defaced or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall pay the Merger Consideration in respect of such lost, stolen, defaced or destroyed Certificate.

        (f) Withholding Rights.     Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement (including any payments made in respect of the Appraisal Shares) to any holder of shares of Company Common Stock such amounts as Parent, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Paying Agent.

        (g) Termination of Fund.     At any time following the date six (6) months after the Effective Time, Parent or the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest or other amounts earned with respect thereto) that had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter, subject to time limitations in Section 3.02(d), such holders shall be entitled to look only to Parent and the Surviving Corporation (subject to abandoned property, escheat or similar Laws) as general creditors thereof with respect to the payment of any Merger Consideration that may be payable upon surrender of any Certificates held by such holders, as determined pursuant to this Agreement, without any interest thereon.

ARTICLE IV

Representations and Warranties

        SECTION 4.01.     Representations and Warranties of the Company.     Except as set forth in the disclosure schedule (with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates; provided , however , that any information set forth in one section of such disclosure schedule shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is readily apparent on its face) delivered by the Company to Parent prior to the execution of this Agreement (the " Company Disclosure Schedule "), the Company represents and warrants to Parent and Sub as follows:

•         (a)     Organization, Standing and Corporate Power.     Each of the Company and its Subsidiaries has been duly organized and is validly existing and in good standing (in the jurisdictions that recognize the concept of good standing) under the laws of the jurisdiction of its incorporation or formation, as the case may be, and has all requisite power and authority and possesses all

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• governmental licenses, permits, authorizations and approvals necessary to enable it to use its corporate or other name and to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted and as currently proposed by its management to be conducted, except where the failure to be in good standing (except with respect to the Company), have such power or authority or possess such governmental licenses, permits, authorizations or approvals individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing (in jurisdictions that recognize the concept of good standing) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or to be in good standing individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent, prior to the execution of this Agreement, complete and accurate copies of the Company Certificate and its Amended and Restated Bylaws (the " Company Bylaws "), and the comparable organizational documents of each of its Subsidiaries, in each case as amended to the date hereof. The Company has made available to Parent complete and accurate copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof) of, and resolutions approved and adopted at, all meetings of the stockholders of the Company and each of its Subsidiaries, the Boards of Directors of the Company and each of its Subsidiaries and the committees of each of such Boards of Directors, in each case held since January 1, 2005 and prior to the date hereof.

          (b)     Subsidiaries.     Section 4.01(b) of the Company Disclosure Schedule lists as of the date hereof each Subsidiary of the Company and, for each such Subsidiary, the jurisdiction of incorporation or formation and, as of the date hereof, each jurisdiction in which such Subsidiary is qualified or licensed to do business. All issued and outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever (other than liens, charges and encumbrances for current taxes not yet due and payable) (collectively, " Liens "), and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests. Except for the capital stock of, or voting securities or equity interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other voting securities or equity interests in, any corporation, limited liability company, partnership, joint venture, association or other entity.

          (c)     Capital Structure.     (i) The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share (" Company Preferred Stock "), of which 1,000,000 shares of Company Preferred Stock were designated by the Board of Directors of the Company as Series A Junior Participating Preferred Stock and are issuable upon exercise of the rights (the " Company Rights ") under the Rights Agreement dated as of October 5, 2001, between the Company and Mellon Investor Services LLC, as rights agent (the " Rights Agreement ").

          (ii) At the close of business on May 27, 2008, (A) 42,656,290 shares of Company Common Stock were issued and outstanding, (B) 118,916 shares of Company Common Stock were held by the Company in its treasury, (C) 8,433,753 shares of Company Common Stock were reserved and available for issuance pursuant to the 2006 Equity Incentive Plan of the Company, the 1996 Stock Option Plan of the Company and the 2000 Non-Employee Director Stock Option Plan of the Company (such plans, together with the 2000 Employee Stock Purchase Plan of the Company (the " Purchase Plan "), the " Company Stock Plans "), of which 3,888,806 shares of Company Common Stock were subject to outstanding options (other than rights under the Purchase Plan) to acquire

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  shares of Company Common Stock from the Company (such options, together with any other options to acquire shares of Company Common Stock from the Company granted after May 27, 2008 under the Company Stock Plans or otherwise, the " Company Stock Options ") and 469,505 shares of Company Common Stock were subject to outstanding restricted stock units with respect to Company Common Stock (such restricted stock units, together with any other restricted stock units with respect to Company Common Stock granted after May 27, 2008 under the Company Stock Plans or otherwise, the " Company RSUs "), (D) 178,638 shares of Company Common Stock were reserved and available for issuance pursuant to the Purchase Plan, (E) 6,109,517 shares of Company Common Stock (such shares, the " CEFF Shares ") were reserved and available for issuance pursuant to the terms of that certain Common Stock Purchase Agreement, dated as of July 19, 2006, by and between the Company and Kingsbridge Capital Limited (" Kingsbridge "), (F) 285,000 shares of Company Common Stock were subject to an outstanding warrant issued to Kingsbridge with an exercise price of $4.94 per share (the " Company Warrant ") and (G) no shares of Company Preferred Stock were issued or outstanding or were held by the Company as treasury shares.

