AGREEMENT AND PLAN OF MERGER

                                                                                                                                                         

                                                                                                                              

TABLE OF CONTENTS

Exhibits:

Exhibit A         Conditions to the Offer

INDEX OF DEFINED TERMS

WHEREAS the respective Boards of Directors of Parent, Holdings, Merger Sub and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement;

WHEREAS, in furtherance of such acquisition, Parent proposes to cause Merger 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 $0.0001 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 $16.50 (such amount or, if the Offer is amended in accordance with the terms of this Agreement and a different amount per share is paid pursuant to the Offer, such different amount, the “ Offer Price ”), net to the seller in cash, on the terms and subject to the conditions set forth in this Agreement;

WHEREAS the respective Boards of Directors of Parent, Holdings, Merger Sub and the Company have approved the merger (the “ Merger ”) of Merger Sub into the Company on the terms and subject to the conditions set forth in this Agreement; and

WHEREAS Parent, Holdings, Merger 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.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

The Offer

SECTION 1.01.   The Offer.   (a)  Subject to the terms and conditions of this Agreement, as promptly as practicable (but in no event later than 10 business days after the date of this Agreement), Merger Sub shall, and Parent and Holdings shall cause Merger Sub to, commence the Offer within the meaning of the applicable rules and regulations of the Securities and Exchange Commission (the “ SEC ”); provided , however , that Parent, Holdings and Merger Sub shall not be required to commence, or cause to be commenced, the Offer prior to the date on which the Company is prepared to file the Schedule 14D-9.  The obligations of Merger Sub to, and of Parent and Holdings to cause Merger Sub to, accept for payment, and pay for, any shares of Company Common Stock tendered pursuant to the Offer are subject to the satisfaction or waiver of the conditions set forth in Exhibit A (the “ Offer Conditions ”).  The initial expiration date of the Offer shall be 12:00 midnight, New York City time, on the 20th business day following the commencement of the Offer (determined using Rule 14d-1(g)(3) of the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the “ Exchange Act ”)).  Merger Sub expressly reserves the right to waive any Offer Condition or modify the terms of the Offer, except that, without the consent of the Company, Merger Sub shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the Offer Price, (iii) waive or amend the Minimum Tender Condition, (iv) add to the conditions set forth in Exhibit A or modify any condition set forth in Exhibit A in any manner adverse to the holders of Company Common Stock, (v) except as otherwise provided in this Section 1.01(a), extend the Offer, (vi) change the form of consideration payable in the Offer or (vii) otherwise amend the Offer in any manner adverse to the holders of Company Common Stock.  Notwithstanding the foregoing, Merger Sub may, without the consent of the Company, (A) extend the Offer for one or more consecutive increments of not more than seven business days each, if at the scheduled expiration date of the Offer any of the Offer Conditions is not satisfied, until such time as such conditions are satisfied or waived or (B) extend the Offer for the minimum period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer.  In addition, if at the otherwise scheduled expiration date of the Offer any Offer Condition is not satisfied, Merger Sub shall, and Parent and Holdings shall cause Merger Sub to, extend the Offer at the request of the Company for one or more consecutive increments of not more than seven business days each (or for such longer period as may be agreed by Parent and the Company); provided that Merger Sub shall not be required to, and Parent and Holdings shall not be required to cause Merger Sub to, extend the Offer beyond the date that is 90 days after the initial expiration date of the Offer only if the Minimum Tender Condition is not satisfied at such time.  In addition, Merger Sub may make available one or more “subsequent offering periods”, in accordance with Rule 14d-11 of the Exchange Act, of at least three and not more than 20 business days each, unless Parent has become the owner, directly or indirectly, of 90% or more of the outstanding shares of Company Common Stock.  On the terms and subject to the conditions of the Offer and this Agreement, Merger Sub shall, and Parent and Holdings shall cause Merger Sub to, pay for all shares of Company Common Stock validly tendered in accordance with the terms of the Offer and not withdrawn that Merger Sub becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer and, in any event, no more than two business days after the Offer Closing Date.  The date on which Merger Sub first accepts for payment the shares of Company Common Stock tendered in the Offer is referred to as the “ Offer Closing Date ”.

(b)  On the date of commencement of the Offer, Parent, Holdings and Merger 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 furnish to Parent, Holdings and Merger Sub all information concerning the Company required by the Exchange Act to be set forth in the Offer Documents.  Each of Parent, Holdings, Merger Sub and the Company shall promptly correct any information provided by it for use 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, Holdings and Merger 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 the Offer Documents, as so amended or supplemented, to be disseminated to the Company’s stockholders, in each case as and to the extent required by applicable Federal securities Laws.  Parent, Holdings and Merger Sub shall provide the Company and its counsel in writing with any comments Parent, Holdings, Merger Sub or their counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments.  Prior to the filing of the Offer Documents (including any amendment or supplement thereto) with the SEC or the dissemination thereof to the stockholders of the Company, or responding to any comments of the SEC with respect to the Offer Documents, Parent, Holdings and Merger Sub shall provide the Company and its counsel a reasonable opportunity to review and comment on such Offer Documents or response (including the proposed final version thereof), and Parent, Holdings and Merger Sub shall give reasonable and good faith consideration to any comments made by the Company or its counsel.

(c)  Parent shall provide or cause to be provided to Merger Sub on a timely basis the funds necessary to purchase any shares of Company Common Stock that Merger Sub becomes obligated to purchase pursuant to the Offer.

(d)  Parent, Holdings and Merger 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 Parent, Holdings or Merger 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 amounts are so withheld and paid over to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

SECTION 1.02.   Company Actions.    (a)  Subject to Sections 5.04 and 8.05, the Company hereby approves of and consents to the Offer, the Merger and the other transactions contemplated by this Agreement (collectively, the “ Transactions ”).

