Agreement and Plan of Merger

EXHIBIT 2.1

Agreement and Plan of Merger

dated as of February 20, 2008

among

Pfizer Inc.,

Explorer Acquisition Corp.

and

Encysive Pharmaceuticals Inc.

Table of Contents

		Page
ARTICLE 1 THE OFFER AND THE MERGER			1
SECTION 1.1 The Offer			1
SECTION 1.2 Company Actions			3
SECTION 1.3 The Merger			4
SECTION 1.4 Effects of the Merger			4
SECTION 1.5 Closing			5
SECTION 1.6 Consummation of the Merger			5
SECTION 1.7 Organizational Documents; Directors and Officers			5
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES			5
SECTION 2.1 Conversion of Merger Sub Capital Stock			5
SECTION 2.2 Conversion of Company Common Stock			6
SECTION 2.3 Exchange of Certificates			7
SECTION 2.4 Company Options; Phantom Units; Restricted Stock			8
SECTION 2.5 Warrants			10
SECTION 2.6 Taking of Necessary Action; Further Action			10
SECTION 2.7 Option to Acquire Additional Shares			10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY			11
SECTION 3.1 Organization			11
SECTION 3.2 Capitalization			13
SECTION 3.3 Authorization; No Conflict			14
SECTION 3.4 Subsidiaries			15
SECTION 3.5 SEC Reports and Financial Statements			16
SECTION 3.6 Absence of Material Adverse Changes, etc.			19
SECTION 3.7 Litigation			19
SECTION 3.8 Information Supplied			19
SECTION 3.9 Broker’s or Finder’s Fees			20
SECTION 3.10 Employee Plans			20
SECTION 3.11 Opinion of Financial Advisor			23
SECTION 3.12 Taxes			23
SECTION 3.13 Environmental Matters			26
SECTION 3.14 Regulatory Compliance			27
SECTION 3.15 Intellectual Property			30
SECTION 3.16 Employment Matters			33
SECTION 3.17 Insurance			33
SECTION 3.18 Material Contracts			34
SECTION 3.19 Rights Agreement			36
SECTION 3.20 Real Property			36

		Page
SECTION 3.21 Liquidated Damages Event			37
SECTION 3.22 State Takeover Statutes			37
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB			37
SECTION 4.1 Organization			37
SECTION 4.2 Merger Sub; Ownership of Shares			37
SECTION 4.3 Authorization; No Conflict			38
SECTION 4.4 Information Supplied			39
SECTION 4.5 Availability of Funds			39
SECTION 4.6 Broker’s or Finder’s Fees			39
SECTION 4.7 No Additional Representations			39
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER			40
SECTION 5.1 Conduct of Business by the Company Pending the Merger			40
ARTICLE 6 ADDITIONAL AGREEMENTS			43
SECTION 6.1 Preparation of Proxy Statement; Stockholders Meetings			43
SECTION 6.2 Employee Benefit Matters			44
SECTION 6.3 Antitrust Filings			46
SECTION 6.4 Public Statements			46
SECTION 6.5 Standard of Efforts			46
SECTION 6.6 Notification of Certain Matters			48
SECTION 6.7 Access to Information; Confidentiality			48
SECTION 6.8 No Solicitation			49
SECTION 6.9 Indemnification and Insurance			52
SECTION 6.10 Section 16 Matters			53
SECTION 6.11 Directors			53
SECTION 6.12 Warrants; Notes			54
ARTICLE 7 CONDITIONS			55
SECTION 7.1 Conditions to Each Party’s Obligation To Effect the Merger			55
SECTION 7.2 Conditions to Obligations of Parent and Merger Sub			55
ARTICLE 8 TAX MATTERS			55
SECTION 8.1 Cooperation on Tax Matters			55
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER			56
SECTION 9.1 Termination			56
SECTION 9.2 Effect of Termination			57
SECTION 9.3 Fees and Expenses			58

		Page
SECTION 9.4 Amendment			59
SECTION 9.5 Waiver			59
ARTICLE 10 GENERAL PROVISIONS			59
SECTION 10.1 Notices			59
SECTION 10.2 Representations and Warranties			60
SECTION 10.3 Knowledge Qualifiers			60
SECTION 10.4 Interpretations			60
SECTION 10.5 Governing Law; Jurisdiction; Waiver of Jury Trial			60
SECTION 10.6 Counterparts; Facsimile Transmission of Signatures			61
SECTION 10.7 Assignment; No Third Party Beneficiaries			61
SECTION 10.8 Severability			61
SECTION 10.9 Entire Agreement			61
SECTION 10.10 Parent Guarantee			62
SECTION 10.11 Enforcement			62

Defined Terms

Agreement and Plan of Merger (this “ Agreement ”), dated as of February 20, 2008, among Pfizer Inc. , a Delaware corporation (“ Parent ”), Explorer Acquisition Corp. , a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), and Encysive Pharmaceuticals Inc. , a Delaware corporation (the “ Company ”).

Introduction

          The respective Boards of Directors of Parent, 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.

          In furtherance of such acquisition, Parent has agreed to cause Merger Sub to commence a tender offer (as it may be amended from time to time as permitted under this Agreement, the “ Offer ”) to purchase all the shares of common stock, par value $0.005 per share, of the Company (the “ Company Common Stock ”), including the associated Rights, issued and outstanding (each, a “ Share ” and, collectively, the “ Shares ”), at a price per Share of $2.35 (such amount, or any other amount per Share paid pursuant to the Offer and this Agreement, the “ Offer Price ”), subject to any required withholding of Taxes, net to the seller in cash, on the terms and subject to the conditions set forth in this Agreement.

          Following consummation of the Offer, the parties intend that Merger Sub will be merged with and into the Company (the “ Merger ”), with the Company surviving the Merger as a wholly owned subsidiary of Parent in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”), and each Share that is not tendered and accepted pursuant to the Offer, other than certain Shares as provided in Sections 2.2(b) and (c), will thereupon be cancelled and converted into the right to receive cash in an amount equal to the Offer Price, on the terms and subject to the conditions set forth herein.

          The respective Boards of Directors of Parent, Merger Sub and the Company have approved this Agreement and the Transactions, including the Offer and the Merger, on the terms and subject to the conditions set forth herein.

          In consideration of the foregoing and of the representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as follows:

ARTICLE 1
THE OFFER AND THE MERGER

          SECTION 1.1 The Offer . (a) Provided that (1) none of the events or circumstances set forth in paragraphs (a) through (g) of Annex A hereto shall have occurred and be existing (and shall not have been waived by Merger Sub) and (2) the Company shall have complied in all material respects with its obligations under Section 1.2, as promptly as reasonably practicable, but in no event later than ten (10) business days (as defined in Rule 14d-1(g)(3) promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) after the date of this Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, commence the Offer