          (iii) Since the close of business on May 27, 2008, (A) there have been no issuances by the Company of shares of capital stock or other voting securities or equity interests of the Company, other than issuances of shares of Company Common Stock pursuant to the exercise of Company Stock Options, the Company Warrant and rights under the Purchase Plan and the settlement of Company RSUs, in each case outstanding as of the close of business on May 27, 2008, and only if and to the extent required by their terms as in effect on such date, and (B) there have been no issuances by the Company of securities convertible into, or exchangeable or exercisable for, or options, warrants or other rights to acquire, or shares of deferred stock, restricted stock units, stock-based performance units, stock appreciation rights or "phantom" stock awards with respect to, any such stock, interests or securities, or other rights that are linked to the value of Company Common Stock or the value of the Company or any part thereof, other than rights under the Purchase Plan.

          (iv) There are no outstanding shares of Company Common Stock or Company Preferred Stock subject to vesting or restrictions on transfer imposed by the Company. All outstanding Company Stock Options and Company RSUs have been granted under the Company Stock Plans. Other than the Company Stock Plans, there is no plan, contract, agreement or arrangement providing for the grant of options to acquire shares of Company Common Stock by the Company or any of its Subsidiaries. Section 4.01(c)(iv) of the Company Disclosure Schedule sets forth a complete and accurate list, as of May 27, 2008, of (A) all outstanding Company Stock Options, the number of shares of Company Common Stock subject to each such Company Stock Option, the grant date, expiration date, exercise price per share and vesting schedule thereof and the name of the holder thereof and an indication of whether or not such holder is a current employee of the Company or any of its Subsidiaries and whether or not such Company Stock Option is intended to qualify as an incentive stock option under Section 422 of the Code and (B) all shares of Company Common Stock that are subject to outstanding Company RSUs, the grant date and vesting schedule of each Company RSU and name of the holder thereof and an indication of whether or not such holder is a current employee of the Company or any of its Subsidiaries. All Company Stock Options and Company RSUs are evidenced by stock option agreements, restricted stock unit agreements or other award agreements, in each case substantially in the forms made available to Parent or as filed as exhibits to the Filed Company SEC Documents, except that the forms of such agreements differ with respect to the number of Company Stock Options, Company RSUs or shares covered thereby, the exercise price (if applicable), vesting schedule and expiration date applicable thereto and other similar terms, provided that no stock option agreement, restricted stock unit agreement or other award agreement contains terms that are inconsistent in any material respect with, or material terms in addition to, such forms.

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•         (v) With respect to the Company Stock Options, (A) each Company Stock Option intended to qualify as an "incentive stock option" under Section 422 of the Code so qualifies, (B) each grant of a Company Stock Option was duly authorized no later than the date on which the grant of such Company Stock Option was by its terms to be effective (the " Grant Date ") by all necessary corporate action, including, as applicable, approval by the Board of Directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (C) each such grant was made in accordance with the terms of the applicable Company Stock Plan, the Exchange Act and all other applicable Laws, including the rules of The NASDAQ Stock Market LLC (" NASDAQ "), (D) the per share exercise price of each Company Stock Option was equal to the fair market value (as defined in the Company Stock Plans) of a share of Company Common Stock on the applicable Grant Date and (E) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the related notes) of the Company and disclosed in the Company SEC Documents in accordance with the Exchange Act and all other applicable Laws. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, Company Stock Options prior to, or otherwise knowingly coordinate the grant of Company Stock Options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