(b)  Subject to Section 5.04(b), on 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, as amended from time to time, the “ Schedule 14D-9 ”), which shall describe and make the recommendations referred to in Section 3.04(b) and shall mail the Schedule 14D-9 to the holders of Company Common Stock.  Parent, Holdings and Merger Sub shall furnish to the Company all information concerning Parent, Holdings and Merger Sub required by the Exchange Act to be set forth in the Schedule 14D-9.  Each of the Company, Parent, Holdings and Merger Sub shall promptly correct any information provided by it for use 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 Company’s stockholders, in each case as and to the extent required by applicable Federal securities Laws.  The Company shall provide Parent and its counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments.  Prior to the filing of the Schedule 14D-9 (including any amendment or supplement thereto) with the SEC or the 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 and its counsel 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 and good faith consideration to any comments made by Parent or its counsel.  The Company hereby consents to the inclusion in the Offer Documents of a description of the recommendation of the Board of Directors of the Company contained in the Schedule 14D-9.

(c)  In connection with the Offer, the Company shall cause its transfer agent to promptly furnish Merger Sub 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, 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 Merger 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 the Company’s stockholders.  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, Parent, Holdings and Merger Sub shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement shall be terminated, shall, upon request, deliver to the Company all copies of such information then in their possession or control.

SECTION 1.03.   Top-Up Option.   (a)  The Company hereby grants to Merger 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 that number of newly issued, fully paid and nonassessable 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, Holdings and Merger Sub at the time of exercise of the Top-Up Option, shall constitute one share more than 90.0% of the Fully Diluted Shares outstanding immediately after the issuance of the Top-Up Shares; provided , however , that the Top-Up Option may not be exercised if the number of Top-Up Shares exceeds the lesser of (i) that number of shares of Company Common Stock authorized and unissued (treating shares held in treasury as unissued) and not reserved for issuance at the time of exercise of the Top-Up Option and (ii) that number of shares of Company Common Stock the issuance of which would require approval of the Company’s stockholders under applicable Law or the rules and regulations of The NASDAQ Global Select Market (“ Nasdaq ”).  The Top-Up Option shall be exercisable only once, in whole but not in part, at such time as Parent, Holdings and Merger Sub, directly or indirectly, own at least 85.0% of the Fully Diluted Shares and following the expiration of the Offer and any subsequent offering period.  The obligation of the Company to issue and deliver the Top-Up Shares upon the exercise of the Top-Up Option is subject to the condition that no Legal Restraint that has the effect of prohibiting the exercise of the Top-Up Option or preventing the issuance and delivery of the Top-Up Shares 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 of 1933, as amended (together with the rules and regulations promulgated thereunder, the “ Securities Act ”).  In the event Merger Sub wishes to exercise the Top-Up Option, Merger Sub shall give the Company two business days prior written notice, specifying (i) the number of shares of 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 Merger Sub specifying, based on the information provided by Merger 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 Merger Sub to the Company shall be paid to the Company, at Merger Sub’s option, (i) in cash, by wire transfer in immediately available funds, or (ii) by issuance by Merger Sub to the Company of a promissory note on terms reasonably satisfactory to the Company.

ARTICLE II

The Merger

SECTION 2.01.   The Merger .   On the terms and subject to the conditions set forth in this Agreement, and in accordance with the Delaware General Corporation Law (the “ DGCL ”), Merger Sub shall be merged with and into the Company at the Effective Time.  At the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation (the “ Surviving Corporation ”).

SECTION 2.02.   Merger Closing.    The closing of the Merger (the “ Merger Closing ”) shall take place at the offices of Debevoise & Plimpton LLP, 919 Third Avenue, New York, New York 10022 at 10:00 a.m., New York City time, on the second business day following the satisfaction or (to the extent permitted by Law) waiver by the party or parties entitled to the benefits thereof of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Merger Closing), or at such other place, time and date as shall be agreed in writing by the parties hereto; provided , however , that if all the conditions set forth in Article VII have not been satisfied or (to the extent permitted by Law) waived on such second business day, then the Merger Closing shall take place on the first business day on which all such conditions shall have been satisfied or (to the extent permitted by Law) waived, or at such other place, time and date as shall be agreed in writing by the parties hereto.  The date on which the Merger Closing occurs is referred to in this Agreement as the “ Merger Closing Date ”.

SECTION 2.03.   Effective Time.    Prior to the Merger Closing, Merger Sub shall prepare, and on the Merger Closing Date, Merger Sub shall file with the Secretary of State of the State of Delaware, a certificate of merger or other appropriate documents (in any such case, the “ Certificate of Merger ”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL to effectuate the Merger.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with such Secretary of State or at such other time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “ Effective Time ”).

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

SECTION 2.05.   Certificate of Incorporation and By-laws.    (a)  The Company Charter shall be amended at the Effective Time to be the same as the Certificate of Incorporation of Merger Sub as in effect immediately prior to the Effective Time (except that the name of the Company set forth in such amended certificate of incorporation shall be “Noven Pharmaceuticals, Inc.”), and as so amended shall be the Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

(b)  The By-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the By-laws of the Surviving Corporation (except that the name of the Company set forth in such bylaws shall be “Noven Pharmaceuticals, Inc.”) until thereafter changed or amended as provided therein or by applicable Law.

SECTION 2.06.   Directors and Officers.    (a)  The directors of Merger 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.

(b)  The officers of the Company 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 or appointed and qualified, as the case may be.

