OPTION AGREEMENT

Option Agreement

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CEPHALON INC | Ception Therapeutics, Inc

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Title: OPTION AGREEMENT
Governing Law: Delaware Date: 5/6/2009
Industry: Biotechnology and Drugs Law Firm: McCarter English;Duane Morris;Sidley Austin Sector: Healthcare

Exhibit 10.3

OPTION AGREEMENT

Dated as of January 13, 2009

between

CEPHALON, INC.

and

CEPTION THERAPEUTICS, INC.

TABLE OF CONTENTS

		Page

ARTICLE I
DEFINITIONS AND INTERPRETATIONS

1.1.	Definitions	2
1.2.	Interpretation	10

ARTICLE II
OPTION TO ACQUIRE THE COMPANY; DELIVERIES

2.1.	Option to Acquire the Company	11
2.2.	Consideration for the Option and Purchase Option	11
2.3.	Optionee’s Deliveries	11
2.4.	The Company’s Deliveries	12
2.5.	Withholding Rights	13
2.6.	Actions Upon Exercise of the Option	13
2.7.	Exercise of Option Pursuant to Purchase Options	15

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

3.1.	Organization and Capitalization of the Company	16
3.2.	Subsidiaries and Investments	18
3.3.	Authority of the Company	18
3.4.	Financial Statements	19
3.5.	Operations Since Balance Sheet Date	20
3.6.	No Undisclosed Liabilities	22
3.7.	Taxes	22
3.8.	Availability of Assets	23
3.9.	Governmental Permits; Regulatory Matters	24
3.10.	Real Property	25
3.11.	Personal Property	26
3.12.	Intellectual Property	26
3.13.	Inventories	31
3.14.	Title to Property	32
3.15.	Employees and Related Agreements; ERISA	32
3.16.	Employee Relations	34
3.17.	Contracts	34
3.18.	Status of Contracts	36
3.19.	No Violation or Litigation	36
3.20.	Environmental Matters	37
3.21.	Insurance	38
3.22.	Suppliers	38
3.23.	Takeover Laws	39
3.24.	Approval by Stockholders	39
3.25.	Foreign Corrupt Practices Act; Etc.	39
3.26.	No Finder	40

TABLE OF CONTENTS

		Page

3.27.	Disclosure	40

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OPTIONEE

4.1.	Organization of Optionee	40
4.2.	Authority of Optionee	40
4.3.	No Finder	41
4.4.	Financial Wherewithal	41

ARTICLE V
ACTION PRIOR TO THE OPTION TERMINATION DATE

5.1.	Investigation by Optionee; Information Rights	41
5.2.	Preserve Accuracy of Representations and Warranties; Notification of Certain Matters	44
5.3.	Consents of Third Parties; Governmental Approvals	45
5.4.	Conduct of Business by the Company and the Subsidiaries	46
5.5.	Acquisition Proposals	50
5.6.	Takeover Laws	50
5.7.	Termination of Res 5-0002 EE Study	51
5.8.	Charter Amendment; Stockholder Option Agreements	51

ARTICLE VI
INDEMNIFICATION

6.1.	Indemnification by the Company	51
6.2.	Indemnification by Optionee	52
6.3.	Notice of Claims	53
6.4.	Third Person Claims	54
6.5.	Adjustment to Option Consideration	55
6.6.	Set-off	55
6.7.	No Punitive or Consequential Damages	55
6.8.	Insurance Proceeds and Tax Benefits	55
6.9.	Exclusive Remedy	56

ARTICLE VII
TERMINATION

7.1.	Termination Rights	56
7.2.	Effect of Termination	56

ARTICLE VIII
GENERAL PROVISIONS

8.1.	Survival of Obligations	56
8.2.	Confidential Nature of Information	56

TABLE OF CONTENTS

		Page

8.3.	No Public Announcement	57
8.4.	Notices	57
8.5.	Successors and Assigns	58
8.6.	Entire Agreement; Amendments	58
8.7.	Partial Invalidity	58
8.8.	Waivers	58
8.9.	Expenses	59
8.10.	Execution in Counterparts	59
8.11.	Governing Law	59
8.12.	Submission to Jurisdiction	59
8.13.	Waiver of Jury Trial	59

iii

EXHIBITS

A		Form of Stockholder Option Agreement
B		Form of Charter Amendment
C		Form of Credit Agreement
D		Form of Merger Agreement
E		Operating Plan
F		Stockholders’ Option Consideration Distribution Procedures
G		Form of Opinion of Sidley Austin LLP
H		Form of Opinion of Duane Morris LLP

OPTION AGREEMENT

OPTION AGREEMENT (this “ Agreement ”), dated as of January 13, 2009, between Cephalon, Inc., a Delaware corporation (“ Optionee ”), and Ception Therapeutics, Inc., a Delaware corporation (the “ Company ”).

WHEREAS, upon the terms and subject to the conditions contained herein, the Company has agreed to grant to Optionee during the period beginning on the date hereof and ending on the Option Termination Date an exclusive option to acquire the Company pursuant to a merger (the “ Merger ”) of Merger Sub with and into the Company, with the Company continuing as the surviving corporation, all pursuant to the terms and conditions of this Agreement, the Merger Agreement and the General Corporation Law of the State of Delaware (the “ DGCL ”);

WHEREAS, Optionee and certain holders of Outstanding Company Stock are entering into Stockholder Option and Support Agreements in the form of Exhibit A (the “ Stockholder Option Agreements ”), pursuant to which such holders have or will have, among other things, (a) agreed to vote in favor of the transactions contemplated by this Agreement and the Merger Agreement and (b) granted to Optionee the right to purchase all of the Outstanding Company Stock owned by such holders (the “ Purchase Options ”);

WHEREAS, the Stockholders who have entered into Stockholder Option Agreements as of the date hereof together own, beneficially and of record, at least (i) 68% of the outstanding shares of the Company’s Voting Common Stock, par value $0.001 per share (the “ Voting Common Stock ”), (ii) 60% of the outstanding shares of the Company’s Series A Preferred Stock, par value $0.001 per share (the “ Series A Preferred Stock ”), (iii) 58% of the outstanding shares of the Company’s Series B Junior Preferred Stock, par value $0.001 per share (the “ Series B Junior Preferred Stock ”), (iv) 84% of the outstanding shares of the Company’s Series C-1 Preferred Stock, par value $0.001 per share (the “ Series C-1 Preferred Stock ”), (v) 76% of the outstanding shares of the Company’s Series C-2 Preferred Stock, par value $0.001 per share (the “ Series C-2 Preferred Stock ”), (vi) the right to acquire, pursuant to the Series C-2 Preferred Stock Purchase Agreement, up to an additional 393,474 shares of Series C-2 Preferred Stock (such rights, the “ F&F C-2 Share Rights ”) and (vii) subject to certain conditions, the right to acquire, pursuant to the Fulcrum Plan of Merger Amendment, up to 9,620,000 shares of the Company’s Series C-3 Preferred Stock, par value $0.001 per share (the “ Series C-3 Preferred Stock ”), or, if such conditions are not satisfied, up to an additional 9,620,000 shares of Voting Common Stock (such rights, the “ Series C-3 Issuance Rights ”) (the Series A Preferred Stock, Series B Junior Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series C-3 Preferred Stock being referred to herein collectively as the “ Preferred Stock ”), in each case determined on a fully-diluted basis assuming the conversion of all outstanding shares of Preferred Stock and the exercise of all options, warrants or other rights convertible into or exercisable for shares of Common Stock or Preferred Stock; and

WHEREAS, (i) the Board of Directors of the Company has determined that the Option and the Merger are each in the best interest of the Company and its stockholders and has approved and declared advisable this Agreement, the Merger Agreement (to the extent the Option is exercised on the terms hereof (including the Merger Agreement in the form attached hereto)) and the transactions contemplated hereby and thereby and (ii) the Board of Directors of

Optionee (or a duly authorized committee thereof) has approved this Agreement and the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties to this Agreement agree as follows:

ARTICLE I
DEFINITIONS AND INTERPRETATIONS

1.1. Definitions . In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and shall be equally applicable to both the singular and plural forms.