          (vi) As of the close of business on May 27, 2008, there were outstanding Company Stock Options to purchase 1,343,561 shares of Company Common Stock with exercise prices on a per share basis lower than the Merger Consideration, and the weighted average exercise price of such Company Stock Options was equal to $3.76 per share. As of the close of business on May 27, 2008, (A) 102,203 shares of Company Common Stock were subject to outstanding rights under the Purchase Plan based on payroll information for the period ended May 15, 2008 (assuming the fair market value per share of Company Common Stock determined in accordance with the terms of the Purchase Plan on the last day of the offering period in effect under the Purchase Plan on the date hereof will be equal to the Merger Consideration and that payroll deductions continue at the current rate through September 30, 2008) (the " Current ESPP Shares ") and (B) up to a maximum of 76,435 shares of Company Common Stock in addition to the Current ESPP Shares (the " Additional ESPP Shares ") could be subject to outstanding rights under the Purchase Plan based on payroll information for the period ended May 15, 2008 (assuming the fair market value per share of Company Common Stock determined in accordance with the terms of the Purchase Plan on the last day of the offering period in effect under the Purchase Plan on the date hereof will be equal to the Merger Consideration and that payroll deductions increase as permitted by the terms of the Purchase Plan through September 30, 2008), resulting in a potential increase in the aggregate Merger Consideration payable for the Additional ESPP Shares of up to approximately $320,000 after giving effect to the purchase price per share of the Additional ESPP Shares. Each Company Stock Option and each Company RSU may, by its terms, be treated at the Effective Time as set forth in Section 6.04(a)(i) or 6.04(a)(ii), as applicable, and all rights to purchase shares of Company Common Stock under the Purchase Plan may, by their terms, be treated in accordance with Section 6.04(a)(iii). No holder of a Company Stock Option or Company RSU or right to purchase shares of Company Common Stock under the Purchase Plan is entitled to any treatment of such Company Stock Option or Company RSU or right to purchase shares of Company Common Stock under the Purchase Plan other than as provided in Section 6.04(a), and after the Closing no holder of a Company Stock Option or Company RSU (or former such holder) shall have the right to acquire any capital stock of the Company or any other equity interest therein.

          (vii) All outstanding shares of capital stock of the Company are, and all shares which may be issued pursuant to the Company Warrant, Company Stock Options or the Company RSUs or rights

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  under the Purchase Plan will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company are entitled to vote. Except as set forth above in this Section 4.01(c) and for shares of Company Common Stock issued or to be issued upon the exercise or settlement of Company Stock Options, Company RSUs and the Company Warrant and included in clauses (C) and (F), as applicable, of Section 4.01(c)(ii), as of May 27, 2008, (A) there were not issued, reserved for issuance or outstanding (1) any shares of capital stock or other voting securities or equity interests of the Company or any of its Subsidiaries, (2) any securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or equity interests of the Company or any of its Subsidiaries, (3) any warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company or any of its Subsidiaries or (4) any shares of deferred stock, restricted stock units, stock-based performance units, stock appreciation rights or "phantom" stock awards with respect to any capital stock of the Company or any of its Subsidiaries, or other rights that are linked to the value of the Company Common Stock or the value of the Company or any part thereof and (B) there were not any outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Neither the Company nor any of its Subsidiaries is a party to any voting or other agreement with respect to the voting of any such securities and, to the knowledge of the Company, as of the date hereof, there are no irrevocable proxies and no voting agreements, other than those contemplated by the Transaction Agreements, with respect to any such securities.

          (d)     Authority; Noncontravention.     The Company has all requisite corporate power and authority to execute and deliver this Agreement, to consummate the Merger and the other transactions contemplated by the Transaction Agreements, assuming the accuracy of the representations and warranties of Parent and Sub in Section 4.02(f) and subject, in the case of the Merger if required by applicable Law, to the affirmative vote of the holders of a majority of the outstanding shares of the Company Common Stock in favor of adopting this Agreement (the " Stockholder Approval "), and to comply with the provisions of this Agreement. The execution and delivery of this Agreement by the Company, the consummation by the Company of the Merger and the other transactions contemplated by the Transaction Agreements and the compliance by the Company with the provisions of this Agreement have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize the Transaction Agreements, to comply with the terms of this Agreement or to consummate the Merger and the other transactions contemplated by the Transaction Agreements, assuming the accuracy of the representations and warranties of Parent and Sub in Section 4.02(f) and subject, in the case of the Merger if required by applicable Law, to obtaining the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (subject to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies). The Board of Directors of the Company, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions (i) approving and declaring advisable the Transaction Agreements, the Offer, the Merger and the other transactions contemplated by the Transaction Agreements, (ii) declaring that it is in the best interests of the stockholders of the Company that the Company enter into this Agreement and