SECTION 2.07.   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 any shares of capital stock of Merger Sub:

(a)   Capital Stock of Merger Sub.   Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

(b)   Cancelation of Treasury Stock and Parent-Owned Stock.   Each share of Company Common Stock that is owned by the Company, Parent, Holdings or Merger Sub shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

(c)   Stock Held by Subsidiaries.   Each share of Company Common Stock that is owned by any subsidiary of the Company or Parent (other than Merger Sub) shall automatically be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

(d)   Conversion of Other Company Common Stock.   Subject to Sections 2.07(b), 2.07(c) and 2.07(e), each issued share of Company Common Stock shall be converted into the right to receive the Offer Price in cash (the “ Merger Consideration ”).  As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration in accordance with Section 2.08, without interest.

(e)   Appraisal Rights.   Notwithstanding anything in this Agreement to the contrary, shares (“ Appraisal Shares ”) of Company Common Stock that are outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Appraisal Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL (“ Section 262 ”) shall not be converted into the Merger Consideration as provided in Section 2.07(d), but instead the holders of Appraisal Shares shall be entitled to payment of the fair market value of such Appraisal Shares in accordance with Section 262; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, then the right of such holder to be paid the fair value of such holder’s Appraisal Shares shall cease and such Appraisal Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, the Merger Consideration as provided in Section 2.07(d).  The Company shall serve prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands.  Prior to the Effective Time, 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 any of the foregoing.

SECTION 2.08.   Payment of Merger Consideration.    (a)   Paying Agent.   Prior to the Effective Time, Parent shall select a bank or trust company reasonably acceptable to the Company to act as paying agent (the “ Paying Agent ”) for the payment of the Merger Consideration to former holders of Company Common Stock.  Parent shall take all steps necessary to enable and shall cause the Surviving Corporation to provide to the Paying Agent on a timely basis, as and when needed after the Effective Time, cash necessary to pay for the shares of Company Common Stock converted into the right to receive cash pursuant to Section 2.07(d) (such cash being hereinafter referred to as the “ Exchange Fund ”).

(b)   Exchange Procedure.   As soon as reasonably practicable after the Effective Time (but in no event later than three business days after the Effective Time), the Surviving Corporation or Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the “ Certificates ”) which were converted into the right to receive the Merger Consideration pursuant to Section 2.07 (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent, and shall be in such form and have such other provisions as are customary and reasonably acceptable to the Company and Parent) and (ii) instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration.  Upon surrender of a Certificate to the Paying Agent for cancelation, together with such letter of transmittal, duly 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 into which the shares of Company Common Stock theretofore represented by such Certificate shall have been converted pursuant to Section 2.07, 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 transfer records of the Company, payment may be made to a Person other than the Person in whose name the Certificate so surrendered is registered, if 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 Parent that such Tax has been paid or is not applicable.  Until surrendered as contemplated by this Section 2.08, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the amount of cash, without interest, into which the shares of Company Common Stock theretofore represented by such Certificate have been converted pursuant to Section 2.07.  No interest shall be paid or accrue on the cash payable upon surrender of any Certificate.

(c)   Treatment of Book-Entry Shares.   As soon as reasonably practicable after the Effective Time (but in no event later than three business days after the Effective Time), the Surviving Corporation or Parent shall cause the Paying Agent to mail to each holder of record, as of the Effective Time of the Merger, of Book-Entry Shares a check in an amount of U.S. dollars equal to the aggregate amount of Merger Consideration to which such holder is entitled hereunder.

(d)   No Further Ownership Rights in Company Common Stock.   The Merger Consideration paid in accordance with the terms of this Article II upon conversion of any shares of Company Common Stock shall be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock, and after the Effective Time there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of shares of Company Common Stock that were outstanding immediately prior to the Effective Time.  If, after the Effective Time, any certificates formerly representing shares of Company Common Stock are presented to the Surviving Corporation or the Paying Agent for any reason, they shall be canceled and exchanged as provided in this Article II.

(e)   Termination of Exchange Fund.   Any portion of the Exchange Fund that remains undistributed to the holders of Company Common Stock for 12 months after the Effective Time shall be delivered to Parent, upon demand, and any holder of Company Common Stock who has not theretofore complied with this Article II shall thereafter look only to Parent for payment of its claim for Merger Consideration.

(f)   No Liability.   None of Parent, Holdings, Merger Sub, the Company or the Paying Agent shall be liable to any Person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.  If any Certificate has not been surrendered prior to five years after the Effective Time (or immediately prior to such earlier date on which the Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Entity), any such shares, cash, dividends or distributions in respect of such Certificate 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.

(g)   Investment of Exchange Fund.   The Paying Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis.  Any interest and other income resulting from such investments shall be paid to Parent.  In no event, however, shall such investment or any such payment of interest or income delay the receipt by holders of Certificates or Book-Entry Shares of the Merger Consideration, or otherwise impair such holders’ rights hereunder.