“ Accrued Dividends ” means the aggregate amount of accrued and unpaid dividends on the shares of Preferred Stock in question.

“ Acquisition Proposal ” has the meaning specified in Section 5.5 .

“ Affiliate ” means, with respect to any Person, any other Person which, at the time of determination, directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person. “ Control ” means, as to any Person, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. The terms “Controlled by,” “under common Control with” and “Controlling” shall have correlative meanings.

“ Agreement ” means this Option Agreement.

“ Antitrust Division ” means the Antitrust Division of the United States Department of Justice.

“ Balance Sheet ” means the unaudited consolidated balance sheet of the Company and the Subsidiaries as of November 30, 2008 included in Schedule 3.4 .

“ Balance Sheet Date ” means November 30, 2008.

“ Bring-Down Certificate ” has the meaning specified in Section 2.6(b)(i) .

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq .

“ Certificate of Incorporation ” means the Restated Certificate of Incorporation of the Company, as amended as of the date of this Agreement.

“ Charter Amendment ” means the amendment to the Certificate of Incorporation to be filed with the Secretary of State of the State of Delaware in the form attached as Exhibit B .

“ Claim Notice ” has the meaning specified in Section 6.3(a) .

“ Closing Date ” has the meaning specified in the Merger Agreement.

“ Closing Date Merger Consideration ” has the meaning specified in the Merger Agreement.

“ Code ” means the Internal Revenue Code of 1986.

“ Common Stock ” means the Voting Common Stock and the Non-Voting Common Stock.

“ Company ” has the meaning specified in the first paragraph of this Agreement.

“ Company Agreements ” has the meaning specified in Section 3.18 .

“ Company Ancillary Agreements ” means the Stockholder Option Agreements, the Credit Agreement, the certificate being delivered pursuant to Section 2.4(c) and the Bring-Down Certificate.

“ Company Group ” means any “affiliated group” (as defined in Section 1504(a) of the Code without regard to the limitations contained in Section 1504(b) of the Code) that files or has filed a consolidated federal income Tax Return and that, at any time on or before the date hereof, includes or has included the Company or any predecessor of the Company, or any other group of corporations which, at any time on or before the date hereof, files or has filed a Tax Return on a combined, consolidated or unitary basis with the Company or any predecessor of the Company (or another such predecessor).

“ Company Group Member ” means (i) the Company and its Affiliates, (ii) the directors, officers and employees of the Company and its Affiliates and (iii) the respective successors and assigns of each of the foregoing.

“ Company IP ” has the meaning specified in Section 3.12(b) .

“ Company Property ” means any real or personal property, plant, building, facility, structure, underground storage tank, equipment or unit, or other asset owned, leased or operated by the Company or a Subsidiary.

“ Confidentiality Agreement ” means the Confidentiality Agreement dated as of October 8, 2008 between the Company and Optionee.

“ Contaminant ” means any waste, pollutant, hazardous or toxic substance or waste, petroleum, petroleum-based substance or waste, special waste, or any constituent of any such substance or waste.

“ Copyrights ” has the meaning specified in Section 3.12(a) .

“ Court Order ” means any judgment, order, award or decree of any United States federal, state or local, or any supra-national or non-U.S., court or tribunal and any award in any arbitration proceeding.

“ Credit Agreement ” means the Subordinated Credit Agreement between the Company and Optionee in the form attached hereto as Exhibit C .

“ DGCL ” has the meaning specified in the recitals to this Agreement.

“ Encumbrance ” means any lien (statutory or other), claim, charge, security interest, mortgage, deed of trust, pledge, hypothecation, assignment, conditional sale or other title retention agreement, preference, priority or other security agreement or preferential arrangement of any kind, and any easement, encroachment, covenant, restriction, right of way, defect in title or other encumbrance of any kind.

“ Environmental Encumbrance ” means an Encumbrance in favor of any Governmental Body for (i) any liability under any Environmental Law or (ii) damages arising from, or costs incurred by such Governmental Body in response to, a Release or threatened Release of a Contaminant into the environment.

“ Environmental Law ” means all Requirements of Laws relating to or addressing the environment, health or safety, including CERCLA, OSHA and RCRA and any state equivalent thereof.

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

“ ERISA Affiliate ” has the meaning specified in Section 3.15(g) .

“ ERISA Benefit Plans ” has the meaning specified in Section 3.15(a) .

“ Exercise Withdrawal Notice ” has the meaning specified in Section 2.6(c) .

“ Existing Royalties ” has the meaning specified in Section 5.3(b) .

“ Expenses ” means any and all reasonable out-of-pocket expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against pursuant to Article VI (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).

“ Expiration Date ” means February 20, 2009.

“ F&F C-2 Share Rights ” has the meaning specified in the recitals to this Agreement.

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

“ FTC ” means the United States Federal Trade Commission.

“ Fulcrum Plan of Merger Amendment ” means the Amendment to Agreement and Plan of Merger, dated as of January 19, 2007, by and among the Company, Fulcrum Pharmaceuticals, Inc., CT Research, Inc. and each of the Ception Holders and Ception Consultants (each as defined therein) party thereto.

“ Governmental Body ” means any United States federal, state or local, or any supra-national or non-U.S., government, political subdivision, governmental, regulatory or

administrative authority, instrumentality, agency body or commission, self-regulatory organization, court, tribunal or judicial or arbitral body.

“ Governmental Permits ” has the meaning specified in Section 3.9(a) .

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

“ Identified IP ” means the Intellectual Property that has been identified by and disclosed to the parties’ external intellectual property counsel on or before the date of this Agreement.

“ Indebtedness ” of any Person means (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property other than trade accounts (including commissions payable to sales representatives) arising in the ordinary course of business, (iii) all reimbursement obligations with respect to surety bonds, letters of credit (to the extent not collateralized with cash or cash equivalents), bankers’ acceptances and similar instruments (in each case, whether or not matured), (iv) all obligations evidenced by notes, including promissory notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person, (vi) all indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness and (vii) all agreements, undertakings or arrangements by which any Person guarantees, endorses or becomes or is contingently liable for any of the foregoing of another Person, or guarantees the payment of dividends or other distributions upon the equity securities or interest of any other Person.

“ Indemnified Party ” has the meaning specified in Section 6.3(a) .

“ Indemnitor ” has the meaning specified in Section 6.3(a) .

“ Intellectual Property ” has the meaning specified in Section 3.12(a) .

“ IRS ” means the Internal Revenue Service.

“ Knowledge of the Company ” means the actual knowledge after reasonable investigation of Stephen Tullman, Dr. Tim Henkel, Doug Gessl and Kamil Ali-Jackson; provided, that, with respect to any representation or warranty of the Company relating to an Oral Anti-TNF Product, no reasonable investigation shall be required. “ Know ” and “ Known ” shall have correlative meanings.