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  consummate the Offer, the Merger and the other transactions contemplated by the Transaction Agreements on the terms and subject to the conditions set forth therein, (iii) declaring that the terms of the Offer and the Merger are fair to the Company's stockholders, (iv) recommending that the Company's stockholders accept the Offer, tender their shares of Company Common Stock pursuant to the Offer and, if required by applicable Law, adopt this Agreement and (v) determining that each member of the Compensation Committee approving any employment compensation, severance or other employee benefit arrangement as set forth in Section 4.01(q) is an "independent director" within the meaning of NASDAQ Rule 4200(a)(15) (an " Independent Director "), which resolutions, except to the extent permitted by Section 5.02, have not been rescinded, modified or withdrawn in any way. The execution and delivery of this Agreement by the Company do not, and the consummation by the Company of the Offer, the Merger and the other transactions contemplated by the Transaction Agreements and compliance by the Company with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, (x) the Company Certificate or the Company Bylaws or the comparable organizational documents of any of its Subsidiaries, (y) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, development agreement, distribution agreement or other legally binding contract, agreement, obligation, commitment, arrangement, understanding, instrument, permit, franchise or license, whether oral or written (each, including all amendments thereto, a " Contract "), to which the Company or any of its Subsidiaries is a party or any of their respective properties or other assets is subject or (z) subject to (i) the accuracy of the representations and warranties of Parent and Sub in Section 4.02(f), (ii) the Stockholder Approval and (iii) the governmental filings and the other matters referred to in the following sentence, any (A) Federal, state or local, domestic or foreign, statute, law, code, ordinance, rule or regulation of any Governmental Entity (each, a " Law ") or (B) Federal, state or local, domestic or foreign, judgment, injunction, order, writ or decree of any Governmental Entity (each, a " Judgment "), in each case applicable to the Company or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (y) and (z), any such conflicts, violations, breaches, defaults, rights, losses or Liens that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. The Company and its Board of Directors have taken all action necessary to (i) render the Company Rights inapplicable to the Transaction Agreements, the Offer, the Merger and the other transactions contemplated by the Transaction Agreements and (ii) ensure that (A) neither Parent nor any of its affiliates or associates is or will become an "Acquiring Person" (as defined in the Rights Agreement) by reason of the Transaction Agreements, the Offer, the Merger or any other transaction contemplated by the Transaction Agreements, (B) a "Distribution Date" (as defined in the Rights Agreement) shall not occur, and the Company Rights to purchase Series A Junior Participating Preferred Stock shall not become exercisable, by reason of the Transaction Agreements, the Offer, the Merger or any other transaction contemplated by the Transaction Agreements and (C) the Company Rights shall expire, and the Final Expiration Date (as defined in the Rights Agreement) shall occur, immediately prior to the Effective Time. No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each, a " Governmental Entity ") is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the Offer, the Merger or the other transactions contemplated by the Transaction Agreements or the compliance by the Company with the provisions of this Agreement, except for (1) the filing of a premerger

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• notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (including the rules and regulations promulgated thereunder, the " HSR Act "), and the receipt, termination or expiration, as applicable, of approvals or waiting periods required under the HSR Act or any other applicable competition, merger control, antitrust or similar Law, (2) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy statement relating to the adoption by the stockholders of the Company of this Agreement, if required by applicable Law (as amended or supplemented from time to time, the " Proxy Statement "), (C) an information statement required in connection with the Offer under Rule 14f-1 under the Exchange Act (as amended or supplemented from time to time, the " Information Statement ") and (D) such reports under the Exchange Act as may be required in connection with the Transaction Agreements, the Offer, the Merger and the other transactions contemplated by the Transaction Agreements, (3) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (4) any filings required under the rules and regulations of NASDAQ and (5) such other consents, approvals, orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect.

          (e)     Company SEC Documents.     (i) The Company has filed or furnished, as applicable, all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) with the SEC required to be filed or furnished, as applicable, by the Company since January 1, 2005 (such documents, together with any documents and information incorporated therein by reference and together with any documents filed during such period by the Company with the SEC on a voluntary basis on Current Reports on Form 8-K, the " Company SEC Documents "). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended (including the rules and regulations promulgated thereunder, the " Securities Act "), the Exchange Act, and the Sarbanes-Oxley Act of 2002 (including the rules and regulations promulgated thereunder, " SOX ") applicable to such Company SEC Documents, and none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised, amended, supplemented or superseded by a later-filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits 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 were made, not misleading, which individually or in the aggregate would require an amendment, supplement or corrective filing to any such Company SEC Document. The Company has made available to Parent copies of all comment letters received by the Company from the SEC since January 1, 2005 (excluding all letters received from the SEC indicating that the SEC would not be reviewing any registration statement filed with the SEC by the Company), and relating to the Company SEC Documents, together with all written responses of the Company thereto. As of the date of this Agreement, there are no outstanding or unresolved comments in such comment letters received by the Company from the SEC. The Company has not received any written notice from the SEC that any of the Company SEC Documents is the subject of any ongoing review by the SEC. Each of the financial statements (including the related notes) of the Company included in the Company SEC Documents complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect at the time of filing, has been prepared in accordance with generally accepted accounting principles in the United States (" GAAP ") (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied

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  on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as disclosed in the Company SEC Documents filed by the Company and publicly available prior to the date of this Agreement (the " Filed Company SEC Documents "), neither the Company nor any of its Subsidiaries has any material liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise). None of the Subsidiaries of the Company is, or has at any time been, subject to the reporting requirements of Sections 13(a) and 15(d) of the Exchange Act. Except as disclosed in the Filed Company SEC Documents, neither the Company nor any of its Subsidiaries has any (A) indebtedness for borrowed money, (B) indebtedness evidenced by any bond, debenture, note, mortgage, indenture or other debt instrument or debt security, (C) accounts payable to trade creditors and accrued expenses not arising in the ordinary course of business, (D) amounts owing as deferred purchase price for the purchase of any property outside of the ordinary course of business or (E) guarantees with respect to any indebtedness or obligation of a type described in clauses (A) through (D) above of any other person (collectively, " indebtedness ").

          (ii) Each of the principal executive officer of the Company and 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 Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of SOX with respect to the Company SEC Documents, and the statements contained in such certifications are true and accurate. For purposes of this Agreement, "principal executive officer" and "principal financial officer" shall have the meanings given to such terms in SOX. 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 SOX, except for broker-assisted "cashless" exercise programs in connection with Company Stock Options conducted in accordance with Regulation T issued by the Board of Governors of the Federal Reserve System.

          (iii) The Company maintains a system of "internal control over financial reporting" (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance (A) regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, (B) that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, (C) that receipts and expenditures of the Company are being made only in accordance with the authorization of management and directors of the Company and (D) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the Company's financial statements.

          (iv) The "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) of the Company are designed to provide reasonable assurance that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure and to enable the chief executive officer and chief financial officer of the Company to make the certifications required under the Exchange Act with respect to such reports.

          (v) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or

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  among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand, or any "off balance sheet arrangements" (as defined in Item 303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company's or such Subsidiary's published financial statements or other Company SEC Documents.

          (vi) Since January 1, 2005, the Company has not received any oral or written notification of any "material weakness" in the Company's internal control over financial reporting. There is no outstanding "significant deficiency" or "material weakness" which the Company's independent accountants certify has not been appropriately and adequately remedied by the Company, other than, in the case of any "significant deficiencies", any such deficiency which individually or in the aggregate has not had or would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the terms "significant deficiency" and "material weakness" shall have the meanings assigned to them in Release No. 2007-005 of the Public Company Accounting Oversight Board, as in effect on the date hereof.

          (f)     Information Supplied.     None of the information included or incorporated by reference in the Schedule 14D-9, the Information Statement or the Proxy Statement (and none of the information supplied by the Company in writing specifically for inclusion or incorporation by reference in the Offer Documents) will, in the case of the Schedule 14D-9, the Information Statement and the Offer Documents, at the respective times the Schedule 14D-9, the Information Statement and the Offer Documents are filed with the SEC or first published, sent or given to the Company's stockholders or, in the case of the Proxy Statement, at the time the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any statement that, in light of the circumstances under which it is made, is false or misleading with respect to any 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, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference in the Schedule 14D-9, the Information Statement or the Proxy Statement based on information supplied by Parent or Sub in writing specifically for inclusion or incorporation by reference therein. The Schedule 14D-9, the Information Statement and the Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act.

          (g)     Absence of Certain Changes or Events.     Except to the extent readily apparent from disclosure in the Filed Company SEC Documents (excluding, in each case, any disclosures set forth in any risk factor section or in any section relating to forward looking statements and any other disclosures included therein to the extent that they are cautionary, predictive or forward looking in nature), between December 31, 2007 and the date of this Agreement, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there has not been any event, change, effect or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect, and during such period there has not been any action which, if it had been taken or occurred after the execution of this Agreement, would have required the consent of Parent pursuant to the second sentence of Section 5.01(a) of this Agreement.

          (h)     Litigation.     There is no suit, action or proceeding pending or, to the knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries or any of their respective assets or properties that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against, or, to the Company's knowledge, any investigation by any Governmental Entity involving, the Company or any of its Subsidiaries or any of their respective assets that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect.