(h)   Withholding Rights.   Each of the Surviving Corporation, Parent, Holdings, Merger Sub and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Company Common Stock pursuant to this Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code, or under any provision of state, local or foreign Tax Law.  To the extent amounts are so withheld and paid over to the appropriate taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

ARTICLE III

Representations and Warranties of the Company

Except as disclosed in the reports, schedules, forms, statements and other documents filed by the Company with the SEC since January 1, 2007 and publicly available prior to the date of this Agreement (the “ Filed Company SEC Documents ”) (excluding any disclosures in the Filed Company SEC Documents under the headings “Risk Factors”, “Forward-Looking Information”, “Cautionary Factors” and “Outlook” and any other disclosures that are generic, predictive or forward-looking in nature) or as set forth in the letter, dated as of the date of this Agreement, from the Company to Parent, Holdings and Merger Sub (which shall be arranged in numbered and lettered sections corresponding to the numbered and lettered sections contained in this Article III, and the disclosure in any section shall be deemed to qualify or apply to other sections in this Article III to the extent that it is readily apparent on the face of such disclosure that it also qualifies or applies to such other sections, the “ Company Disclosure Letter ”), the Company represents and warrants to Parent, Holdings and Merger Sub as follows:

SECTION 3.01.   Organization, Standing and Power.   Each of the Company, each of its subsidiaries (the “ Company Subsidiaries ”) and Vivelle Ventures LLC (“ Vivelle ”) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized (in the case of good standing, to the extent the concept is recognized by such jurisdiction) and has full corporate power and authority necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, except in the case of the Company Subsidiaries and Vivelle, where the failure of any such Company Subsidiary or Vivelle to be in good standing would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.  Each of the Company, each Company Subsidiary and, to the knowledge of the Company, Vivelle is duly qualified or licensed to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.  The Company has made available to Parent true and complete copies of the certificate of incorporation of the Company, as amended to the date of this Agreement (as so amended, the “ Company Charter ”), and the By-laws of the Company, as amended to the date of this Agreement (as so amended, the “ Company By-laws ”).

SECTION 3.02.   Company Subsidiaries; Equity Interests.    (a)  Section 3.02(a) of the Company Disclosure Letter lists, as of the date of this Agreement, each Company Subsidiary and its jurisdiction of organization.  All the outstanding shares of capital stock of each Company Subsidiary have been validly issued and are fully paid and nonassessable and are owned by the Company, by another Company Subsidiary or by the Company and another Company Subsidiary, free and clear of all pledges, liens, charges, mortgages, encumbrances and security interests of any kind or nature whatsoever (collectively, “ Liens ”), other than Permitted Liens.  The Company has made available to Parent true and complete copies of the organizational documents, as amended to the date of this Agreement, of each Company Subsidiary and Vivelle.

(b)  Except for its interests in the Company Subsidiaries and the Company’s ownership of 49% of the equity interests in Vivelle, the Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person.

SECTION 3.03.   Capital Structure.    (a)  The authorized capital stock of the Company consists of  80,000,000 shares of Company Common Stock and 100,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”), of which 30,000 shares of Company Preferred Stock were designated by the Company Board 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 November 6, 2001, between the Company and American Stock Transfer & Trust Company, as amended on March 18, 2008 (the “ Company Rights Agreement ”).  At the close of business on July 9, 2009 (the “ Measurement Date ”), (i) 25,028,987 shares of Company Common Stock were issued and outstanding, of which 253,020 shares of Company Common Stock were Company Restricted Shares, (ii) 322,345 shares of Company Common Stock were held by the Company in its treasury, (iii) 1,399,639 shares of Company Common Stock were subject to outstanding Company Stock Options, 2,560,496 shares of Company Common Stock were subject to outstanding Company SARs, 50,000 shares of Company Common Stock were subject to outstanding Company RSUs and 2,133,093 additional shares of Company Common Stock were reserved for issuance pursuant to the Company Stock Plans, (iv) no shares of Company Preferred Stock were issued or outstanding and (v) 30,000 shares of Company Preferred Stock were reserved for issuance in connection with the Company Rights.  Except as set forth above, at the close of business on the Measurement Date, no shares of capital stock or other securities of the Company were issued, reserved for issuance or outstanding.  All outstanding options to purchase Company Common Stock, outstanding stock appreciation rights linked to the price of Company Common Stock and outstanding restricted stock units were granted under a Company Stock Plan.

(b)  All outstanding shares of Company Common Stock are, and all such shares that may be issued prior to the Effective Time (including pursuant to the Top-Up Option) will be when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights.

(c)  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 holders of Company Common Stock may vote (“ Voting Company Debt ”).  Other than intercompany indebtedness owed to the Company or one of the Company Subsidiaries, none of the Company or any of the Company Subsidiaries has any indebtedness for borrowed money .

(d)  Except as set forth above, as of the date of this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, restricted stock units, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is a party or by which any of them is bound (i) obligating the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Company, any Company Subsidiary or Vivelle or any Voting Company Debt or (ii) obligating the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle to issue, grant or enter into any such option, warrant, right, security, commitment, Contract, arrangement or undertaking.  As of the date of this Agreement, there are no outstanding contractual obligations of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle to repurchase, redeem or otherwise acquire any shares of capital stock of the Company, any Company Subsidiary or Vivelle.  The Company has made available to Parent a true and complete copy of the Company Rights Agreement, as amended to the date of this Agreement.

(e)  All outstanding Company Stock Options, Company SARs, Company RSUs and Company Restricted Shares have been granted under the Company Stock Plans.  Section 3.03(e) of the Company Disclosure Letter sets forth a true and complete list, as of the Measurement Date, of (i) all outstanding Company Stock Options, the number of shares of Company Common Stock subject to each such Company Stock Option, the exercise price per share and the name of the holder thereof, (ii) all outstanding Company SARs, the number of shares of Company Common Stock subject to each such Company SAR, the exercise price per share and the name of the holder thereof, (iii) all Company Restricted Shares and the name of the holder thereof and (iv) all outstanding Company RSUs and the name of the holder thereof.  All Company Stock Options, Company SARs, Company Restricted Shares and Company RSUs are evidenced by written award agreements, in each case substantially in the forms that have been provided to Parent, except that such agreements differ from such forms with respect to the number of Company Stock Options, Company SARs, Company Restricted Shares, Company RSUs or shares of Company Common Stock covered thereby, the exercise price (if applicable), vesting schedule and expiration date applicable thereto and other similar terms.