within the meaning of the applicable rules and regulations of the SEC. The obligations of Merger Sub to, and of Parent 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 conditions set forth in Annex A. The initial expiration date of the Offer shall be the 20th business day following the commencement of the Offer (determined using Exchange Act Rule 14d-1(g)(3)). Merger Sub expressly reserves the right to waive any condition to the Offer, to increase the price per Share payable in the Offer and/or to modify the other 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 the Minimum Tender Condition (as defined in Annex A), (iv) add to the conditions set forth in Annex A or modify any condition set forth in Annex A in a manner adverse to the holders of Company Common Stock, (v) extend the Offer (except as provided below), (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, extend the Offer (i) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer, (ii) if at the scheduled expiration date of the Offer, any of the conditions set forth in Annex A shall not have been satisfied or waived, for one (1) or more periods of not more than ten (10) business days each, until such time as such conditions are satisfied or waived, or (iii) for one (1) or more periods for an aggregate period of not more than twenty (20) business days beyond the latest expiration date that would otherwise be permitted if, on such expiration date, there shall not have been tendered and not withdrawn that number of Shares that, together with any Shares then owned by Parent, would equal ninety percent (90%) or more of the issued and outstanding Shares; provided that if Merger Sub shall extend the offer pursuant to this clause (iii), Merger Sub shall waive during such extension all conditions set forth in Annex A other than the Minimum Tender Condition, the Regulatory Condition and the conditions set forth in paragraphs (a), (b) and (f) therein. In addition, subject to Parent’s right to terminate this Agreement pursuant to Section 9.1, (i) if at the initially scheduled expiration date of the Offer, any one or more of the Minimum Tender Condition, the Regulatory Condition or the conditions set forth in paragraphs (a), (b), (e) or (f) of Annex A are not satisfied, at the request of the Company Merger Sub shall, and Parent shall cause Merger Sub to, extend the offer one (1) time for a period of up to ten (10) business days and (ii) if at any extended expiration date of the Offer, the Regulatory Condition or the conditions set forth in paragraphs (e) or (f) of Annex A are not satisfied, at the request of the Company Merger Sub shall, and Parent shall cause Merger Sub to, extend the Offer for increments of not more than ten (10) business days each until such time as such conditions are satisfied or waived; provided that Merger Sub shall not be required to extend the Offer beyond the Outside Date. Further, Merger Sub may, without the consent of the Company, make available a “subsequent offering period”, in accordance with Rule 14d-11 promulgated by the SEC under the Exchange Act, for up to twenty (20) business days. On the terms and subject to the conditions of the Offer and this Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, pay for all Shares validly tendered and not withdrawn pursuant to the Offer that Merger Sub becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. For the avoidance of doubt, the parties hereto agree that shares of Restricted Stock may be tendered in the Offer and be acquired by Parent or Merger Sub pursuant to the Offer.

          (b) On the date of commencement of the Offer, Parent 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 promptly provide Parent with all information concerning the Company that is required to be included in the Offer Documents. Each of Parent, 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 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 holders of Company Common Stock, in each case as and to the extent required by applicable Federal securities Laws. The Company and its counsel shall be given a reasonable opportunity to review and comment upon the Offer Documents before they are filed with the SEC and disseminated to stockholders. Parent and Merger Sub shall provide the Company and its counsel in writing with any comments Parent, 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, shall consult with the Company and its counsel prior to responding to any such comments and shall provide the Company with copies of all such responses.

          (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.

          SECTION 1.2 Company Actions . The Company hereby approves of and consents to the Offer, the Merger and the other transactions contemplated by this Agreement (collectively, the “ Transactions ”). The Company represents and warrants that the Board of Directors of the Company (the “ Company Board ”), at a meeting duly called and held, has unanimously (i) approved and declared advisable this Agreement and the Transactions, including the Offer and the Merger (such approval having been made in accordance with the DGCL, including for purposes of Section 203 thereof), and (ii) resolved to recommend that stockholders of the Company accept the Offer, tender their Shares to Merger Sub pursuant thereto and adopt this Agreement. Subject to Section 6.8(c), the Company shall, through the Company Board, recommend that stockholders of the Company accept the Offer, tender their Shares to Merger Sub pursuant thereto and adopt this Agreement. The Company hereby consents to the inclusion in the Offer Documents of the recommendation of the Company Board described above. The Company also represents and warrants that (A) the Company Board has received the opinion of Morgan Stanley & Co. Incorporated (the “ Company Financial Advisor ”), dated the date of this Agreement, to the effect that, as of such date, and subject to the various assumptions and qualifications set forth therein, the consideration to be received by the Company’s stockholders in the Offer and the Merger is fair to such holders from a financial point of view and (B) the Company has been authorized by the Company Financial Advisor to permit the inclusion of such opinion and/or references thereto in the Offer Documents and, together with a description of the material financial analyses underlying such opinion, in the Schedule 14D-9 and any Proxy Statement, subject to prior review and consent by the Company Financial Advisor (such consent not to be unreasonably withheld or delayed). Further, the Company represents and warrants that

it has been informed that all directors and executive officers of the Company intend to tender all of their respective Shares, if any, in the Offer and that the Offer Documents may so state.

          (a) 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 ”) describing the recommendations referred to in Section 1.2(a) and shall mail the Schedule 14D-9 to the holders of Shares. Each of the Company, Parent 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 holders of Company Common Stock, in each case as and to the extent required by applicable Federal securities Laws. Parent and its counsel shall be given a reasonable opportunity to review and comment upon the Schedule 14D-9 before it is filed with the SEC and disseminated to holders of Shares. 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, shall consult with Parent and its counsel prior to responding to any such comments and shall provide Parent with copies of all such responses.

          (b) In connection with the Offer, the Company shall instruct its transfer agent to furnish Merger 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 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 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, Parent 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.

          SECTION 1.3 The Merger . At the Effective Time, in accordance with this Agreement and the DGCL, Merger Sub shall be merged with and into the Company, the separate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation. For purposes of this Agreement, (i) the corporation surviving the Merger after the Effective Time may be referred to as the “ Surviving Corporation ” and (ii) the Company and Merger Sub are collectively referred to as the “ Constituent Corporations ”.

          SECTION 1.4 Effects of the Merger . The Merger shall have the effects set forth in Section 259 of the DGCL.

          SECTION 1.5 Closing . The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m. (East Coast time) on a date to be specified by the parties, which shall be no later than the second business day after satisfaction or (to the extent permitted by applicable Law) waiver of the conditions set forth in Article 7 (other than any such conditions which by their nature cannot be satisfied until the Closing Date, which shall be required to be so satisfied or (to the extent permitted by applicable Law) waived on the Closing Date), at the offices of Covington & Burling LLP, 620 Eighth Avenue, New York, New York 10018, unless another time, date or place is agreed to in writing by the parties hereto (such date upon which the Closing occurs, the “ Closing Date ”).

          SECTION 1.6 Consummation of the Merger . As soon as practicable after the Closing, the parties hereto shall cause the Merger to be consummated by filing 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 ”) in such form as required by, and executed in accordance with, the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with such Secretary of State, or at such later time as Parent and the Company shall agree and specify in the Certificate of Merger (the time and date the Merger becomes effective being the “ Effective Time ” and “ Effective Date ”, respectively).

          SECTION 1.7 Organizational Documents; Directors and Officers .

          (a) The certificate of incorporation of the Company as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein and under the DGCL. The By-laws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided therein and under the DGCL. The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall serve until the earlier of their resignation or removal or their respective successors are duly elected or appointed and qualified, as the case may be. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall serve until the earlier of their resignation or removal or until their respective successors have been duly elected or appointed and qualified, as the case may be.

          (b) If requested by Parent prior to the Effective Time, the Company shall use its commercially reasonable efforts to cause the directors of each of the Company Subsidiaries (or certain of the Company Subsidiaries as indicated by Parent) to tender their resignations as directors, effective as of the Effective Time and to deliver to Parent written evidence of such resignations at the Effective Time.

ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

          SECTION 2.1 Conversion of Merger Sub Capital Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or any holder of shares of Merger Sub capital stock, each share of Merger Sub capital

stock shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.005 per share, of the Surviving Corporation.

          SECTION 2.2 Conversion of Company Common Stock . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or any holder of Shares:

          (a) Each Share issued and outstanding immediately prior to the Effective Time (other than (i) any Shares to be canceled pursuant to Section 2.2(b) and (ii) any Appraisal Shares) shall be canceled and shall be converted automatically into the right to receive the highest price per Share paid pursuant to the Offer (the “ Merger Consideration ”). As of the Effective Time, all such Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration upon surrender of such certificate in accordance with Section 2.3, without interest.

          (b) Each Share held in the treasury of the Company and each Share owned by Merger Sub, Parent or any wholly-owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be canceled without any conversion thereof and no payment or distribution shall be made with respect thereto.

          (c) Appraisal Rights . Notwithstanding anything in this Agreement to the contrary, Shares 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 Shares (“ Appraisal Shares ”) pursuant to, and who complies in all respects with, Section 262 of the DGCL (“ Section 262 ”) shall not be converted into the right to receive Merger Consideration as provided in Section 2.2(a), but rather the holders of Appraisal Shares shall be entitled to payment of the fair value of such Appraisal Shares in accordance with Section 262 (and at the Effective Time, such Appraisal Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and such holders shall cease to have any right with respect thereto, except the right to receive the fair 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, Merger Consideration as provided in Section 2.2(a). 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 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. Any portion of the Merger Consideration made available by the Exchange Agent pursuant to Section 2.3(a) to pay for Appraisal Shares shall be returned to Parent upon demand.

          SECTION 2.3 Exchange of Certificates .

          (a) Exchange Agent . Prior to the Effective Time, Parent shall enter into an agreement with such bank or trust company as may be designated by Parent and reasonably acceptable to the Company (the “ Exchange Agent ”), which shall provide for the payment of Merger Consideration in accordance with the terms of this Section 2.3. Parent shall, or shall take all steps necessary to enable and cause the Surviving Corporation to, deposit with the Exchange Agent as of the Effective Time, for the benefit of the holders of Shares, for payment by the Exchange Agent in accordance with this Article 2, the cash necessary to pay for the Shares converted into the right to receive Merger Consideration (the “ Exchange Fund ”). The Exchange Fund shall not be used for any other purpose. Such aggregate Merger Consideration deposited with the Exchange Agent shall, pending its disbursement to such holders, be invested by the Exchange Agent as directed by Parent. Any net profit resulting from, or interest or income produced by, such amounts on deposit with the Exchange Agent will be payable to Parent or as Parent otherwise directs.

          (b) Exchange Procedures . As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Shares (the “ Certificates ”) whose shares were converted into the right to receive the Merger Consideration pursuant to Section 2.2, (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 Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in surrendering the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Exchange Agent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall receive in exchange therefor the amount of cash which the Shares theretofore represented by such Certificate entitle such holder to receive pursuant to the provisions of this Article 2 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 issuance 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. Each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon surrender in accordance with this Section 2.3 the Merger Consideration into which the Shares shall have been converted pursuant to Section 2.2. No interest shall be paid or shall accrue on any cash payable to holders of Certificates pursuant to the provisions of this Article 2.

          (c) No Further Ownership Rights in Company Common Stock . The Merger Consideration paid upon the surrender for exchange of Certificates in accordance with the terms of this Article 2 shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares theretofore represented by such Certificates, subject , however , to the Surviving Corporation’s obligation to pay any dividends or make any other distributions with a record date prior to the Effective Time that may have been declared or made by the Company on such Shares

in accordance with the terms of this Agreement or prior to the date of this Agreement and that remain unpaid at the Effective Time, and there shall be no further registration of transfers on the stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this Article 2, except as otherwise provided by Law.

          (d) Termination of Exchange Fund . Any portion of the Exchange Fund that remains undistributed to the holders of Certificates for 180 days after the Effective Time shall be delivered to Parent, upon demand, and any holders of Certificates who have not theretofore complied with this Article 2 shall thereafter look only to Parent (subject to abandoned property, escheat or similar Laws, as general creditors thereof) for payment of their claim for Merger Consideration.

          (e) No Liability . None of Parent, Merger Sub, the Company or the Exchange 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 shall not have been surrendered prior to such date on which any amounts payable pursuant to this Article 2 would otherwise escheat to or become the property of any Governmental Authority (as defined in Section 3.3(c)), any such amounts 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.

          (f) Lost Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto pursuant to this Agreement.

          (g) Withholding Rights . Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the applicable Tax Law. To the extent that amounts are so withheld by the Parent and paid to the appropriate Taxing Authorities, 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 the Parent.

          SECTION 2.4 Company Options; Phantom Units; Restricted Stock .

          (a) Prior to the Effective Time, the Company shall take all actions necessary to provide that each Option outstanding immediately prior to the Effective Time (whether or not then vested or exercisable) shall be cancelled and terminated and converted at the Effective Time into the right to receive a cash amount equal to the Option Consideration for each share of Company Common Stock then subject to the Option, or, if the Option Consideration shall be a

negative number, no such cash payment shall be due and owing. Except as otherwise provided below, any Option Consideration due and owing shall be paid as soon after the Closing Date as shall be practicable. Notwithstanding the foregoing, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any Option Consideration otherwise payable such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law. Prior to the Effective Time, the Company shall make any amendments to the terms of the Stock Plans and obtain any consents from holders of Options that, in each case, are necessary to give effect to the transactions contemplated by this Section 2.4 and, notwithstanding anything to the contrary, payment may be withheld in respect of any Option until any necessary consents are obtained. Prior to the Effective Time, the Company shall take all actions necessary to terminate all its Stock Plans, such termination to be effective at or before the Effective Time. For purposes of this Agreement, “ Option Consideration ” means, with respect to any share of Company Common Stock issuable under a particular Option, an amount equal to (i) the Merger Consideration per Share less (ii) the exercise price payable in respect of each share of Company Common Stock issuable under such Option; “ Options ” means any option granted, and, immediately before the Effective Time not exercised, expired or terminated, to a current or former employee, director or independent contractor of the Company or any of the Company Subsidiaries or any former subsidiary of the Company or predecessor thereof to purchase shares of Company Common Stock pursuant to the Stock Plans; and “ Stock Plans ” means the Company’s Amended and Restated 1990 Incentive Stock Option Plan, Amended and Restated 1992 Incentive Stock Option Plan, Amended and Restated 1995 Stock Option Plan, Amended and Restated 1995 Non-Employee Director Stock Option Plan, Amended and Restated 1999 Stock Incentive Plan and 2007 Incentive Plan, as amended.

          (b) As soon as practicable following the date of this Agreement, the Company Board (or, if appropriate, any committee thereof administering the Stock Plans) shall adopt such resolutions or take such other actions as may be required, if any, so that, subject to the terms of the Stock Plans and the grants thereunder (i) each Phantom Unit shall become fully vested and deemed earned in full effective as of the day immediately preceding the date of acceptance for payment of the shares of Company Common Stock pursuant to the Offer, (ii) each holder of a Phantom Unit shall thereafter become entitled to receive in cash (subject to amounts required to be withheld by Law), within 30 days of the day immediately preceding the date of acceptance for payment of the shares of Common Stock pursuant to the Offer, the amount payable thereunder to the holder thereof pursuant the terms of such Phantom Unit and the related Stock Plan under which it was granted and (iii) any forfeiture provisions applicable to the Phantom Units shall lapse as of the acceptance for payment of shares of Company Common Stock pursuant to the Offer. As used in this Agreement, “ Phantom Unit ” means an award, other than an Option or Restricted Stock, granted and, immediately before the date specified in clause (b)(i) above, not paid or terminated to a current or former employee, director or independent contractor of the Company or any of the Company Subsidiaries or any former subsidiary of the Company or predecessor thereof pursuant to the Stock Plans for which the value of a Share of Company Common Stock is used to measure the benefits payable to the grantee of such award.