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•         (i)     Contracts.     (A) Section 4.01(i) of the Company Disclosure Schedule contains a complete and correct list, as of the date of this Agreement, of each of the Contracts described below in this Section 4.01(i)(A) that are in effect as of the date of this Agreement:

  •         (i) each Contract to which the Company or any of its Subsidiaries is a party that restricts in any material respect the ability of the Company or any of its Subsidiaries to compete with any person in any area or to engage in any activity or business;

            (ii) each Contract to which the Company or any of its Subsidiaries is a party providing for exclusivity or any substantially similar requirement or that (1) restricts the Company or any of its Subsidiaries in any material respect or (2) after the Effective Time would restrict Parent or any of its Subsidiaries in any material respect, in each case with respect to the development, manufacture, marketing or distribution of their respective services, products or product candidates, including Covered Product Candidates, or with respect to the granting of licenses or otherwise with respect to the operation of their businesses;

            (iii) each Contract to which the Company or any of its Subsidiaries is a party with (1) any affiliate of the Company or any of its Subsidiaries, (2) any current director, officer or employee of the Company or any of its Subsidiaries (each, a " Company Personnel ") (other than the Company Benefit Plans and the Company Benefit Agreements) or (3) any person known by the Company to be an affiliate of any Company Personnel;

            (iv) each Contract to which the Company or any of its Subsidiaries is a party under which the Company or any of its Subsidiaries has incurred any material indebtedness;

            (v) each Contract to which the Company or any of its Subsidiaries is a party (other than the Company Benefit Plans and the Company Benefit Agreements) under which the Company or any of its Subsidiaries has agreed to issue, deliver, sell, pledge, encumber or grant registration rights in respect of any shares of its capital stock, any other equity or voting interests or any securities convertible into, or exchangeable for, or any options, warrants, calls or rights to acquire, any such stock, interests or securities or any stock appreciation rights, restricted stock units, stock-based performance units, "phantom" stock awards or other rights that are linked to the value of Company Common Stock or the value of the Company or any part thereof;

            (vi) each Contract to which the Company or any of its Subsidiaries is a party creating or granting a Lien, other than (1) Liens for taxes not yet due and payable, that are payable without penalty or that are being contested in good faith and for which adequate reserves have been recorded, (2) Liens for assessments and other governmental charges or landlords', carriers', warehousemen's, mechanics', repairmen's, workers' and similar Liens 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, (3) Liens incurred in the ordinary course of business, consistent with past practice, in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations, (4) Liens securing equipment subject to any lease required to be capitalized on the Company's balance sheet in accordance with GAAP and (5) Liens incurred in the ordinary course of business consistent with past practice that are not reasonably likely to adversely interfere in a material way with the use of properties or assets encumbered thereby (collectively, " Permitted Liens ");

            (vii) each Contract to which the Company or any of its Subsidiaries is a party granting the other party to such Contract or a third party "most favored nation" pricing or terms that

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    (1) applies to the Company or any of its Subsidiaries or (2) following the Effective Time, would apply to Parent or any of its Subsidiaries other than the Surviving Corporation;

            (viii) each Contract to which the Company or any of its Subsidiaries is a party containing any "non-solicitation", "no-hire" or substantially similar provision that restricts in any material respect the Company or any of its Subsidiaries;

            (ix) each Contract to which the Company or any of its Subsidiaries is a party for any joint venture (whether in partnership, limited liability company or other organizational form) or material alliance or similar material arrangement, including each material Contract relating to research, clinical trial, development, distribution, sale, supply, license, marketing, co-promotion, manufacturing or other commercial activities by the Company or any of its Subsidiaries or by third parties, and each material Contract with any contract research organizations, laboratory testing companies, medical institutions, clinical investigators, contract manufacturing organizations and third party manufacturers;

            (x) each Contract to which the Company or any of its Subsidiaries is a party with any Governmental Entity;

            (xi) each Contract to which the Company or any of its Subsidiaries is a party with any beneficial owner of any shares of Company Common Stock, or securities convertible into, or exchangeable for, or any options, warrants, calls or rights to acquire, any shares of Company Common Stock, where such Contract provides for consideration payable to such beneficial owner or any of its affiliates as a result of the tender of the shares of Company Common Stock beneficially owned by such beneficial owner in the Offer;

            (xii) each Contract that governs or otherwise applies to the Intellectual Property Rights owned by, licensed by, licensed to, used by or held for use by the Company or any of its Subsidiaries (excluding: (1) non-disclosure or confidentiality agreements entered into in the ordinary course of business consistent with past practice; (2) Contracts entered into in the ordinary course of business consistent with past practice with independent contractors, consultants, contract research organizations, laboratory testing companies, medical institutions, clinical investigators, contract manufacturing organizations, third party manufacturers and other vendors not otherwise required to be disclosed pursuant to any other subsection of this Section 4.01(i)(A); and (3) "material transfer agreements" and evaluation agreements entered into in the ordinary course of business consistent with past practice that are not otherwise required to be disclosed pursuant to any other subsection of this Section 4.01(i)(A)) and each Contract containing any material option or future material right in respect of any such Intellectual Property Rights;

            (xiii) each Contract to which the Company or any of its Subsidiaries is a party in respect of Leased Real Property; and

            (xiv) each Contract to which the Company or any of its Subsidiaries is a party containing any standstill provisions which in any material respect limits (1) the ability of any person to acquire the securities or assets of the Company or any of its Subsidiaries or (2) the ability of the Company or any of its Subsidiaries to acquire the securities or assets of any person.