(f)  With respect to outstanding Company Stock Options and outstanding Company SARs, (i) each grant of a Company Stock Option or Company SAR was duly authorized no later than the time and date the grant of such Company Stock Option or Company SAR was made and effective (the “ Grant Date ”) by all necessary corporate action, including, as applicable, approval by the Company Board (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, (ii) 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 and regulations of Nasdaq and any other exchange on which securities of the Company are traded, (iii) the per share exercise price of each Company Stock Option or Company SAR was equal to or greater than the fair market value (within the meaning of Section 409A of the Code) of a share of Company Common Stock on the applicable Grant Date and (iv) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the notes thereto) of the Company and disclosed in the Company SEC Documents in accordance with the Exchange Act and all other applicable Laws.

SECTION 3.04.   Authority; Execution and Delivery; Enforceability.    (a)  The Company has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions.  The execution and delivery by the Company of this Agreement and the consummation by the Company of the Transactions have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the Merger, to receipt of the Company Stockholder Approval, if required by applicable Law.  The Company has duly executed and delivered this Agreement, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (except insofar as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability relating to or affecting creditors’ rights, or by principles governing the availability of equitable remedies, whether considered in a proceeding at law or in equity).

(b)  The Board of Directors of the Company (the “ Company Board ”), at a meeting duly called and held, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Offer, the Merger and the other Transactions, (ii) determining that the terms of the Offer, the Merger and the other Transactions are fair to and in the best interests of the stockholders of the Company, (iii) recommending that the holders of Company Common Stock accept the Offer and tender their shares of Company Common Stock pursuant to the Offer and (iv) recommending that the Company’s stockholders adopt this Agreement if the Company Stockholder Approval is required by applicable Law, which resolutions, as of the date of this Agreement, have not been rescinded, modified or withdrawn in any way.  Such resolutions are sufficient to render inapplicable to Parent, Holdings and Merger Sub and this Agreement, the Offer, the Merger or any other Transaction the provisions of Section 203 of the DGCL to the extent, if any, such Section would otherwise be applicable to this Agreement, the Offer, the Merger or any other Transaction.  No other state takeover statute or similar statute or regulation applies to the Company with respect to this Agreement, the Offer, the Merger or any other Transaction.

(c)  The only vote of holders of any class or series of capital stock of the Company necessary to approve and adopt this Agreement and the Merger, if required by applicable Law, is the adoption of this Agreement by the holders of a majority of the outstanding Company Common Stock (the “ Company Stockholder Approval ”).  The affirmative vote of the holders of any class or series of capital stock of the Company is not necessary to consummate the Offer or any Transaction other than the Merger.

SECTION 3.05.   No Conflicts; Consents.    (a)  The execution and delivery by the Company of this Agreement do not, and the consummation of the Offer, the Merger and the other Transactions and compliance with the terms hereof will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or acceleration of any obligation or to loss of or reduction in a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle under, any provision of (i) the Company Charter, the Company By-laws or the comparable organizational documents of any Company Subsidiary or Vivelle, (ii) any material contract (written or oral), lease, license, indenture, note, bond, agreement, concession, franchise or other instrument (a “ Contract ”) to which the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is a party or by which any of their respective properties or assets is bound or (iii) subject to the filings and other matters referred to in Section 3.05(b), any judgment, order or decree (“ Judgment ”) or statute, law, ordinance, rule or regulation (“ Law ”) applicable to the Company or any Company Subsidiary or their respective properties or assets or, to the knowledge of the Company, Vivelle or its properties or assets.

(b)  No consent, approval, license, permit, order or authorization (“ Consent ”) of, or registration, declaration or filing with, or permit from, any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (a “ Governmental Entity ”), is required to be obtained or made by or with respect to the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions, other than (i) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (ii) the filing with the SEC of (A) the Schedule 14D-9, (B) a proxy or information statement relating to the adoption of this Agreement by the Company’s stockholders (the “ Proxy Statement ”), if such adoption is required by Law, (C) any information statement (the “ Information Statement ”) required under Rule 14f-1 in connection with the Offer and (D) such reports under Section 13 of the Exchange Act as may be required in connection with this Agreement, the Offer, the Merger and the other Transactions, (iii) 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 the other jurisdictions in which the Company is qualified to do business, (iv) such filings as may be required under the rules and regulations of Nasdaq and (v) such other items (A) required solely by reason of the participation of Parent (as opposed to any third Person) in the Transactions or (B) that would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.

(c)  The Company has taken all actions necessary to (i) render the Company Rights Agreement inapplicable to this Agreement, the Offer, the Merger and the other Transactions 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 Company Rights Agreement) by reason of this Agreement, the Offer, the Merger or any other Transaction, (B) a “Distribution Date” (as defined in the Company Rights Agreement) shall not occur by reason of this Agreement, the Offer, the Merger or any other Transaction and (C) the Company Rights shall expire immediately prior to the Effective Time.

SECTION 3.06.   SEC Documents; Undisclosed Liabilities.    (a)  The Company has filed all reports, schedules, forms, statements and other documents required to be filed pursuant to Sections 13(a) and 15(d) of the Exchange Act by the Company with the SEC since January 1, 2007 (the “ Company SEC Documents ”).

(b)  As of their respective effective dates (in the case of Company SEC Documents that are registration statements filed pursuant to the Securities Act) and as of their respective SEC filing dates (in the case of all other Company SEC Documents), each Company SEC Document complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Document, and except to the extent corrected or superseded by a subsequent filing with the SEC prior to the date hereof, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(c)  The audited consolidated financial statements and the unaudited quarterly financial statements (including, in each case, the notes thereto) of the Company included in the Company SEC Documents when filed complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles in the United States (“ GAAP ”) (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other rules and regulations of the SEC) applied in all material respects on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present 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 quarterly statements, to normal year-end adjustments).