          (c) As soon as practicable following the date of this Agreement, the Company Board (or, if appropriate, any committee thereof administering the Stock Plans) shall adopt such resolutions or take such other actions as may be required to provide for the lapse as of the

acceptance for payment of shares of Company Common Stock pursuant to the Offer of all forfeiture provisions applicable to any shares of Restricted Stock and to permit cashless or net vesting of such shares of Restricted Stock. Each holder of Restricted Stock shall be treated as a holder of the corresponding number of shares of Company Common Stock as of the acceptance for payment of shares of Company Common Stock pursuant to the Offer in accordance with the terms of Section 2.2 in the same manner as other outstanding shares of Company Common Stock issued and outstanding as of immediately prior to the acceptance for payment of shares of Company Common Stock pursuant to the Offer. As used in this Agreement, “ Restricted Stock ” means any award of restricted Company Common Stock outstanding immediately before the Effective Time with respect to which the restrictions have not lapsed, and which award shall not have previously expired or terminated, to a current or former employee, director or independent contractor of the Company or any of the Company Subsidiaries or any predecessor thereof pursuant to any applicable Stock Plan or any other contract or agreement entered into by the Company or any of the Company Subsidiaries.

          SECTION 2.5 Warrants . At the Effective Time and subject to Section 6.12, each outstanding Warrant of the Company shall be converted into the right to receive, upon exercise of such Warrant and payment of the exercise price thereof, an amount equal to the product of (x) the number of shares of Company Common Stock for which such Warrant may be exercised and (y) the Merger Consideration. As used in this Agreement, “ Warrant ” means a Common Stock Purchase Warrant issued by the Company pursuant to the Securities Purchase Agreement dated as of August 20, 2007.

          SECTION 2.6 Taking of Necessary Action; Further Action . Each of Parent, Merger Sub and the Company shall use commercially reasonable efforts to take all such actions as may be necessary or appropriate in order to effectuate the Merger under the DGCL as promptly as commercially practicable. If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of either of the Constituent Corporations, the officers and directors of the Surviving Corporation are fully authorized in the name of each Constituent Corporation or otherwise to take, and shall take, all such lawful and necessary action.

          SECTION 2.7 Option to Acquire Additional Shares . The Company hereby grants to Merger Sub an option (the “ Top-Up Option ”), exercisable in accordance with this Section 2.7, to purchase up to that number of newly issued shares of Company Common Stock (the “ Top-Up Option Shares ”) equal to the number of shares that, when added to the number of Shares owned by Parent and its subsidiaries immediately following consummation of the Offer, shall constitute one share more than 90% of the Shares then outstanding (after giving effect to the issuance of the Top-Up Option Shares) for a cash purchase price per Top-Up Option Share equal to the Offer Price; provided , however , that the number of Top-Up Option Shares shall not exceed the number equal to 19.9% of the Shares outstanding immediately prior to the issuance of the Top-Up Option Shares. The Top-Up Option may be exercised by Merger Sub at any one time before the Effective Time within thirty (30) business days after Merger Sub’s acceptance of, and payment for Shares pursuant to the Offer in accordance with the terms of this Agreement. If Merger Sub wishes to so exercise the Top-Up Option, Merger Sub shall give the Company written notice within such thirty (30)-business day period specifying the number of shares of

Company Common Stock that Merger Sub wishes to purchase pursuant to the Top-Up Option and a place and a time (which, subject to applicable Law and any required regulatory approvals, shall be at least two (2), but not more than five (5), business days after the date of delivery of such written notice) for the closing of such purchase. At such closing, (i) the purchase price in respect of such exercise of the Top-Up Option (which shall equal the product of (x) the number of shares of Company Common Stock being purchased pursuant to the Top-Up Option and (y) the Offer Price) shall be paid to the Company in immediately available funds by wire transfer to an account designated by the Company, and (ii) the Company shall deliver to Merger Sub a certificate or certificates representing the number of shares of Company Common Stock so purchased. The Company agrees that it shall reserve (and maintain free from preemptive rights) sufficient authorized but unissued shares of Common Stock so that the Top-Up Option may be exercised without additional authorization of shares of Company Common Stock (after giving effect to all other options, warrants, convertible securities and other rights to purchase shares of Company Common Stock). Merger Sub shall acquire the Top-Up Option Shares for investment purposes only and not with a view to any distribution thereof, and will not sell any Top-Up Option Shares purchased pursuant to this Section except in compliance with the Securities Act of 1933, as amended.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth on the disclosure letter (each section of which qualifies the correspondingly numbered representation and warranty or covenant to the extent specified therein, provided that any disclosure set forth with respect to any particular section shall be deemed to be disclosed in reference to other applicable sections of this Agreement to the extent it is reasonably apparent from a reading of the disclosure that such disclosure is applicable to such other sections) previously delivered by the Company to Parent (the “ Company Disclosure Letter ”), the Company hereby represents and warrants to Parent and Merger Sub as follows:

SECTION 3.1 Organization .

     (a) Each of the Company and the Company Subsidiaries is a corporation, limited liability company or limited partnership duly organized, validly existing and, where applicable, in good standing under the laws of the jurisdiction of its organization. Each of the Company and the Company Subsidiaries has all requisite power and authority necessary to enable it to own, operate and lease its properties and to carry on its business as now conducted. Each of the Company and the Company Subsidiaries possesses all licenses, franchises, permits, certificates, approvals and authorizations from Governmental Authorities, or required by Governmental Authorities to be obtained, in each case necessary for the lawful conduct of their respective businesses as now conducted, the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect (collectively, “ Permits ”). A “ Company Material Adverse Effect ” means any change, event, occurrence or development of a state of facts that, individually or in the aggregate with all other changes, events, occurrences or developments of a state of facts, is materially adverse to, (i) the business, operations, properties, assets, liabilities (contingent or otherwise), financial condition or results of operations of the Company and the Company Subsidiaries considered as a single enterprise or (ii) the ability of the Company to perform its obligations under this Agreement in

accordance with its terms or to consummate the Transactions; provided , however , that no event, change, occurrence or development of a state of facts shall be included in the definition of Company Material Adverse Effect that (A) arises out of general political, economic or market conditions or general changes or developments in the biotechnology or pharmaceutical industry or affecting participants in the biotechnology or pharmaceutical industry (provided that such adverse effect does not affect the Company or any Company Subsidiaries, taken as a whole, in a disproportionate manner), (B) results from or is caused by acts of terrorism or war (whether or not declared) or natural disasters occurring after the date hereof (provided that such adverse effect does not affect the Company or any Company Subsidiaries, taken as a whole, in a disproportionate manner), (C) arises out of, results from or relate to the Transactions or the announcement or performance thereof (including any negative impact on relationships with employees of the Company or the Company Subsidiaries as a result of the announcement or performance of this Agreement), provided that any legal or contractual consequence of the execution of this Agreement or the consummation of the Transactions that has not been disclosed to Parent in this Agreement or the Company Disclosure Letter shall not be excluded under this proviso, (D) results from changes in Law (after the date hereof) or any applicable accounting regulations or principles or the interpretations thereof, (E) results from changes in the price or trading volume of the Company’s stock (provided that any event, change, occurrence or development of a state of facts that may have caused or contributed to such change in market price or trading volume shall not be excluded under this proviso) (F) results from any failure by the Company to meet revenue, earnings or other projections, in and of itself (provided that any event, change, occurrence or development of a state of facts that may have caused or contributed to such failure to meet published revenue, earnings or other projections shall not be excluded under this proviso) or (G) results from a delisting warning or delisting of the Company Common Stock on the Nasdaq Stock Market due to the closing price per share falling below the $1.00 minimum bid price.