“ Leased Real Property ” has the meaning specified in Section 3.10(b) .

“ Letter of Intent ” means the letter agreement dated November 20, 2008 between the Company and Optionee.

“ LOI Payment ” means the $25,000,000 payment made by Optionee to the Company on November 24, 2008 pursuant to the Letter of Intent.

“ Losses ” means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, Taxes, damages, deficiencies or other charges.

“ MAE Representations ” means [**]

“ Marks ” has the meaning specified in Section 3.12(a) .

“ Material Adverse Effect ” means any change or effect that is materially adverse to the assets, liabilities (absolute or contingent), business, condition (financial or otherwise), results of operations or prospects of the Company and the Subsidiaries, taken as a whole; provided , however , that, without limiting the generality of what shall not constitute a “Material Adverse Effect,” to the extent any such change or effect results from changes affecting the United States economy or financial or securities markets as a whole or changes that are the result of factors generally affecting the industry in which the Company and the Subsidiaries conduct their business, to the extent such changes do not disproportionately impact the Company and its Subsidiaries, taken as a whole, relative to other companies in the industry in which the Company and its Subsidiaries conduct their business, it shall not be taken into account in determining whether there has been a “Material Adverse Effect.”

“ Merger ” has the meaning specified in the recitals to this Agreement.

“ Merger Agreement ” means the Agreement and Plan of Merger among the Company, Optionee and Merger Sub in the form attached hereto as Exhibit D .

“ Merger Agreement Execution Date ” has the meaning specified in Section 2.6(c) .

“ Merger Sub ” means a direct or indirect wholly owned subsidiary of Optionee, whether existing as of the date hereof or hereafter formed.

“ Net Reslizumab Sales ” means [**]

“ NOLs ” means the regular Tax net operating loss carryovers and carrybacks of the Company and each of the Subsidiaries (and, if applicable, the alternative minimum tax net operating loss carryovers and carrybacks of the Company and each of the Subsidiaries); provided , however , that any carrybacks are limited to net operating losses that arise in periods ending on or before the Closing Date.

“ Non-Option Granting Stockholder ” has the meaning specified in Section 2.7(a) .

“ Non-ERISA Commitments ” has the meaning specified in Section 3.15(b) .

“ Non-Voting Common Stock ” means the Non-Voting Common Stock of the Company, par value $0.001 per share.

“ Nondisclosure Agreements ” has the meaning specified in Section 3.12(g)(iv) .

**Portions of the Exhibit have been omitted and have been filed separately pursuant to an application for confidential treatment filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

“ Operating Plan ” means the business plan of the Company attached hereto as Exhibit E , as the same may be amended from time to time by mutual agreement of the Company and Optionee.

“ Option ” has the meaning specified in Section 2.1 .

“ Option Consideration ” has the meaning specified in Section 2.2 .

“ Option Exercise Date ” has the meaning specified in Section 2.1 .

“ Option Period ” has the meaning specified in Section 2.1 .

“ Option Termination Date ” means the earlier of (a) the date that is 30 business days after the receipt by Optionee of the final study report for the Res-5-0002 EE Study indicating that the co-primary endpoints have not been achieved, (b) the date that is 15 business days after receipt by Optionee of the final study report for the Res-5-0002 EE Study indicating that the co-primary endpoints have been achieved or (c) such earlier date on which Optionee terminates this Agreement pursuant to Section 7.1(b) .

“ Optionee ” has the meaning specified in the first paragraph of this Agreement.

“ Optionee Ancillary Agreements ” means the Stockholder Option Agreements, the Credit Agreement, the certificate being delivered pursuant to Section 2.3(c) and the certificate to be delivered pursuant to Section 2.6(a) .

“ Optionee Group Member ” means (i) Optionee and its Affiliates, (ii) the directors, officers and employees of each of Optionee and its Affiliates and (iii) the respective successors and assigns of each of the foregoing.

“ Optionee Updated Representations ” means the representations and warranties of Optionee set forth in (a) Section 4.3(b)(i)(D) (solely with respect to Court Orders which come into effect after the date hereof) and (b) Section 4.3(b)(ii) (solely with respect to changes in Requirements of Law occurring after the date hereof).

“ Oral Anti-TNF Product ” means [**]

“ OSHA ” means the Occupational Safety and Health Act, 29 U.S.C. §§ 651 et seq .

“ Outstanding Company Stock ” means the Common Stock, Preferred Stock and options, warrants and other rights convertible into or exercisable for shares of Common Stock or Preferred Stock (including any Common Stock or Preferred Stock or options, warrants or other rights convertible into or exercisable for shares of Common Stock or Preferred Stock issued by the Company after the date hereof).

“ Patents ” has the meaning specified in Section 3.12(a) .

“ Pending Indemnity Amount ” has the meaning specified in Section 6.6 .

“ Pension Plans ” has the meaning specified in Section 3.15(a) .

“ Permitted Encumbrances ” means (i) liens for Taxes and other governmental charges and assessments which are not yet due and payable, (ii) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other similar liens imposed by law arising in the ordinary course of business for sums not yet due and payable and (iii) other liens or imperfections on property which do not adversely affect title to, detract from the value of, or impair the existing use of, the property affected by such lien or imperfection.

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

“ Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Purchase Options ” has the meaning specified in the recitals to this Agreement.

“ RCRA ” means the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq .

“ Release ” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant into the indoor or outdoor environment or into or out of any Company Property, including the movement of Contaminants through or in the air, soil, surface water, groundwater or Company Property.

“ Remedial Action ” means actions required to (i) clean up, remove, treat or in any other way address Contaminants in the indoor or outdoor environment, (ii) prevent the Release or threatened Release or minimize the further Release of Contaminants or (iii) investigate and determine if a remedial response is needed and to design such a response and post-remedial investigation, monitoring, operation and maintenance and care.

“ Requirements of Laws ” means any United States federal, state and local, and any non-U.S., laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Body (including those pertaining to electrical, building, zoning, environmental and occupational safety and health requirements) or common law.

“ Res-5-0010 Asthma Study ” means the Company’s ongoing clinical trial for Reslizumab in patients with asthma.

“ Res-5-0002 EE Study ” means the Company’s ongoing Phase IIb/III clinical trial for Reslizumab in patients with eosinophilic esophagitis.

“ Res-5-0004 Open-Label EE Study ” means the Company’s ongoing open-label extension study for Reslizumab in patients with eosinophilic esophagitis.

“ Reslizumab ” means [**]

“ Rights Proceeds ” means the proceeds received by the Company from the exercise of Stock Options, Warrants and F&F C-2 Share Rights.

“ Series A Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Series B Junior Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Series C-1 Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Series C-2 Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Series C-2 Preferred Stock Purchase Agreement ” means the Series C-2 Preferred Stock Purchase Agreement, dated as of January 19, 2007, among the Company and the purchasers party thereto, as amended by Amendment No. 1, dated as of May 30, 2007.

“ Series C-3 Issuance Rights ” has the meaning specified in the recitals to this Agreement.

“ Series C-3 Preferred Stock ” has the meaning specified in the recitals to this Agreement.

“ Specified Covenants ” means the covenants and agreements of the Company set forth in Sections 5.1 , 5.2 , 5.3(a) , 5.3(b) , 5.4(b)(ix) , 5.4(b)(xi) , 5.4(b)(xiii) , 5.4(b)(xiv) , 5.4(b)(xv) , 5.4(b)(xvi) , 5.4(b)(xvii) , 5.4(b)(xviii) , 5.4(b)(xix) and 5.4(b)(xx) .