(d)  Except as set forth in the audited consolidated balance sheet of the Company, as of December 31, 2008, included in the Company SEC Documents (together with the notes thereto, the “ Company Balance Sheet ”), the Company and the Company Subsidiaries do not have any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise) other than (i) liabilities or obligations incurred in the ordinary course of business since the date of the Company Balance Sheet, (ii) liabilities or obligations incurred in connection with the Transactions and (iii) liabilities or obligations that would not reasonably be expected to, individually or in the aggregate, have a Company Material Adverse Effect.

(e)  The Company maintains a system of “internal controls over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances (i) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, consistently applied, (ii) that transactions are executed only in accordance with the authorization of management and (iii) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s properties or assets.

(f)  The “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) utilized by the Company are reasonably designed to ensure that information 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 SEC’s rules and forms and is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

(g)   Since January 1, 2007, none of the Company, the Company’s independent accountants, the Company Board, any Company Officer or the audit committee of the Company Board has received (A) any oral or written notification of any (i) “significant deficiency” in the internal controls over financial reporting of the Company, (ii) “material weakness” in the internal controls over financial reporting of the Company or (iii) fraud, whether or not material, that involves management or other employees of the Company who have a significant role in the internal controls over financial reporting of the Company or (B) any material complaint, allegation, assertion or claim alleging, asserting or claiming that the accounting or auditing practices, procedures, methodologies or methods of the Company, any of the Company Subsidiaries or Vivelle or their respective internal accounting controls fail to comply with GAAP, generally accepted auditing standards or applicable Law.  For purposes of this Agreement, the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them by the Public Company Accounting Oversight Board in Auditing Standard No. 2, as in effect on the date of this Agreement.

(h)  Since January 1, 2007, no attorney representing the Company or any of the Company Subsidiaries, whether or not employed by the Company or any of the Company Subsidiaries, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to the General Counsel of the Company.

SECTION 3.07.   Information Supplied.    Subject to the accuracy of the representations and warranties of Parent, Holdings and Merger Sub set forth in Article IV, none of the information supplied or to be supplied by or on behalf of the Company for inclusion or incorporation by reference in (a) the Offer Documents, the Schedule 14D-9 or the Information Statement will, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published, sent or given to the Company’s stockholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (b) the Proxy Statement will, at the date it is first mailed to the Company’s stockholders or at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.  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 and the rules and regulations thereunder, except that no representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Parent, Holdings or Merger Sub for inclusion or incorporation by reference therein.

SECTION 3.08.   Absence of Certain Changes or Events.    From the date of the Company Balance Sheet to the date of this Agreement, the Company has conducted its business in the ordinary course in all material respects, and during such period there has not been:

(a)  any change, event, effect or occurrence that, individually or in the aggregate, has had or is reasonably likely to have a Company Material Adverse Effect;

(b)  any declaration, setting aside or payment of any dividend on, or making of any other distribution (whether in cash, stock or property) with respect to, any capital stock of the Company;

(c)  any split, combination or reclassification of any capital stock of the Company or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company;

(d)  (i)   any material increase by the Company or any Company Subsidiary to any current or former director, officer, employee or independent contractor of the Company or any Company Subsidiary (each, a “ Company Personnel ”) in compensation or granting or amending any awards under any Company Benefit Plan (not including granting any equity or equity-based compensation), except in the ordinary course of business consistent with past practice or as was required under employment agreements included in or described in the Filed Company SEC Documents, (ii) any granting by the Company or any Company Subsidiary to any Company Personnel of any material increase in severance or termination pay, except as was required under any employment, severance or termination agreements included in or described in the Filed Company SEC Documents, (iii) any entry by the Company or any Company Subsidiary into any employment, severance or termination agreement with any Company Personnel or (iv) any material amendment to a Company Benefit Plan or Company Benefit Agreement;

(e)  any change in accounting methods, principles or practices by the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle materially affecting the consolidated assets, liabilities or results of operations of the Company, except as may have been required (i) by GAAP (or any interpretation thereof), including pursuant to standards, guidelines and interpretations of the Financial Accounting Standards Board or any similar organization, or (ii) by Law, including Regulation S-X under the Securities Act;

(f)  any material elections with respect to Taxes by the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle or settlement or compromise by the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle of any material Tax liability or refund;

(g)  any material damage, destruction or loss, whether or not covered by insurance, to any material assets of the Company, any of the Company Subsidiaries or, to the knowledge of the Company, Vivelle; or

(h)  any discounting, rebate, promotional or other special incentive arrangements with respect to the sale of any finished products by the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle, other than in the ordinary course of business consistent with past practice.

SECTION 3.09.   Taxes.    (a)  The Company, each Company Subsidiary and, to the knowledge of the Company, Vivelle have (i) timely filed, taking into account any extensions, all material Tax Returns required to have been filed and such Tax Returns are accurate and complete in all material respects, and (ii) paid all material Taxes required to have been paid by it other than Taxes that are not yet due or that are being contested in good faith in appropriate proceedings.  The most recent financial statements contained in the Filed Company SEC Documents reflect an adequate reserve (excluding any reserves for deferred Taxes), if such a reserve is required by GAAP, for all material Taxes payable by the Company and the Company Subsidiaries for all taxable periods and portions thereof ending on or before the date of such financial statements.

(b)  The Company, each Company Subsidiary and, to the knowledge of the Company, Vivelle have complied in all material respects with all applicable Tax Laws relating to the withholding of Taxes (including withholding of Taxes in connection with amounts paid or owing to any employee, former employee or independent contractor) and have duly and timely withheld and paid over to the appropriate Governmental Entity all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Tax Laws.