          (b) The copies of the certificate of incorporation and bylaws of the Company (the “ Company Charter Documents ”) which are incorporated by reference as exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 are complete and correct copies of such documents and contain all amendments thereto as in effect on the date of this Agreement. The Company has delivered or made available to Parent complete and correct copies of the certificate of incorporation and by-laws (or comparable organizational documents) of each of the Company Subsidiaries (the “ Subsidiary Documents ”), in each case, as amended to the date of this Agreement. All such Company Charter Documents and Subsidiary Documents are in full force and effect and neither the Company nor any of the Company Subsidiaries is in violation of any of their respective provisions. The Company has made available to Parent correct and complete copies of the minutes (or, in the case of minutes that have not yet been finalized, a brief summary of the meeting) of all meetings of stockholders, the Company Board and each committee of the Company Board and the Company Subsidiaries since January 1, 2005; provided that the Company shall not be obligated to furnish to Parent any minutes for meetings that only discuss the Transactions or alternative transactions considered by the Company Board.

          SECTION 3.2 Capitalization .

          (a) The authorized capital stock of the Company consists of (i) 150,000,000 shares of Company Common Stock and (ii) 5,000,000 shares of preferred stock, par value $0.005 per share, (“ Company Preferred Stock ”). As of the close of business on February 15, 2008: (A) 81,175,765 shares of Company Common Stock were issued and 80,962,765 shares of Company Common Stock were outstanding, including in each case the associated Preferred Share Purchase Rights (the “ Rights ”) issued pursuant to the Rights Agreement dated as of January 2, 2002 between the Company and The Bank of New York, as Rights Agent (the “ Rights Agreement ”); (B) no shares of Company Preferred Stock were issued or outstanding and 10,000 shares of Junior Participating Series A Company Preferred Stock were reserved for issuance upon exercise of the Rights under the Rights Agreement; (C) 213,000 shares of Company Common Stock were held by the Company in its treasury; (D) there were outstanding Options to purchase 5,032,753 shares of Company Common Stock and 7,866,067 shares of Company Common Stock were reserved for issuance under the Stock Plans (including upon exercise of the Options); (E) there were outstanding $130,000,000 in aggregate principal amount of the Company’s 2.50% Convertible Notes due 2012 (the “ Notes ”) convertible into 9,322,001 shares of Company Common Stock and such number of shares of Company Common Stock were reserved for issuance upon conversion of the Notes; and (F) there were outstanding Warrants exercisable for 7,692,305 shares of Company Common Stock and such number of shares of Company Common Stock were reserved for issuance upon conversion of the Warrants. Such issued and outstanding shares of Company Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, and are free of preemptive rights. Section 3.2(a) of the Company Disclosure Letter sets forth, as of the close of business on February 15, 2008, each outstanding option, warrant or other right to subscribe for, purchase or acquire from the Company any capital stock of the Company or securities convertible into or exchangeable for capital stock of the Company, including the name of the holder thereof, the stock plan under which it was issued, the date of grant and exercise price thereof, and the vesting schedule thereof. Except for the Phantom Units described on Section 3.2(a) of the Company Disclosure Letter, there are no outstanding or authorized stock appreciation rights, phantom stock awards or other rights that are linked in any way to the price of the Company Common Stock or the value of the Company or any part thereof. During the period from February 15, 2008 to the date of this Agreement, (i) the Company has not issued any shares of its capital stock, options, warrants voting securities or equity interests, or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, options, warrants, voting securities or equity interests. The Company has not, subsequent to February 15, 2008, declared or paid any dividend, or declared or made any distribution on, or authorized the creation or issuance of, or issued, or authorized or effected any split-up or any other recapitalization of, any of its capital stock, or directly or indirectly redeemed, purchased or otherwise acquired any of its outstanding capital stock. The Company has not heretofore agreed to take any such action, and there are no outstanding contractual obligations of the Company of any kind to redeem, purchase or otherwise acquire any outstanding shares of capital stock of the Company. Other than the Company Common Stock, there are no outstanding bonds, debentures, notes or other indebtedness or securities of the Company having the right to vote (or, other than the outstanding Options, Rights, Notes and Warrants, convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote.

          (b) Except as set forth in Section 3.2(a) and for Company Preferred Stock issuable upon exercise of the Rights, (i) as of February 15, 2008, no shares of capital stock or other voting securities of the Company are issued, reserved for issuance or outstanding, and (ii) there are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which the Company or any of the Company Subsidiaries is a party or by which any of them is bound obligating the Company or any of the Company Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities or equity interests of the Company or of any of the Company Subsidiaries or obligating the Company or any of the Company Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking.

          (c) The Compensation Committee of the Company’s Board of Directors, consisting solely of independent directors, has taken all such actions as may be required to cause to be exempted under Rule 14d-10(d)(2) under the Exchange Act, any and all employment compensation, severance and employee benefit agreements and arrangements that have been entered into or granted by the Company or any Company Subsidiary with or to current or future directors, officers, or employees of the Company and the Company Subsidiaries, to ensure that all such agreements and arrangements satisfy the safe harbor provisions of Rule 14d-10(d)(2) of the Exchange Act. All Options were granted at an exercise price at least equal to the fair market value (within the meaning of Section 409A of the Code) of a share of Company Common Stock on the date of grant and no Option has been extended, amended or repriced since the date of the grant.

          SECTION 3.3 Authorization; No Conflict .

          (a) The Company has the requisite corporate power and authority to enter into and deliver this Agreement and all other agreements and documents contemplated hereby to which it is a party and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the Transactions have been duly authorized and approved by the Company Board. No other corporate proceedings on the part of the Company or any of the Company Subsidiaries are necessary to authorize the execution and delivery of this Agreement, the performance by the Company of its obligations hereunder and the consummation by the Company of the Transactions, except, in the case of the Merger (to the extent required by the DGCL), for the approval of this Agreement by the holders of a majority of the issued and outstanding shares of Company Common Stock (the “ Required Company Stockholder Vote ”). This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or similar Laws of general application affecting or relating to the enforcement of creditors rights generally and equitable principles of general applicability, whether considered in a proceeding at law or in equity (the “ Bankruptcy and Equity Exception ”).

          (b) Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the Transactions nor compliance by the Company with any of the provisions herein will (i) result in a violation or breach of or conflict with the

Company Charter Documents or the Subsidiary Documents, (ii) result in a violation or breach of or conflict with any provisions of, or result in the loss of any benefit under or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation of, or give rise to a right of purchase under, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any Lien (as defined in Section 3.4) upon any of the properties or assets owned or operated by the Company or any Company Subsidiaries under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, contract, lease, agreement or other instrument or obligation of any kind to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or any of their respective properties or assets may be bound or (iii) subject to obtaining or making the consents, approvals, orders, authorizations, registrations, declarations and filings referred to in paragraph (c) below, violate any judgment, ruling, order, writ, injunction or decree of any Governmental Authority (“ Judgment ”) or any statute, code, decree, law, ordinance, rule or regulation or orders of Governmental Authorities (“ Law ”) applicable to the Company or any of the Company Subsidiaries or any of their respective properties or assets, other than any such event described in items (ii) or (iii) which, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect.

          (c) No consent, approval, order or authorization of, or registration, declaration or filing with, any Federal, state, local or foreign governmental or regulatory authority (a “ Governmental Authority ”) is necessary to be obtained or made by the Company or any Company Subsidiary in connection with the Company’s execution, delivery and performance of this Agreement or the consummation by the Company of the Transactions, except for (i) compliance with the DGCL, with respect to the filing of the Certificate of Merger, (ii) compliance with and filings pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and the rules and regulations promulgated thereunder (the “ HSR Act ”) and the foreign competition or antitrust Laws identified on Section 3.3(c)(ii) of the Company Disclosure Letter, (iii) the filing with the SEC of (A) the Schedule 14D-9, (B) if necessary, a proxy statement in definitive form relating to the Company Stockholders Meeting (as defined in Section 6.1(b)) (such proxy statement, as amended or supplemented from time to time, (the “ Proxy Statement ”)) and compliance with other applicable requirements of the Exchange Act, (C) any information statement required by Rule 14f-1 promulgated by the SEC under the Exchange Act (the “ Information Statement ”) in connection with the Offer and (D) such reports under Section 13 or 16 of the Exchange Act and the rules and regulations promulgated thereunder, as may be required in connection with this Agreement and the Transactions, (iv) compliance with the rules of The Nasdaq Stock Market Inc. (“ Nasdaq ”), and (v) compliance with the “blue sky” laws of various states, other than such other consents, approvals, orders, authorizations, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation of the Transactions.

          SECTION 3.4 Subsidiaries .

          (a) All of the subsidiaries of the Company (each a “ Company Subsidiary ” and together, the “ Company Subsidiaries ”) and their respective jurisdictions of organization are identified in Section 3.4(a) of the Company Disclosure Letter. Other than the Company

Subsidiaries, the Company does not own or control, directly or indirectly, any membership interest, partnership interest, joint venture interest, other equity interest or any other capital stock of any Person and there are no silent partnerships, sub-partnerships and/or similar rights with respect to the Company or any Company Subsidiary. As used in this Agreement, “ Person” means an individual, corporation, partnership, limited partnership, joint venture, association, trust, unincorporated organization, limited liability company or other entity.

          (b) All of the outstanding shares of capital stock or other equity securities of, or other ownership interests in, each Company Subsidiary are, where applicable, duly authorized, validly issued, fully paid and nonassessable, and the Company or a Company Subsidiary is the record and beneficial owner of such shares, securities or interests, free and clear of any Liens or limitations on voting rights. All such shares of capital stock, equity securities and other ownership interests have been duly and validly issued and are fully paid and nonassessable. There are no subscriptions, options, warrants, calls, rights, convertible securities or other agreements or commitments of any character relating to the issuance, transfer, sales, delivery, voting or redemption (including any rights of conversion or exchange under any outstanding security or other instrument) for any of the capital stock or other equity interests of, or other ownership interests in, any Company Subsidiary. There are no agreements requiring the Company or any Company Subsidiary to make contributions to the capital of, or lend or advance funds to, any Company Subsidiary. As used in this Agreement, “ Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest, claim or encumbrance of any kind in respect of such asset.

          SECTION 3.5 SEC Reports and Financial Statements . Since January 1, 2005, the Company has filed with the SEC all forms, reports, schedules, registration statements, definitive proxy statements and other documents (collectively, including all exhibits thereto, the “ Company SEC Reports ” ) required to be filed by the Company with the SEC. As of their respective dates, and giving effect to any amendments or supplements thereto filed prior to the date of this Agreement, the Company SEC Reports complied in all material respects with the requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), the Exchange Act and the Sarbanes-Oxley Act, as the case may be and the respective rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Reports, and none of the Company SEC Reports contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comments received from the SEC Staff with respect to the Company SEC Reports. To the knowledge of the Company, none of the Company SEC Reports is the subject of ongoing SEC review or investigation. None of the Company Subsidiaries is required to file any forms, reports or other documents with the SEC pursuant to Section 13 or 15 of the Exchange Act.

          (a) The consolidated balance sheets and the related consolidated statements of operations, consolidated statements of stockholders’ equity and consolidated statements of cash flows (including, in each case, any related notes and schedules thereto) (collectively, the “ Company Financial Statements ”) of the Company contained in the Company SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in

conformity with United States generally accepted accounting principles (“ GAAP ”) (except, in the case of unaudited statements, as may be noted therein) applied on a consistent basis during the periods involved (except as otherwise noted therein) and present fairly in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and the Company Subsidiaries as of the dates or for the periods presented therein (subject, in the case of unaudited statements, to normal year end adjustments that will not be material in amount or effect). Neither the Company nor any of the Company Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required to be reflected or reserved against on a consolidated balance sheet of the Company prepared in accordance with GAAP or the notes thereto, other than liabilities (i) as and to the extent reflected or reserved against on the audited balance sheet of the Company and the Company Subsidiaries as of December 31, 2006 (including the notes thereto) or any subsequent Company Financial Statement included in the Company SEC Reports or (ii) incurred after December 31, 2006 in the ordinary course of business consistent with past practices and that are not, individually or in the aggregate, material to the Company and the Company Subsidiaries, taken as a whole.

          (b) Neither the Company nor any Company Subsidiary is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract (including any contract or arrangement relating to any transaction or relationship between or among the Company and any of the Company Subsidiaries, on the one hand, and any unconsolidated Affiliate, 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 of the SEC), where the results, purpose or effect of such contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of the Company Subsidiaries in the Company SEC Reports. As used in this Agreement, “ Affiliate ” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

          (c) With respect to each annual report on Form 10-K, each quarterly report on Form 10-Q and each amendment of any such report included in the Company SEC Reports filed since January 1, 2005, the principal executive officer and principal financial officer of the Company (or each former principal executive officer and each former principal financial officer of the Company) have made all certifications required by the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”) and any related rules and regulations promulgated by the SEC and the statements contained in any such certifications are complete and correct.

          (d) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or 15d-15(e) promulgated by the SEC under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company and the Company Subsidiaries required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is made known to the Company’s principal executive officer and its principal financial officer by others within

those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared; and, to the knowledge of the Company, such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and its principal financial officer to material information required to be included in the Company’s periodic reports required under the Exchange Act and 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 SEC rules and forms. The Company’s principal executive officer and its principal financial officer have disclosed, based on their most recent completed evaluation, to the Company’s auditors and the audit committee of the Board of Directors of the Company and to Parent, (x) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data and have identified for the Company’s auditors any material weaknesses in internal controls and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls. To the knowledge of the Company, there are no facts or circumstances that would prevent its chief executive officer and principal financial officer from giving the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.

          (e) To the knowledge of the Company, neither the Company nor any of the Company Subsidiaries nor any director, officer, agent, employee or Affiliate of the Company or any of the Company Subsidiaries is aware of any action, or any allegation of any action, or has taken any action, directly or indirectly, (i) that would constitute a violation by such Persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder the (“ FCPA ”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA, or (ii) that would constitute an offer to pay, a promise to pay or a payment of money or anything else of value, or an authorization of such offer, promise or payment, directly or indirectly, to any employee, agent or representative of another company or entity in the course of their business dealings with the Company or any of the Company Subsidiaries, in order to induce such person to act against the interest of his or her employer or principal.

          (f) The Company has disclosed to Parent all internal investigations, and, to the knowledge of the Company, all external, governmental or other regulatory investigations, in each case regarding any action or any allegation of any action described in subsection (e) of this Section 3.5. To the knowledge of the Company, it also has disclosed to Parent all facts or circumstances that call into question the accuracy of its books and records or the adequacy of the internal controls at the Company or any of the Company Subsidiaries with respect to the actions described in subsection (e) of this Section 3.5.

          (g) The Company and the Company Subsidiaries have instituted and maintained policies and procedures designed to ensure, and which are reasonably expected to ensure, compliance with the FCPA.

          (h) The Company is in compliance in all material respects with all current listing and corporate governance requirements of Nasdaq, and is in compliance in all material respects with all rules, regulations and requirements of the Sarbanes-Oxley Act and the SEC.

          SECTION 3.6 Absence of Material Adverse Changes, etc .

          (a) Since September 30, 2007, the Company and the Company Subsidiaries have conducted their business in the ordinary course of business consistent with past practice and:

     (i) there has not been or occurred any event, change, occurrence or development of a state of facts that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; and

     (ii) neither the Company nor any of the Company Subsidiaries have taken any action described in Section 5.1 hereof (other than (b)(vii), (ix), (x), (xiii), (xv), (xvi) and (xvii) and (b)(xxii) to the extent relating the foregoing) that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of such provision.

          (b) Without limiting the foregoing, except as disclosed in the Available Company SEC Documents, since December 31, 2006, there has not occurred any damage, destruction or loss (whether or not covered by insurance) of any material asset of the Company or any of the Company Subsidiaries that materially affects the use thereof. As used in this Agreement, “ Available Company SEC Documents ” means the reports, schedules, forms, statements and other documents filed by the Company with the SEC or furnished by the Company to the SEC, in each case, prior to the date of this Agreement.

          SECTION 3.7 Litigation . There are no suits, actions, claims or legal, administrative, arbitration or other proceedings or governmental or regulatory investigations pending or, to the knowledge of the Company, threatened, to which the Company or any of the Company Subsidiaries is a party, or, to the knowledge of the Company, that materially affects the assets of the Company or any of the Company Subsidiaries, except where such suits, actions, claims, proceedings or investigations would not reasonably be expected to result in a Judgment for money damages in excess of $250,000 and would not reasonably be expected to result in any material injunctive relief. There are no material Judgments of any Governmental Authority or arbitrator outstanding (or, to the knowledge of the Company, threatened to be imposed) against the Company or any of the Company Subsidiaries.

          SECTION 3.8 Information Supplied . None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in (i) 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 holders of Company Common Stock, 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 in which they are made, not misleading, and (ii) the Proxy Statement (if any) will, at the date it is first mailed to the holders of Company Common Stock or at the time of the Company Stockholders Meeting (if such a meeting is held), 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 or will, at the time of the Company Stockholders Meeting (if such a meeting is held), omit to state any material fact necessary to correct any statement in any earlier communication from the Company with respect to the solicitation of proxies for the Company Stockholders Meeting that shall have become false or misleading in any material respect. The Schedule 14D-9, the Information Statement and the Proxy Statement (if any) will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. No representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub in writing specifically for inclusion or incorporation by reference in the Schedule 14D-9, the Information Statement or the Proxy Statement (if any).

          SECTION 3.9 Broker’s or Finder’s Fees . Except for the Company Financial Advisor, no agent, broker, investment banker, or similar Person or firm acting on behalf of the Company or any Company Subsidiary or under the Company’s or any Company Subsidiary’s authority is or will be entitled to any advisory, commission or broker’s or finder’s fee or similar fee or commission or reimbursement of expenses from any of the parties hereto in connection with any of the Transactions. The Company has heretofore delivered to Parent a complete and correct copy of the Company’s engagement letter with the Company Financial Advisor, which letter describes all fees payable to the Company Financial Advisor in connection with the Transactions, all agreements under which any such fees or any expenses are payable and all indemnification and other agreements related to the engagement of the Company Financial Advisor.

          SECTION 3.10 Employee Plans . (a)   Section 3.10(a)(i) of the Company Disclosure Letter sets forth all Company Employee Benefit Plans. Section 3.10(a)(ii) of the Company Disclosure Letter sets forth a complete and accurate list, as of the date of this Agreement, of all employees of the Company and the Company Subsidiaries, indicating for each employee (to the extent permitted by Law) his or her name, date of hire, position, salary, target bonus, and accrued vacation and sick leave balance, location and status as full time or part time employees. Such information shall be updated in writing and delivered to Parent as of a date within three (3) business days of Closing. As used in this Agreement, “ Company Employee Benefit Plan ” means an Employee Benefit Plan maintained, adopted, sponsored, contributed or required to be contributed to by the Company or any entity with which the Company is considered a single employer under Section 414(b), (c) or (m) of the Code ( “Company ERISA Affiliates ” ) with respect to any current or former employee, officer or director of the Company or any of the Company Subsidiaries or any beneficiary or dependent thereof and under which the Company or any Company ERISA Affiliate would reasonably be expected to have any material liability. As used in this Agreement, “ Employee Benefit Plan ” means any material plan, program, policy, practice, agreement or other arrangement, whether written or unwritten, relating to individual consulting, employment, pension, profit-sharing, bonus, incentive compensation,

deferred compensation, vacation, sick pay, stock purchase, equity-based stock option, phantom equity, severance, supplemental unemployment, hospitalization or other medical, life, or other insurance, long- or short-term disability, change of control, fringe benefit or any other similar employee benefits.

          (b) With respect to each Company Employee Benefit Plan, the Company has made available to Parent a true, correct and complete copy of: (i) each written Company Employee Benefit Plan and all amendments thereto, if any; (ii) the most recent Annual Report (Form 5500 Series) including all applicable schedules, if any; (iii) the current summary plan description and any material modifications thereto, if any, or any written summary provided to participants with respect to any plan for which no summary plan description exists; (iv) the most recent determination letter (or if applicable, advisory or opinion letter) from the Internal Revenue Service, if any; and (v) all material notices given to such Company Employee Benefit Plan, the Company, or any Company ERISA Affiliate by the Internal Revenue Service, Department of Labor, Pension Benefit Guarantee Corporation, the Financial Services Commission of Ontario, the Canada Revenue Agency, or other governmental agency relating to such Company Employee Benefit Plan.

          (c) Each Company Employee Benefit Plan that is intended to be “qualified” within the meaning of Section 401(a) of the Code (“ Qualified Company Employee Benefit Plan ” ) has been the subject of a favorable determination letter (or, if applicable, advisory or opinion letter) from the Internal Revenue Service that has not been revoked (or if not determined to be so qualified, such Company Employee Benefit Plan may still be amended within the remedial amendment period to cure any qualification defect to the extent permitted by Law), and to the Company’s knowledge, no event has occurred and no condition exists that would reasonably be expected to adversely affect the qualified status of any such Company Employee Benefit Plan.

          (d) (i)  Each Company Employee Benefit Plan has been operated and administered in all material respects in accordance with its provisions and in compliance with all applicable provisions of ERISA and the Code and any other applicable Laws; and (ii) all contributions required to be made to any Company Employee Benefit Plan have to the extent material been made or the amount of such payment or contribution obligation has been reflected in the Available Company SEC Documents which are publicly available prior to the date of this Agreement.

          (e) (i)  Neither the Company nor any Company Subsidiary has engaged in any prohibited transaction that will have a material effect on the Company and the Company Subsidiaries, taken as a whole, within the meaning of Section 4975 of the Code or Section 406 of ERISA, as a fiduciary or party in interest with respect to any Company Employee Benefit Plan; and (ii) to the knowledge of the Company, no prohibited transaction has occurred with respect to any Company Employee Benefit Plan.

          (f) Neither the Company nor any Company ERISA Affiliate has, at any time during the last six years, sponsored, contributed to or been obligated to contribute to any pension plan subject to Title IV of ERISA, any “multiemployer plan” (as defined in Section 3(37) of ERISA) or a plan that has two or more contributing sponsors at least two of whom are not under common control (within the meaning of Section 4063 of ERISA).

          (g) No Company Employee Benefit Plan that is a welfare plan within the meaning of Section 3(1) of ERISA provides benefits or coverage following retirement or other termination of employment other than as required by Part 6 of Subtitle B of Title I of ERISA or Section 4980B of the Code or under a similar state Law, or claims incurred on or before the end of the month on or immediately following the termination date of any employee.

          (h) Neither the execution and delivery of this Agreement nor the consummation of the Transactions, either alone or in connection with a subsequent event, will (i) result in any material payment (including without limitation severance, unemployment compensation, bonus or otherwise) becoming due to any director, officer or employee of the Company under any Company Employee Benefit Plan or otherwise, (ii) result in a payment or benefit becoming due to any director, officer or employee of the Company under any Company Employee Benefit Plan or otherwise which will be characterized as an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code that is subject to the imposition of an excise tax under section 4999 of the Code, (iii) materially increase any benefits otherwise payable under any Company Employee Benefit Plan, or (iv) result in the acceleration of the time of payment, funding or vesting of any such benefits to any material extent.

          (i) Each Company Employee Benefit Plan has been operated in good faith compliance with the applicable provisions of Section 409A of the Code, and no benefit provided under such Company Employee Benefit Plan will trigger any reportable transaction under Section 409A of the Code.

          (j) With respect to each non-US Company Employee Benefit Plan (a “ Foreign Plan ”):

     (i) all employer and employee contributions to each Foreign Plan required by law or by the terms of such Foreign Plan have been made, or, if applicable, accrued in accordance with normal accounting practices;

     (ii) each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities;

     (iii) other than routine claims for benefits, no Company Employee Benefit Plan, no administrator of any Company Employee Benefit Plan, and no member of any body which administers a Company Employee Benefit Plan, is subject to any pending action, investigation, examination, claim (including claims for income taxes, interest, penalties, fines or excise taxes) or any other proceeding initiated by any Person, and there exists no state of facts which could reasonably be expected to give rise to any such action, investigation, examination, claim or other proceeding;

     (iv) subject to the requirements of applicable Laws, no provision of any Company Employee Benefit Plan or of any agreement, and no act or omission of the Company in any way limits, impairs, modifies or otherwise affects the right of the Company to unilaterally amend or terminate any Company Employee Benefit Plan, and no commitments to improve or otherwise amend any Company Employee Benefit Plan have been made; and

     (v) No Foreign Plan is, or at any time was, a defined benefit registered pension plan; and

          (k) the Company is not and has not at any time since 27 April 2004 been connected with or an associate of (as those terms are used in the UK Pensions Act 2004) an employer in relation to an occupational pension scheme (as defined in section 1 of the UK Pension Schemes Act 1993 (“ PSA 1993 ”) established in the UK which is not a money purchase scheme (as defined in section 181 of PSA 1993).

          As used in this Agreement, “ Code ” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder, and “ ERISA ” means the Employee Retirement Income Securities Act of 1974, as amended, and the rules and regulations promulgated thereunder.

          SECTION 3.11 Opinion of Financial Advisor . The Company Board has received from the Company Financial Advisor an opinion (the “ Fairness Opinion ”) to the effect that, as of the date of the opinion and subject to the considerations and limitations set forth therein, the consideration to be received by holders of Company Common Stock in the Offer and the Merger is fair, from a financial point of view, to the holders of the Company Common Stock (other than Parent, Merger Sub and their affiliates). The Company has delivered to Parent a correct and complete copy of the Fairness Opinion for informational purposes only and not for reliance by Parent.

          SECTION 3.12 Taxes .

          (a) Each of the Company and each Company Subsidiary has timely filed all material federal, provincial, state, local, municipal, and other Tax Returns required to be filed by it in the manner prescribed by applicable Law and all such Tax Returns are true, complete and correct in all material respects; and all Taxes due and owing (whether or not shown as due on such Tax Returns) have been paid in full and the Company and each Company Subsidiary has made adequate provision (or adequate provision has been made on its behalf) for all accrued Taxes not yet due. The accruals and reserves for Taxes reflected in the Company’s Form 10-K for the fiscal year ended December 31, 2006 are adequate to cover all Taxes accruing through such date. There are no Liens on any of the assets, rights or properties of the Company or any Company Subsidiary with respect to Taxes, (other than Liens for Taxes not yet due and payable or for Taxes that the Company or a Company Subsidiary is contesting in good faith through appropriate proceedings).

          (b) There is no claim, audit, action, suit, proceeding or investigation currently pending or, to the knowledge of the Company threatened against or with respect to the Company or any Company Subsidiary in respect of any Tax or Tax asset of the Company or any Company Subsidiary.

          (c) Neither the Company nor any Company Subsidiary has ever been a party to a “reportable transaction” within the meaning of Treas. Reg. Sec. 1.6011-4(b) or any similar provision of state, local or foreign law.

          (d) Neither the Company nor any Company Subsidiary is a party to any Tax sharing agreement, Tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority).

          (e) The federal income Tax Returns of the Company and the Company Subsidiaries have been examined by and settled with the United States Internal Revenue Service or have expired or otherwise have been closed by virtue of the expiration of the relevant statute of limitations for all taxable periods ending on or before December 31, 2003.

          (f) Neither the Company nor any Company Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company), or (ii) has any liability for the Taxes of any Person (other than the Company or any of the Company Subsidiaries) under Treas. Reg. Sec. 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee of successor, by contract, or otherwise.

          (g) Neither the Company nor any Company Subsidiary currently is the beneficiary of any extension of time within which to file any Tax Return. Neither the Company nor any Company Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (h) Neither the Company nor any Company Subsidiary has been included in any “consolidated”, “unitary” or “combined” Tax Return provided for under the law of the United States, any foreign jurisdiction or any state or locality with respect to Taxes for any taxable period for which the statute of limitations has not expired (other than a group of which the Company and/or any Company Subsidiary are the only members).

          (i) Neither the Company nor any Company Subsidiary has applied for and/or received a ruling or determination from a Tax Authority regarding a past or prospective transaction of the Company or any Company Subsidiary.

          (j) No claim has been made by a Tax Authority in a jurisdiction where the Company or any of the Company Subsidiaries does not file Tax Returns that the Company or any Company Subsidiary is or may be subject to taxation by that jurisdiction.

          (k) Each of the Company a