“ Squeeze Out Merger ” has the meaning specified in Section 2.7(a) .

“ Squeeze Out Merger Agreement ” has the meaning specified in Section 2.7(a) .

“ Stock Options ” means the outstanding options granted under the Stock Plan to acquire shares of Voting Common Stock, as more fully described in Schedule 3.1(d) .

“ Stock Plan ” means the Company’s Equity Incentive Plan, as amended.

“ Stockholder Option Agreements ” has the meaning specified in the recitals to this Agreement.

“ Stockholders ” means the holders of Outstanding Company Stock who enter into the Stockholder Option Agreements.

“ Stockholders’ Agreement ” means the Amended and Restated Stockholders’ Agreement, dated as of January 19, 2007, by and among the Company and the stockholders of the Company party thereto.

“ Stockholders’ Option Consideration ” has the meaning specified in Section 2.2 .

“ Subsidiary ” has the meaning specified in Section 3.2(a) .

“ Tax ” means: (i) any United States federal, state or local, or non-U.S., net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or environmental (including taxes under Code Section 59A) tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of

any kind whatsoever, together with any interest or penalty, addition to tax or additional amount imposed by any Governmental Body; and (ii) any liability for the payment of amounts with respect to payments of a type described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group, or as a result of any obligation under any Tax Sharing Arrangement or Tax indemnity agreement.

“ Tax Return ” means any return, report or similar statement required to be filed with respect to any Taxes (including any attached schedules), including any information return, claim for refund, amended return or declaration of estimated Tax.

“ Tax Sharing Arrangement ” means any agreement or arrangement for the allocation or payment of Tax liabilities or payment for Tax benefits with respect to a consolidated, combined or unitary Tax Return which Tax Return includes or included the Company or any Subsidiary.

“ Third Person Claim ” has the meaning specified in Section 6.3(a) .

“ Trade Secrets ” has the meaning specified in Section 3.12(a) .

“ Updated Representations ” means the representations and warranties of the Company contained in Article III that are identified on Schedule 1 attached hereto.

“ Updated Schedules ” has the meaning specified in Section 2.6(b)(ii) .

“ Voting Common Stock ” has the meaning specified in the recitals to this Agreement.

“ WARN ” has the meaning specified in Section 3.15(c) .

“ Warrants ” means the outstanding warrants to acquire shares of Voting Common Stock, Series A Preferred Stock or Series C-2 Preferred Stock, as the case may be, as more fully described in Schedule 3.1(d) .

“ Welfare Plans ” has the meaning specified in Section 3.15(a) .

1.2. Interpretation . For purposes of this Agreement, (i) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation,” (ii) the word “or” is not exclusive and (iii) the words “herein”, “hereof”, “hereby”, “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (i) to Articles, Sections, Exhibits and Schedules mean the Articles and Sections of, and the Exhibits and Schedules attached to, this Agreement; (ii) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement; and (iii) to a statute means such statute as amended from time to time and includes any regulations promulgated thereunder. All references herein to the Company or any Subsidiary shall include the predecessors and successors of such Person. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. Titles to Articles and headings of Sections are inserted for convenience of reference only and shall not be deemed a part of or to affect the meaning or interpretation of this Agreement. This Agreement, the Company Ancillary

Agreements and the Optionee Ancillary Agreements shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

ARTICLE II
OPTION TO ACQUIRE THE COMPANY; DELIVERIES

2.1. Option to Acquire the Company . At any time after the date hereof and through and including the Option Termination Date (the “ Option Period ”), Optionee shall have an irrevocable option (the “ Option ”), but not the obligation, to acquire the Company pursuant to the Merger, on the terms and subject to the conditions set forth in the Merger Agreement. Optionee shall exercise the Option, if at all, by giving written notice to the Company and to the Stockholders’ Representative (as defined in the Merger Agreement, and at the address for the Stockholders’ Representative set forth therein) of the exercise of the Option on or prior to the Option Termination Date (the date such notice is delivered, the “ Option Exercise Date ”).

2.2. Consideration for the Option and Purchase Option . Optionee shall pay the Company as consideration for the Option an aggregate of $50,000,000 (fifty million dollars), consisting of (a) the LOI Payment and (b) upon the execution of this Agreement, the payment to the Company of $25,000,000 (twenty-five million dollars) in consideration of the Option by wire transfer of immediately available funds to an account previously specified in writing by the Company. Pursuant to the Stockholder Option Agreements, Optionee shall pay, upon the execution of this Agreement, the Stockholders $50,000,000 (fifty million dollars) (the “ Stockholders’ Option Consideration ”) in consideration of the Purchase Options by wire transfer of immediately available funds to an account maintained by Duane Morris LLP (for the benefit of the Stockholders) previously specified in writing by the Company, which amount shall be disbursed by Duane Morris LLP to the Stockholders in accordance with the procedures set forth on Exhibit F attached hereto (such payments to the Company and the Stockholders, collectively the “ Option Consideration ”). Except as set forth in Article VI , the Option Consideration shall be non-refundable and non-creditable.

2.3. Optionee’s Deliveries . Concurrently with the execution and delivery of this Agreement, Optionee is delivering to the Company all of the following:

(a) a copy of Optionee’s Restated Certificate of Incorporation certified as of a recent date by the Secretary of State of the State of Delaware;

(b) a certificate of good standing of Optionee issued as of a recent date by the Secretary of State of the State of Delaware;

(c) a certificate of the secretary or an assistant secretary of Optionee, dated the date hereof, as to: (i) no amendments to the Restated Certificate of Incorporation of Optionee since a specified date; (ii) the by-laws of Optionee; (iii) the resolutions of the Board of Directors of Optionee (or a duly authorized committee thereof) authorizing the execution, delivery and performance of this Agreement and the Optionee Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of

Optionee executing this Agreement and any Optionee Ancillary Agreement being executed and delivered on the date hereof;

(d) the Credit Agreement, duly executed by Optionee;

(e) the Stockholder Option Agreements executed by Stockholders as of the date hereof, duly executed by Optionee; and

(f) an opinion of Sidley Austin LLP addressed to the Company in the form attached hereto as Exhibit G .

2.4. The Company’s Deliveries . Concurrently with the execution and delivery of this Agreement, the Company is delivering to Optionee all of the following:

(a) a copy of the Certificate of Incorporation certified as of a recent date by the Secretary of State of the State of Delaware;

(b) a certificate of good standing of the Company issued as of a recent date by the Secretary of State of the State of Delaware;

(c) a certificate of the secretary or an assistant secretary of the Company, dated the date hereof, as to: (i) no amendments to the Certificate of Incorporation since a specified date; (ii) the by-laws of the Company; (iii) the resolutions of the Board of Directors and stockholders of the Company authorizing the execution, delivery and performance of this Agreement and the Company Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) the incumbency and signatures of the officers of the Company executing this Agreement and any Company Ancillary Agreement being executed and delivered on the date hereof;

(d) the Credit Agreement, duly executed by the Company;

(e) the Stockholder Option Agreements, duly executed by the Stockholders as of the date hereof;

(f) all consents, waivers or approvals obtained by the Company with respect to the consummation of the transactions contemplated by this Agreement, the Company Ancillary Agreements and the Merger Agreement, other than under the HSR Act (a list of such consents, waivers and approvals, as agreed to by the Company and Optionee, being set forth in Schedule 2.4(f) );

(g) a receipt executed by the Company acknowledging receipt of the LOI Payment and $25,000,000 (twenty-five million dollars);

(h) a receipt executed by Duane Morris LLP acknowledging receipt of the Stockholders’ Option Consideration; and

(i) an opinion of Duane Morris LLP addressed to Optionee and in the form attached hereto as Exhibit H .

2.5. Withholding Rights . Optionee shall be entitled to deduct and withhold from the consideration, if any, otherwise payable pursuant to the Stockholder Option Agreements (pursuant to the procedures in this Agreement or otherwise) to any Stockholder, or to any designee of such Stockholder, such amounts as are required to be deducted and withheld with respect to the making of such payments under the Code, or any provision of state, local or foreign Tax law. Optionee shall deliver to Duane Morris LLP, in its capacity under Section 2.2 , information with respect to any deduction or withholding to be made pursuant to this Section 2.5 .

2.6. Actions Upon Exercise of the Option . In the event that Optionee exercises the Option:

(a) Optionee shall, on the Option Exercise Date, deliver to the Company a certificate, dated the date of its delivery and duly executed by the Chief Executive Officer or any Vice President of Optionee, certifying that: (i) between the date hereof and the Option Exercise Date, there has been no material breach by Optionee in the performance of any of its covenants and agreements herein; (ii) as of the Option Exercise Date, none of the representations and warranties of Optionee contained herein that is qualified as to materiality is untrue or incorrect in any respect except for such changes therein as are specifically permitted by this Agreement; (iii) as of the Option Exercise Date none of the representations and warranties of Optionee contained herein (other than the Optionee Updated Representations) that is not qualified as to materiality is untrue or incorrect in any material respect except for such changes therein as are specifically permitted by this Agreement; and (iv) none of the Optionee Updated Representations is untrue or incorrect in any material respect after giving effect to any disclosures attached to such certificate, which disclosures shall consist solely of information regarding circumstances, facts, events or conditions that have arisen, occurred or come into existence after the date hereof with respect to the Optionee Updated Representations ( provided that such disclosures shall not (A) correct, supplement or amend the disclosures set forth in the Schedules delivered on the date hereof for purposes of the representations and warranties made by the Company as of the date hereof or (B) change the nature or scope of the applicable Optionee Updated Representations by effectively amending or modifying the language contained in such Optionee Updated Representations as opposed to merely listing exceptions thereto);

(b) the Company shall, not later than five (5) business days after the Option Exercise Date, deliver to Optionee:

(i) a certificate (the “ Bring-Down Certificate ”), dated the date of its delivery and duly executed by the Chief Executive Officer of the Company, certifying that: (A) between the date hereof and the date of the Bring-Down Certificate, there has been no material breach by the Company in the performance of any of its covenants and agreements herein; (B) as of the date of the Bring-Down Certificate, none of the representations and warranties of the Company contained herein (other than the Updated Representations and the MAE Representations) that is qualified as to materiality is untrue or incorrect in any respect except for such changes therein as are consistent in all material respects with the Operating Plan and not specifically prohibited by Section 5.4 ; provided , that, [**]; (C) as of the date of the Bring-Down Certificate, none of the representations and warranties of the Company contained herein (other than the Updated Representations and the MAE Representations) that is not qualified as to materiality is untrue or incorrect

in any material respect except for such changes therein as are consistent in all material respects with the Operating Plan and not specifically prohibited by Section 5.4 ; [**] (D) as of the date of the Bring-Down Certificate, (1) none of the Updated Representations that is qualified as to materiality is untrue or incorrect in any respect after giving effect to the Updated Schedules and (2) none of the Updated Representations that is not qualified as to materiality is untrue or incorrect in any material respect after giving effect to the Updated Schedules; and (E) as of the date of the Bring-Down Certificate, none of the MAE Representations is untrue or incorrect in any respect except for such breaches of the MAE Representations which have not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and

(ii) any necessary update to the Schedules delivered by the Company to Optionee on the date hereof with respect to the Updated Representations (“ Updated Schedules ”), which Updated Schedules shall consist solely of information regarding circumstances, facts, events or conditions that have arisen, occurred or come into existence after the date hereof with respect to the Updated Representations ( provided that such Updated Schedules shall not (A) correct, supplement or amend the disclosures set forth in the Schedules delivered on the date hereof for purposes of the representations and warranties made by the Company as of the date hereof or (B) change the nature or scope of the applicable Updated Representations by effectively amending or modifying the language contained in such Updated Representations as opposed to merely listing exceptions thereto); and

(c) if the Bring-Down Certificate is accompanied by Updated Schedules, within five (5) business days following Optionee’s receipt of such Bring-Down Certificate and Updated Schedules from the Company, Optionee may at its option deliver a written notice (the “ Exercise Withdrawal Notice ”) to the Company stating that Optionee desires to withdraw its exercise of the Option. If Optionee delivers the Exercise Withdrawal Notice, the Option shall be deemed not to have been exercised by Optionee and (i) with respect to the first such Exercise Withdrawal Notice, the Option shall remain outstanding until the Option Termination Date, and this Agreement shall remain in full force and effect and (ii) with respect to the second such Exercise Withdrawal Notice, the delivery of such Exercise Withdrawal Notice shall be deemed to be a delivery of a notice of termination of this Agreement pursuant to Section 7.1(b) . If Optionee does not deliver an Exercise Withdrawal Notice, the Company and Optionee shall, and Optionee shall cause Merger Sub to, execute and deliver the Merger Agreement no later than three (3) business days after the later of (A) the date of delivery of the Bring-Down Certificate, (B) if the Bring-Down Certificate is not delivered pursuant to Section 2.6(b) , the date by which the Bring-Down Certificate was to be delivered pursuant to Section 2.6(b) and (C) if the Bring-Down Certificate is accompanied by Updated Schedules, the earlier of (x) the date by which any Exercise Withdrawal Notice may be delivered by Optionee pursuant to this Section 2.6(c) and (y) the date on which Optionee delivers written notice to the Company that it will not deliver an Early Withdrawal Notice (the date of such execution and delivery of the Merger Agreement, the “ Merger Agreement Execution Date ”); provided that in the case described in clause (B) above, Optionee may at its sole option elect not to enter into the Merger Agreement upon the failure of the Company to deliver the Bring-Down Certificate by delivery of written notice of such determination at any time prior to the expiration of the three (3) business day period during which the Merger Agreement is to be executed pursuant to this sentence and upon delivery of

such notice the Option shall remain outstanding and this Agreement shall remain in full force and effect. Contemporaneously with the execution of the Merger Agreement, the Company and Optionee, as applicable, shall, and Optionee shall cause Merger Sub to, execute and deliver such other agreements, documents, instruments and certificates as are contemplated by the Merger Agreement to be executed and delivered by such party concurrently therewith, including schedules to the Merger Agreement responsive to the representations and warranties of the Company made in Article V thereof, which schedules shall be consistent in all respects with the Schedules delivered by the Company in response to the representations and warranties of the Company made by Article III hereof except (I) for such changes therein as are consistent in all material respects with the Operating Plan and not specifically prohibited by Section 5.4 or contained in the Updated Schedules and (II) that, solely with respect to the specific representations and warranties of the Company in the Merger Agreement that correspond to the MAE Representations [**], the Company may provide updated information in the corresponding schedules to the Merger Agreement so long as the events or occurrences disclosed in such updated information have not had (nor would they reasonably be expected to have), individually or in the aggregate, a Material Adverse Effect.

2.7. Exercise of Option Pursuant to Purchase Options .

(a) Notwithstanding Section 2.6 , if Optionee exercises the Purchase Options and, pursuant to the Stockholder Option Agreements, chooses to purchase shares of Outstanding Company Stock directly from the Stockholders, Optionee shall use commercially reasonable efforts to consummate, as soon as reasonably practicable following such purchase, a merger (the “ Squeeze Out Merger ”) of a subsidiary of Optionee with and into the Company pursuant to which holders of Outstanding Company Stock who do not execute a Stockholder Option Agreement (each, a “ Non-Option Granting Stockholder ”) receive consideration that is equal to the consideration it would have received in the Merger pursuant to the Merger Agreement. In connection with the Squeeze Out Merger, the Company and Optionee shall take such actions as shall be reasonably necessary to consummate the Squeeze Out Merger, including (a) entering into a merger agreement relating to the Squeeze Out Merger (the “ Squeeze Out Merger Agreement ”), (b) duly calling, giving notice of, convening and holding a meeting of the Company’s stockholders (including Optionee) for the purpose of approving the Squeeze Out Merger and the Squeeze Out Merger Agreement, (c) in connection therewith, delivering such Disclosure Materials (as defined in the Merger Agreement) as are required by applicable Requirements of Law, (d) recommending to the stockholders adoption and approval of the Squeeze Out Merger Agreement and the Squeeze Out Merger and (e) soliciting the approval and adoption of the Squeeze Out Merger Agreement and the Squeeze Out Merger by the requisite number of stockholders as required by the Certificate of Incorporation (as then in effect), the DGCL and the Stockholders’ Agreement (if applicable).

(b) The Squeeze Out Merger Agreement shall incorporate, mutatis mutandis , all of the provisions of, and identified in, paragraph 2(b) of each Stockholder Option Agreement, such that the Non-Option Granting Stockholders shall have the same rights and receive the same consideration (taking into account the respective holdings of each class or classes of Outstanding Company Stock held by each of them) as the holders of Outstanding Company Stock who executed a Stockholder Option Agreement and whose Outstanding Company Stock was purchased directly by Optionee.

(c) For the avoidance of doubt and without limiting the scope of Optionee’s obligations under the Squeeze Out Merger Agreement, Optionee shall give effect, and cause the Company to give effect, to the provisions of Section 8.1 of the Merger Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

As an inducement to Optionee to enter into this Agreement and to consummate the transactions contemplated hereby, the Company represents and warrants to Optionee and agrees as follows:

3.1. Organization and Capitalization of the Company .

(a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified to transact business as a foreign corporation and is in good standing in each of the jurisdictions listed in Schedule 3.1(a) , which jurisdictions are the only ones in which the ownership or leasing of the Company’s assets or the conduct of the Company’s business requires such qualification, except where the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. No other jurisdiction has made a written demand, request or has otherwise indicated in writing that the Company is required so to qualify on account of the ownership or leasing of its assets or the conduct of its business. The Company has full corporate power and authority to own or lease and to operate and use its assets and to carry on its business as now conducted.

(b) Except as set forth in Schedule 3.1(b) , true and complete copies of (i) the Certificate of Incorporation and all amendments thereto, (ii) the Company’s by-laws, as amended to date, and (iii) the minute books of the Company have been delivered or made available to Optionee. The Company is not in default under, or in violation of, any provision of the Certificate of Incorporation or its by-laws. Such minute books contain true and complete records of all meetings or other actions taken by the board of directors and stockholders of the Company. The Charter Amendment has been duly adopted and approved by the Company’s Board of Directors and by the stockholders of the Company holding sufficient Outstanding Company Stock to approve the Charter Amendment in accordance with the Certificate of Incorporation (as in effect immediately prior to the effectiveness of the Charter Amendment), the Stockholders’ Agreement and any agreements governing outstanding Stock Options, Warrants or other rights to acquire capital stock of the Company.

(c) The authorized capital stock of Company consists of (i) 600,000,000 shares of Voting Common Stock, of which 23,323,212 shares are issued and outstanding, (ii) 6,000,000 shares of Non-Voting Common Stock, of which 4,889,464 shares are issued and outstanding, and (iii) 164,145,000 shares of Preferred Stock, of which (A) 23,000,000 shares are designated Series A Preferred Stock, of which 20,871,664 shares are issued and outstanding, (B) 3,500,000 shares are designated Series B Junior Preferred Stock, of which 3,444,802 shares are issued and outstanding, (C) 13,250,000 shares are designated Series C-1 Preferred Stock, of which 13,146,503 shares are issued and outstanding, (D) 114,775,000 shares are designated Series C-2 Preferred Stock, of which 113,301,299 shares are issued and outstanding, and (E) 9,620,000

shares are designated Series C-3 Preferred Stock, of which 0 shares are issued and outstanding. The Company does not hold any treasury shares. All of the issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and have been offered, issued, sold and delivered by the Company in compliance with all applicable federal and state securities laws. None of the issued and outstanding shares of Common Stock or Preferred Stock has been issued in violation of, or is subject to, any preemptive rights, rights of first offer, rights of first refusal or subscription rights, except as set forth in Schedule 3.1(c) .

(d) All of the Common Stock, Preferred Stock, Stock Options, Warrants, F&F C-2 Share Rights and Series C-3 Issuance Rights are held of record by the holders and in the amounts identified in Schedule 3.1(d) . Schedule 3.1(d) also sets forth: (i) the number of shares of Common Stock into which each share of Preferred Stock is convertible; (ii) the exercise price per share of each Stock Option and each Warrant; (iii) the date of grant of each Stock Option and each Warrant and the expiration date thereof; (iv) the number of shares of Common Stock or Preferred Stock issuable upon the exercise of each Stock Option or Warrant; and (v) the number of shares of Common Stock or Preferred Stock issuable as a result of outstanding F&F C-2 Share Rights and Series C-3 Issuance Rights. True and complete copies of the stock record books, agreements evidencing Warrants, Stock Options, F&F C-2 Share Rights and Series C-3 Issuance Rights have been delivered or made available to Optionee. Each Warrant and Stock Option was duly issued and is valid and in full force and effect.

(e) Schedule 3.1(e) sets forth (i) the unpaid Accrued Dividends (whether or not declared) with respect to each holder of shares of Preferred Stock and (ii) the per diem accrual rate of dividends with respect to each share of Preferred Stock pursuant to the terms of the Certificate of Incorporation. There are no declared and unpaid dividends or other distributions with respect to any shares of Common Stock or Preferred Stock.

(f) Except (i) for the Stock Options and Warrants, (ii) for the issuance of shares of Series C-3 Preferred Stock or Voting Common Stock pursuant to the Fulcrum Plan of Merger Amendment, (iii) the F&F C-2 Share Rights, (iv) as set forth in the Certificate of Incorporation and (v) as set forth in Schedule 3.1(f) , there are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the issuance, sale, purchase or redemption of any shares of capital stock or other equity interest of the Company, whether on conversion of other securities or otherwise. Except for this Agreement and as set forth in Schedule 3.1(f) , the Company is not a party to any, and to the Knowledge of the Company there exists no, stockholder agreement, voting trust agreement or any other similar contract, agreement, arrangement, commitment, plan or understanding restricting or otherwise relating to the voting, dividend, ownership or transfer rights of any shares of capital stock of the Company. Except as set forth in Schedule 3.1(f) , the Company is not under any obligation to register under the Securities Act of 1933 any shares of its capital stock or any other securities of the Company, whether currently outstanding or that may subsequently be issued.

(g) There are no bonds, debentures, notes or other instruments evidencing Indebtedness of the Company or any of the Subsidiaries issued or outstanding (i) having the right to vote on any matters on which stockholders may vote (or which is convertible into, or

exchangeable for, securities having such right) or (ii) the value of which is in any way based upon or derived from capital or voting stock of Company or any of the Subsidiaries.

3.2. Subsidiaries and Investments .

(a) Schedule 3.2 sets forth a list of each corporation, partnership, limited liability company, joint venture or other entity (i) in which the Company, directly or indirectly, owns of record or beneficially 50% or more of the outstanding voting securities or of which it is a general partner (each such corporation, partnership, limited liability company, joint venture or other entity being referred to herein as a “ Subsidiary ”), (ii) in which the Company, directly or indirectly, owns of record or beneficially any outstanding voting securities or other equity interests or (iii) which is Controlled by the Company.

(b) Schedule 3.2 sets forth the authorized capital stock of each Subsidiary and indicates the number of issued and outstanding shares of capital stock, the number of issued shares of capital stock held as treasury shares and the number of shares of capital stock unissued and not reserved for any purpose of each Subsidiary. Except as set forth in Schedule 3.2 and except for this Agreement, there are no agreements, arrangements, options, warrants, calls, rights or commitments of any character relating to the issuance, sale, purchase or redemption of any shares of capital stock of any of the Subsidiaries. All of the outstanding shares of capital stock of each of the Subsidiaries are validly issued, fully paid and nonassessable. All of the outstanding shares of capital stock of each of the Subsidiaries are owned by the Company of record and beneficially free from all Encumbrances, except as set forth in Schedule 3.2 .

(c) Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly qualified to transact business as a foreign corporation and is in good standing under the laws of each jurisdiction listed under its name in Schedule 3.2 , which jurisdictions are the only ones in which the ownership or leasing of such Subsidiary’s assets or the conduct of such Subsidiary’s business requires such qualification, except where the failure to be so qualified or in good standing would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. No other jurisdiction has made a written demand, request or has otherwise indicated in writing that such Subsidiary is required so to qualify. Each Subsidiary has full corporate power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted.

(d) True and complete copies of (i) the certificate of incorporation and all amendments thereto, (ii) the by-laws, as amended to date, and (iii) the minute books of each Subsidiary have been delivered or made available to Optionee. No Subsidiary is in default under, or in violation of, any provision of its certificate of incorporation or by-laws. Such minute books contain true and complete records of all meetings or other actions taken by the board of directors and stockholders of each Subsidiary.

3.3. Authority of the Company .

(a) The Company has full corporate power and authority to execute, deliver and perform this Agreement, all of the Company Ancillary Agreements and the Merger Agreement.

The execution, delivery and performance of this Agreement, the Company Ancillary Agreements and, to the extent the Option is exercised on the terms hereof (including the Merger Agreement in the form attached hereto) the Merger Agreement (together with the other instruments, documents and agreements contemplated by or to be executed in connection with the transactions contemplated by the Merger Agreement) by the Company have been duly authorized and approved by the Company’s board of directors and, other than with respect to the Merger Agreement, to the extent required by the Certificate of Incorporation or any agreement to which the Company is a party, by the requisite number of the Company’s stockholders and do not require any further authorization or consent of the Company or its stockholders. This Agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding obligation of the Company enforceable in accordance with its terms, and each of the Company Ancillary Agreements has been duly authorized by the Company and upon execution and delivery by the Company will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms, in each case except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the effect of general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

(b) Except as set forth in Schedule 3.3 , neither the execution and delivery of this Agreement, any of the Company Ancillary Agreements or the Merger Agreement nor the consummation of any of the transactions contemplated hereby or thereby, nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof, in each case by the Company, nor the exercise of the Option, will:

(i) conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of the properties or assets of the Company or any Subsidiary, under (A) the certificate of incorporation (including, with respect to the Company, as amended by the Charter Amendment) or by-laws, or similar organizational documents, of the Company or any Subsidiary, (B) any Company Agreement, (C) any other material mortgage, franchise, permit or other authorization, right, restriction or obligation to which the Company or any Subsidiary is a party or any of the assets or properties of the Company or any Subsidiary is subject or by which the Company or any Subsidiary is bound, (D) any Court Order to which the Company or any Subsidiary is a party or any of the properties or assets of the Company or any Subsidiary is subject or by which the Company or any Subsidiary is bound, or (E) any material Requirements of Laws affecting the Company, any Subsidiary or any of their respective properties, assets or business; or

(ii) require the approval, consent, authorization or act of, or the making by the Company of any declaration, filing or registration with, any Person, except, with respect to the consummation of the Merger, as provided under the HSR Act.

3.4. Financial Statements . Schedule 3.4 contains (i) the audited consolidated balance sheets of the Company and the Subsidiaries as of December 31, 2007 and 2006 and the related statements of income and cash flows for each of the years then ended, together with the

appropriate notes to such financial statements, and (ii) the unaudited consolidated balance sheet of the Company and the Subsidiaries as of November 30, 2008 and the related statements of income and cash flows for the 11 months then ended. Except as set forth therein or in the notes thereto and subject, in the case of the financial statements referred to in clause (ii) above, to normal year-end adjustments and the absence of notes, such balance sheets and statements of income and cash flow have been prepared in conformity with U.S. generally accepted accounting principles consistently applied, and such balance sheets and related statements of income and cash flows present fairly in all material respects the consolidated financial position and results of operations and cash flows of the Company and the Subsidiaries as of their respective dates and for the respective periods covered thereby. Except as set forth in Schedule 3.4 , the financial statements referred to in clause (ii) above include all adjustments, which consist only of normal accruals made in the ordinary course of business, necessary for such fair presentation in all material respects, other than normal year-end audit adjustments and footnotes.

3.5. Operations Since Balance Sheet Date .

(a) Except as set forth in Schedule 3.5(a) , since the Balance Sheet Date, there has been no Material Adverse Effect, and no fact or condition exists or, to the Knowledge of the Company, is threatened which would reasonably be expected to cause a Material Adverse Effect.

(b) Except as set forth in Schedule 3.5(b) , since the Balance Sheet Date, the Company and the Subsidiaries have conducted their business only in the ordinary course of business. Without limiting the generality of the foregoing, since the Balance Sheet Date, except as set forth in Schedule 3.5(b) , neither the Company nor any Subsidiary has:

(i) except as contemplated by this Agreement, issued, delivered or agreed (conditionally or unconditionally) to issue or deliver, or granted any option, warrant or other right to purchase, any of its capital stock or other equity interest or any security convertible into its capital stock or other equity interest;

(ii) issued, delivered or agreed (conditionally or unconditionally) to issue or deliver any of its bonds, notes or other debt securities, or borrowed or agreed to borrow any funds;

(iii) paid any obligation or liability (absolute or contingent) other than current liabilities reflected on the Balance Sheet and current liabilities incurred since the Balance Sheet Date in the ordinary course of business;

(iv) declared, set aside or made, or agreed to declare, set aside or make, any payment of dividends or distributions to its stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock or other equity interest, it being understood that pursuant to the terms of the Certificate of Incorporation, dividends accrue whether or not declared (but have not been paid) on the outstanding Series A Preferred Stock, Series C-1 Preferred Stock, Series C-2 Preferred Stock and Series C-3 Preferred Stock;

(v) except in the ordinary course of business, made any amendment or termination of any Company Agreement;

(vi) undertaken or committed to undertake capital expenditures exceeding $200,000 or acquired any real property;

(vii) sold, leased (as lessor), transferred or otherwise disposed of, or mortgaged or pledged, or imposed or suffered to be imposed any Encumbrance (other than a Permitted Encumbrance) on, any of the assets reflected on the Balance Sheet or any assets acquired by it after the Balance Sheet Date, except for inventory and minor amounts of personal property sold or otherwise disposed of for fair value in the ordinary course of business;

(viii) canceled any debts owed to or claims held by it (including the settlement of any claims or litigation) or waived any other rights held by it other than in the ordinary course of business;

(ix) created, incurred or assumed, or agreed to create, incur or assume, any Indebtedness or entered into, as lessee, any capital lease (as defined in Statement of Financial Accounting Standards No. 13);

(x) accelerated or delayed collection of notes or accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected in the ordinary course of business;

(xi) delayed or accelerated payment of any account payable beyond or in advance of its due date or the date when such account payable would have been paid in the ordinary course of business;

(xii) written off any notes or accounts receivable or portions thereof as uncollectible except for write-offs in the ordinary course of business or as required by U.S. generally accepted accounting principles consistently applied;

(xiii) allowed the levels of raw materials, supplies, work-in-process, finished goods, goods on consignment or other materials included in its inventory to vary in any material respect from the levels maintained in the ordinary course of business;

(xiv) instituted any increase in any compensation payable to any director, officer, consultant or employee or in any profit-sharing, bonus, incentive, deferred compensation, insurance, pension, retirement, medical, hospital, disability, welfare or other benefits made available to its directors, officers, consultants or employees, except (A) regularly scheduled salary increases for employees, (B) year-end bonuses paid to employees consistent with past compensation practices and (C) the adoption of any ERISA Benefit Plans or Non-ERISA Commitments set forth in Schedules 3.15(a) and 3.15(b) , respectively;

(xv) paid any amount or incurred any liability to or in respect of, or sold any properties or assets to, or entered into any transaction, agreement or arrangement with any corporation or business in which any officer or director of the Company or any Subsidiary has any direct or indirect ownership interest;

(xvi) entered into any collective bargaining agreements or employment agreements;

(xvii) made any change in the accounting principles and practices used by it from those applied in the preparation of the Balance Sheet and the related statements of income and cash flow for the period then ended; or

(xviii) prepared or filed any Tax Return inconsistent with past practice or, on any such Tax Return, taken any position, made any election, or adopted any method that is inconsistent with the positions taken, elections made or methods used in preparing or filing similar Tax Returns in prior periods, except where necessitated as a result of a change in circumstances of the Company from a prior period.

3.6. No Undisclosed Liabilities . Except as set forth in Schedule 3.6 , neither the Company nor any Subsidiary is subject to any material liability (including Known unasserted claims), whether absolute, contingent, accrued or otherwise, which is not shown or which is in excess of amounts shown or reserved for in the Balance Sheet, other than liabilities of the same nature as those set forth in the Balance Sheet and reasonably incurred in the ordinary course of business after the Balance Sheet Date.

3.7. Taxes .

(a) Except as set forth on Schedule 3.7(a) : (i) each of the Company, each Subsidiary and each Company Group has filed all Tax Returns required to be filed; (ii) all such Tax Returns are complete and accurate in all material respects and disclose all Taxes required to be paid by the Company, each Subsidiary and each Company Group for the periods covered thereby and all Taxes shown to be due on such Tax Returns have been timely paid; (iii) none of the Company, any Subsidiary or any Company Group is currently the beneficiary of any extension of time within which to file any Tax Return; (iv) all Taxes (whether or not shown on any Tax Return) owed by the Company, any Subsidiary or any Company Group have been timely paid; (v) none of the Company, any Subsidiary or any member of any Company Group has waived or been requested to waive any statute of limitations in respect of Taxes; (vi) there is no action, suit, investigation, audit, claim or assessment pending or proposed or threatened in writing with respect to Taxes of the Company, any Subsidiary or any Company Group and, to the Knowledge of the Company, no reasonable basis exists therefor; (vii) all deficiencies asserted or assessments made as a result of any examination of the Tax Returns referred to in clause (i) have been paid in full; (viii) there are no Tax Sharing Arrangements (other than those solely among the Company and the Subsidiaries); (ix) there are no liens for Taxes upon the assets of the Company or any Subsidiary except liens relating to current Taxes not yet due; (x) all Taxes which the Company, any Subsidiary or any Company Group are required by law to withhold or to collect for payment have been duly withheld and collected, and have been paid or accrued, reserved against and entered on the books of the Company; (xi) there are no Tax rulings, requests for rulings, or closing agreements relating to the Company, any Subsidiary or any Company Group; (xii) no written claim has ever been made by a Governmental Body in a jurisdiction where the Company or any Subsidiary has never paid Taxes or filed Tax Returns asserting that the Company or any Subsidiary is or may be subject to Taxes assessed by such jurisdiction; (xiii) neither the Company nor any Subsidiary has been a member of any Company Group other than each

Company Group of which it is a member as of the date hereof and neither the Company nor any Subsidiary has had any direct or indirect ownership in any corporation, partnership, joint venture, or other entity other than the Subsidiaries; and (xiv) neither the Company nor any Subsidiary has any liability for Taxes of any Person (other than the Company or any Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

(b) No transaction contemplated by this Agreement or the Company Ancillary Agreements is subject to withholding under Section 1445 of the Code.

(c) As a result of the transactions contemplated by this Agreement and the Company Ancillary Agreements, none of the Company, any Subsidiary or Optionee will be obligated to make a payment to an individual that would be a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future.

(d) The aggregate Taxes payable by the Company and each Subsidiary (including Taxes payable by any Company Group) with respect to any taxable period will not exceed the aggregate Taxes that would have been payable by them with respect to such period had no Option Consideration been paid (for the avoidance of doubt, Tax liability shall be determined after taking into account NOLs with respect to taxable periods ending on or before the Closing Date being properly carried forward or back); provided , however , that any such excess with respect to a taxable period beginning after the date hereof shall not be taken into account to the extent such excess would not have occurred but for the NOLs carried over or back to such period being less than the NOLs that properly could have been carried over or back to such taxable period had no Option Consideration been paid; provided , further , that any such excess shall be computed by assuming that the net operating losses with respect to taxable periods ending on or before the Closing Date for which Optionee files the Tax Returns of the Company are carried back to taxable periods ending on or before the Closing Date to the extent they may properly be so carried back.

3.8. Availability of Assets .

(a) Except as set forth in Schedule 3.8 and except for the Identified IP, the assets and properties owned, leased or licensed by the Company and the Subsidiaries constitute all the assets and properties used in or necessary for the operation of their business (including all books, records, computers and computer programs and data processing systems) as presently conducted in all material respects, are, in the case of tangible assets, in good and serviceable condition (subject to normal wear and tear) and are suitable for the uses for which intended.

(b) Schedule 3.8 sets forth a description of all material services provided to the Company or a Subsidiary by any stockholder of the Company (or any Affiliate of a stockholder of the Company) utilizing either (i) assets not owned by the Company or a Subsidiary or (ii) employees not listed in Schedule 3.15(f) , and the manner in which the costs of providing such services ha

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