(c)  No material Taxes with respect to the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle are under audit by any Governmental Entity or the subject of any judicial or administrative proceeding.  There are no entity classification elections for US federal income tax purposes in force with respect to the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle.  All Tax Returns filed with respect to Tax years of the Company and all Company Subsidiaries through the Tax year ended 2004 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under applicable Law, after giving effect to extensions or waivers, has expired.  To the knowledge of the Company, all Tax Returns filed with respect to Tax years of Vivelle through the Tax year ended 2004 have been examined and closed or are Tax Returns with respect to which the applicable period for assessment under applicable Law, after giving effect to extensions or waivers, has expired.

(d)  No deficiency for any material Tax has been asserted or assessed by a taxing authority in writing against the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle which deficiency has not been paid.  Except as would not reasonably be expected to be material in any respect to the Company, the Company Subsidiaries and Vivelle, there are no currently effective waivers, extensions or comparable consents regarding the application of the statute of limitations with respect to Taxes or Tax Returns which have been given by or on behalf of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course).

(e)  None of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle (i) has received or applied for a Tax ruling or entered into a closing agreement pursuant to Section 7121 of the Code (or any predecessor provision or any similar provision of state, local or foreign Law), in either case that would be binding upon the Company, any Company Subsidiary or Vivelle after the Offer Closing Date or (ii) has any liability for the Taxes of any other Person other than the Company or any Company Subsidiary (whether under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign Law, as a transferee or successor, pursuant to any Tax sharing or indemnity agreement or other contractual agreements, or otherwise).

(f)  None of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle will be required to include in income any adjustment pursuant to Section 481 of the Code (or any similar provision of state, local or foreign Law) by reason of a change in accounting method by the Company, any Company Subsidiary or Vivelle.

(g)  None of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is a party to a “gain recognition agreement” within the meaning of the Treasury Regulations under Section 367 of the Code.

(h)  None of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among the Company and wholly owned Company Subsidiaries).

(i)  Within the past two years, none of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle has been a “distributing corporation” or a “controlled corporation” in a distribution intended to qualify for tax-free treatment under Section 355 of the Code.

(j)  None of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle has been a party to a transaction that, as of the date of this Agreement, constitutes a “listed transaction” for purposes of Section 6011 of the Code and applicable Treasury Regulations thereunder (or a similar provision of state Law).

(k)  No Company Subsidiary organized outside of the United States is or has been classified as a passive foreign investment company, as defined in Section 1297 of the Code.

(l)  For purposes of this Agreement:

“ Taxes ” means all taxes, customs, tariffs, withholding, imposts, levies, duties, fees or other like assessments or charges of any kind imposed by a Governmental Entity, together with all interest, penalties and additions imposed with respect to such amounts.

“ Tax Return ” means all Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.

SECTION 3.10.   Labor Relations.    (a)  There are no collective bargaining or other labor union agreements to which the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is a party or by which the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is bound.  None of the employees of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle is represented by any union with respect to his employment by the Company, any such Company Subsidiary or Vivelle.  In the last two years up to and including the date of this Agreement, none of the Company, any of the Company Subsidiaries or, to the knowledge of the Company, Vivelle has experienced any material labor disputes, strikes, work stoppages, slowdowns, lockouts or union organization attempts concerning any employees of the Company, a Company Subsidiary or Vivelle.

(b)  There is no material unfair labor practice charge or complaint or other proceeding pending, or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary before the National Labor Relations Board, Equal Employment Opportunity Commission or any similar Governmental Entity.

(c)  To the knowledge of the Company, there is no material unfair labor practice charge or complaint or other proceeding pending or threatened against Vivelle before the National Labor Relations Board, Equal Employment Opportunity Commission or any similar Governmental Entity.

SECTION 3.11.   Employee Benefits.    (a)  Section 3.11(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of each material Company Benefit Plan.  “ Company Benefit Plan ” means each (i) “pension plan” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) or post-retirement or employment health or medical plan or  program, (ii) bonus, incentive or deferred compensation or equity or equity-based compensation plan or program, (iii) severance, change in control, retention or termination plan or program, or (iv) other compensation or benefit plan or program, in each case, sponsored, maintained, contributed to or required to be maintained or contributed to by the Company, any of the Company 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, other than a Company Benefit Agreement.

(b)  Section 3.11(b) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of each written employment, consulting, bonus, incentive or deferred compensation, equity or equity-based compensation, severance, change in control, retention or termination Contract between the Company or any Company Subsidiary, on the one hand, and an individual, on the other hand (each, a “ Company Benefit Agreement ”).

(c)  With respect to each Company Benefit Plan and Company Benefit Agreement, the Company has made available to Parent true and complete copies of (i) such Company Benefit Plan or Company Benefit Agreement, including any amendment thereto, (ii) each trust, insurance, annuity or other funding Contract related thereto, (iii) the most recent financial statements and actuarial or other valuation reports prepared with respect thereto, (iv) the most recent annual report on Form 5500 required to be filed with the Internal Revenue Service with respect thereto (if any) and (v) all material communications received from the IRS, the Pension Benefit Guaranty Corporation, the Department of Labor or any other Governmental Entity (including a description of any oral communication) during the last two years.

(d)  Each Company Benefit Plan and Company Benefit Agreement (and any related trust or other funding vehicle) has been administered in all material respects in accordance with its terms and is in compliance in all material respects with ERISA, the Code and all other applicable Laws.  Each of the Company and each of the Company Subsidiaries is in compliance in all material respects with ERISA, the Code and all other applicable Laws in respect of the Company Benefit Plans and Company Benefit Agreements.