          (B) The Company has made available to Parent a complete and correct copy of each of the Contracts referred to in Section 4.01(i)(A). Except as disclosed in the Filed Company SEC Documents, as of the date hereof, neither the Company nor any of its Subsidiaries is a party to, and none of their respective properties or other assets is subject to, any Contract that is of a nature required to be filed as an exhibit to a report or filing under the Securities Act or the Exchange Act and the rules and regulations promulgated thereunder. Each Contract of the Company or any of its Subsidiaries that is required to be set forth on Section 4.01(i) of the

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• Company Disclosure Schedule or required to be filed as an exhibit to the Filed Company SEC Documents (a " Material Contract ") is in full force and effect (except for those Contracts that have expired or have been terminated in accordance with their terms) and is a legal, valid and binding agreement of the Company or its Subsidiary, as the case may be, and, to the knowledge of the Company, of each other party thereto, enforceable against the Company or such Subsidiary, as the case may be, and, to the knowledge of the Company, each other party thereto (subject to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies), in each case, in accordance with its terms. Each of the Company and its Subsidiaries has performed or is performing all obligations required to be performed by it under the Material Contracts and is not (with or without notice or lapse of time or both) in breach in any material respect or in default under the Material Contracts currently in effect, and has not waived or failed to enforce any material rights or benefits thereunder, and, to the knowledge of the Company, no other party to any of the Material Contracts is (with or without notice or lapse of time or both) in breach in any material respect or default thereunder. There has occurred no event giving to others (with or without notice or lapse of time or both) any right of termination, material amendment or cancellation of any Material Contract or any license thereunder.

          (j)     Permits; Compliance with Laws.     The Company and its Subsidiaries have in effect all certificates, permits, licenses, franchises, approvals, concessions, qualifications, registrations, certifications and similar authorizations from any Governmental Entity (collectively, " Permits "), including all Permits under the Federal Food, Drug, and Cosmetic Act of 1938, as amended (including the rules and regulations promulgated thereunder, the " FDCA "), and the regulations of the Federal Food and Drug Administration (the " FDA ") promulgated thereunder, that are necessary for them to own, lease or operate their properties and assets and to carry on their businesses in all material respects as currently conducted. The execution and delivery of this Agreement by the Company does not, and the consummation of the Offer, the Merger and the other transactions contemplated by the Transaction Agreements and compliance with the terms thereof could not reasonably be expected to, cause the revocation or cancellation of any material Permit. Each of the Company and its Subsidiaries is, and since January 1, 2005 has been, in compliance in all material respects with all applicable Laws and Judgments. Neither the Company nor any of its Subsidiaries has received any written communication during the past three (3) years from any person that alleges that the Company or any of its Subsidiaries is not in compliance in all material respects with, or is subject to any material liability under, any Permit, Law or Judgment or relating to the revocation or modification of any material Permit. Neither the Company nor any of its Subsidiaries has received any written notice that any investigation or review by any Governmental Entity is pending with respect to the Company or any of its Subsidiaries or any of the properties, assets or operations of the Company or any of its Subsidiaries or that any such investigation or review is contemplated.

          (k)     Environmental Matters.     (i) Except for those matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect, (A) the assets, properties, businesses and operations of each of the Company and its Subsidiaries are, and have been, in compliance with all applicable Environmental Laws, and neither the Company nor any of its Subsidiaries has received any written communication alleging that the Company or any of its Subsidiaries is in violation of, or has any liability under, any Environmental Law, (B) each of the Company and its Subsidiaries has obtained and is, and has been, operating in compliance with all Environmental Permits, and all such Environmental Permits are valid and in good standing, (C) there is no Environmental Claim pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective predecessors, (D) there has been no Release of any Hazardous Material at, on, under or from any property or facility currently or formerly owned, leased or operated by the Company or any of its

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  Subsidiaries or, to the knowledge of the Company, at any adjacent or off-site location, that would reasonably be expected to form the basis of any Environmental Claim against the Company or any of its Subsidiaries or against any person whose liabilities for such Environmental Claim the Company or any of its Subsidiaries has, or may have, retained or assumed, either contractually or by operation of law, and (E) to the knowledge of the Company, there are no facts, circumstances or conditions with respect to any of the current or former assets, properties, businesses or operations of the Company or its Subsidiaries that have resulted, or would reasonably be expected to result, in a violation of, or liability under, any Environmental Law.

          (ii) The term " Environmental Claim " means any administrative, regulatory or judicial action, suit, order, claim, demand, directive, Lien, investigation, proceeding or notice of noncompliance by or from any Governmental Entity or any other person alleging liability relating to or arising out of a Release of, or human exposure to, any Hazardous Material or the failure to comply with any Environmental Law or Environmental Permit. The term " Environmental Permit " means any permit, license, exemption, order, franchise, authorization, consent or approval required under any applicable Environmental Law for the Company or its Subsidiaries to conduct its respective businesses. The term " Environmental Law " means any Law or legally binding Contract relating to pollution, contamination or cleanup, protection or restoration of the environment or natural resources, or human health as it relates to the environment. The term " Hazardous Material " means any medical, biological or biohazardous material, including without limitation any infectious material, biological product, bodily fluid, stock, culture, diagnostic specimen or regulated medical waste, or any other chemical, substance, material or waste that is listed or defined as a "hazardous substance", "hazardous waste", "hazardous material", "extremely hazardous substance", "toxin", "pollutant", "contaminant" or terms of similar import under any applicable Environmental Law. The term " ARelease " means any release, spill, emission, leaking, pumping, emitting, depositing, discharging, injecting, escaping, leaching, dispersing, dumping, pouring, disposing or migrating into, onto or through the environment (including ambient air, surface water, ground water, land surface or subsurface strata) or within any building, structure, facility or fixture.

          (l)     Labor Relations.     There are no collective bargaining or other labor union agreements to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound. None of the employees of the Company or any of its Subsidiaries are represented by any union with respect to their employment by the Company or any such Subsidiary. Since January 1, 2005, neither the Company nor any of its Subsidiaries has experienced any labor disputes, union organization attempts, strikes, work stoppages, slowdowns or lockouts. There is no unfair labor practice charge or complaint or other proceeding pending, or, to the knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries before the National Labor Relations Board or any similar Governmental Entity. The Company is, and has been, in compliance in all material respects with all applicable Laws respecting employment, including discrimination or harassment in employment, terms and conditions of employment, termination of employment, wages, overtime classifications, hours, occupational safety and health, employee whistle-blowing, immigration, employee privacy, employment practices and classification of employees, consultants and independent contractors. The Company has not effectuated, and does not intend to effectuate, (i) a "plant closing" (as defined in the Worker Adjustment and Retraining Notification Act of 1988 (the " WARN Act ")) affecting any single site of employment or one or more facilities or operating units within any single site of employment of the Company or (ii) a "mass layoff" (as defined in the WARN Act) affecting any single site of employment or facility of the Company; or, in the case of clauses (i) and (ii) of this sentence, any similar action under any comparable Law requiring notice to employees in the event of a plant closing, layoff or substantial cessation of industrial or commercial operations. The Company has complied in all material respects with any applicable Law with respect to the employment,

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  discharge or layoff of any such employee, including the WARN Act and any comparable Law. No Company Personnel is primarily based outside of the United States.

          (m)     Employee Benefits.     (i) Section 4.01(m)(i)(1) of the Company Disclosure Schedule sets forth a complete and accurate list of each (A) "employee pension benefit plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (" ERISA ")), (B) "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), (C) post-retirement or employment health or medical plan, program, policy or arrangement, (D) bonus, incentive or deferred compensation or equity or equity-based compensation plan, program, policy or arrangement, (E) severance, change in control, retention or termination plan, program, policy or arrangement or (F) other material compensation or benefit plan, program, policy or arrangement, in each case, sponsored, maintained, contributed to or required to be maintained or contributed to by the Company, any of its Subsidiaries or any other person or entity that, together with the Company, is treated as a single employer under Section 414 of the Code (each, a " Commonly Controlled Entity ") for the benefit of any Company Personnel (each, a " Company Benefit Plan ") in effect as of the date hereof. Section 4.01(m)(i)(2) of the Company Disclosure Schedule sets forth a complete and accurate list of each written employment, consulting, bonus, incentive or deferred compensation, equity or equity-based compensation, severance, change in control, retention, termination or other written contract between the Company or any of its Subsidiaries, on the one hand, and any Company Personnel, on the other hand (each, a " Company Benefit Agreement "). Except for the Company Benefit Plans and the Company Benefit Agreements, there are no material Contracts between the Company or any of its Subsidiaries, on the one hand, and any Company Personnel, on the other hand, providing for employment, consu