(e)  None of the Company, any of the Company Subsidiaries or any Commonly Controlled Entity has sponsored, maintained, contributed to or been required to maintain or contribute to, or has any actual or contingent liability under, any Company Benefit Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code or is otherwise a defined benefit plan.  No Company Benefit Plan or Company Benefit Agreement provides health, medical or other welfare benefits after retirement or other termination of employment (other than continuation coverage required under Section 4980(B)(f) of the Code or analogous state Laws), and no circumstances exist that could result in the Company or any Company Subsidiary becoming obligated to provide any such benefits.

(f)  None of the execution and delivery of this Agreement, the obtaining of the Company Stockholder Approval (if required by applicable Law) or the consummation of the Offer, the Merger or any other Transaction (alone or in conjunction with any other event, including any termination of employment on or following the Effective Time) will (i) entitle any Company Personnel to any compensation or benefit, (ii) accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation or benefit or trigger any other material obligation under any Company Benefit Plan or Company Benefit Agreement or (iii) result in any breach or violation of, or default under, or limit the Company’s right to amend, modify or terminate, any Company Benefit Plan or Company Benefit Agreement.

(g)  No amount or other entitlement that could be received as a result of the execution and delivery of this Agreement, the obtaining of the Company Stockholder Approval (if required by applicable Law) or the consummation of the Offer, the Merger or any other Transaction (alone or in conjunction with any other event, including any termination of employment on or following the Effective Time) by any “disqualified individual” (as defined in Section 280G(c) of the Code) with respect to the Company will constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).  No Company Personnel is entitled to receive any gross-up or additional payment by reason of the tax required by Section 409A or 4999 of the Code being imposed on such person.

(h)  The Compensation Committee of the Company Board (the “ Compensation Committee ”) (each member of which the Company Board has determined is an “independent director” as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules and is an “independent director” in accordance with the requirements of Rule 14d-10(d)(2) under the Exchange Act) (i) at a meeting duly called and held, duly adopted resolutions approving each agreement, arrangement or understanding entered into on or before the date hereof by the Company or any of its affiliates with current or future directors, officers or employees of the Company and its affiliates and (ii) has taken all other actions necessary to ensure that any such arrangements fall within the safe harbor provisions of Rule 14d-10(d).

SECTION 3.12.   Title to Properties.    (a)  The Company, the Company Subsidiaries and, to the knowledge of the Company, Vivelle (a) have good, valid and marketable title to all real property owned by the Company, any Company Subsidiary or Vivelle and good, valid and marketable title to, or valid leasehold interests in, all of the other respective properties and assets reflected in the Company Balance Sheet or acquired after the date thereof, in each case that are material to the business of the Company and the Company Subsidiaries, taken as a whole, free and clear of all Liens, except (i) Liens for taxes, assessments and other governmental charges and levies that are not due and payable or that may thereafter be paid without interest or penalty, (ii) mechanics’, carriers’, workmen’s, warehousemen’s, repairmen’s or other like Liens arising or incurred in the ordinary course of business that are not overdue for a period of more than 30 days or which are being contested in good faith by appropriate proceedings, (iii) Liens incurred in the ordinary course of business 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 that do not, and would not reasonably be expected to, individually or in the aggregate, materially impair or interfere with the continued use and operation of, or materially detract from the value of, the assets to which they relate in the business of the Company, the Company Subsidiaries and Vivelle as presently conducted, (iv) applicable zoning, building and other similar codes and regulations, (v) any conditions that would be disclosed by a current, accurate survey or physical inspection and that do not, and would not reasonably be expected to, individually or in the aggregate, materially impair or interfere with the continued use and operation of, or materially detract from the value of, the assets to which they relate in the business of the Company, the Company Subsidiaries and Vivelle as presently conducted and (vi) Liens (other than Liens securing indebtedness for borrowed money), defects or irregularities in title, easements, rights-of-way, covenants, restrictions and other similar matters that do not, and would not reasonably be expected to, individually or in the aggregate, materially impair or interfere with the continued use and operation of, or materially detract from the value of, the assets to which they relate in the business of the Company, the Company Subsidiaries and Vivelle, as presently conducted (collectively, “ Permitted Liens ”) and (b) have complied with the terms of all leases to which they are parties and under which they are in occupancy that are reflected in the Company Balance Sheet or acquired after the date thereof that are material to the business of the Company and the Company Subsidiaries, taken as a whole, and all such leases are in full force and effect.

(b)  Section 3.12(b) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, of all real property owned or leased by the Company, any of the Company Subsidiaries or, to the knowledge of the Company, Vivelle, in each case indicating whether such real property is owned, leased or subleased by the Company or a Company Subsidiary and whether the Company or a Company Subsidiary is currently leasing or subleasing any such property, other than ordinary course leases or rentals of public storage facilities used by sales representatives.

(c)  As of the date of this Agreement, none of the Company, any Company Subsidiary or, to the knowledge of the Company, Vivelle has granted or is obligated under any option, right of first offer, right of first refusal or other contractual right to purchase, acquire, sell or dispose of the real property listed in Section 3.12(b) of the Company Disclosure Letter or any portion thereof or interest therein.

SECTION 3.13.   Contracts.    (a)  Except for this Agreement and for the Contracts disclosed in the Filed Company SEC Documents, Section 3.13(a) of the Company Disclosure Letter sets forth a true and complete list, as of the date of this Agreement, and the Company has made available to Parent true and complete copies, of each Contract to which the Company, any Company Subsidiary or, in the case of clauses (v), (viii), (xi) and (xiv), to the knowledge of the Company, Vivelle is a party or by which any of their respective properties or assets are bound: