UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549


FORM 8-K


CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934


Date of report (Date of earliest event reported):   December 1, 2010

INSMED INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
       
Virginia
(State or Other Jurisdiction of Incorporation)
       
0-30739
54-1972729
(Commission File Number)
(IRS Employer Identification No.)
       
8720 Stony Point Parkway, Suite 200, Richmond, Virginia
23235
(Address of Principal Executive Offices)
(Zip Code)
       
(804) 565-3000
(Registrant’s Telephone Number, Including Area Code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

S       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

£      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

£      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

Item 1.01.                      Entry Into A Material Definitive Agreement.

Merger Agreement

On December 1, 2010, Insmed Incorporated, a Virginia corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with River Acquisition Co., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), Transave, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“LLC Sub”), Transave, Inc., a Delaware corporation (“Transave”), and TVM V Life Science Ventures GmbH & Co. KG, in its capacity as the stockholders’ agent.  The Merger Agreement and the transactions contemplated thereby have been approved by the boards of directors of the Company, Merger Sub and Transave and by the sole member of LLC Sub.  Immediately following the execution and delivery of the Merger Agreement, Transave delivered to the Company and Merger Sub the irrevocable written consent of certain of the stockholders of Transave representing approximately 89% of the issued and outstanding Transave Capital Stock (as defined below) on an as converted to Transave Common Stock (as defined below) basis and approximately 92% of the Transave Preferred Stock (as defined below) voting as a separate class on an as converted to Transave Common Stock basis.  Following receipt of such written consent of the Transave stockholders, upon the terms set forth in the Merger Agreement, Merger Sub merged with and into Transave, with Transave continuing as the surviving corporation (the “First Merger”) and, immediately thereafter as a part of an integrated plan, Transave, as the surviving corporation of the First Merger, merged with and into LLC Sub, with LLC Sub continuing as the surviving company and as a wholly owned subsidiary of the Company (the “Second Merger,” and together with the First Merger, the “Mergers”).

Under the terms of the Merger Agreement, (i) the Transave stockholders holding shares of Series A Preferred Stock, par value $0.001 per share, of Transave (“Series A Preferred Stock”), shares of Series B Preferred Stock, par value $0.001 per share, of Transave (“Series B Preferred Stock”), shares of Series C Preferred Stock, par value $0.001 per share, of Transave (“Series C Preferred Stock”), or shares of Series D Preferred Stock, par value $0.001 per share, of Transave (“Series D Preferred Stock,” and collectively with Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, the “Transave Preferred Stock”), received an aggregate of (A) 25,938,818 newly issued shares of the common stock, par value $0.01 per share, of the Company (the “Company Common Stock”) and (B) 91,745,892 shares of newly created Series B Conditional Convertible Preferred Stock, par value $0.01 per share, of the Company (the “Company Preferred Stock”), the terms of which are described below, and (ii) the Transave stockholders holding shares of common stock of Transave, par value $0.001 per share (“Transave Common Stock,” and collectively with Transave Preferred Stock, “Transave Capital Stock”) received an aggregate of approximately $561,280 in cash.  Collectively, the shares of the Company Common Stock and the Company Preferred Stock (on an as converted basis) issued in connection with the Mergers represent approximately 46.7% of the capital stock of the Company on a fully diluted basis.  In connection with the closing of the Mergers (the “Closing”), the Company paid off Transave’s existing debt facility totaling approximately $8 million.

Transave has made customary representations and warranties in the Merger Agreement relating to, among other things, its (and its subsidiaries’) respective capital structure and organization, financial condition and business, operations, absence of  material adverse effects, permits, licenses and assets.  Similarly, the Company has made customary representations and warranties in the Merger Agreement relating to, among other things, its capitalization, financial statements, absence of  material adverse effect, permits, licenses and the Company’s public filings with the Securities and Exchange Commission. Under the terms of the Merger Agreement, the Company agreed to use reasonable best efforts, including filing a proxy statement with the Securities Exchange Commission, to obtain, following the consummation of the Mergers, the Company’s shareholders’ approval of the conversion of the Company Preferred Stock (as described below).

Of the 91,745,892 shares of the Company Preferred Stock issued in the Mergers, an aggregate of 17,652,707 shares of the Company Preferred Stock was retained by the Company as security for any indemnification payments required pursuant to the terms of the Merger Agreement.  (the “Holdback Shares”).  Such shares will be delivered to Transave stockholders that have not perfected appraisal rights under the Delaware General Corporation Law and that are otherwise entitled to Merger Consideration (“Eligible Stockholders”), with necessary adjustments made for indemnity claims, on the distribution dates specified in the Merger Agreement.

Under the terms of the Merger Agreement, the Eligible Stockholders are obligated to indemnify the Company for all losses resulting from breaches of Transave’s representations and warranties or Transave’s breach or failure to perform its covenants under the Merger Agreement. Similarly, the Company is obligated to indemnify the Eligible Stockholders for all losses resulting from breaches of the Company’s representations and warranties and the Company’s breach or failure to perform its covenants under the Merger Agreement.  The Company’s indemnification claims are limited to and must be satisfied out of the Holdback Shares.  The Company’s indemnification liability is limited to $12,558,136.  In each case, indemnification claims are required to be asserted within 18 months following the Closing of the Mergers.

A copy of the Merger Agreement is filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.  The foregoing description of the Merger Agreement is qualified in entirety by reference to the full text of the Merger Agreement filed with this Current Report on Form 8-K.

Terms of the Preferred Stock

The terms, rights, obligations and preferences of the shares of the Company Preferred Stock issued in connection with the Mergers are set forth in the Articles of Amendment to the Articles of Incorporation of the Company (the “Articles of Amendment”) which was filed with the State Corporation Commission of the Commonwealth of Virginia on the closing date of the Mergers.  The terms of the shares of the Company Preferred Stock include the following:

Liquidation Preference : Each share of Company Preferred Stock has a liquidation preference equal to the greater of (x) $0.7114 per share (“Stated Value”) plus an amount equal to any accrued and unpaid dividends on such shares of the Company Preferred Stock or (y) the value of the shares of the Company Common Stock that would be issued in respect thereof upon conversion of such share of the Company Preferred Stock (regardless of whether the Company’s shareholders have approved the conversion of the shares of Company Preferred Stock).

Dividend : Shares of the Company Preferred Stock are entitled to receive any dividends payable on the Company Common Stock.  In addition, shares of the Company Preferred Stock will accrue dividends at a rate of 12.5% per annum at the end of each six month period following the earlier of (i) December 1, 2011 or (ii) the date upon which at least 50 patients have been given at least one dose in Phase III clinical trials for ARIKACE TM , but in no event earlier than September 1, 2011.  Accrued dividends will be paid in cash except that the board of directors of the Company may pay such dividends in kind by increasing the Stated Value by the amount of such dividend.

Mandatory Conversion : Shares of the Company Preferred Stock will automatically convert into shares of the Company Common Stock upon receipt of shareholder approval of the conversion feature.

Conversion Rate : Each share of the Company Preferred Stock will be convertible into the number of shares of the Company Common Stock equal to the number obtained by dividing (x) the Stated Value plus the accrued but unpaid dividends on such shares by (y) $0.7114 (subject to customary adjustments for changes in the Company’s capital structure).

Redemption : In the event shareholder approval has not been obtained, on or after the fifth anniversary of the Closing, the holders of at least 62.5% of the then outstanding shares of the Company Preferred Stock may cause the Company to redeem all, but not less than all, of the outstanding shares of the Company Preferred Stock by written election, provided that the redemption date will be at least 180 days after delivery to the Company of such written election.  In the event of such redemption, the redemption price per share (the “Series B Redemption Price”) will be equal to the greater of (x) the Stated Value plus an amount equal to any accrued and unpaid dividends on such shares of the Company Preferred Stock or (y) the product of (a) the average closing price for the ten consecutive trading days immediately preceding the redemption date and (b) the number of shares of the Company Common Stock that such holder of the Company Preferred Stock would have been entitled to receive upon conversion.  In the event that less than all of the Series B Preferred Stock is redeemed within 30 days after the date set for redemption, any shares remaining outstanding shall accrue interest on the Series B Redemption Price at a rate of 15% per annum.

Voting : Shares of the Company Preferred Stock will be non-voting, except that for as long as at least 10% of the Company Preferred Stock issued on the closing date of the Mergers remain outstanding, the Company may not alter the rights, preferences, power or privileges of the shares of the Company Preferred Stock, increase or decrease (other than by conversion) the total number of authorized or issued shares of Company Preferred Stock, authorize or issue, or obligate itself to issue, any equity security having a preference over or on parity with the Company Preferred Stock with respect to dividends or liquidation, redeem, purchase or otherwise acquire any shares of junior stock or any series of preferred stock other than the Company Preferred Stock or declare, pay or set aside for payment any dividends on the Company Common Stock without the approval of the holders of at least 62.5% of the then outstanding shares of the Company Preferred Stock.  In addition, for as long as at least 10% of the Company Preferred Stock issued on the closing date of the Mergers remain outstanding, the Company must obtain the approval of the holders of at least a majority of the then outstanding shares of the Company Preferred Stock in order to liquidate the Company or to effect a change of control, provided that such voting rights will expire when the holders of the Company Preferred Stock as of the Closing no longer beneficially own at least a majority of the outstanding shares of the Company Preferred Stock.

A copy of the Articles of Amendment is filed with this Current Report on Form 8-K as Exhibit 3.1 and is incorporated herein by reference.  The foregoing description of the terms of the Company Preferred Stock is qualified in entirety by reference to the full text of the Articles of Amendment filed with this Current Report on Form 8-K.

Shareholders’ Agreement

On the date of the Merger Agreement, in connection with the execution thereof,  the Company also entered into a shareholders’ agreement (the “Shareholders’ Agreement”) with certain Transave stockholders (the “Shareholder Parties”) who collectively held approximately 89% of the issued and outstanding Transave Capital Stock on an as converted to Transave Common Stock basis.

Pursuant to the Shareholders’ Agreement, the Shareholder Parties holding 62.5% of the outstanding Company Common Stock and Company Preferred Stock (on an as converted to Company Common Stock basis) held by all Shareholder Parties have the right to nominate one director for election to the Company Board.  Such right to nominate a director will expire following the earliest of (i) the fifth anniversary of the Closing, (ii) the conversion of the Company Preferred Stock to Company Common Stock, or (iii) such time that the Shareholder Parties and their affiliates no longer hold at least 6,484,705 shares of the Company Common Stock and at least 22,936,473 shares of Company Preferred Stock issued pursuant to the Mergers.

Under the terms of the Shareholders’ Agreement, the Shareholder Parties are prohibited from transferring any shares of the Company received in connection with the Mergers for 180 days following the Closing of the Mergers, provided that certain shareholders are permitted to transfer up to an aggregate 7,600,000 shares of Company Common Stock or Company Preferred Stock (on an as converted to Common Stock basis) prior to such time.  Thereafter, the Shareholder Parties are able to dispose of shares received in connection with the Mergers to unaffiliated third parties up to one-third of the stock of the Company received by them every six months (with each additional 1/3 increment being cumulative and in addition to the amount such Shareholder Party was otherwise permitted to sell but did not sell in the previous six-month period).

In addition, until the 18-month anniversary of the closing date, the Shareholder Parties are prohibited, unless otherwise consented to or requested by the Company or as otherwise permitted under the Shareholders’ Agreement, from (i) acquiring additional shares of the Company Common Stock (or securities convertible or exercisable into shares of the Company Common Stock), (ii) entering into an agreement relating to a change of control transaction or other extraordinary transaction involving the Company and (iii) taking certain actions relating to the voting of the Company securities.

A copy of the Shareholders’ Agreement is filed with this Current Report on Form 8-K as Exhibit 4.1 and is incorporated herein by reference.  The foregoing description of the Shareholders’ Agreement is qualified in entirety by reference to the full text of the Shareholders’ Agreement filed with this Current Report on Form 8-K.

Registration Rights Agreement

On the date of the Merger Agreement, in connection with the execution thereof, the Company also entered into a customary registration rights agreement with respect to the shares of the Company Common Stock (including shares of Company Common Stock issuable upon conversion of the Company Preferred Stock) issued to Transave stockholders under the Merger Agreement.  The agreement provides for (i) two demand registrations, (ii) “piggy-back” registration rights and (iii) Form S-3 shelf registration rights.  The registration rights are subject to certain dollar thresholds and other limitations, including (if applicable) holdbacks at the request of underwriters.

A copy of the registration rights agreement is filed with this Current Report on Form 8-K as Exhibit 4.2 and is incorporated herein by reference.  The foregoing description of the registration rights agreement is qualified in its entirety by reference to the full text of the registration rights agreement filed with this Current Report on Form 8-K.


Item 2.01.                      Completion of Acquisition or Disposition of Assets.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.01 by reference.

Item 3.02.                      Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.

The issuance and sale of the shares of the Company Common Stock and the Company Preferred Stock at the Closing of the Mergers are exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Regulation D promulgated under the Securities Act (“Regulation D”).  Prior to the issuance of the shares of the Company Common Stock and the Company Preferred Stock, each of Transave’s stockholders is required to make certain representations to the Company as required by Regulation D.  The Company has not and will not engage in general solicitation or advertising with regard to the issuance and sale of the Company Common Stock and the Company Preferred Stock and has not and will not offer securities to the public in connection with the issuance and sale of the Company securities pursuant to the Merger Agreement.

Item 3.03                      Material Modification to Rights of Security Holders

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.

Under the Articles of Amendment, for so long as at least 10% of the Company Preferred Stock issued on the closing date of the Mergers remains outstanding, the Company may not pay or set aside for payment any dividends on the Company Common Stock without the approval of the holders of at least 62.5% of the then outstanding shares of the Company Preferred Stock.

Item 5.02.                      Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 5.02 by reference.

In connection with the Mergers described in Item 1.01, on December 1, 2010 Kenneth G. Condon, Graham K. Crooke and Dennis M. Lanfear resigned as directors of the Company and Mr. Donald Hayden, Jr. was appointed as a director and as the Chairman of the Board of Directors of the Company.

Melvin Sharoky, M.D. and Randall W. Whitcomb, M.D. have been appointed to serve on the Audit Committee of the Board of Directors to fill the vacancies created by the resignations of Messrs. Condon and Crooke.  Steinar Engelsen, M.D. will continue to serve as a member of the Audit Committee.  The Board has determined that Dr. Engelsen is an “audit committee financial expert,” as that term is defined in the rules promulgated by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002.  The Board has determined that Dr. Sharoky and Dr. Whitcomb are independent directors as defined by Rule 5605(c)(2) of the NASDAQ Listing Rules and our Corporate Governance Guidelines.

Mr. Hayden has been appointed to the Compensation Committee of the Board of Directors and the Nominations and Corporate Governance Committee of the Board of Directors to fill the vacancies created by the resignation of Mr. Condon.

As provided in the Merger Agreement, on December 1, 2010, the Company appointed Timothy Whitten, the Chief Executive Officer of Transave immediately prior to the Mergers, as the Chief Executive Officer and President of the Company, and Dr. Renu Gupta as Executive Vice President Development and Chief Medical Officer.

Donald Hayden, Jr., age 54, served as the Executive Chairman of Transave since April 2006.  In addition, Mr. Hayden has served as a member of the Board of Directors of Amicus Therapeutics, Inc. (“Amicus”) since March 2006 and as Lead Independent Director of Amicus since February 2010.  Mr. Hayden previously served as Chairman of the Board of Directors of Amicus from March 2006 until February 2010 and from September 2006 until March 2007 as Interim President and Chief Executive Officer of Amicus.  From 1991 to 2005, he held several executive positions with Bristol-Myers Squibb Company, most recently serving as Executive Vice President and President, Americas.  Mr. Hayden holds a B.A. from Harvard University and an M.B.A. from Indiana University.

Timothy Whitten, age 53, served as the President and Chief Executive Officer of Transave since 2006.  He joined Transave from Pharmacyclics where he served for approximately five years.  His roles included Senior Vice President of Commercial Operations and Business Development, among others.  Prior to Pharmacyclics, Mr. Whitten spent 16 years at Bristol-Myers Squibb Company (BMS).  His roles included Vice President, Global Marketing, Oncology, Immunology and Pulmonary Diseases; Vice President U.S. Marketing, Bristol Myers Oncology and Immunology; and Vice President, Global Pravastatin Initiative.  During his 16 years in marketing, sales and strategic planning at BMS, Mr. Whitten led the successful U.S. launch and marketing of Taxol® (paclitaxel) Injection, an oncology product.  He also led the company’s strategic direction for the global oncology and immunology franchises.  Mr. Whitten earned his master’s degree in business administration from Colgate Darden Graduate School of Business Administration at University of Virginia and received his pharmacy degree Magna Cum Laude from West Virginia University.

Renu Gupta, M.D., age 55, has served as the Executive Vice President Development and Chief Medical Officer of Transave, Inc. since September 2006, and has been a Director of the UK subsidiary, Transave Inhalation Biotherapeutics as of May 2008.  From May 2003 to August 2006, she held the position of Senior Vice President Development at Antigenics, Inc.  Prior to that, she served at Novartis as Vice President and Head of U.S. Clinical Research and Development and Global Head of Cardiovascular, Metabolics, Endocrine and Gastroenterology Research. Dr. Gupta also spent almost 10 years at Bristol-Myers Squibb, where she was responsible for clinical research, business development and global development and marketing strategy for infectious diseases and immunology.  Dr. Gupta received her bachelor and medical degrees from the University of Zambia and completed her medical and post-doctoral training at Albert Einstein Medical Center, the Wistar Institute of Anatomy and Biology, Children’s Hospital of Philadelphia, and the University of Pennsylvania, where she was Adjunct Assistant Professor until 1997.  Dr. Gupta has more than 25 years of development, regulatory and senior management experience with the biopharma industry.  Her work has been published in leading peer-reviewed journals and she has been active in numerous relevant academic and professional societies.  Dr. Gupta is a founding member of the Industrial Management Board at the Harvard Medical School, served as Chair of the Medical Advisory Council for Antigenics, past member of the Scientific Advisory Board at Cerimon Pharmaceuticals, and the Institute of Medicine Forum on Emerging Infections, and is Board Member of Aim at Melanoma, former Charlie Guild Melanoma Foundation.

The Company intends to enter into employment agreements with Mr. Whitten and Dr. Gupta on mutually agreeable terms to be negotiated.

In connection with the transaction, the Compensation Committee of the Company’s Board of Directors amended the Company’s outstanding restricted stock awards and stock option awards granted under the Company’s Amended and Restated 2000 Stock Incentive Plan (the “Plan”) to provide for immediate vesting of such awards as of the effective date of the Merger.  The Compensation Committee also extended the period during which any option holder may exercise outstanding options awarded under the Plan after termination of his or her employment or service with the Company for any reason, other than for cause as provided in the Plan, to the earlier of the second anniversary of the date of termination of the option holder’s employment or service with the Company, or the original expiration date of the option as provided in the individual option agreement.

Item 5.03.                      Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 5.03 by reference.

In connection with the Mergers described in Item 1.01, on December 1, 2010, the closing date of the Mergers, the Company filed with the State Corporation Commission of the Commonwealth of Virginia an Articles of Amendment to the Articles of Incorporation of the Company in order to create the Company Preferred Stock.  The terms, rights, obligations and preferences of the shares of the Company Preferred are described in Item 1.01 above.

On December 1, 2010, the Company amended its bylaws to provide that the number of directors constituting the Board of Directors shall be not less than four nor more than six directors and the number of directors constituting the Board of Directors was decreased from six directors to four directors.

Item 8.01.                      Other Events.

On December 2, 2010, the Company issued a press release relating to the Mergers, which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
 
Forward–Looking Statements

The statements made in this Form 8-K contain forward-looking statements which are made pursuant to provisions of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Investors are cautioned that such statements in this Form 8-K, including statements relating to expectations regarding the anticipated benefits of the business combination, the results of clinical trials, the development of the combined company’s products, the anticipated shareholder vote and the business strategies, plans and objectives of management, constitute forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the forward-looking statements.  The risks and uncertainties include, without limitation, we may be unsuccessful in integrating the operations of the combined company, we may be unsuccessful in developing our product candidates, our expenses may be higher than anticipated and other risks and challenges detailed in our filings with the U.S. Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2009.  Readers are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this Form 8-K.  We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this release or to reflect the occurrence of unanticipated events.
 
Important Information
 
The Company intends to file a proxy statement and other relevant materials with the SEC to obtain shareholder approval of the convertibility of the Company Preferred Stock issued to the holders of the Transave Preferred Stock (the “Shareholder Approval”). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE SHAREHOLDER APPROVAL. The proxy statement, any amendments or supplements to the proxy statement and other relevant documents filed by the Company with the SEC will be available free of charge through the web site maintained by the SEC at www.sec.gov or by calling the SEC at telephone number 1-800-SEC-0330. Free copies of these documents may also be obtained from the Company’s website at www.insmed.com or by writing to: Insmed Incorporated, 8720 Stony Point Parkway, Suite 200, Richmond, Virginia, 23235, Attention: Mr. W. McIlwaine Thompson, Corporate Secretary.

    The Company and its directors and executive officers are deemed to be participants in the solicitation of proxies from the shareholders of the Company in connection with the Shareholder Approval. Information regarding the Company’s directors and executive officers is included in the Company’s definitive proxy statement for its 2010 annual meeting of shareholders held on June 9, 2010, which was filed with the SEC on April 30, 2010.  Other information regarding the participants in such proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement to be filed in connection with the Shareholder Approval.
 
Cautionary Statement
 
The issuance of the securities in the transactions described in this 8-K has not been registered under the Securities Act, or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This 8-K shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction or state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or state.

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of business acquired.

As permitted by Item 9.01(a)(4) of Form 8-K, the Company will file the financial statements required by Item 9.01(a)(1) of Form 8-K pursuant to an amendment to this Current Report on Form 8-K not later than seventy-one (71) calendar days after the date this initial Current Report on Form 8-K reporting the acquisition of Transave was required to be filed.

(b) Pro forma financial information.

As permitted by Item 9.01(b)(2) of Form 8-K, the Company will file the pro forma financial information required by Item 9.01(b)(1) of Form 8-K pursuant to an amendment to this Current Report on Form 8-K not later than seventy-one (71) calendar days after the date this initial Current Report on Form 8-K reporting the acquisition of Transave was required to be filed.

(d) Exhibits
 
2.1
Agreement and Plan of Merger, dated as of December 1, 2010, by and among the Company, Merger Sub, LLC Sub, Transave and TVM V Life Science Ventures GmbH & Co. KG, as stockholders’ agent.
 
3.1
Articles of Amendment to the Articles of Incorporation of the Company, dated as of December 1, 2010.
 
3.2
Amendment to Amended and Restated Bylaws of the Company
 
4.1
Shareholders’ Agreement dated as of December 1, 2010, by and among the Company and the Shareholder Parties.
 
4.2
Registration Rights Agreement, dated as of December 1, 2010, by and among the Company and the shareholders that are party to the agreement from time to time.
 
99.1
Press release issued by the Company on December 2, 2010.


 
 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


      Insmed Incorporated

Date: December 2, 2010

      By: /s/Kevin P. Tully C.G.A.
      Name: Kevin P. Tully C.G.A.
 
Title: Executive Vice President & Chief Financial Officer

 
 
 


EXECUTION COPY




 
AGREEMENT AND PLAN OF MERGER
 
among:
 
Insmed incorporated
a Virginia corporation;
 
River Acquisition Co.,
a Delaware corporation;
 
Transave, LLC,
a Delaware limited liability company
 
Transave, Inc.,
 
a Delaware corporation;
 
and
 
TVM V Life Science Ventures GmbH & Co. KG,
as the Stockholders’ Agent.
 
___________________________
 
Dated as of December 1, 2010
 
___________________________
 

 


 
 
 

TABLE OF CONTENTS
 
 
Section


 
 
 

LIST OF EXHIBITS AND SCHEDULES
 
ANNEXES
 
Annex I                      Certain Definitions
 
Annex II                      Persons with Knowledge
 
EXHIBITS
 
Exhibit A                      Merger Consideration Schedule
 
Exhibit B                      Form of Letter of Transmittal
 
Exhibit C                      Board Appointments
 
SCHEDULES
 
Disclosure Schedule
 
Parent Disclosure Schedule
 

 
 
 

AGREEMENT AND PLAN OF MERGER
 
This Agreement and Plan of Merger is made and entered into as of December 1, 2010, by and among: Insmed Incorporated , a Virginia corporation (“ Parent ”), River Acquisition Co. , a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), Transave, LLC , a Delaware limited liability company, the sole member of which is Parent (“ LLC Sub ”), Transave, Inc. , a Delaware corporation (the “ Company ”), and TVM V Life Science Ventures GmbH & Co. KG , as the Stockholders’ Agent.  Certain other capitalized terms used in this Agreement are defined in Annex I.
 
Recitals
 
A.           Upon the terms of this Agreement and in accordance with the General Corporation Law of the State of Delaware, as amended (the “ DGCL ”), and the Delaware Limited Liability Company Act, as amended (the “ DLLC ” and, together with the DGCL, “ Delaware Law ”), Parent, Merger Sub, LLC Sub and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ First Merger ”), with the Company as the surviving corporation (the “ Surviving Corporation ”), and then immediately after the First Merger and as a part of an integrated plan, the Surviving Corporation will merge with and into LLC Sub (the “ Second Merger ,” and together with the First Merger, the “ Mergers ”), with LLC Sub as the surviving entity (the “ Surviving LLC ,” and together with the Surviving Corporation, the “ Surviving Company ”).
 
B.           The board of directors of the Company has approved this Agreement and declared its advisability and approved the First Merger and other transactions contemplated by this Agreement and has recommended that the Stockholders of the Company approve and adopt this Agreement and the First Merger.
 
C.           The board of directors of Parent has approved this Agreement and declared its advisability and approved the Mergers and other transactions contemplated by this Agreement.
 
D.           The board of directors of Merger Sub has approved this Agreement and declared its advisability and approved the First Merger and other transactions contemplated by this Agreement and has recommended that Parent, as the sole stockholder of Merger Sub, approve and adopt this Agreement and the First Merger.
 
E.           Parent, as the sole member of LLC Sub, has approved this Agreement and declared its advisability and approved the Second Merger and other transactions contemplated by this Agreement.
 
F.           Immediately following the execution and delivery of this Agreement, and as a condition to the willingness of Parent and Merger Sub to enter into this Agreement, the Company shall have delivered to Parent and Merger Sub the irrevocable written consent of certain of the stockholders of the Company representing not less than a majority of the shares of Company Capital Stock (voting together as a single class on an as-converted basis) and sixty-two and one half percent (62.5%) of the shares of Company Preferred Stock (voting as a separate class on an as converted basis).
 
G.           As a material inducement to the Company’s willingness to enter into this Agreement and consummate the transactions contemplated by this Agreement, Parent shall cause to be delivered to the Company, concurrently with the execution of this Agreement, a registration rights agreement between the stockholders of the Company named therein and Parent, duly executed by Parent.
 
H.           As a material inducement to the Parent’s and the Company’s willingness to enter into this Agreement and consummate the transactions contemplated by this Agreement, Parent and certain of the stockholders of the Company are executing and delivering, concurrently with the execution of this Agreement, a stockholders’ agreement pursuant to which such persons have agreed, among other things, to certain restrictions on the transfer of their shares of Parent Capital Stock.

I.           The parties intend that the Mergers constitute an integrated transaction that qualifies as a reorganization within the meaning of Section 368(a)(1)(A) of the Code.
 
Agreement
 
NOW, THEREFORE , in consideration of the foregoing and the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the parties to this Agreement agree as follows:
 
1.  
 
1.1   Merger of Merger Sub into the Company
 
Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, at the Effective Time, (i) Merger Sub shall be merged with and into the Company, (ii) the separate existence of Merger Sub shall cease and (iii) the Company shall be the Surviving Corporation of the First Merger and shall continue its legal existence under the DGCL.  Immediately after the Effective Time and as part of an integrated plan and in accordance with Delaware Law, (i) the Surviving Corporation shall be merged with and into LLC Sub, (ii) the separate existence of the Surviving Corporation shall cease and (iii) LLC Sub shall be the Surviving LLC of the Second Merger and shall continue its legal existence under the DLLC.
 
1.2   Effect of the Mergers
 
(a)   At and after the Effective Time, the First Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises, and be subject to all of the restrictions, disabilities and duties of the Company and Merger Sub, as provided under Section 259 of the DGCL.
 
(b)   At and after the Second Effective Time, the Second Merger shall have the effects set forth in this Agreement and in the applicable provisions of the Delaware Law.  Without limiting the generality of the foregoing, and subject thereto, at the Second Effective Time, the Surviving LLC shall possess all the rights, privileges, powers and franchises, and be subject to all of the restrictions, disabilities and duties of the Surviving Corporation and LLC Sub.
 
1.3   Closing; Effective Time
 
Upon the terms of this Agreement, the closing of the Mergers (the “ Closing ”) shall take place at the offices of Greenberg Traurig, LLP, 200 Park Avenue, New York, New York 10166, unless another place is agreed to in writing by the parties hereto, on the date of this Agreement at a time agreed by Parent and the Company (the “ Closing Date ”).  As promptly as practicable after the Closing, the Company and Merger Sub shall cause a properly executed certificate of merger (the “ Certificate of Merger ”) conforming to the requirements of the DGCL to be filed with the Secretary of State of the State of Delaware.  The First Merger shall become effective as of the date and time that the Certificate of Merger is filed and accepted by the Secretary of State of the State of Delaware (the “ Effective Time ”).  Immediately following the Effective Time, the Surviving Corporation and LLC Sub shall cause a properly executed certificate of merger (the “ Second Certificate of Merger ”) conforming to the requirements of the Delaware Law to be filed with the Secretary of State of the State of Delaware.  The Second Merger shall become effective as of the date and time that the Second Certificate of Merger is filed and accepted by the Secretary of State of the State of Delaware (the “ Second Effective Time ”).
 
1.4   Organizational Documents; Directors and Officers
 
(a)   At and after the Effective Time:
 
(i)   the certificate of incorporation of the Company shall be the certificate of incorporation of the Surviving Corporation as in effect immediately prior to the Effective Time (which shall contain such provisions as are necessary to give full effect to the exculpation and indemnification provided for in Section 4.2 hereof) until thereafter amended as provided and in accordance with applicable Legal Requirements; and
 
(ii)   the bylaws of the Company shall be the bylaws of the Surviving Corporation as in effect immediately prior to the Effective Time (which shall contain such provisions as are necessary to give full effect to the exculpation and indemnification provided for in Section 4.2 hereof) until thereafter amended as provided and in accordance with applicable Legal Requirements.
 
(b)   At and after the Second Effective Time:
 
(i)   the certificate of formation of LLC Sub (the “ LLC Sub Certificate ”), as in effect immediately prior to the Second Effective Time, shall be the certificate of formation of the Surviving LLC until thereafter amended as provided and in accordance with applicable Legal Requirements; and
 
(ii)   the limited liability company operating agreement of LLC Sub (the “ LLC Sub Operating Agreement ”), as in effect immediately prior to the Second Effective Time (which shall contain such provisions as are necessary to give full effect to the exculpation and indemnification provided for in Section 4.2 hereof), shall be the limited liability company operating agreement of the Surviving LLC until thereafter amended as provided and in accordance with applicable Legal Requirements.
 
(c)   The directors  and officers of the Surviving Corporation immediately after the Effective Time shall be those Persons designated by Parent after consultation with the Company.
 
(d)   The managers and officers of LLC Sub immediately after the Second Effective Time shall be those Persons designated by Parent after consultation with the Company.
 
1.5   Conversion of Company Capital Stock
 
(a)   Conversion of Company Capital Stock .  As of the Effective Time, by virtue of the First Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company or Merger Sub, each share of Company Capital Stock owned by Parent, Merger Sub, the Company or any direct or indirect wholly-owned subsidiary of Parent, Merger Sub or the Company immediately prior to the Effective Time, if any, shall, be canceled without payment of any consideration with respect thereto and each other share of Company Capital Stock outstanding immediately prior to the Effective Time shall be converted into the right to receive from Parent the Merger Consideration with respect to each share of Company Capital Stock as set forth on Exhibit A, to be delivered in accordance with Sections 1.5(c) and (d).
 
(b)   Conversion of Merger Sub Stock .  By virtue of the First Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company or Merger Sub, each share of the common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.
 
(c)   Delivery of Closing Merger Consideration .  The Closing Merger Consideration with respect to each share of Company Capital Stock shall be delivered promptly after the Effective Time, following the surrender of the certificate representing such share of Company Capit al Stock in accordance with Section ‎1.9, in the amounts specified on Exhibit A.
 
(d)   Delivery of Holdback Merger Consideration .  The Holdback Merger Consideration with respect to each share of Company Capital Stock shall be delivered at the times and in the manner specified in Article 6 hereof.
 
(e)   Aggregate Consideration .  Notwithstanding anything to the contrary set forth herein, the aggregate Merger Consideration to be issued in connection with the First Merger with respect to all shares of Company Capital Stock, Company Options, Company Restricted Stock Awards and Company Warrants shall be 25,938,818   shares of Parent Common Stock, 91,745,892 shares of Parent Series B Preferred Stock and $561,280.17. In no event shall the aggregate number of shares of Parent Common Stock issued by Parent pursuant to this Agreement (other than shares of Parent Common Stock issued upon conversion of the Parent Series B Preferred Stock in accordance with the Articles of Amendment) exceed 19.9% of the shares of Parent Common Stock outstanding immediately prior to the Closing.
 
1.6   Treatment of Stock Options; Restricted Stock.
 
Immediately prior to the closing of the First Merger, each Option shall, by virtue of the First Merger and without the need for any further action on the part of the holder thereof, on the terms and subject to the conditions set forth in this Agreement, be accelerated in full and cancelled and terminated without the payment of any consideration in the Mergers and the Company Option Plan shall be terminated.  Prior to the Effective Time, the board of directors of the Company (the “ Company Board ”) has adopted all resolutions and taken all actions which are necessary to effectuate the foregoing.
 
1.7   Warrants
 
As of the date hereof, each outstanding Company Warrant has been exercised or terminated.
 
1.8   Dissenting Shares
 
(a)   Effect on Dissenting Shares .  Notwithstanding any provisions of this Agreement to the contrary, shares of Company Capital Stock held by a holder who has demanded and perfected such demand for appraisal of such holder’s shares of Company Capital Stock in accordance with Section 262 of the DGCL and has neither effectively withdrawn nor lost such holder’s right to such appraisal (the “ Dissenting Shares ”) shall not be converted into the applicable Merger Consideration, but shall be canceled and shall cease to exist and shall represent the right only to receive such rights as are granted by the DGCL.  Parent shall be entitled to retain any Merger Consideration not paid on account of such Dissenting Shares pending resolution of the claims of such holders, and the Eligible Stockholders shall not be entitled to any portion thereof.
 
(b)   Loss of Dissenting Share Status . Notwithstanding the provisions of Section ‎1.8(a), if any holder of shares of Company Capital Stock who demands appraisal of such holder’s shares under the D GCL shall effectively withdraw or lose (through the failure to perfect or otherwise) such holder’s right to appraisal, then as of the occurrence of such event, such holder’s shares of Company Capital Stock shall automatically be converted into the right to receive the applicable Merger Consideration, without interest thereon, as and when payable pursuant to this Agreement.
 
(c)   Notice of Dissenting Shares .  The Surviving Company or Parent, as the case may be, shall give the Stockholders’ Agent: (i) prompt notice of any demands for appraisal of shares of Company Capital Stock received by the Surviving Company or Parent, withdrawals of any demands, and any other instruments served pursuant to the DGCL and received by the Surviving Company or Parent; and (ii) the opportunity to participate in all negotiations and proceedings with respect to any such demands for appraisal, provided that the Surviving Company and Parent shall have the right to direct all such negotiations and proceedings.  Neither the Surviving Company nor Parent shall, except with the prior written consent of Stockholders’ Agent, which consent shall not be unreasonably withheld or delayed, make any payment with respect to any demands for appraisal of shares of Company Capital Stock or offer to settle any such demands in each case for any amount in excess of what is payable by Parent in accordance with this Agreement with respect to such shares of Company Capital Stock and other than by operation of law or pursuant to a final order of a court of competent jurisdiction. The Stockholders’ Agent shall not, except with the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed, make any payment with respect to any demands for appraisal of shares of Company Capital Stock or offer to settle any such demands other than by operation of law or pursuant to a final order of a court of competent jurisdiction.
 
1.9   Exchange of Certificates
 
(a)   Letter of Transmittal – Capital Stock . Not later than ten (10) days following the Effective Time, Parent shall mail, or cause to be mailed, to each record holder of Company Capital Stock immediately prior to the Effective Time: (i) a letter of transmittal substantially in the form attached hereto as Exhibit B (which shall specify that delivery of Company Stock Certificates shall be effected, and risk of loss and title to Company Stock Certificates shall pass, only upon delivery of such Company Stock Certificates to Parent, and a provision whereby such holder agrees to be bound by the provisions of A rticles ‎1, 5 and 6 and Section ‎7.1) (a “ Letter of Transmittal ”); and (ii) instructions for use in effecting the exchange of Company Stock Certificates for the Merger Consideration payable with respect to such Company Capital Stock.  Upon the surrender to Parent of a Company Stock Certificate (or an indemnity agreement as described in Section ‎1.9(d)), together with a duly executed Letter of Transmittal, the holder of such Company Stock Certificate shall be entitled to receive in exchange therefor the Merger Consideration that such holder has the right to receive pursuant to this Agreement, and the Company Stock Certificate so surrendered shall forthwith be canceled.  From and after the Effective Time, each Company Stock Certificate which prior to the Effective Time represented shares of Company Capital Stock shall be deemed to represent only the right to receive the Merger Consideration payable with respect to such shares, and the holder of each such Company Stock Certificate shall cease to have any rights with respect to the shares of Company Capital Stock formerly represented thereby.  Parent shall have the option of appointing an exchange agent approved by the Stockholders’ Agent, which approval shall not be unreasonably withheld or delayed, to carry out the provisions of this Section 1.9.
 
(b)   Payments to Others .  If payment or issuance of Merger Consideration in respect of shares of Company Capital Stock converted pursuant to this Agreement is to be made to a Person other than the Person in whose name a surrendered Company Stock Certificate is registered, it shall be a condition to such payment that the Company Stock Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment shall have paid any transfer and other Taxes required by reason of such payment in a name other than that of the registered holder of the Company Stock Certificate surrendered or shall have established to the reasonable satisfaction of Parent that such Tax either has been paid or is not payable.
 
(c)   Stock Transfer Books .  As of the Effective Time, the stock transfer books of the Company shall be closed and there shall not be any further registration of transfers of shares of Company Capital Stock thereafter on the records of the Company.  If, after the Effective Time, certificates for shares of Company Capital Stock (“ Company Stock Certificates ”) are presented to the Surviving Company, they shall be canceled and exchanged for the Merger Consideration payable with respect to such shares as provided for in this Article ‎1.  No interest shall accrue or be paid on any Merger Consideration payable upon the surrender of a Company Stock Certificate which immediatel y before the Effective Time represented outstanding shares of Company Capital Stock.
 
(d)   Lost Certificates .  In the event any Company Stock Certificate representing shares of Company Capital Stock converted in connection with the First Merger pursuant to Section ‎1. 5 shall have been lost, stolen or destroyed, Parent may, in its reasonable discretion and as a condition precedent to the payment of any Merger Consideration with respect to the shares of Company Capital Stock previously represented by such Company Stock Certificate, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide an appropriate indemnity agreement providing for indemnity against any claim that may be made against Parent, the Surviving Company or any affiliated party with respect to such Company Stock Certificate.
 
(e)   Dividends .  No dividends or other distributions declared or made with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Company Stock Certificate with respect to the shares of Parent Common Stock represented thereby, until such holder surrenders such Company Stock Certificate or, if such Company Stock Certificate is lost or stolen, such holder delivers the indemnity agreement referred to in paragraph (d) above, in accordance with this Section 1.9 (at which time such holder shall be entitled, subject to the effect of applicable abandoned property, escheat or similar laws and subject to Section 1.9(g), to receive all such dividends and distributions).
 
(f)   Cash in Lieu of Fractional Shares .  No fractional shares of Parent Capital Stock shall be issued, no certificates for any such fractional shares shall be issued and no cash payment in lieu of any fractional share shall be paid to any holder in connection with the First Merger.  Any fraction of a share of Parent Capital Stock shall be rounded down to the nearest whole number.
 
(g)   Escheat .  Notwithstanding anything in this Agreement to the contrary, neither Parent nor any other Person shall be liable to any holder of shares of Company Capital Stock or to any other Person for any amount paid to a public official pursuant to applicable abandoned property law, escheat law or similar Legal Requirement.  Any amounts remaining unclaimed by holders of shares of Company Capital Stock at such time as such amounts would otherwise escheat to or become property of any Governmental Body shall, to the extent permitted by applicable Legal Requirements, become the property of Parent free and clear of any Encumbrance.
 
(h)   Withholding.  Each of Parent and the Surviving Company shall be entitled to deduct and withhold from any consideration payable or issuable pursuant to this Agreement to any security holder or former security holder of the Company such amounts as Parent determines in good faith are required to be deducted or withheld therefrom or in connection therewith under the Code or any provision of state, local or foreign Tax law or similar Legal Requirement or under any other applicable Legal Requirement.  To the extent such amounts are so deducted or withheld and paid to the appropriate governmental authorities, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.  To the extent that amounts are so withheld and paid over to the appropriate governmental authority by Parent, Parent or the Surviving Company, as the case may be, shall deliver a notice to the holder of the Certificate, as applicable, of such amount so deducted, withheld or paid over if and to the extent required by applicable Legal Requirements.
 
1.10   Conversion of Capital Stock of the Surviving Corporation
 
As of the Second Effective Time, by virtue of the Second Merger and without any further action on the part of Parent, the Surviving Corporation or LLC Sub:
 
(i)   each share of common stock of the Surviving Corporation issued and outstanding immediately prior to the Second Effective Time shall be canceled and retired and shall cease to exist, and no merger consideration or other consideration shall be delivered in exchange therefore; and
 
(ii)   each membership interest of LLC Sub issued and outstanding prior to the Second Effective Time shall remain outstanding and shall constitute the only issued and outstanding equity interests of the Surviving Company immediately after the Second Effective Time.
 
2.  
 
Except as set forth in the disclosure schedules delivered by the Company concurrently with the execution of this Agreement to Parent, Merger Sub and LLC Sub (the “ Disclosure Schedule ”), which shall identify any exceptions to the representations, warranties and covenants contained in this Agreement (with specific reference to the particular Section or subsection to which such information relates; provided , however , that any information set forth in one section of such Disclosure Schedule also shall be deemed to apply to each other section and subsection of this Agreement to which its relevance is reasonably apparent), the Company represents and warrants to Parent, Merger Sub and LLC Sub as follows:
 
2.1   Due Organization; No Subsidiaries; Etc.
 
(a)   Organization .  The Company has been duly organized, and is validly existing and in good standing under the laws of the State of Delaware.  The Company has the requisite corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its material obligations under all Company Material Contracts.
 
(b)   Qualification .  The Company is duly qualified to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the property owned, leased or operated by it or the nature of its business requires such qualification and where the failure to be so qualified will or would reasonably be expected to have or result in a Company Material Adverse Effect.  P art ‎2.1(b) of the Disclosure Schedule accurately sets forth each jurisdiction where the Company is qualified to do business as a foreign corporation.
 
(c)   Directors and Officers .  Part ‎2.1(c) of the Disclosure Schedule accurately sets forth: (i) the names of the members of the Company Board; (ii) the names of the members of each committee of the Company Board; and (iii) the names and titles of the officers of the Company.
 
(d)   Subsidiaries .  Other than Transave Inhalation Biotherapeutics Limited (the “ Company Subsidiary ”), neither the Company nor any of its Subsidiaries has ever owned, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity interest in, any Entity.  Neither the Company nor any of its Subsidiaries has agreed or is obligated to make any future investment in or capital contribution to any Entity.  Except as set forth on Part 2.1(d) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has guaranteed or is responsible or liable for any obligation of any Entity.  The Company Subsidiary has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its formation.  The Company Subsidiary has the requisite corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; and (ii) to own and use its assets in the manner in which its assets are currently owned and used.
 
2.2   Charter Documents; Records
 
The Company has made available to Parent or its Representatives accurate and complete copies of: (a) the certificate of incorporation and bylaws or similar organizational documents, including all amendments thereto, of the Company and each of its Subsidiaries (the “ Charter Documents ”); and (b) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders or members, the board of directors and all committees of the board of directors of the Company and each of its Subsidiaries since December 31, 2007.  The Company and its Subsidiaries are not in material violation of any of their respective Charter Documents.
 
2.3   Capitalization
 
(a)   Outstanding Securities .  The authorized capital stock of the Company as of the date of this Agreement consists of: (i) 700,000,000 shares of Company Common Stock, of which 22,463,903 shares are issued and outstanding as of the date of this Agreement; and (ii) 493,196,239 shares of Company Preferred Stock, of which: (A) 5,733,884 shares are designated as Series A Preferred Stock, 3,935,374 shares of which are issued and outstanding as of the date of this Agreement; (B) 17,779,414 shares are designated as Series B Preferred Stock, 17,165,733 shares of which are issued and outstanding as of the date of this Agreement; (C) 69,682,941 shares are designated as Series C Preferred Stock, 68,588,096 of which are issued and outstanding as of the date of this Agreement; and (D) 400,000,000 shares are designated as Series D Convertible Preferred Stock, 180,895,692 of which are issued and outstanding as of the date of this Agreement.  There are no shares of capital stock held in the Company’s treasury.  Except as set forth in Part 2.3(a) of the Disclosure Schedule, the Company has never declared or paid any dividends on any shares of Company Capital St ock.  Part ‎2.3(a) of the Disclosure Schedule sets forth the names of the Company’s stockholders, the addresses of the Company’s stockholders as set forth on the Company records a nd the class, series and number of shares of Company Capital Stock owned of record by each of such stockholders.  All of the outstanding shares of Company Capital Stock have been duly authorized and validly issued, and are fully paid and nonassessable.  Ex cept as set forth in Part ‎2.3(a) of the Disclosure Schedule, the conversion rights associated with the Company Preferred Stock, the rights created under the Company Stockholder Agreements, and as provided by the terms of any Company Options, Company Warrants and Company Notes, there are no outstanding repurchase options, forfeiture provisions or restrictions on transfer (other than restrictions on transfer imposed by virtue of applicable federal and state securities laws).  Each share of Company Preferred Stock is convertible into the number of shares of Company Common Stock set forth in Part 2.3(a) of the Disclosure Schedule.  No shares of capital stock of the Company are owned by the Company Subsidiary.
 
(b)   Stock Options and Restricted Stock .  The Company has reserved 54,091,012 shares of Company Common Stock for issuance under the Company Option Plan, of which options to purchase 47,399,878 shares of Company Common Stock are currently outstanding and 745,756 shares of Company Common Stock have been issued upon the exercise of Company Options granted by the Company under the Company Option Plan and 1,937,786 shares of restricted Company Common Stock have been awarded under the Company Option Plan as of the date of this Agreement.  Part ‎2.3(b) of the Disclosure Schedule accurately sets forth, with respect to each Company Option that is outstanding as of the date of this Agreement and each Company Restricted Stock Award: (i) the name of the holder of such Company Option or Company Restricted Stock Award; (ii) the total number of shares of Company Common Stock that are subject to such Company Option or Company Restricted Stock Award and the number of shares of Company Common Stock with respect to which such Company Option is immediately exercisable or with respect to which such Company Restricted Stock Award is fully vested; (iii) the date on which such Company Option or Company Restricted Stock Award was granted and the term thereof; (iv) the vesting schedule for such Company Option or Company Restricted Stock Award and whether the vesting thereof shall be subject to any acceleration in connection with the Mergers or any of the other transactions contemplated by this Agreement; (v) the exercise price per share of Company Common Stock purchasable under such Company Option and (vi) whether such Company Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code or is intended to be subject to Section 409A of the Code.  Each grant of a Company Option and each Company Restricted Stock Award was duly authorized no later than the date on which the grant of such Company Option or Company Restricted Stock Award was by its terms to be effective (the “ Grant Date ”) by all necessary corporate action, each such grant was made in accordance with the terms of the applicable compensation plan or arrangement of the Company and the per share exercise price of each Company Option was no less than the fair market value of a share of Company Common Stock, as determined in good faith reliance on a reasonable valuation method, on the applicable Grant Date.
 
(c)   Warrants .  Part ‎2.3 (c) of the Disclosure Schedule accurately sets forth, with respect to each Company Warrant that is outstanding as of the date of this Agreement: (i) the name of the holder of such Company Warrant; (ii) the class, series and total number of shares of Company Capital Stock that are subject to such Company Warrant and the class, series and number of shares of Company Capital Stock with respect to which such Company Warrant is immediately exercisable; (iii) the date on which such Company Warrant was issued and the term of such Company Warrant; (iv) the vesting schedule for such Company Warrant; and (v) the exercise price per share of Company Capital Stock purchasable under such Company Warrant.  The Company has made available to Parent or its Representatives accurate and complete copies of each Company Warrant that is outstanding.
 
(d)   Subsidiaries .  All of the outstanding shares of capital stock of, or other equity interests in, each Subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable.  All of the outstanding capital stock or securities of, or other equity interests in, each of the Subsidiaries of the Company (the “ Subsidiary Capital Stock ”), is owned, directly or indirectly, by the Company, and is owned free and clear of any lien or Encumbrance.  Part ‎2.3(d) of the Disclosure Schedule lists: ( i) each Subsidiary of the Company; (ii) its jurisdiction of incorporation or organization; and (iii) the location of its principal executive office.
 
(e)   No Other Securities .  E xcept as set forth in Part ‎2.3(b), ‎2.3(c) or 2.3(d) of the Disclosure Schedule, th e conversion rights associated with the Company Preferred Stock, the rights created under the Company Stockholder Agreements, and as provided by the terms of any Company Options, Company Warrants and Company Notes, there are no outstanding repurchase options, forfeiture provisions or restrictions on transfer (other than restrictions on transfer imposed by virtue of applicable federal and state securities laws).  There is no: (i) outstanding subscription, option, call, convertible note, warrant or right (whether or not currently exercisable) to acquire any shares of Company Capital Stock, Subsidiary Capital Stock or other securities of the Company or any of its Subsidiaries; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of Company Capital Stock or Subsidiary Capital Stock (or cash based on the value of any of such shares) or other securities of the Company or any of its Subsidiaries; or (iii) Contract under which the Company or any of its Subsidiaries is or may become obligated to sell or otherwise issue any shares of Company Capital Stock, Subsidiary Capital Stock or any other securities, including any promise or commitment to grant Company Options or other securities of the Company or any of its Subsidiaries to an employee of or other service provider to the Company or any of its Subsidiaries.
 
(f)   Legal Issuance .  All outstanding shares of Company Capital Stock and Subsidiary Capital Stock, all outstanding Company Options and Company Warrants were issued in compliance in all material respects with: (i) all applicable federal and state securities laws and other applicable Legal Requirements and (ii) all requirements set forth in the Contracts applicable to such shares of Company Capital Stock identified in Part 2.11(a)(xii) of the Disclosure Schedule.  None of the outstanding shares of Company Capital Stock or Subsidiary Capital Stock were issued in violation of any preemptive rights or other rights to subscribe for or purchase securities of the Company or any of its Subsidiaries.  Part ‎2.3(f) of the Disclosure Schedule accurately iden tifies each Company Contract relating to any securities of the Company or any of its Subsidiaries that contains any information rights, registration rights, financial statement requirements or other terms that would survive the Closing unless terminated or amended prior to the Closing.
 
(g)   Repurchased Shares .  Part ‎2.3(g) of the Disclosure Schedule accurately sets forth with respect to any shares of capital stock ever repurchased or redeemed by the Company or any of its Subsidiaries (other than repurchases from employees of the Company and its Subsidiaries pursuant to customary repurchase rights in the ordinary course of business or pursuant to transactions in accordance with the Company Option Plan): (i) the name of the seller of such shares; (ii) the number, class and series of shares repurchased or redeemed; (iii) the date of such repurchase or redemption; and (iv) the price paid by the Company or such Subsidiary for such shares.  All shares of capital stock of the Company and its Subsidiaries ever repurchased or redeemed by the Company or any of its Subsidiaries were repurchased or redeemed in material compliance with: (i) all applicable securities laws and other applicable Legal Requirements and (ii) all requirements set forth in the Contracts applicable to such repurchased or redeemed shares identified in Part 2.11(a)(xii) of the Disclosure Schedule.
 
2.4   Financial Statements and Related Information; Inventory
 
(a)   Delivery of Financial Statements .  The Company has made available to Parent or its Representatives the following financial statements, including any notes and schedules thereto (collectively, the “ Company Financial Statements ”): (i) the audited balance sheets of the Company as of December 31, 2007, December 31, 2008 and December 31, 2009, and the related audited statements of operations, statements of stockholders’ deficiency and statements of cash flows for the years ended December 31, 2007, December 31, 2008 and December 31, 2009, together with the notes thereto and the unqualified report and opinion of Ernst & Young LLP relating thereto; and (ii) the unaudited consolidated balance sheet of the Company as of September 30, 2010 (the “ Unaudited Interim Balance Sheet ” and such date, the “ Unaudited Interim Balance Sheet Date ”), and the related unaudited consolidated statement of operations, statements of stockholders’ deficiency and statements of cash flows for the nine months ended September 30, 2010.
 
(b)   Fair Presentation .  The Company Financial Statements present fairly, in all material respects, the financial position of the Company as of the respective dates thereof and the results of operations and cash flows of the Company for the periods covered thereby.  The Company Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered (except as may be indicated in the notes thereto or, in the case of Unaudited Interim Balance Sheet, as permitted by GAAP), except that the financial statements referred to in Sec tion ‎2.4(a)(ii) do not contain footnotes and are subject to normal and recurring year-end adjustments that are not material in amount.
 
(c)   Internal Controls .  The books, records and accounts of the Company accurately and fairly reflect, in all material respects, in reasonable detail, the transactions in and dispositions of the assets of the Company and its Subsidiaries.  The systems of internal accounting controls maintained by the Company and each of its Subsidiaries are materially sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in material conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is take n with respect to any differences.  Part ‎2.4(c) of the Disclosure Schedule lists, and the Company has delivered to Parent copies of, all written descriptions of, and all material written policies, manuals and other documents promulgating, such internal ac counting controls.  Since January 1, 2007, neither the Company nor any Subsidiary nor, to the Company’s Knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any Subsidiary, has received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Subsidiary or their respective internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any Subsidiary has engaged in questionable accounting or auditing practices.  No attorney representing the Company or any Subsidiary, whether or not employed by the Company or any Subsidiary, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by the Company or any of its officers, directors, employees or agents to the Company Board or any committee thereof or to any director or officer of the Company.  Since January 1, 2007, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer or general counsel of the Company or the Company Board or any committee thereof.
 
(d)   Net Working Capital .  Part 2.4(d) of the Disclosure Schedule sets forth a true, accurate and complete statement of the Company’s Net Working Capital as of the date hereof.
 
2.5   Liabilities
 
(a)   No Liabilities .  Neither the Company nor any of its Subsidiaries has accrued, contingent or other Liabilities of any nature, either matured or unmatured (whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for: (i) Liabilities identified as such in the “ liabilities ” column of the Unaudited Interim Balance Sheet; (ii) accounts payable or accrued salaries that have been incurred by the Company and each of its Subsidiaries since the Unaudited Interim Balance Sheet Date in the ordinary course of business and materially consistent with the Company’s and each of its Subsidiaries’ past practices; (iii) Liabilities under the Company Material Contracts that are expressly set forth in and identifiable by reference to the text of such Company Contract; (iv) Liabilit ies identified in Part ‎2.5(a) of the Disclosure Schedule; and (v) Liabilities that individually or in the aggregate would not be material to the Company and its Subsidiaries taken as a whole.
 
(b)   Indebtedness; Accounts Payable .  Part ‎2.5(b) of the Disclosure Schedule sets forth: (i) all accounts payable of the Company and each of its Subsidiaries as of the date of this Agreement; and (ii) all outstanding notes payable of the Company and each of its Subsidiaries and all other Indebtedness of the Company and each of its Subsidiaries as of the date of this Agreement.  Effective as of the Effective Time, the Company Notes shall be converted into shares of Company Capital Stock in accordance with the terms thereof.  Upon such conversion of the Company Notes and payment of all amounts outstanding under the Venture Loan by Parent in connection with the Closing, other than as set forth on Part 2.5(b) of the Disclosure Schedule, the Company shall have no outstanding Indebtedness except for any Indebtedness that is not material in amount and that is secured only by Permitted Encumbrances.
 
(c)   No “Off-Balance Sheet” Arrangements .  Neither the Company nor any of its Subsidiaries has ever effected or otherwise been a party to any “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Act).  Without limiting the generality of the foregoing, neither the Company nor any of its Subsidiaries has ever guaranteed any debt or other obligation of any other Person.
 
(d)   Inventory .  The inventory of the Company and its Subsidiaries is in all material respects fit for the purpose for which it was procured, less ordinary wear and tear and amounts reserved for inventory write-down set forth in the Unaudited Interim Balance Sheet, as adjusted for operations, time and transactions since the date thereof in accordance with the past custom and practice of the Company and its Subsidiaries.
 
2.6   Absence of Changes
 
Except as expressly contemplated by this Agreement or set forth in Part ‎2.6 of the Disclosure Sc hedule, since December 31, 2009:
 
(a)   there has not been any Company Material Adverse Effect, and no event has occurred or circumstance has arisen that, in combination with any other events or circumstances, would reasonably be expected to have or result in a Company Material Adverse Effect;
 
(b)   there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the Company’s or any of its Subsidiaries’ material assets (whether or not covered by insurance); and
 
(c)   neither the Company nor any of its Subsidiaries has taken any of the following actions:
 
(i)   canceled any of its respective insurance policies identified in Part 2.17 of the Disclosure Schedule;
 
(ii)   declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock or other securities, nor repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities, except pursuant to transactions effected in accordance with and pursuant to the Company Option Plan;
 
(iii)   other than the Company Notes and associated Company Warrants, sold, issued or authorized the issuance of: (A) any capital stock or other security; (B) any option or right to acquire any capital stock (or cash based on the value of capital stock) or other security; or (C) any instrument convertible into or exchangeable for any capital stock (or cash based on the value of capital stock) or other security;
 
(iv)   amended or waived any of its rights under, or permitted the acceleration of vesting under: (A) any provision of any Company Option Plan; (B) any provision of any agreement evidencing any outstanding Company Option; or (C) any provision of any restricted stock agreement;
 
(v)   other than the Certificate Amendment, amended or permitted the adoption of any amendment to its Charter Documents, or effected or permitted the Company or any of its Subsidiaries to become a party to any recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
 
(vi)   formed any Subsidiary or acquire any equity interest or other interest in any other Entity;
 
(vii)   made any capital expenditure, except for such capital expenditures that, when added to all other capital expenditures made on behalf of the Company and its Subsidiaries, do not exceed $25,000;
 
(viii)   (A) entered into, or permitted any of the assets owned or used by it to become bound by, any Contract that is or would constitute a Company Material Contract; or (B) materially amended or prematurely terminated, or waived any material right or remedy under, any such Contract;
 
(ix)   entered into any Contract: (A) with respect to manufacturing or warehousing services; (B) with respect to the sale, lease or delivery of equipment material to its business; (C) that obligates the Company or any of its Subsidiaries (or otherwise contemplates) the grant of a license in the future (whether based on the occurrence or non-occurrence of a particular event or otherwise); (D) with any Governmental Body or any university, college or other educational institution; and (E) pursuant to which any Person is granted access to any Company IP, in each case that are not terminable by the Company and its Subsidiaries (without penalty) on notice of less than 30 days;
 
(x)   (A) acquired, leased or licensed any right or other asset from any other Person for an aggregate value in excess of $50,000; (B) sold, leased, licensed pledged, granted, encumbered (other than Permitted Encumbrances) or otherwise disposed of any of its properties or assets which are material, individually or in the aggregate, to its business outside of the ordinary course of business; or (C) waived or relinquish any material right, in each case except in the ordinary course of business consistent with past practices;
 
(xi)   (A) loaned money to any Person (other than routine travel advances to current employees of the Company or its Subsidiaries in the ordinary course of business consistent with past practices); or (B) incurred or guaranteed any Indebtedness (other than the Company Notes);
 
(xii)   (A) materially increase or otherwise enhance benefits otherwise payable under any Company Employee Plan; (B) paid any bonus or made any profit-sharing payment, cash incentive payment or similar payment, other than commissions or bonuses paid in the ordinary course of business and consistent with past practices; (C) materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation (including equity-based compensation, whether payable in cash or otherwise) or remuneration payable to any of its directors, officers or employees other than increases which the Company was obligated to make under existing agreements or with respect to employees other than directors or officers, that was in the ordinary course of business and consistent with past practices or (D) promoted any employee or hired any new employee;
 
(xiii)   except as required by any applicable Legal Requirement, changed any of its methods of accounting or accounting practices in any material respect;
 
(xiv)   made or changed any material Tax election, adopted or changed a material accounting method in respect of Taxes, entered into a Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settled or comprised a claim, notice, audit report or assessment in respect of Taxes, or consented to an extension or waiver of the statutory limitation period applicable to a claim or assessment in respect of Taxes;
 
(xv)   commenced or settled any Legal Proceeding for an amount in excess of $50,000 or that relates to any Company IP;
 
(xvi)   applied for or accepted any Grant; or
 
(xvii)   agreed or committed to take any of the actions described in clauses “‎(iii)” through “‎(xvi)” above.
 
2.7   Title to Assets
 
(a)   Good Title .  The Company and each of its Subsidiaries owns, and has good and legal title to, all real property and personal property (other than Intellectual Property, which is covered by Section 2.10 hereof), reflected on the Unaudited Interim Balance Sheet (all such properties, assets and contract rights being the “ Assets ”).  All such Assets are owned by the Company and each of its Subsidiaries free and clear of any liens or other Encumbrances, except for Permitted Encumbrances.  Part 2.7(a) of the Disclosure Schedule identifies all Assets which value exceeds $50,000 owned by the Company or any of its Subsidiaries that are located at any facility operated by any manufacturer contracted by the Company or any of its Subsidiaries or any location other than the Company Leased Real Property.
 
(b)   Leased Assets .  Part ‎2.7(b) of the Disclos ure Schedule identifies all Assets that are material to the business of the Company and each of its Subsidiaries and that are being leased to the Company and each of its Subsidiaries for which the annual rental payment for each such Asset exceeds $50,000.
 
2.8   Bank Accounts
 
.  Part ‎2.8 of the Dis closure Schedule lists with respect to each account maintained by or for the benefit of the Company or any of its Subsidiaries at any bank or other financial institution: (a) the name of the bank or other financial institution at which such account is maintained; (b) the account number; (c) the type of account; and (d) the names of all Persons who are authorized to sign checks or other documents with respect to such account.
 
2.9   Equipment; Real Property
 
(a)   Equipment .  Part 2.9 of the Disclosure Schedule identifies as of the Unaudited Interim Balance Sheet Date each item of machinery, equipment, tools, supplies, furniture, fixtures, personalty, vehicles and other tangible property owned or leased by the Company or any of its Subsidiaries which value exceeds $50,000 (“ Tangible Property ”).  Such Tangible Property is, taken as a whole, in reasonably adequate for the uses to which it is being put and is in good operating condition and repair (ordinary wear and tear excepted).
 
(b)   Real Property .  Part 2.9(b) of the Disclosure Schedule sets forth a list of each lease pursuant to which the Company or any of its Subsidiaries leases real property from any other Person.  (All real property leased to the Company and its Subsidiaries, including all buildings, structures, fixtures and other improvements leased to the Company and its Subsidiaries, are referred to as the “ Company Leased Real Property ”).  To the Knowledge of the Company, the present use and operation of the Leased Real Property is authorized by, and is in compliance with, in all material respects, all applicable zoning, land use, building, fire, health, labor, safety and Environmental Laws and other Legal Requirements.  There is no Legal Proceeding pending, or to the Knowledge of the Company threatened, that challenges or adversely affects, or would challenge or adversely affect, the continuation of the present use or operation of any Company Leased Real Property.  To the Knowledge of the Company, there is no existing plan or study by any Governmental Body or by any other Person that challenges or otherwise adversely affects the continuation of the present ownership, use or operation of any Company Leased Real Property. The Company is not a party to any subleases, licenses, occupancy agreements or other contractual obligations that grant the right of use or occupancy of any of the Company Leased Real Property to any Person other than the Company and its Subsidiaries.  The Company and each of its Subsidiaries have complied in all material respects with the terms of all leases (to which they are parties) relating to the Company Leased Real Property, and to the Knowledge of the Company, all such leases are in full force and effect in all material respects.  The Company and its Subsidiaries do not currently own, nor has the Company or any of its Subsidiaries ever owned, any real property.
 
2.10   Intellectual Property
 
(a)   Registered IP .  Part ‎2.10(a) of the Disclosure Schedule accurately identifies: (i) each item of Registered IP in which the Company or any of i ts Subsidiaries has or purports to have an ownership interest of any nature (whether exclusively, jointly with another Person or otherwise); (ii) the jurisdiction in which such item of Registered IP has been registered or filed and the applicable registration or serial number; and (iii) any other Person that has an ownership interest in such item of Registered IP and the nature of such ownership interest.
 
(b)   Inbound Licenses .  Part ‎2.10(b) of the Disclosure Schedule accurately identifies: (i) each written Contract pursuant to which any Intellectual Property Right is or has been licensed, sold, assigned or otherwise conveyed or provided to the Company or any of its Subsidiari es (other than: (A) agreements between the Company or any of its Subsidiaries and its employees, substantially in the Company’s standard form thereof; and (B) non-exclusive licenses to third-party software), whether the licenses or rights granted to the Company in each such Contract are exclusive or non-exclusive, whether the Company or any of its Subsidiaries has any royalty or other payment obligations under such Contract.
 
(c)   Outbound Licenses .   Part ‎2.10(c) of the Disclosure Schedule accurately identifies each written Contract pursuant to which the Company has granted to any Person (or pursuant to which the Company may be obligated in the future to grant to any Person, whether due merely to the passage of time, or due to the occurrence of an event or otherwise) any license under, or pursuant to which any Person otherwise has received or acquired from the Company (or may in the future be entitled to receive or acquire from the Company) any right (whether or not currently exercisable and including a right to receive a license) or interest in, any Company IP.  Except for the Contracts identified in Part 2.10(c) of the Disclosure Schedule, and except pursuant to any licensed agreement under which the Company is licensed to practice any Company IP, neither the Company nor any of its Subsidiaries is bound by, or subject to, any Contract, whether or not in writing, containing any covenant or other provision that in any way limits or restricts the ability of the Company or any of its Subsidiaries to use, exploit, assert or enforce any Company IP anywhere in the world.
 
(d)   Royalty Obligations .   Part ‎2.10(d) of the Disclosure Schedule contains a complete and accurate list and summary of all royalties, fees, commissions and other amounts payable by the Company or any of its Subsidiaries to any other Person pursuant to any Company IP Contract (othe r than sales commissions paid to employees according to the Company’s standard commissions plan) upon or for the use of any Company IP.
 
(e)   Standard Form IP Agreements .  The Company has made available to Parent or its Representatives a complete and accurate copy of each standard form of Company IP Contract currently used by the Company or any of its Subsidiaries, including each standard form of: (i) terms and conditions of sale; (ii) development agreement; (iii) employee agreement containing any assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; (iv) consulting or independent contractor agreement containing any assignment or license of Intellectual Property or Intellectual Property Rights or any confidentiality provision; or (v) confidentiality or nondisclosure agreement (collectively, the “ Company IP Form Contracts ”).   Part ‎2.10(e) of the Disclosure Schedule accurately identifies each Company IP Form Contract that deviates in any material adverse respect from the corresponding standard form agreement made available to Parent or its Representatives, including any agreeme nt with an employee, consultant or independent contractor in which the employee, consultant or independent contractor expressly reserved or retained any Intellectual Property Rights related to the Company’s business, research or development and such Intellectual Property Rights were not licensed (or made available for licensing) to the Company or any of its Subsidiaries.
 
(f)   Ownership Free and Clear .  The Company (or one of its Subsidiaries) exclusively owns all right, title and interest to and in the Company I P (other than Intellectual Property Rights licensed to the Company or any of its Subsidiaries) free and clear of any Encumbrances (other than licenses granted pursuant to the Contracts listed in Part ‎2.10(c) of the Disclosure Schedule and other than the C ompany Material Contracts described in Section 2.11(a) hereof).  Without limiting the generality of the foregoing:
 
(i)   all documents and instruments necessary to establish, perfect and maintain the rights of the Company and its Subsidiaries in the Company IP that is owned by the Company or one of its Subsidiaries (collectively, “ Company-Owned IP ”) have been validly executed, delivered, filed, and recorded in a timely manner with the appropriate Governmental Body;
 
(ii)   each Company Employee who is or was inventor, as determined in accordance with principles of United States patent law, of any invention, whether patentable or not, included in the Company-Owned IP has signed a written agreement containing an assignment of his or her Intellectual Property Rights pertaining to such invention to the Company and containing confidentiality provisions protecting the Company-Owned IP, and the Company has recorded each such assignment with the appropriate Governmental Body;
 
(iii)   the Company has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all proprietary information pertaining to the Company;
 
(iv)   except as set forth in Part 2.10(f)(iv) of the Disclosure Schedule, no funding, facilities or personnel of any Governmental Body or university, college or other educational institution were used, directly or indirectly, to develop or create, in whole or in part, any Company-Owned IP and, to the Company’s Knowledge, no current or former employee, consultant or independent contractor of the Company or any of its Subsidiaries who was involved in, or contributed to, the creation or development of any Company-Owned IP performed services for any Governmental Body, for a university, college or other educational institution or for a research center, at the same time during which such employee, consultant or independent contractor was also performing services for the Company or any of its Subsidiaries;
 
(v)   except as set forth in Part 2.10(c) or Part 2.10(f)(v) of the Disclosure Schedule, the Company and its Subsidiaries have neither assigned nor granted any license or other rights to the Company IP and is under no obligation to grant any such assignment, license or rights to any third party; and
 
(vi)   the Company and its Subsidiaries own or otherwise have, and after the Closing the Surviving Corporation and its Subsidiaries will continue to own or otherwise have, all Intellectual Property Rights needed to conduct the business of the Company and its Subsidiaries as currently conducted and, to the Knowledge of the Company, all Intellectual Property Rights needed to conduct the business of the Company and its Subsidiaries as currently planned by the Company and its Subsidiaries to be conducted.
 
(g)   Valid and Enforceable .  All Registered IP was validly issued under the laws of the country that issued it, and is subsisting and enforceable.  Without limiting the generality of the foregoing:
 
(i)   to the Knowledge of the Company: no trademark or trade name owned, used or applied for by the Company or any of its Subsidiaries infringes any trademark or trade name owned, used or applied for by any other Person, the Company and each of its Subsidiaries has taken reasonable steps to police the use of its trademarks;
 
(ii)   to the Knowledge of the Company: Part ‎2.10(g)(ii) of the Disclo sure Schedule accurately identifies and describes each action, filing, and payment that must be taken or made on or before the date that is 30 days after the date of this Agreement in order to maintain such item of Registered IP in full force and effect;
 
(iii)   no interference, opposition, cancellation, reissue, reexamination or other challenge or Legal Proceeding is pending or threatened in writing, in which the scope, validity or enforceability of any Registered IP is being contested or challenged, it being clearly acknowledged that such representation and warranty does not apply to any proceedings before any patent office with respect to the prosecution and issuance of any patent; and
 
(iv)   the Company previously engaged patent counsel to investigate the Company's freedom to operate using the Registered IP in the United States, and a copy of the corresponding opinion has been made available to Parent or its Representatives, and to the Knowledge of the Company:  (A) no claim within the Registered IP is dominated by a claim of any patent or patent application of a third party in any country; and (B) the Company’s technology does not infringe any patent rights of any third party.
 
(h)   No Third-Party Infringement of Company IP .  To the Knowledge of the Company, no Person is cur rently infringing or misappropriating any Company IP.  Part ‎2.10(h) of the Disclosure Schedule accurately identifies (and the Company has made available to Parent or its Representatives a complete and ac curate copy of) each letter or other written correspondence that has been sent by or to the Company or any of its Subsidiaries or any Representative of the Company or any of its Subsidiaries regarding any actual, alleged or suspected infringement or misappropriation of any Company IP, and indicates the current status of the matter referred to in such letter or correspondence.
 
(i)   Effects of This Transaction .  Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated by this Agreement will, with or without notice or lapse of time or both, result in, or give any other Person the right or option pursuant to any Company IP Contract to cause or declare: (i) a loss of, or Encumbrance on, any Company IP; (ii) a breach of or default under any Company IP Contract; (iii) the release, disclosure or delivery of any Company IP by or to any escrow agent or other Person; or (iv) the grant, assignment or transfer to any other Person of any license or other right or interest under, to or in any of the Company IP.
 
(j)   No Infringement of Third-Party IP Rights .  The Company has not received any written notice from any third party asserting or alleging that the Company or any of its Subsidiaries has infringed or misappropriated any Intellectual Property Right of any other Person.  No product of the Company or any Subsidiary of the Company infringes any Intellectual Property Right (but excluding infringements related to any patent rights that have not been publicly disclosed as of the date of this Agreement) of, or contains any Intellectual Property misappropriated from, any other Person.  Without limiting the generality of the foregoing:
 
(i)   no infringement, misappropriation or similar claim or Legal Proceeding is pending or threatened in writing, against the Company or any of its Subsidiaries or against any other Person who is or may be entitled, to be indemnified, defended, held harmless or reimbursed by the Company or any of its Subsidiaries with respect to such claim or Legal Proceeding;
 
(ii)   none of the Company or any of its Subsidiaries has received any written notice specifically alleging that the Company or any of its Subsidiaries, or any Company Employee or agents of the Company, have misappropriated or are infringing any Intellectual Property Rights of another Person; and
 
(iii)   none of the Company or any of its Subsidiaries is bound by any Contract to indemnify, defend, hold harmless or reimburse any other Person with respect to, or otherwise assumed or agreed to discharge or otherwise take responsibility for, any existing or potential Intellectual Property infringement, misappropriation or similar claim (other than indemnification provisions in the Company’s standard forms of Company IP Contracts or in any other Contract disclosed in Part 2.10 of the Disclosure Schedule).
 
(k)   Privacy Policies .  Part ‎2.10(k) of the Disclosure Schedule contains each Company Pri vacy Policy in effect at any website owned and currently operated by the Company.  To the Knowledge of the Company, the Company and each of its Subsidiaries has complied at all times and in all material respects with all of the Company Privacy Policies and with all applicable Legal Requirements pertaining to privacy, User Data or Personal Data, including with respect to registration requirements.  Neither the execution, delivery or performance of this Agreement nor the consummation of any of the transactions contemplated by this Agreement, nor Parent’s possession or use of the User Data or any data or information in the Company Databases in compliance with the Company Privacy Policies, will result in any violation of any Company Privacy Policy or any Legal Requirement pertaining to privacy, User Data or Personal Data.
 
(l)   Personal Data .  Part ‎2.10(l) of the Disclosure Schedule identifies and describes each distinct electronic or other database containing (in whole or in part) Personal Data maintained by or for the Company or any of its Subsidiaries at any time (the “ Company Databases ”), the types of Personal Data in each such database, the means by which the Personal Data was collected, and the security policies that have been adopted and maintained with respect to each such database.  To the Knowledge of the Company:  (i) no breach or violation of any such security policy has occurred, and (ii) there has been no unauthorized or illegal use of or access to any of the data or information in any of the Company Databases.
 
2.11   Contracts
 
(a)   Contracts .  Part 2.11(a) of the Disclosure Schedule accurately identifies each of the following contracts and agreements of the Company or any of its Subsidiaries as of the date hereof:
 
(i)   (A) each Company Contract relating to the employment of, or the performance of services by, any Company Employee earning annual base compensation in excess of $75,000; (B) any Company Contract pursuant to which the Company or any of its Subsidiaries is obligated to make any severance, termination or similar payment to any Company Employee; and (C) any Company Contract pursuant to which the Company or any of its Subsidiaries is obligated to make any bonus or similar payment (other than payment in respect of salary) to any Company Employee;
 
(ii)   each Company Contract which provides for indemnification of any Company Employee or any Company Director;
 
(iii)   each Company Contract relating to the voting and any other rights or obligations of a stockholder of the Company;
 
(iv)   each Company Contract, with obligations remaining to be performed (or liabilities continuing) after the date of this Agreement, relating to the merger, consolidation, reorganization or any similar transaction with respect to the Company or any of its Subsidiaries;
 
(v)   each Company Contract (other than (A) the Company’s standard Confidentiality and Assignment of Inventions Agreement, a form of which has been made available to Parent, and (B) non-exclusive licenses to third-party software) relating to the acquisition, transfer, development or sharing of any technology, Intellectual Property or Intellectual Property Right (including any joint development agreement, collaboration agreement or similar agreement entered into by the Company or any of its Subsidiaries);
 
(vi)   each Company Contract (other than (A) the Company’s standard Confidentiality and Assignment of Inventions Agreement, a form of which has been made available to Parent, and (B) non-exclusive licenses to third-party software) relating to the license of any patent, copyright, trade secret or other Intellectual Property or Intellectual Property Right: (x) to the Company or any of its Subsidiaries; or (y) from the Company or any of its Subsidiaries;
 
(vii)   each Company Contract relating to the acquisition, sale, spin-off or outsourcing of any Subsidiary or business unit or operation of the Company or any of its Subsidiaries;
 
(viii)   each Company Contract creating or relating to any partnership or joint venture or any sharing of revenues, profits, losses, costs or liabilities;
 
(ix)   each Company Contract imposing any restriction or requirement on the Company or any of its Subsidiaries: (A) to compete with any other Person in any geographic area or during any period of time; (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner with any other Person; or (C) to develop or distribute any product technology;
 
(x)   each Company Contract granting exclusive rights to license, market, sell or deliver any products or services of the Company or any of its Subsidiaries or otherwise contemplating an exclusive relationship between the Company and any other Person;
 
(xi)   each Company Contract creating or involving any agency relationship, distribution or reseller arrangement or franchise relationship;
 
(xii)   each Company Contract regarding the acquisition, issuance or transfer of any securities of the Company or any of its Subsidiaries and each Company Contract affecting or dealing with any securities of the Company or any of its Subsidiaries, including any restricted share agreements or escrow agreements;
 
(xiii)   each Company Contract relating to Indebtedness other than trade Indebtedness of the Company or any Subsidiary that is not material in amount;
 
(xiv)   each Company Contract relating to the purchase or sale of any asset (other than the Company’s securities) by or to, or the performance of any services by or for, any Company Related Party;
 
(xv)   any Company Contract pursuant to which the Company or any of its Subsidiaries made payments of cash or other consideration in excess of $50,000 during the twelve months ended December 31, 2009 or that involves or contemplates the payment or delivery of cash or other consideration by the Company or any of its Subsidiaries in an amount or having a value reasonably expected to be in excess of $50,000 in the aggregate during the twelve month period ending December 31, 2010;
 
(xvi)   any Company Contract relating to a Grant; and
 
(xvii)   any other Company Contract the absence of which would be reasonably expected to have a Company Material Adverse Effect.
 
(Contracts in the respective categories described in clauses “‎(i)” through “‎(xvii)” above and all Contracts identified, or required to be identified, in Part ‎2.11(a) of the Disclosure Schedule are referred to in this Agreement as “ Company Material Contracts .”)
 
(b)   Delivery and Status of Company Material Contracts .  The Company has made available to Parent or its Representatives accurate and complete copies of all written Company Material Contracts identified in Part 2.11(a) of the Disclosure Schedule, including all amendments thereto.  Part ‎2.11(b) of the Disclosure Schedule provides an accurate and complete description of the material terms of each Company Material Contract that is not in written form, if any.  Each Company Material Contract is in full force and effect in all material respects, and is enforceable by the Company or its Subsidiaries, as applicable, in accordance with its terms, subject to: (A) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (B) rules of law governing specific performance, injunctive relief and other equitable remedies.
 
(c)   No Breach .  Except as set forth in Part ‎2.11(c) of the Disclosure Schedule: (i) neither the Company nor any of its Subsidiaries has committed any material violation or breach, and neither the Company nor any of its Subsidiaries has committed any material default under, any Company Material Contract, which remains uncured, and, to the Knowledge of the Company, no other Person has committed any material violation or breach, or committed any material default under, any Company Material Contract which remains uncured; (ii) to the Knowledge of the Company, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time or both) will, or would reasonably be expected to: (A) result in a material violation or breach of any of the provisions of any Company Material Contract; (B) give any Person the right to declare a default or exercise any remedy under any Company Material Contract; (C) give any Person the right to accelerate the maturity or performance of any Company Material Contract; or (D) give any Person the right to cancel, terminate or modify any Company Material Contract; (iii) neither the Company nor any of its Subsidiaries has received any written notice or to the Knowledge of the Company other communication regarding any actual or possible material violation or breach of, or material default under, any Company Material Contract; and (iv) neither the Company nor any of its Subsidiaries has waived any of its respective material rights under any Company Material Contract.
 
2.12   Compliance with Legal Requirements; Regulatory Matters
 
(a)   Compliance with Legal Requirements .  The Company and each of its Subsidiaries is, and, to the Knowledge of the Company has at all times been, in compliance in all material respects with each Legal Requirement that is applicable to it or to the conduct of its business or the ownership of its assets, including the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated thereunder (the “ FD&C Act ”).  Except as set forth in Part ‎2.12 (a) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has received any written notice or to the Knowledge of the Company any other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement.
 
(b)   No Debarment .  None of the Company or any of its Subsidiaries or any of their respective directors, officers, consultants, employees or affiliates, or, to the Knowledge of the Company, suppliers, in each case to the extent any such party was responsible for the development or had responsibilities that involve the development of commercialization of any product or potential product under development or investigation by the Company or any of its Subsidiaries, (i) are debarred under Section 306(a) or 306(b) of the FD&C Act; (ii) have been charged with, or convicted of, any felony under applicable laws related to any of the following:  (A) the development or approval of any drug product or the regulation of any drug product under the FD&C Act; (B) a conspiracy to commit, aid or abet the development or approval of any drug product or regulation of any drug product; (C) health care program-related crimes (involving Medicare or any other health care program administered by any Governmental Body); (D) patient abuse, controlled substances, bribery, payment of illegal gratuities, fraud, perjury, false statement, racketeering, blackmail, extortion, falsification or destruction of records; (E) interference with, obstruction of an investigation into, or prosecution of, any criminal offense; or (F) a conspiracy to commit, aid or abet any of these listed felonies or misdemeanors; or (iii) is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any Federal or State health care programs or any health care programs administered by any other Governmental Body (including convicted of a criminal offense that falls within the scope of 42 U.S.C. 1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any Federal procurement or nonprocurement programs.
 
(c)   FDA Compliance . The Company and its Subsidiaries are in material compliance with all applicable statutes, rules and regulations of the FDA, and, to the extent applicable, other Governmental Bodies, with respect to the clinical testing, manufacture, labeling, storing, testing, or distribution of their compounds and products, including, to the extent applicable, current “Good Manufacturing Practice,” or cGMP regulations, “Good Clinical Practice” or GCP regulations to the extent the clinical data from any of their clinical studies is used to support regulatory approval of the Company’s products, “Good Laboratory Practice” (as such terms are defined in applicable Legal Requirements) or GLP regulations to the extent the non-clinical data from the Company’s or its Subsidiaries’ non-clinical studies is used to support regulatory approval of any products of the Company and its Subsidiaries, “Informed Consent” and “Institutional Review Board” regulations, and all applicable requirements relating to the protection of human subjects for its clinical trials as required by the FDA and all applicable Governmental Bodies.
 
(d)   Reporting Requirements . The Company and its Subsidiaries are in compliance in all material respects with all applicable reporting requirements set forth in the FD&C Act.
 
(e)   No Investigation .  None of the Company or its Subsidiaries, nor to the Company’s Knowledge any Person providing services to the Company or its Subsidiaries (including any Third Party Suppliers), is in receipt of written notice of, or is subject to, any adverse inspection, finding of non-compliance, compelled or voluntary recall, investigation, penalty for corrective or remedial action or other compliance or enforcement action, in each case relating to any of the Company’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled, by the FDA or any other applicable Governmental Body.  There are no pending or, to the Knowledge of the Company, threatened actions, proceedings or complaints by the FDA or any other applicable Governmental Body against the Company or its Subsidiaries, or to the Company’s Knowledge any Person providing services to the Company or its Subsidiaries (including any Third Party Suppliers) relating to any of the Company’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled or which would otherwise prohibit or impede the conduct of the Company’s business as currently conducted or contemplated to be conducted.  Without limiting the generality of the foregoing, Part 2.12(e) of the Disclosure Schedule sets forth each FDA Form 483 or similar inspection report and any warning letter or other similar notice that the Company or its Subsidiaries or to the Company’s Knowledge any Person providing services to the Company or its Subsidiaries (including any Third Party Suppliers) has received from the FDA or any other applicable Governmental Body relating to any of the Company’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled.  True, correct and complete copies of any item set forth in Part 2.12(e) of the Disclosure Schedule and all responses and other correspondence submitted by, or on behalf of, the Company or its Subsidiaries to or from the FDA or any applicable Governmental Body (and to the extent available to the Company any similar correspondence to or from any Person providing services to the Company or its Subsidiaries (including Third Party Suppliers)) with respect to such items have been made available to Parent.  Except as set forth in Part 2.12(e) of the Disclosure Schedule, the Company and its Subsidiaries have promptly responded to each of the items set forth in Part 2.12(e) of the Company Disclosure Schedule and have taken all steps required to remedy any deficiencies or deviations noted in any such items.
 
(f)   Third Party Suppliers . Part 2.12(f) of the Disclosure Schedule sets forth all of the third party manufacturers and suppliers of materials, reagents, active pharmaceutical ingredients, compounds and products used by the Company or its Subsidiaries (each a “ Third Party Supplier ”).  Expect as set forth in Part 2.12(f) of the Disclosure Schedule, the  Company has inspected Third Party Suppliers and to the Company’s Knowledge, each such Third Party Supplier (i) has complied and is complying in all material respects with all applicable statutes, rules and regulations of the FDA, and, to the extent applicable, other Governmental Bodies, and (ii) has all material Governmental Authorizations necessary to conduct its business and perform its obligations as Third Party Supplier and all such Governmental Authorizations are in full force and effect.
 
(g)   Good Manufacturing Practice . To the Knowledge of the Company, the inventory of the Company of key materials, reagents, active pharmaceutical ingredients, compounds and products, has been manufactured, handled, stored and distributed in accordance in all material respects with applicable Legal Requirements, including current “Good Manufacturing Practice,” or cGMP regulations.
 
(h)   Adverse Experiences . The Company has made available to Parent information regarding all serious as well as non-serious adverse events which, to the Knowledge of the Company, have occurred during the course of any studies conducted by or on behalf of the Company with respect to any products or compounds of the Company or its Subsidiaries.  There have been no reportable adverse events which, to the Knowledge of the Company, have occurred during the course of any studies conducted by or on behalf of the Company with respect to the products or compounds of the Company or its Subsidiaries. There have been no product recalls conducted by or issued to the Company or its Subsidiaries and no requests from the FDA or any other applicable Governmental Bodies requesting the Company or its Subsidiaries to cease to investigate, test, manufacture or distribute any products, compounds or study drugs of the Company or its Subsidiaries.
 
(i)   Studies and Trials .  All studies and trials conducted by or on behalf of the Company and its Subsidiaries on all products, compounds or study drugs of the Company or its Subsidiaries have been made available to Parent, and the Company has otherwise provided for review all material preclinical and clinical studies and trials regarding the efficacy and safety of all products, compounds or study drugs of the Company or its Subsidiaries.  The Company has heretofore made available to Parent all material written correspondence between the Company and its Subsidiaries with the FDA and any other applicable Governmental Body regarding any products, compounds or study drugs of the Company or its Subsidiaries.
 
(j)   FDA Disclosure .  Neither the Company and its Subsidiaries nor, to the Company’s Knowledge, any officer, employee or agent of the Company, has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Body, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Body, or committed an act, made a statement or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for any investigation by, and no such investigation has been instituted or threatened by, (i) the FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991), (ii) Department of Health and Human Services Officer of Inspector General or Department of Justice pursuant to the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)) or the Federal False Claims Act (31 U.S.C. § 3729 et seq.) or (iii) any equivalent statute of any country in the European Union.
 
(k)   No Suspension of Clinical Trials . No clinical trial of a product of the Company or its Subsidiaries has been suspended, put on hold or terminated prior to completion by any Governmental Body.
 
(l)   Human Derived Materials . The Company and its Subsidiaries have complied in all material respects with all applicable laws, guidelines and regulations relating to the collection and/or use of the human cell lines, tissue, human clinical isolates or similar human-derived materials and the Company or its Subsidiaries have obtained any material approvals, consents, and/or authorization required by law (including the Health Insurance Portability and Accountability Act and regulations promulgated thereunder) for the collection, use, and/or transfer of such human cell lines, tissue, human clinical isolates or similar human-derived materials.  Such human cell lines, tissue, human clinical isolates or similar human-derived materials may be used without any obligations to the individuals or entities who contributed the materials, including any obligations of compensation to such individuals or entities who contributed the materials for any purposes, including any obligations of compensation to such individuals or entities who contributed the materials or any other third party for the intellectual property associated with, or commercial use of, such materials for any purposes.
 
2.13   Governmental Authorizations; No Subsidies
 
(a)   Governmental Authorizations .  Part ‎2.13(a) of the Disclosure Schedule identifies each Governmental Authorization held by the Company and each of its Subsidiaries that is material to the operation of its business, and the Company has made available to Parent or its Representatives accurate and complete copies of all Governmental Authorizations identified in Part ‎2.13(a) of the Disclosure Schedule.  The Governmental Authorizations identified in Part ‎2.13(a) of the Disclosure Schedule are valid and in full force and effect, and collectively constitute all Governmental Authorizations necessary to enable the Company and each of its Subsidiaries to conduct its business in the manner in which its business is currently being conducted in all material respects.  The Company and each of its Subsidiaries is in material compliance with the terms and requirements of the respective Governmental Authorizations identified in Part ‎2.13(a) of the Disclosure Schedule.  Neither the Company nor any of its Subsidiaries has received any written notice from any Governmental Body regarding: (i) any actual or possible violation of or failure to comply with any material term or requirement of any Gover nmental Authorization listed or required to be listed in Part ‎2.13(a) of the Disclosure Schedule; or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization listed or required to be listed in Part ‎2.13(a) of the Disclosure Schedule.
 
(b)   No Subsidies .  Part ‎2.13(b) of the Disclosure Schedule provides a complete list of all pending and outstanding grants, Cooperative Research and Development Agreements (CRADAs), incentives, qualifications and subsidies (collectively, “ Grants ”) from any Governmental Body or other Person, granted to the Company or any of its Subsidiaries.  The Company has made available to Parent or its Representatives accurate and complete copies of all material documents requesting Grants or amendments thereto submitted by the Company or any of its Subsidiaries and of all letters of approval, and supplements thereto, granted to the Company or any of its Subsidiaries, as well as all correspondence or written summaries pertaining thereto.  The Company and each of its Subsidiaries are in material compliance with all of the material terms, conditions and requirements of their respective Grants and have, as and when required by the Grants, duly fulfilled all the material undertakings relating thereto.  Except as set forth on Part 2.13(b) of the Disclosure Schedule, neither the execution, delivery or performance of this Agreement, nor the consummation of the Mergers or any of the other transactions contemplated by this Agreement, does, will or would reasonably be expected to (with or without notice or lapse of time or both) give any Person the right to revoke, withdraw, suspend, cancel, terminate or modify any Grant identified or required to be identified in Part ‎2.13(b) of the Disclosure Schedule.  Except as set forth in Part 2.13(b) of the Disclosure Schedule, none of Company or any of its Subsidiaries has developed any Intellectual Property through the application of any financing made available by any of the Grants.
 
(c)   Export Compliance .  The Company and its Subsidiaries have obtained all approvals necessary for: (i) exporting all products of the Company and its Subsidiaries that are exported by the Company or its Subsidiaries in the current operation of its business, whether for sale or for use in research and development, in accordance with all material Legal Requirements related to export control; and (ii) importing all products of the Company and its Subsidiaries into any country in which any such products are now sold, used or licensed for use.  To the Company’s Knowledge, all such export and import licenses and approvals throughout the world are current, outstanding and in full force and effect, and the Company and its Subsidiaries are in material compliance with the terms of all such export and import licenses or approvals.  There are no pending Legal Proceedings and to the Knowledge of the Company, threatened Legal Proceedings, against the Company or any of its Subsidiaries with respect to such export and import licenses and approvals.  To the Knowledge of the Company, there are no facts or circumstances which are reasonably expected to result in a Legal Proceeding against the Company or any of its Subsidiaries or any of their respective businesses or assets or any of the directors or officers of the Company or any of its Subsidiaries, pertaining to export or import transactions.
 
(d)   Foreign Corrupt Practices Act .  The Company and each Subsidiary and, to the Company’s Knowledge, each employee, officer, director and agent thereof, have complied with and are in compliance in all material respects and none of them has taken any action that has materially violated or would reasonably be expected to result in a failure to comply in all material respects with or a material violation of the Foreign Corrupt Practices Act of 1977, as amended.
 
2.14   Tax Matters
 
(a)   Tax Returns and Payments .  All material Tax Returns required to be filed by or on behalf of the Company and any of its Subsidiaries for taxable periods ending on or before the Closing Date have been timely and properly filed and are true, accurate and complete in all material respect.  All material Taxes (whether or not shown on any Tax Return) of the Company and each of its Subsidiaries that are due and payable have been timely and properly paid.  All Taxes required to be collected or withheld (including with respect to any employee, creditor, independent creditor, shareholder or other third party) by the Company or any of its Subsidiaries have been properly and timely collected or withheld and remitted to the proper Tax authority.  The Company has made available to Parent or its Representatives accurate and complete copies of all Tax Returns filed by the Company and each of its Subsidiaries and related examination reports and stat ements of deficiencies assessed against or agreed to by the Company.  Part ‎2.14(a) of the Disclosure Schedule lists each jurisdiction in which the Compan y and each of its Subsidiaries is required to file a Tax Return.  No claim has ever been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  The Company Financial Statements properly and adequately accrue or reserve for Tax liabilities in accordance with GAAP.
 
(b)   Audits; Claims .  Except as set forth in Part 2.14(b) of the Disclosure Schedule, no Tax Return of the Company or any of its Subsidiaries has ever been examined or audited by any Governmental Body and there are no pending audits or examinations relating to Taxes or any Tax Returns of either the Company or any of its Subsidiaries of which the Company or a Subsidiary thereof has received notice or has Knowledge.  Neither the Company nor any of its Subsidiaries has received from any Governmental Body any notice or otherwise has Knowledge of any: (i) intent to open an audit or other review relating to any Taxes or Tax Returns of the Company or any of its Subsidiaries; (ii) request for information related to Tax matters; (iii) notice of deficiency or proposed Tax adjustment that has not been resolved and paid in full; or (iv) threatened or proposed audit or examinations relating to Taxes or any Tax Returns of either the Company or any of its Subsidiaries.  No extension or waiver of the limitation period applicable to any Tax or Tax Returns has been granted by or requested from the Company or any of its Subsidiaries.  No claim or Legal Proceeding is pending or threatened against the Company or any of its Subsidiaries in respect of any Tax.  There are no liens for Taxes upon any of the assets of the Company or any of its Subsidiaries except liens for current Taxes not yet due and payable (and for which there are adequate accruals, in accordance with GAAP).
 
(c)   Parachute Payments .  Except as set forth in Part 2.14(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to any Contract that has resulted or would reasonably be expected to result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provisions of state, local or foreign Tax law).  The transactions contemplated by this Agreement will not be the direct or indirect cause of any amount paid or payable by the Company and/or any of its Subsidiaries being classified as an excess parachute payment under Section 280G of the Code.
 
(d)   Closing Agreements; Etc .  Neither the Company nor any of its Subsidiaries is a party to, is bound by or has any obligation under any Tax allocation or sharing agreement, tax indemnity or similar agreement.  Neither the Company nor any of its Subsidiaries has: (i) ever been a member of an “affiliated group” (within the meaning of Section 1504 of the Code);   or (ii) any Liability for the Taxes of any Person (other than the Company or such Subsidiary, as applicable).
 
(e)   Distributed Stock .  Neither the Company nor any of its Subsidiaries has distributed stock of another Person, and neither the Company nor any of its Subsidiaries has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
 
(f)   Tax Holidays .  There are no (and there have never been any) Tax exemptions, Tax holidays or other Tax reduction agreements or arrangements applicable to the Company or any of its Subsidiaries.
 
(g)   Net Operating Losses .  The Company has made available to Parent all information reasonably available to the Company that is reasonably necessary for Parent to determine whether there has been any change in ownership of the Company within the meaning of Section 382(g) of the Code since the earliest date of incorporation of the Company or any of its predecessors.
 
(h)   Adjustment in Taxable Income .  Neither the Company nor any of its Subsidiaries is currently, and neither the Company nor any of its Subsidiaries will for any period for which a Tax Return has not been filed be, required to include in any taxable period (or portion thereof) ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in a prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or pursuant to Section 481 or 263A of the Code (or any comparable provision under state, local or foreign Tax laws) or for any other reason.
 
(i)   Penalties .  Neither the Company nor any of its Subsidiaries has disclosed on its Tax Returns any Tax reporting position taken in any Tax Return which would result in the imposition of penalties under Section 6662 of the Code (or any comparable provisions of state, local or foreign law).
 
(j)   Tax Shelter and Listed Transactions .  Neither the Company nor any of its Subsidiaries has consummated or participated in, and neither the Company nor any of its Subsidiaries is currently participating in, any transaction which was or is a “Tax shelter” transaction as defined in Sections 6662 or 6111 of the Code or the Treasury Regulations promulgated thereunder.  Neither the Company nor any of its Subsidiaries has participated in, and neither the Company nor any of its Subsidiaries is currently participating in, a “Listed Transaction” or a “Reportable Transaction” within the meaning of Section 6707A(c) of the Code or Treasury Regulation Section 1.6011-4(b), or any transaction requiring disclosure under a corresponding or similar provision of state, local, or foreign law.
 
(k)   Transferee or Successor Tax Liability .  Neither the Company nor any of its Subsidiaries has any Liability for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law) as a transferee or successor, by Contract or otherwise.
 
(l)   Dual Consolidated Loss .  Neither the Company nor any of its Subsidiaries has incurred a dual consolidated loss within the meaning of Section 1503 of the Code.
 
(m)   Foreign Tax .  The Company and each of its Subsidiaries has in its possession official foreign government receipts for any Taxes paid by it to any foreign Tax authorities.
 
(n)   FIRPTA .  Neither the Company nor any of its Subsidiaries has (and neither the Company nor any of its Subsidiaries has ever been) a “United States real property holding corporation” within the meaning of Section 897 of the Code during the period specified in Section 897(c)(1)(A)(ii) of the Code, and the Company and each of its Subsidiaries has filed with the Internal Revenue Service all statements, if any, which are required under Section 1.897-2(h) of the Treasury Regulations.
 
(o)   Withholdings .  The Company and each of its Subsidiaries has complied with all applicable Legal Requirements relating to the payment, reporting and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions under any foreign law), has, within the time and in the manner prescribed by law, withheld from employee wages or consulting compensation and timely paid over to the proper governmental authorities (or is properly holding for such timely payment) all amounts required to be so withheld and paid over under all applicable Legal Requirements, including federal and state income Taxes, Federal Insurance Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income and employment Tax withholding laws, and has timely filed all withholding Tax Returns, for all periods.
 
2.15   Employee and Labor Matters; Benefit Plans
 
(a)   Employee List .  Part ‎2.15(a) of the Disclosure Schedule contains a list of all current Company Employees as of the date of this Agreement, and correctly reflects: (i) their dates of employment; (ii) their current p ositions; (iii) their current salaries; (iv) any other compensation payable to them (including housing allowances, compensation payable pursuant to bonus, deferred compensation or commission arrangements or other compensation); and (v) each Company Employee Plan in which they participate or are eligible to participate.  Neither the Company nor any of its Subsidiaries is, and neither the Company nor any of its Subsidiaries has ever been, bound by or a party to, and neither the Company nor any of its Subsidiaries has a duty to bargain for, any collective bargaining agreement or other Contract with a labor organization representing any Company Employees and there are no labor organizations representing, or, to the Knowledge of the Company, purporting to represent or seeking to represent any current Company Employees.  Neither the Company nor any of its Subsidiaries is engaged, and neither the Company nor any of its Subsidiaries has ever been engaged, in any unfair labor practice of any nature which would be reasonably likely to result in a material Liability to the Company.  Neither the Company nor any of its Subsidiaries has had any strike, slowdown, work stoppage, lockout, job action or threat thereof, or question concerning representation, by or with respect to any of the Company Employees.  No event has occurred, and no condition or circumstance exists, that would reasonably be expected to directly or indirectly give rise to or provide a basis for the commencement of any such strike, slowdown, work stoppage, lockout, job action, labor dispute or union organizing activity or any similar activity or dispute.
 
(b)   Leave of Absence .  Except as set forth in Part ‎2.15(b) of the Disclosure Schedule, there is no current Company Employee who is not fully available to perfor m work because of disability or other leave.
 
(c)   At Will Employment .  Except as set forth in Part ‎2.15(c) of the Disclosure Schedule, the employment of each of the current Company Employees is terminable by the Company or its Subsidiaries, as applicable, at w ill.  The Company has made available to Parent or its Representatives accurate and complete copies of all employee manuals and handbooks, disclosure materials, policy statements and other materials relating to the employment of the Company Employees.
 
(d)   Employee Departures/Restrictions .  To the Knowledge of the Company, no employee of the Company or any of its Subsidiaries at the level of senior manager or above: (i) intends to terminate his employment with the Company or any of its Subsidiaries, as applicable; (ii) has received an offer to join a business that may be competitive with the Company’s or any of its Subsidiaries’ business; or (iii) is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on: (A) the performance by such employee of any of his duties or responsibilities as an employee of the Company or any of its Subsidiaries; or (B) the Company’s or any of its Subsidiaries’ businesses or operations
 
(e)   Employee Plans and Agreements .   Part ‎2.15(e) of the Disclosure Schedule contains an accurate and complete list of each Company Employee Plan and each Company Employee Agreement.  Neither the Company nor any of its Subsidiaries intends (and the neither the Company nor any of its Subsidia ries has committed) to establish or enter into any new Company Employee Plan or Company Employee Agreement, or to modify any Company Employee Plan or Company Employee Agreement (except to conform any such Company Employee Plan or Company Employee Agreement to the requirements of any applicable Legal Requirements, in each case as set forth in Part 2.15(e) of the Disclosure Schedule or as required by this Agreement).
 
(f)   Delivery of Documents .  As applicable with respect to each Company Employee Plan, the Company has made available to Parent or its Representatives: (i) correct and complete copies of all documents setting forth the terms of each Company Employee Plan and each Company Employee Agreement, including all amendments thereto and all related trust documents; (ii) the most recent summary plan description together with the summaries of material modifications thereto, if any, with respect to each Company Employee Plan; (iii) all material written Contracts relating to each Company Employee Plan, including administrative service agreements and group insurance contracts; (iv) the annual reports (Form 5500 series) for the last three complete plan years; (v) the most recent letter of determination from the U.S. Internal Revenue Service relating to the tax-qualified status of the Company Employee Plan, if applicable; (vi) all written materials provided to any Company Employee relating to any Company Employee Plan and any proposed Company Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events that would result in any material Liability to the Company or any of its Subsidiaries; (vii) all correspondence to or from any Governmental Body relating to any Company Employee Plan; and (viii) all insurance policies in the possession of the Company and each of its Subsidiaries pertaining to fiduciary liability insurance covering the fiduciaries for each Company Employee Plan.
 
(g)   No Foreign Plans .  Except as set forth on Part 2.15(g) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries has established or maintained: (i) any plan, program, policy, practice, Contract or other arrangement mandated by a Governmental Body other than the United States; (ii) any Company Employee Plan that is subject to any of the Legal Requirements of any jurisdiction outside of the United States; or (iii) any Company Employee Plan that covers or has covered Company Employees whose services are or have been performed primarily outside of the United States.
 
(h)   Absence of Certain Retiree Liabilities .  No Company Employee Plan provides or reflects or represents any Liability of the Company or any of its Subsidiaries to provide, retiree life insurance, retiree health benefits or other retiree employee welfare benefits to any Person for any reason.  Neither the Company nor any of its Subsidiaries has ever represented, promised or contracted (whether in oral or written form) to any Company Employee (either individually or to Company Employees as a group) or any other Person that such Company Employee(s) or other Person would be provided with retiree life insurance, retiree health benefit or other retiree employee welfare benefits, except to the extent required by applicable Legal Requirements.
 
(i)   No Defaults .  The Company and each of its Subsidiaries has performed all obligations required to be performed by it under each Company Employee Plan and is not in default or violation of, and the Company has no Knowledge of any default or violation by any other party to, the terms of any Company Employee Plan.  Each of the Company Employee Plans has been operated and administered in all material respects in accordance with applicable Legal Requirements, including, without limitation, the applicable tax qualification requirements under the Code and ERISA.  No Company Employee Plan and no grants, awards or benefits thereunder are subject to Section 409A(a) or 409A(b) of the Code or, if subject to Section 409A(a) of the Code, have failed or will fail, in form or operation, to meet the requirements of Section 409A(a)(2), 409A(a)(3) or 409A(a)(4) of the Code.  Each Company Employee Agreement that is subject to Code Section 409A(a) has been drafted and administered in good faith compliance with, or has been corrected in good faith reliance upon guidance promulgated under, Section 409A of the Code and the regulations promulgated thereunder.  All premiums and/or contributions to, and material payments from, any Company Employee Plan which may have been required to be made in accordance with the terms of such Company Employee Plan or applicable Legal Requirements have been timely made, and all contributions for any period ending on or before the Closing Date which are not yet due, but will be paid on or prior to the Closing Date, are reflected as an accrued Liability on the Unaudited Interim Balance Sheet.  Each Company Employee Plan can be amended, terminated or otherwise discontinued after the date of this Agreement, without Liability to the Company, any of its Subsidiaries, the Surviving Corporation or to Parent (other than ordinary administration expenses).  There are no audits, inquiries or Legal Proceedings pending or, to the Knowledge of the Company, threatened by any Governmental Body with respect to any Company Employee Plan.  All material reports, returns and similar documents required to be filed with any Governmental Body or distributed to any plan participant have been duly and timely filed or distributed.  With respect to any Company Employee Plan, no “prohibited transaction” or “reportable event” has occurred within the meaning of the applicable provisions of ERISA or the Code.  With respect to each Company Employee Plan that is a group health plan, the Company has complied with the notice and continuation coverage requirements, and all other requirements, of Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA, and the regulations thereunder.
 
(j)   Qualified Plans .  Except as set forth in Part ‎2.15(j) of the Disclosure Schedule, with respect to each Company Employee Plan intended to qualify under Section 401(a) of the Code: (i) the Internal Revenue Service has issued a favorable determination letter or opinion let ter or advisory letter upon which the Company is entitled to rely under Internal Revenue Service pronouncements, that such plan is, and such plan and its related trust are in fact, qualified under Section 401(a) of the Code and the related trusts are exempt from federal income tax under Section 501(a) of the Code; (ii) no such determination letter, opinion letter or advisory letter has been revoked nor has revocation been threatened, nor has any amendment or other action or omission occurred with respect to any such plan since the date of its most recent determination letter, opinion letter or advisory letter, or application therefor, in any respect which would adversely affect its qualification, or materially increase its cost; and (iii) no Company Employee Plan is or has ever been a defined benefit plan subject to Section 412 of the Code and Section 302 of ERISA, a multiemployer plan as defined in Section 4001(a)(3) of ERISA, and/or a multiple employer plan subject to Section 413(c) of the Code.
 
(k)   No Conflict .  Except as set forth in Part ‎2.15(k) of the Disclosure Schedule, neither the execution, delivery or performance of this Agreement, nor the consummation of the Mergers or any of the other transactions contemplated by this Agreement, will or may (either a lone or upon the occurrence of any additional or subsequent events): (i) constitute an event under any Company Employee Plan, Company Employee Agreement, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of Indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Company Employee, except as otherwise set forth on Part 2.3(b) of the Disclosure Schedule; or (ii) create or otherwise result in any Liability with respect to any Company Employee Plan.
 
(l)   Compliance .  The Company and each of its Subsidiaries (i) is in compliance in all material respects with all applicable Legal Requirements, Contracts and orders, rulings, decrees, judgments or arbitration awards of any arbitrator or any court or other Governmental Body respecting employment, employment practices, terms and conditions of employment, wages, hours or other labor-related matters, including Legal Requirements, orders, rulings, decrees, judgments and awards relating to discrimination, wages and hours, labor relations, leave of absence requirements, occupational health and safety, privacy, harassment, retaliation, immigration, wrongful discharge or violation of the personal rights of Company Employees or prospective employees; (ii) has no Liability for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing; and (iii) has no Liability for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security or other benefits or obligations for any Company Employee (other than routine payments to be made in the normal course of business and consistent with past practice).
 
(m)   Labor Relations .  The Company and each of its Subsidiaries has good labor relations, and, except as set forth in Part ‎2.15(m) of the Disclosure Schedule, the Company has no Knowledge of any facts indicating that the consummation of the Mergers or any of the other transactions contemplated by this Agreement will or would reasonably be expected to have or result in a Company Material Adverse Effect on the labor relations of the Company or any of its Subsidiaries.  Except as set forth in Part ‎2.15(m) of the Disclosure Schedule, there are no pending or, to the Knowledge of the Company, threatened or reasonably anticipated claims or Legal Proceedings against the Company or any of its Subsidiaries under any workers’ compensation policy or long-term disability policy.
 
(n)   Claims Against Plans .  There are no pending or, to the Knowledge of the Company, threatened claims or Legal Proceedings against any of the Company Employee Plans, the assets of any of the Company Employee Plans or the Company, its Subsidiaries or the Company Employee Plan administrator or any fiduciary of the Company Employee Plans with respect to the operation of such Company Employee Plans (other than routine, uncontested benefit claims) or asserting any rights or claims to benefits under such Company Employee Plan, and there are no facts or circumstances which would form the basis for any such claims or Legal Proceedings.
 
(o)   Independent Contractors .  Part ‎2.15(o) of the Disclosure Schedule accurately sets forth, with respect to each Person who is or was: (x) at any time, an independent contractor of the Company or any of its Subsidiaries who contributed to the development of any Company IP; and (y) at any time since January 1, 2007, an independent contractor of the Company or any of its Subsidiaries and who has received or may be entitled to receive in excess of $50,000 from the Company or any of its Subsidiaries:
 
(i)   the name of such independent contractor, and the date as of which such independent contractor was originally engaged by the Company or any of its Subsidiaries;
 
(ii)   a description of such independent contractor’s performance objectives, services, duties and responsibilities;
 
(iii)   the aggregate dollar amount of the compensation (including all payments or benefits of any type) received by such independent contractor from the Company or any of its Subsidiaries with respect to services performed in the fiscal year ended December 31, 2009;
 
(iv)   the terms of compensation of such independent contractor; and
 
(v)   any Governmental Authorization that is held by such independent contractor and that relates to the business of the Company.
 
(p)   No Misclassified Employees .  No current or former independent contractor of the Company or any of its Subsidiaries could be deemed to be an employee.  No independent contractor is eligible to participate in any Company Employee Plan other than the Company Option Plan.  Neither Company nor any of its Subsidiaries has ever had any temporary or leased employees that were not treated and accounted for in all respects as employees of the Company or any of its Subsidiaries.
 
(q)   Labor-Related Claims .   Except as set forth in Part ‎2.15(q) of the Disclosure Schedule, there is no Legal Proceeding, claim, labor dispute or grievance pending or, to the Knowledge of the Company, threatened relating to any employment Contract, compensation, wages and hours, lea ve of absence, plant closing notification, employment statute or regulation, privacy right, labor dispute, workers’ compensation policy, long-term disability policy, safety, retaliation, immigration or discrimination matter involving any Company Employee, including charges of unfair labor practices or harassment complaints.
 
2.16   Environmental Matters
 
The Company and each of its Subsidiaries is in compliance with all applicable Environmental Laws in all material respects, which compliance includes the possession by the Company and each of its Subsidiaries of all material Environmental Licenses and other Governmental Authorizations required under applicable Environmental Laws for the operation of its business and use of the Company Leased Real Property, and compliance with the terms and conditions thereof in all material respects.  Neither the Company nor any of its Subsidiaries has received any written notice or the Knowledge of the Company any other communication from a Governmental Body that alleges that the Company or any of its Subsidiaries is not in material compliance with any Environmental Law.  Except in compliance with all applicable Environmental Laws, including any applicable Environmental Licenses, neither the Company nor any of its Subsidiaries has caused or contributed to any Environmental Release and, to the Company’s Knowledge, there are no circumstances which would reasonably be expected to give rise to any Environmental Release by the Company or any of its Subsidiaries.   To the Knowledge of the Company, no other Person has caused any Environmental Release on, at, to, from or underneath the Company Leased Real Property or any other real property or facility that is, or was formerly, used, leased or operated by the Company or any of its Subsidiaries.  To the Knowledge of the Company, no Contaminants are stored or contained on or under any of the Leased Real Properties whether in storage tanks, land fills, pits, ponds, lagoons or otherwise.  All Governmental Authorizations currently held by the Compa ny or any of its Subsidiaries pursuant to Environmental Laws are identified in Part ‎2.16 of the Disclosure Schedule and the Company has made available to Parent copies of all written environmental investigation, study, audit, test, review or other analysi s conducted in the possession or control of the Company or any of its Subsidiaries in relation to the current or prior business of the Company or any of its Subsidiaries, the Company Leased Real Property or any property or facility now or previously used, leased or operated by the Company or any of its Subsidiaries.
 
2.17   Insurance
 
Part ‎2.17 of the Disclosure Schedule identifies each insurance policy maintained by, at the expense of or for the benefit of the Company or any of its Subsidiaries as of the date of this Agreement and identifies any material claims made thereunder as of the date of this Agreement within the past three (3) years.  The Company has made available to Parent or its Representatives accurate and complete copies of the insurance policies identified on Part ‎2.17 of the Disclosure Schedule.  All premiums due on such policies have been paid, and the Company and each Subsidiary is otherwise in compliance with the terms of such policies.  Since December 31, 2007, neither the Company nor any of its Subsidiaries has received any notice or to the Knowledge of the Company any other communication regarding any actual or possible: (i) cancellation or invalidation of any insurance policy; (ii) refusal of any coverage or rejection of any claim under any insurance policy; or (iii) material adjustment in the amount of the premiums payable with respect to any insurance policy.
 
2.18   Related Party Transactions
 
(a)   Except as set forth in Part ‎2.18 of the Disclosure Schedule: (a) no Company Related Party, and to the Knowledge of the Company, no immediate family member of a Company Relat ed Party, has and no Company Related Party and, to the Knowledge of the Company no immediate family member of a Company Related Party, has had, any direct interest or, to the Knowledge of the Company any indirect interest, in any material asset used in the business of the Company or any of its Subsidiaries except for any interest resulting from the ownership of shares of the Company Capital Stock; (b) no Company Related Party and no immediate family member of a Company Related Party is, or has been, indebted to the Company or any of its Subsidiaries (other than for ordinary travel advances); (c) no Company Related Party and no immediate family member of a Company Related Party has entered into, or, to the Knowledge of the Company, has had any financial interest in, any material Contract or transaction involving the Company or any of its Subsidiaries (other than transactions involving the Company’s securities); and (d) to the Knowledge of the Company, no Company Related Party and no immediate family member of a Company Related Party has any claim or right against the Company or any of its Subsidiaries (other than rights under Company Options and rights to receive compensation for services performed as an employee of the Company or any of its Subsidiaries or as a consultant to the Company pursuant to a written consulting agreement or other rights arising in the ordinary course of employment or pursuant to a written consulting agreement).
 
(b)   To the Company’s Knowledge, except as set forth in Part ‎2.18 of the Disclosure Schedule, no Company Related Party has any direct or indirect financial interest in any competitor, supplier, manufacturer, distributor or customer of the Company or any Subsid iary; provided , however , that the ownership of securities representing no more than 5% of the outstanding voting power of any creditor, competitor, supplier, manufacturer, agent, representative, distributor or customer, and which are listed on any national securities exchange or traded actively in the national over-the-counter market, shall not be deemed to be a “financial interest” as long as the Person owning such securities has no other connection or relationship with such creditor, competitor, supplier manufacturer, agent, representative, distributor or customer and has not filed a report on Schedule 13D or 13G or Form 3 or 4 relating to such entity.
 
2.19   Legal Proceedings; Orders
 
(a)   Legal Proceedings .  There is no pending Legal Proceeding and, to the Knowledge of the Company, no Person has threatened to commence any Legal Proceeding: (i) that involves the Company, any of its Subsidiaries or any of the assets owned or used by the Company, any of its Subsidiaries or any Person whose Liability the Company or any of its Subsidiaries has or may have retained or assumed, either contractually or by operation of law; (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Mergers or any of the other transactions contemplated by this Agreement; or (iii) that relates to the ownership of any capital stock of the Company or any of its Subsidiaries, or any option or other right to the capital stock of the Company or any of its Subsidiaries, or right to rec eive consideration as a result of this Agreement.  Except as set forth in Part ‎2.19(a) of the Disclosure Schedule, no Legal Proceeding involving claims in excess of $50,000 has ever been commenced by, and no Legal Proceeding involving claims in excess of $50,000 has ever been pending against, the Company or any of its Subsidiaries.
 
(b)   Orders .  There is no order, writ, injunction, judgment or decree to which the Company, any of its Subsidiaries, or any of the material assets owned or used by the Company or any of its Subsidiaries, is subject.  To the Knowledge of the Company, no officer or other employee of the Company or any of its Subsidiaries is subject to any order, writ, injunction, judgment or decree that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the Company’s or any of its Subsidiaries’ businesses.
 
2.20   Authority; Binding Nature of Agreement
 
(a)   Authority; Binding Nature .  The Company has all requisite corporate power and authority to enter into this Agreement, and, subject to the receipt of the Company Stockholder Approval, to perform its obligations under this Agreement and consummate the Mergers and other transactions contemplated hereby.  The execution and delivery of this Agreement by the Company and, subject to obtaining the Company Stockholder Approval, the performance by the Company of its obligations hereunder and the consummation by the Company of the First Merger and other transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Company, its Subsidiaries and their respective board of directors, and no other corporate proceedings on the part of the Company or any Subsidiary are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, except as set forth in Sections 2.21(b) and 2.22.  This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.
 
(b)   Board Approval .  The Company Board has (i) unanimously determined that the First Merger is advisable and fair and in the best interests of the Company and its stockholders; (ii) unanimously recommended the adoption of this Agreement by the holders of Company Capital Stock and directed that this Agreement and the First Merger be submitted for consideration by the Company’s stockholders; and (iii) to the extent necessary, adopted a resolution having the effect of causing the Company not to be subject to any state takeover law or similar Legal Requirement that might otherwise apply to the Mergers or any of the other transactions contemplated by this Agreement.
 
2.21   Non-Contravention; Consents
 
(a)   Except as set forth in Part ‎2.21 of the Disclosure Schedule, the execution and de livery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation by the Company of the First Merger and other transactions contemplated hereby will not:
 
(i)   contravene, conflict with or result in a violation of any of the provisions of the Company’s Charter Documents;
 
(ii)   assuming that all consents, approvals and authorizations and other actions described in Section 2.21(b) have been obtained and all filings and obligations described in Section 2.21(b) have been made or complied with, conflict with or violate in any material respect any Legal Requirement applicable to the Company or any order, writ, injunction, judgment or decree to which the Company, any of its Subsidiaries or any of the assets owned or used by the Company or any of its Subsidiaries, is subject;
 
(iii)   contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by the Company or any of its Subsidiaries and that is material to the operation of the Company’s business;
 
(iv)   contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Company Contract that is or would constitute a Company Material Contract, or give any Person the right to: (A) declare a default or exercise any remedy under any such Company Material Contract; (B) accelerate the maturity or performance of any such Company Material Contract; or (C) cancel, terminate or modify any such Company Material Contract;
 
(v)   result in the imposition or creation of any lien or other Encumbrance (other than Permitted Encumbrances) upon or with respect to any material asset owned by the Company or any of its Subsidiaries; or
 
(vi)   except as set forth in paragraph (b) below, require the Consent of any Person.
 
(b)   The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Body, except for applicable requirements, if any, of the Exchange Act, state securities or “blue sky” laws and the filing and recordation of the Certificate of Merger with the Secretary of State of the State of Delaware.
 
2.22   Vote Required
 
The affirmative vote of (a) the holders of a majority of the shares of Company Capital Stock (voting together as a single class on an as-converted basis); and (b) the holders of sixty-two and one half percent (62.5%) of the shares of Company Preferred Stock (voting as a separate class on an as converted basis), are the only votes of the holders of any class or series of Company Capital Stock necessary to adopt this Agreement and approve the other transactions contemplated by this Agreement (the votes referred to in clauses “(a)” and “(b)” of this sentence being referred to collectively as the “ Required Merger Stockholder Votes ”); provided , however , that the consent of (x) the holders of at least sixty-two and one half percent (62.5%) in interest of the then outstanding principal amount of Company 2009 Notes is required to convert the principal and unpaid accrued interest of the Company 2009 Notes into shares of Company Capital Stock immediately prior to the First Merger and (y) the holders of at least sixty-two and one half percent (62.5%) in interest of the then outstanding principal amount of Company 2010 Notes is required to convert the principal and unpaid accrued interest of the Company 2010 Notes into shares of Company Capital Stock immediately prior to the First Merger.
 
2.23   Voting Agreement
 
Neither the Company nor, to the Knowledge of the Company, any other party thereto is in breach, violation or default under the Voting Agreement.  No event has occurred that, with notice or lapse of time or both, would constitute such a breach, violation or default by the Company or, to the Knowledge of the Company, the other parties thereto.
 
2.24   Brokers
 
No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Mergers or any of the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its S ubsidiaries, except as set forth in Part 2.24 of the Disclosure Schedule.  Except as set forth in Part ‎2.24 of the Di sclosure Schedule, no Person is or may become entitled to receive any fee or other amount from the Company or any of its Subsidiaries for professional services performed or to be performed in connection with the Mergers or any of the other transactions contemplated by this Agreement.
 
2.25   Full Disclosure
 
This Agreement (including the Disclosure Schedule) does not, and the Merger Consideration Certificate will not: (i) contain any representation, warranty or information that is false or misleading with respect to any material fact; or (ii) omit to state any material fact necessary in order to make the representations, warranties and information contained and to be contained herein and therein (in the light of the circumstances under which such representations, warranties and information were or will be made or provided) not false or misleading.
 
2.26   Disclaimer of Other Representations and Warranties; Knowledge
 
(a)   NEITHER THE COMPANY, ITS SUBSIDIARIES, ANY AFFILIATE THEREOF, NOR ANY OF THEIR RESPECTIVE REPRESENTATIVE, HAS MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO THE COMPANY, ITS SUBSIDIARIES OR THEIR RESPECTIVE BUSINESS OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE 2.
 
(b)   Without limiting the generality of the foregoing, neither the Company, its Subsidiaries, nor any Representative has made, and shall not be deemed to have made, any representations or warranties in the materials relating to the business of the Company or its Subsidiaries made available to Parent, Merger Sub and LLC Sub (or their respective Representatives), including due diligence materials, or in any presentation of the business of the Company by management of the Company or others in connection with the transactions contemplated hereby, and no statement contained in any of such materials or made in any such presentation shall be deemed a representation or warranty hereunder or otherwise or deemed to be relied upon by Parent or Merger Sub in executing, delivering and performing this Agreement and the transactions contemplated hereby.  It is understood that any cost estimates, projections or other predictions, any data, any financial information or any memoranda or offering materials or presentations, including but not limited to, any offering memorandum or similar materials made available by the Company and its Representatives are not and shall not be deemed to be or to include representations or warranties of the Company, and are not and shall not be deemed to be relied upon by Parent or Merger Sub in executing, delivering and performing this Agreement and the transactions contemplated hereby.
 
3.  
 
Except as set forth in the Parent SEC Documents or as specified the disclosure schedules delivered by Parent concurrently with the execution of this Agreement to the Company (the “ Parent Disclosure Schedule ”), which shall identify any exceptions to the representations, warranties and covenants contained in this Agreement (with specific reference to the particular Section or subsection to which such information relates; provided , however , that any information set forth in one section of such Parent Disclosure Schedule also shall be deemed to apply to each other section and subsection of this Agreement to which its relevance is reasonably apparent), Parent, Merger Sub and LLC Sub jointly and severally represent and warrant to the Company as follows:
 
3.1   Due Organization
 
(a)   Parent .  Parent is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the requisite corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its material obligations under all Parent Material Contracts.  Parent is duly qualified to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the property owned, leased or operated by it or the nature of its business requires such qualification and where the failure to be so qualified will or would reasonably be expected to have or result in a Parent Material Adverse Effect.
 
(b)   Merger Sub .  Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  The certificate of incorporation and bylaws of Merger Sub, copies of which have previously been made available to the Company or its Representatives, are accurate and complete copies of such documents as currently in effect and Merger Sub is not in violation of any provision thereof.
 
(c)   LLC Sub .  LLC Sub is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  The LLC Sub Certificate and LLC Sub Operating Agreement, copies of which have previously been made available to the Company or its Representatives, are accurate and complete copies of such documents as currently in effect and LLC Sub is not in violation of any provision thereof
 
(d)   Parent Subsidiaries .  Each of Parent’s Subsidiaries is a corporation or legal Entity, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its organization. Each of Parent’s Subsidiaries has the requisite corporate power or other power and authority to own and use its assets and to conduct its business as it is now being conducted.
 
3.2   Non-Contravention; Consents
 
(a)   Non-Contravention .  Except as set forth in Part ‎3.2 of the Parent Disclosure Schedule, the execution and delivery of this Agreement by Parent, Merger Sub and LLC Sub do not, and the performance by Parent, Merger Sub and LLC Sub of their obligations hereunder and the consummation by Parent, Merger Sub and LLC Sub of the Mergers and other transactions contemplated hereby will not:
 
(i)   contravene, conflict with or result in a violation of any of the provisions of Parent’s articles of incorporation or bylaws;
 
(ii)   contravene, conflict with or result in a violation of any of the provisions of the certificate of incorporation or bylaws of the Merger Sub or the LLC Sub Certificate or LLC Sub Operating Agreement;
 
(iii)   assuming that all consents, approvals and authorizations and other actions described in Section 3.2(b) have been obtained and all filings and obligations described in Section 3.2(b) have been made or complied with, conflict with or violate in any material respect any Legal Requirement applicable to Parent, Merger Sub or LLC Sub or any order, writ, injunction, judgment or decree to which Parent, any of its Subsidiaries or any of the assets owned or used by Parent or any of its Subsidiaries, is subject;
 
(iv)   contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by Parent or any of its Subsidiaries that is material to the operation of Parent’s business;
 
(v)   contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Parent Contract that is or would constitute a Parent Material Contract, or give any Person the right to: (A) declare a default or exercise any remedy under any such Parent Material Contract; (B) accelerate the maturity or performance of any such Parent Material Contract; or (C) cancel, terminate or modify any such Parent Material Contract; or
 
(vi)   result in the imposition or creation of any lien or other Encumbrance (other than Permitted Encumbrances) upon or with respect to any asset owned by Parent or any of its Subsidiaries,
 
except, in the case of clauses (iii)-(vi) above, for any such conflicts, violations, defaults or occurrences, if any, that would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or impair in any material respect the ability of the parties hereto to consummate the Mergers or other transactions contemplated hereby.
 
(b)   Consents .  The execution and delivery of this Agreement by Parent, Merger Sub and LLC Sub do not, and the performance of this Agreement by Parent, Merger Sub and LLC Sub will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Body, except for applicable requirements, if any, of the Securities Act, the Exchange Act, state securities or “blue sky” laws and the filing and recordation of the Certificate of Merger with the Secretary of State of the State of Delaware.
 
3.3   Authority; Binding Nature of Agreement
 
Parent, Merger Sub and LLC Sub each have the requisite corporate power and authority to enter into and perform their obligations under this Agreement and consummate the Mergers and other transactions contemplated hereby. The execution and delivery of this Agreement by Parent, Merger Sub and LLC Sub and the performance by Parent, Merger Sub and LLC Sub of their respective obligations hereunder and the consummation of the Mergers and other transactions contemplated hereby, have been duly authorized by all necessary corporate or limited liability company action, as applicable, on the part of Parent, Merger Sub and LLC Sub and their respective boards of directors or members, as the case may be, except as set forth in Sections 3.2(b) and 3.11.  This Agreement has been duly executed and delivered by Parent, Merger Sub and LLC Sub and constitutes a valid and binding obligation of Parent, Merger Sub and LLC Sub, as the case may be, enforceable against them in accordance with its terms, subject to: (a) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.
 
3.4   Legal Proceedings
 
There is no pending Legal Proceeding and, to the Knowledge of Parent, Merger Sub and LLC Sub, no Person has threatened to commence any Legal Proceeding: (i) that involves Parent, any of its Subsidiaries or any of the assets owned or used by Parent, any of its Subsidiaries or any Person whose Liability Parent or any of its Subsidiaries has or may have retained or assumed, either contractually or by operation of law; (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Mergers or any of the other transactions contemplated by this Agreement; or (iii) that relates to the ownership of any capital stock of Parent or any of its Subsidiaries, or any option or other right to the capital stock of Parent or any of its Subsidiaries, or right to receive consideration as a result of this Agreement.  There is no order, writ, injunction, judgment or decree to which Parent, any of its Subsidiaries, or any of the material assets owned or used by Parent or any of its Subsidiaries, is subject.  To the Knowledge of Parent, no officer or other employee of Parent or any of its Subsidiaries is subject to any order, writ, injunction, judgment or decree that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to Parent’s or any of its Subsidiaries’ businesses.
 
3.5   SEC Filings; Financial Statements
 
(a)   Parent SEC Documents .  Parent has filed all forms, reports and documents required to be filed by it with the SEC since January 1, 2007 (the forms, reports and documents filed since January 1, 2007 and those filed subsequent to the date hereof, including any amendments thereto, collectively, the “ Parent SEC Documents ”).  Each of the Parent SEC Documents at the time of its filing complied in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder applicable to the Parent SEC Documents or, if not yet filed or furnished, will comply in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, and any rules and regulations promulgated thereunder applicable to the Parent SEC Documents.  The Parent SEC Documents did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and any Parent SEC Documents filed or furnished with the SEC subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.
 
(b)   SEC Comment Letters .  As of the date of this Agreement, Parent has timely responded to all comment letters of the staff of the SEC relating to the Parent SEC Documents, and the SEC has not advised Parent that any final responses are inadequate, insufficient or otherwise non-responsive. Parent has made available to the Company or its Representatives true, correct and complete copies of all comment letters, written inquiries and enforcement correspondence between the SEC, on the one hand, and Parent and any of its Subsidiaries, on the other hand, occurring since January 1, 2007 and will, reasonably promptly following the receipt thereof, make available to the Company and its Representatives any such correspondence sent or received after the date hereof. Except as set forth in Part 3.5(b) of the Parent Disclosure Schedule, to the knowledge of Parent, as of the date of this Agreement, none of the Parent SEC Documents is the subject of ongoing SEC review or outstanding SEC comment.
 
(c)   NASDAQ Matters .  As of the date of this Agreement, Parent is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of NASDAQ except as set forth in Part 3.5(c) of the Parent Disclosure Schedule.
 
(d)   Financial Statements .  Each of the consolidated financial statements (including, in each case, any notes or schedules thereto) included in or incorporated by reference into the Parent SEC Documents was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of Parent as at the respective dates thereof and for the respective periods indicated therein, or, in the case of the Parent SEC Documents filed after the date hereof, will fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of Parent as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year end adjustments which have not had, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Parent) (the “ Parent Financial Statements ”).  Neither Parent or any of its Subsidiaries nor, to the Knowledge of Parent, any director, officer, employee, or internal or external auditor of Parent or any of its Subsidiaries has received or otherwise had or obtained actual knowledge of any substantive material complaint, allegation, assertion or claim, whether written or oral, that Parent or any of its Subsidiaries has engaged in questionable accounting or auditing practices.  Part 3.5(d) of the Parent Disclosure Schedule sets forth a true and accurate calculation of Parent Net Cash as of the date hereof.
 
(e)   SOX Compliance .  Except as set forth in Part 3.5(e) of the Parent Disclosure Schedule, each of the principal executive officer of Parent and the principal financial officer of Parent (or each former principal executive officer of Parent and each former principal financial officer of Parent, as applicable) has made all certifications required by Rule 13a−14 or 15d−14 under the Exchange Act or Sections 302 and 906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated thereunder with respect to the Parent SEC Documents, and the statements contained in such certifications were true and correct on the date such certifications were made. For purposes of this Section 3.5(e), “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act. Neither Parent nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers in violation of Section 402 of the Sarbanes Oxley-Act.
 
3.6   Capitalization of Parent
 
As of the date hereof, the authorized capital stock of Parent consists of (i) 500,000,000 shares of Parent Common Stock, and (ii) 200,000,000 shares of preferred stock, par value $.01 per share (“ Parent Preferred Stock ”).  As of the date of this Agreement, 130,345,819 shares of Parent Common Stock are issued and outstanding, all of which are validly issued, fully paid and non-assessable.  Parent has reserved 9,250,000 shares of Parent Common Stock for issuance under the stock option plans of Parent (the “ Parent Stock Option Plans ”), of which options to purchase 2,142,750 shares of Parent Common Stock are currently outstanding and 2,104,835 shares of Parent Common Stock are available for issuance under the Parent Stock Option Plans and 252,704   shares of restricted Parent Common Stock that are subject to vesting requirements as of the date of this Agreement have been awarded under the Parent Stock Option Plan as of the date of this Agreement.  Parent has reserved 1,575,537 shares of Parent Common Stock for issuance under warrants to purchase Parent Common Stock outstanding as of the date hereof (the “ Parent Warrants ”).  As of the date of this Agreement, no shares of Parent Preferred Stock are issued and outstanding.  Except as set forth in this Section 3.6 and except for stock options granted pursuant to the Parent Stock Option Plans, rights to purchase Series A Junior Participating Preferred Stock of Parent pursuant to the Rights Agreement, dated as of May 16, 2001, between Parent and First Union National Bank, as Rights Agent (the “ Parent Rights Agreement ”), and the Parent Warrants set forth in Part 3.6 of the Parent Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of Parent or Merger Sub or obligating Parent or Merger Sub to issue or sell any shares of capital stock of, or other equity interests in, Parent or Merger Sub.  All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable.  There are no outstanding contractual obligations of Parent or Merger Sub to repurchase, redeem or otherwise acquire any shares of Parent Common Stock or any capital stock of Merger Sub.  The Parent Common Stock Consideration equals 19.9% of the shares of Parent Common Stock outstanding immediately prior to the Closing.  The sum of the number of shares in the Parent Common Stock Consideration and the number of shares of Parent Common Stock issuable upon conversion of the Parent Preferred Stock Consideration (assuming the conversion was approved by Parent’s stockholders) shall equal 47.0% of the shares of Parent Common Stock outstanding immediately following the Closing (assuming conversion of the Parent Preferred Stock Consideration into Parent Common Stock and the exercise of all outstanding Parent Warrants and options to purchase Parent Common Stock).
 
3.7   Capitalization of Merger Sub
 
As of the date of this Agreement, the authorized capital stock of Merger Sub consists of 1,000 shares of common stock, par value $0.01 per share (“ Merger Sub Common Stock ”).  As of the date of this Agreement, 100 shares of Merger Sub Common Stock were issued and outstanding.  All of the outstanding shares of Merger Sub Common Stock have been duly authorized and validly issued, and are fully paid and nonassessable and are owned, beneficially and of record, by Parent, free and clear of any claim, lien, Encumbrance, or agreement with respect thereto.
 
3.8   Capitalization of LLC Sub
 
As of the date of this Agreement, all of the outstanding membership interests of LLC Sub have been duly authorized and validly issued, and are fully paid and nonassessable and are owned, beneficially and of record, by Parent, free and clear of any claim, lien, Encumbrance, or agreement with respect thereto other than the LLC Sub Operating Agreement.
 
3.9   Valid Issuance
 
The Parent Common Stock and Parent Series B Preferred Stock to be issued in the Mergers have been duly and validly reserved for issuance, and will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable.  The shares of the Parent Common Stock issuable upon conversion of the shares of Parent Series B Preferred Stock to be issued under this Agreement have been duly and validly reserved for issuance and, upon issuance in accordance with the terms of the Articles of Amendment, will be duly and validly issued.
 
3.10   Absence of Certain Changes or Events
 
Since September 30, 2010, except as expressly contemplated by this Agreement, or specifically disclosed in any Parent SEC Document filed since September 30, 2010 and prior to the date of this Agreement:
 
(a)   there has not been any Parent Material Adverse Effect, and no event has occurred or circumstance has arisen that, in combination with any other events or circumstances, would reasonably be expected to have or result in a Parent Material Adverse Effect;
 
(b)   there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of Parent’s or any of its Subsidiaries’ material assets (whether or not covered by insurance); and
 
(c)   neither the Parent nor any of its Subsidiaries has taken any of the following actions:
 
(i)   sold, issued or authorized the issuance of: (A) any capital stock or other security; (B) any option or right to acquire any capital stock (or cash based on the value of capital stock) or other security; or (C) any instrument convertible into or exchangeable for any capital stock (or cash based on the value of capital stock) or other security;
 
(ii)   amended or waived any of its rights under, or permitted the acceleration of vesting under: (A) any provision of any of the Parent Stock Option Plans; (B) any provision of any agreement evidencing any outstanding Parent Option; or (C) any provision of any restricted stock agreement;
 
(iii)   neither Parent nor any of its Subsidiaries have amended or permitted the adoption of any amendment to its articles of incorporation and bylaws or similar organizational documents, including all amendments thereto, of Parent and each of its Subsidiaries (the “ Parent Charter Documents ”), or effected or permitted Parent or any of its Subsidiaries to become a party to any recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;
 
(iv)   formed any Subsidiary or acquired any equity interest or other interest in any other Entity;
 
(v)   made any capital expenditure outside the ordinary course of business, except for such capital expenditures that, when added to all other capital expenditures made on behalf of Parent and its Subsidiaries, do not exceed $75,000;
 
(vi)   (A) entered into, or permitted any of the assets owned or used by it to become bound by, any Contract that is or would constitute a Parent Material Contract; or (B) materially amended or prematurely terminated, or waived any material right or remedy under, any such Contract;
 
(vii)   sold, leased, licensed, pledged, granted, encumbered (other than Permitted Encumbrances) or otherwise disposed of any of its properties or assets which are material, individually or in the aggregate, to its business outside of the ordinary course of business;
 
(viii)   (A) loaned money to any Person (except for routine travel advances to current employees of Parent or its Subsidiaries in the ordinary course of business consistent with past practices); or (B) guaranteed any Indebtedness;
 
(ix)   (A) established, adopted, materially amended or terminated any Parent Employee Plan; (B) paid any bonus or made any profit-sharing payment, cash incentive payment or similar payment, other than commissions or bonuses paid in the ordinary course of business and consistent with past practices; or (C) materially increased the amount of the wages, salary, commissions, fringe benefits or other compensation (including equity-based compensation, whether payable in cash or otherwise) or remuneration payable to any of its directors or officers;
 
(x)   except as required by any applicable Legal Requirement, changed any of its methods of accounting or accounting practices in any material respect;
 
(xi)   made or changed any material Tax election, adopted or changed a material accounting method in respect of Taxes, enter into a Tax allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing agreement, settle or comprise a claim, notice, audit report or assessment in respect of Taxes, or consented to an extension or waiver of the statutory limitation period applicable to a claim or assessment in respect of Taxes;
 
(xii)   commenced or settled any Legal Proceeding for an amount in excess of $75,000; or
 
(xiii)   agreed or committed to take any of the actions described in clauses “‎(iii)” through “‎(xii)” above.
 
3.11   Operations of Merger Sub
 
Merger Sub is a direct, wholly owned subsidiary of Parent, was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement.  Except for obligations and liabilities incurred in connection with its incorporation and the transactions contemplated by this Agreement, Merger Sub has not, and will not have, incurred, directly or indirectly, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
 
3.12   Operations of LLC Sub
 
LLC Sub is a direct, wholly owned subsidiary of Parent, was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted its operations only as contemplated by this Agreement.  Except for obligations and liabilities incurred in connection with its formation and the transactions contemplated by this Agreement, LLC Sub has not, and will not have, incurred, directly or indirectly, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.
 
3.13   Vote Required
 
The only vote of the holders of any class or series of capital stock of Parent necessary in connection with the transactions contemplated by this Agreement is the affirmative vote of a majority of the votes cast with respect to the Stockholder Proposal at the Parent Stockholders’ Meeting in favor of the approval thereof.
 
3.14   Liabilities
 
Neither Parent nor any of its Subsidiaries has accrued, contingent or other Liabilities of any nature, either matured or unmatured (whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for: (i) those Liabilities that are reflected or reserved against on the consolidated balance sheet of Parent as of December 31, 2009 contained in the Annual Report on Form 10-K of Parent for the period ended December 31, 2009, as amended through the date hereof, filed with the SEC (the “ Parent Balance Sheet ”); (ii) accounts payable or accrued salaries that have been incurred by Parent and each of its Subsidiaries since December 31, 2009 in the ordinary course of business and materially consistent with Parent’s and each of its Subsidiaries’ past practices; (iii) Liabilities identified in Part 3.14 of the Parent Disclosure Schedule; (iv) Liabilities under Parent Material Contracts that are expressly set forth in and identified by reference to the text of such Parent Material Contract; and (v) Liabilities that individually or in the aggregate would not be material to Parent and its Subsidiaries taken as a whole.  Except as set forth in Part 3.14 of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries has any continuing obligation as of the date hereof, contractual or otherwise, to provide any product, product candidate, drug, compound, preparation to any Governmental Body, patient, doctor, hospital or any other third party that is not cancelable with thirty (30) days prior notice without any payment or penalty.
 
3.15   Broker’s Fees
 
No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Mergers or any of the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or any of its Subsidiaries, except as set forth in Part 3.15 of the Parent Disclosure Schedule.
 
3.16   Tax Matters
 
(a)   Tax Returns and Payments .  All material Tax Returns required to be filed by or on behalf of Parent and any of its Subsidiaries for taxable periods ending on or before the Closing Date have been timely and properly filed and are true, accurate and complete in all material respect.  All material Taxes (whether or not shown on any Tax Return) of Parent and each of its Subsidiaries that are due and payable have been timely and properly paid.  All Taxes required to be collected or withheld (including with respect to any employee, creditor, independent creditor, shareholder or other third party) by Parent or any of its Subsidiaries have been properly and timely collected or withheld and remitted to the proper Tax authority.  Parent has made available to the Company or its Representatives accurate and complete copies of all Tax Returns filed by Parent and each of its Subsidiaries and related examination reports and statements of deficiencies assessed agains t or agreed to by Parent.  Part ‎3.16(a) of the Parent Disclosure Schedule lists each jurisdiction in which Parent and each of its Subsidiaries is required to file a Tax Return.  No claim has ever been made by an authority in a jurisdiction where Parent or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  Parent Financial Statements properly and adequately accrue or reserve for Tax liabilities in accordance with GAAP.
 
(b)   Audits; Claims .  Except as set forth in Part 3.16(b) of the Parent Disclosure Schedule, no Tax Return of Parent or any of its Subsidiaries has ever been examined or audited by any Governmental Body and there are no pending audits or examinations relating to Taxes or any Tax Returns of either Parent or any of its Subsidiaries of which Parent or a Subsidiary thereof has received notice or has Knowledge.  Neither Parent nor any of its Subsidiaries has received from any Governmental Body any notice or otherwise has Knowledge of any: (i) intent to open an audit or other review relating to any Taxes or Tax Returns of Parent or any of its Subsidiaries; (ii) request for information related to Tax matters; (iii) notice of deficiency or proposed Tax adjustment that has not been resolved and paid in full; or (iv) threatened or proposed audit or examinations relating to Taxes or any Tax Returns of either Parent or any of its Subsidiaries.  No extension or waiver of the limitation period applicable to any Tax or Tax Returns has been granted by or requested from Parent or any of its Subsidiaries.  No claim or Legal Proceeding is pending or threatened against Parent or any of its Subsidiaries in respect of any Tax.  There are no liens for Taxes upon any of the assets of Parent or any of its Subsidiaries except liens for current Taxes not yet due and payable (and for which there are adequate accruals, in accordance with GAAP).
 
(c)   Parachute Payments .  Except as set forth in Part 3.16(c) of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to any Contract that has resulted or would reasonably be expected to result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provisions of state, local or foreign Tax law).  The transactions contemplated by this Agreement will not be the direct or indirect cause of any amount paid or payable by Parent and/or any of its Subsidiaries being classified as an excess parachute payment under Section 280G of the Code.
 
(d)   Closing Agreements; Etc.   Neither Parent nor any of its Subsidiaries is a party to, is bound by or has any obligation under any Tax allocation or sharing agreement, tax indemnity or similar agreement.  Neither Parent nor any of its Subsidiaries has: (i) ever been a member of an “affiliated group” (within the meaning of Section 1504 of the Code);   or (ii) any Liability for the Taxes of any Person (other than Parent or such Subsidiary, as applicable).
 
(e)   Distributed Stock .  Neither Parent nor any of its Subsidiaries has distributed stock of another Person, and neither Parent nor any of its Subsidiaries has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code.
 
(f)   Tax Holidays .  There are no (and there have never been any) Tax exemptions, Tax holidays or other Tax reduction agreements or arrangements applicable to Parent or any of its Subsidiaries.
 
(g)   Net Operating Losses .  Parent has made available to the Company all information reasonably available to Parent that is reasonably necessary for the Company to determine whether there has been any change in ownership of Parent within the meaning of Section 382(g) of the Code since the earliest date of incorporation of Parent or any of its predecessors.
 
(h)   Adjustment in Taxable Income .  Neither Parent nor any of its Subsidiaries is currently, and neither Parent nor any of its Subsidiaries will for any period for which a Tax Return has not been filed be, required to include in any taxable period (or portion thereof) ending after the Closing Date taxable income attributable to income that accrued in a prior taxable period but was not recognized in a prior taxable period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting or pursuant to Section 481 or 263A of the Code (or any comparable provision under state, local or foreign Tax laws) or for any other reason.
 
(i)   Penalties .  Neither Parent nor any of its Subsidiaries has disclosed on its Tax Returns any Tax reporting position taken in any Tax Return which would result in the imposition of penalties under Section 6662 of the Code (or any comparable provisions of state, local or foreign law).
 
(j)   Tax Shelter and Listed Transactions .  Neither Parent nor any of its Subsidiaries has consummated or participated in, and neither Parent nor any of its Subsidiaries is currently participating in, any transaction which was or is a “Tax shelter” transaction as defined in Sections 6662 or 6111 of the Code or the Treasury Regulations promulgated thereunder.  Neither Parent nor any of its Subsidiaries has participated in, and neither Parent nor any of its Subsidiaries is currently participating in, a “Listed Transaction” or a “Reportable Transaction” within the meaning of Section 6707A(c) of the Code or Treasury Regulation Section 1.6011-4(b), or any transaction requiring disclosure under a corresponding or similar provision of state, local, or foreign law.
 
(k)   Transferee or Successor Tax Liability .  Neither Parent nor any of its Subsidiaries has any Liability for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign law) as a transferee or successor, by Contract or otherwise.
 
(l)   Dual Consolidated Loss .  Neither Parent nor any of its Subsidiaries has incurred a dual consolidated loss within the meaning of Section 1503 of the Code.
 
(m)   Foreign Tax .  Parent and each of its Subsidiaries has in its possession official foreign government receipts for any Taxes paid by it to any foreign Tax authorities.
 
(n)   FIRPTA .  Neither Parent nor any of its Subsidiaries has (and neither Parent nor any of its Subsidiaries has ever been) a “United States real property holding corporation” within the meaning of Section 897 of the Code during the period specified in Section 897(c)(1)(A)(ii) of the Code, and Parent and each of its Subsidiaries has filed with the Internal Revenue Service all statements, if any, which are required under Section 1.897-2(h) of the Treasury Regulations.
 
(o)   Withholdings .  Parent and each of its Subsidiaries has complied with all applicable Legal Requirements relating to the payment, reporting and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code or similar provisions under any foreign law), has, within the time and in the manner prescribed by law, withheld from employee wages or consulting compensation and timely paid over to the proper governmental authorities (or is properly holding for such timely payment) all amounts required to be so withheld and paid over under all applicable Legal Requirements, including federal and state income Taxes, Federal Insurance Contribution Act, Medicare, Federal Unemployment Tax Act, relevant state income and employment Tax withholding laws, and has timely filed all withholding Tax Returns, for all periods.
 
3.17   Employee and Labor Matters; Benefit Plans
 
(a)   Employee List .  Part ‎3.17(a) of the Parent Disclosure Schedule contains a list of all current Parent Employees as of the date of this Agreement, and correctly reflects: (i) their dates of employment; (ii) their current positions; (iii) their current salaries; (iv) any other compensation payable to them (including housing allowances, compensation payable pursuant to bonus, deferred compensation or commission arrangements or other compensation); and (v) each Parent Employee Plan in which they participate or are eligible to participate.  Neither Parent nor any of its Subsidiaries is, and neither Parent nor any of its Subsidiaries has ever been, bound by or a party to, and neither Parent nor any of its Subsidiaries has a duty to bargain for, any collective bargaining agreement or other Contract with a labor organization representing any Parent Employees and there are no labor organizations representing, or, to the Knowledge of Parent, purporting to represent or seeking to represent any current Parent Employees.  Neither Parent nor any of its Subsidiaries is engaged, and neither Parent nor any of its Subsidiaries has ever been engaged, in any unfair labor practice of any nature which would be reasonably likely to result in a material Liability to Parent.  Neither Parent nor any of its Subsidiaries has had any strike, slowdown, work stoppage, lockout, job action or threat thereof, or question concerning representation, by or with respect to any of Parent Employees.  No event has occurred, and no condition or circumstance exists, that would reasonably be expected to directly or indirectly give rise to or provide a basis for the commencement of any such strike, slowdown, work stoppage, lockout, job action, labor dispute or union organizing activity or any similar activity or dispute.
 
(b)   Leave of Absence .  Except as set forth in Part ‎3.17(b) of the Parent Disclosure Schedule, there is no current Parent Employee who is not fully available to perform work because of disability or other leave.
 
(c)   At Will Employment .  Except as set forth in P art ‎3.17(c) of the Parent Disclosure Schedule, the employment of each of the current Parent Employees is terminable by Parent or its Subsidiaries, as applicable, at will.  Parent has made available to the Company or its Representatives accurate and comple te copies of all employee manuals and handbooks, disclosure materials, policy statements and other materials relating to the employment of Parent Employees.
 
(d)   Employee Departures/Restrictions .  To the Knowledge of Parent, no employee of Parent or any of its Subsidiaries at the level of senior manager or above: (i) intends to terminate his employment with Parent or any of its Subsidiaries, as applicable; (ii) has received an offer to join a business that may be competitive with Parent’s or any of its Subsidiaries’ business; or (iii) is a party to or is bound by any confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may have an adverse effect on: (A) the performance by such employee of any of his duties or responsibilities as an employee of Parent or any of its Subsidiaries; or (B) Parent’s or any of its Subsidiaries’ businesses or operations
 
(e)   Employee Plans and Agreements .   Part ‎3.17(e) of the Parent Disclosure Schedule contains an accurate and complete list of each Parent Employee Plan and each Parent Employee Agreement.  Neither Parent nor any of its Subsidiaries intends (and the neither Parent nor any of its Subsidiaries has committed) to establish or enter into any new Parent Employee Plan or Parent Employee Agreement, or to modify any Parent Employee Plan or Parent Employee Agreement (except to conform any such Parent Employee Plan or Parent Employee Agreement to the requirements of any applicable Legal Requirements, in each case as set forth in Part 3.17(e) of the Parent Disclosure Schedule or as required by this Agreement).
 
(f)   Delivery of Documents .  As applicable with respect to each Parent Employee Plan, Parent has made available to the Company or its Representatives: (i) correct and complete copies of all documents setting forth the terms of each Parent Employee Plan and each Parent Employee Agreement, including all amendments thereto and all related trust documents; (ii) the most recent summary plan description together with the summaries of material modifications thereto, if any, with respect to each Parent Employee Plan; (iii) all material written Contracts relating to each Parent Employee Plan, including administrative service agreements and group insurance contracts; (iv) the annual reports (Form 5500 series) for the last three complete plan years; (v) the most recent letter of determination from the U.S. Internal Revenue Service relating to the tax-qualified status of Parent Employee Plan, if applicable; (vi) all written materials provided to any Parent Employee relating to any Parent Employee Plan and any proposed Parent Employee Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events that would result in any material Liability to Parent or any of its Subsidiaries; (vii) all correspondence to or from any Governmental Body relating to any Parent Employee Plan; and (viii) all insurance policies in the possession of Parent and each of its Subsidiaries pertaining to fiduciary liability insurance covering the fiduciaries for each Parent Employee Plan.
 
(g)   No Foreign Plans .  Except as set forth on Part 3.17(g) of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries has established or maintained: (i) any plan, program, policy, practice, Contract or other arrangement mandated by a Governmental Body other than the United States; (ii) any Parent Employee Plan that is subject to any of the Legal Requirements of any jurisdiction outside of the United States; or (iii) any Parent Employee Plan that covers or has covered Parent Employees whose services are or have been performed primarily outside of the United States.
 
(h)   Absence of Certain Retiree Liabilities .  No Parent Employee Plan provides or reflects or represents any Liability of Parent or any of its Subsidiaries to provide, retiree life insurance, retiree health benefits or other retiree employee welfare benefits to any Person for any reason.  Neither Parent nor any of its Subsidiaries has ever represented, promised or contracted (whether in oral or written form) to any Parent Employee (either individually or to Parent Employees as a group) or any other Person that such Parent Employee(s) or other Person would be provided with retiree life insurance, retiree health benefit or other retiree employee welfare benefits, except to the extent required by applicable Legal Requirements.
 
(i)   No Defaults .  Parent and each of its Subsidiaries has performed all obligations required to be performed by it under each Parent Employee Plan and is not in default or violation of, and Parent has no Knowledge of any default or violation by any other party to, the terms of any Parent Employee Plan.  Each of Parent Employee Plans has been operated and administered in all material respects in accordance with applicable Legal Requirements, including, without limitation, the applicable tax qualification requirements under the Code and ERISA.  No Parent Employee Plan and no grants, awards or benefits thereunder are subject to Section 409A(a) or 409A(b) of the Code or, if subject to Section 409A(a) of the Code, have failed or will fail, in form or operation, to meet the requirements of Section 409A(a)(2), 409A(a)(3) or 409A(a)(4) of the Code.  Each Parent Employee Agreement that is subject to Code Section 409A(a) has been drafted and administered in good faith compliance with, or has been corrected in good faith reliance upon guidance promulgated under, Section 409A of the Code and the regulations promulgated thereunder.  All premiums and/or contributions to, and material payments from, any Parent Employee Plan which may have been required to be made in accordance with the terms of such Parent Employee Plan or applicable Legal Requirements have been timely made, and all contributions for any period ending on or before the Closing Date which are not yet due, but will be paid on or prior to the Closing Date, are reflected as an accrued Liability on the Parent Financial Statements.  There are no audits, inquiries or Legal Proceedings pending or, to the Knowledge of Parent, threatened by any Governmental Body with respect to any Parent Employee Plan.  All material reports, returns and similar documents required to be filed with any Governmental Body or distributed to any plan participant have been duly and timely filed or distributed.  With respect to any Parent Employee Plan, no “prohibited transaction” or “reportable event” has occurred within the meaning of the applicable provisions of ERISA or the Code.  With respect to each Parent Employee Plan that is a group health plan, Parent has complied with the notice and continuation coverage requirements, and all other requirements, of Section 4980B of the Code and Parts 6 and 7 of Title I of ERISA, and the regulations thereunder.
 
(j)   Qualified Plans .  Except as set forth in Part ‎3.17(j) of the Parent Disclosure Schedule, with respect to each Parent Employee Plan intended to qualify under Section 40 1(a) of the Code: (i) the Internal Revenue Service has issued a favorable determination letter or opinion letter or advisory letter upon which Parent is entitled to rely under Internal Revenue Service pronouncements, that such plan is, and such plan and its related trust are in fact, qualified under Section 401(a) of the Code and the related trusts are exempt from federal income tax under Section 501(a) of the Code; (ii) no such determination letter, opinion letter or advisory letter has been revoked nor has revocation been threatened, nor has any amendment or other action or omission occurred with respect to any such plan since the date of its most recent determination letter, opinion letter or advisory letter, or application therefor, in any respect which would adversely affect its qualification, or materially increase its cost; and (iii) no Parent Employee Plan is or has ever been a defined benefit plan subject to Section 412 of the Code and Section 302 of ERISA, a multiemployer plan as defined in Section 4001(a)(3) of ERISA, and/or a multiple employer plan subject to Section 413(c) of the Code.
 
(k)   No Conflict .  Except as set forth in Part ‎3.17(k) of the Parent Disclosure Schedule, neither the execution, delivery or performance of this Agreement, nor the cons ummation of the Mergers or any of the other transactions contemplated by this Agreement, will or may (either alone or upon the occurrence of any additional or subsequent events): (i) constitute an event under any Parent Employee Plan, Parent Employee Agreement, trust or loan that will or may result (either alone or in connection with any other circumstance or event) in any payment (whether of severance pay or otherwise), acceleration, forgiveness of Indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Parent Employee; or (ii) create or otherwise result in any Liability with respect to any Parent Employee Plan.
 
(l)   Compliance .  Parent and each of its Subsidiaries (i) is in compliance in all material respects with all applicable Legal Requirements, Contracts and orders, rulings, decrees, judgments or arbitration awards of any arbitrator or any court or other Governmental Body respecting employment, employment practices, terms and conditions of employment, wages, hours or other labor-related matters, including Legal Requirements, orders, rulings, decrees, judgments and awards relating to discrimination, wages and hours, labor relations, leave of absence requirements, occupational health and safety, privacy, harassment, retaliation, immigration, wrongful discharge or violation of the personal rights of Parent Employees or prospective employees; (ii) has no Liability for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing; and (iii) has no Liability for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Body with respect to unemployment compensation benefits, social security or other benefits or obligations for any Parent Employee (other than routine payments to be made in the normal course of business and consistent with past practice).
 
(m)   Labor Relations .  Parent and each of its Subsidiaries has good labor relations, and, except as set forth in Part ‎3.17(m) of the Parent Disclosure Schedule, Parent has no Knowledge of any facts indicating that the consummation of the Mergers or any of the other transactions contemplated by this Agreement will or would reasonably be expected to have or result in a Parent Material Adverse Effect on the labor relations of Parent or any of its Subsidiaries.  Except as set forth in Part ‎3.17(m) of the Parent Disclosure Schedul e, there are no pending or, to the Knowledge of Parent, threatened or reasonably anticipated claims or Legal Proceedings against Parent or any of its Subsidiaries under any workers’ compensation policy or long-term disability policy.
 
(n)   Claims Against Plans .  There are no pending or, to the Knowledge of Parent, threatened claims or Legal Proceedings against any of Parent Employee Plans, the assets of any of Parent Employee Plans or Parent, its Subsidiaries or Parent Employee Plan administrator or any fiduciary of Parent Employee Plans with respect to the operation of such Parent Employee Plans (other than routine, uncontested benefit claims) or asserting any rights or claims to benefits under such Parent Employee Plan, and there are no facts or circumstances which would form the basis for any such claims or Legal Proceedings.
 
(o)   Independent Contractors .  Part ‎3.17(o) of the Parent Disclosure Schedule accurately sets forth, with respect to each Person who is or was: (x) at any time, an independent contractor of Parent or any of its Subsidiaries who contributed to the development of any Parent IP; and (y ) at any time since January 1, 2007, an independent contractor of Parent or any of its Subsidiaries and who has received or may be entitled to receive in excess of $50,000 from Parent or any of its Subsidiaries:
 
(i)   the name of such independent contractor, and the date as of which such independent contractor was originally engaged by Parent or any of its Subsidiaries;
 
(ii)   a description of such independent contractor’s performance objectives, services, duties and responsibilities;
 
(iii)   the aggregate dollar amount of the compensation (including all payments or benefits of any type) received by such independent contractor from Parent or any of its Subsidiaries with respect to services performed in the fiscal year ended December 31, 2009;
 
(iv)   the terms of compensation of such independent contractor; and
 
(v)   any Governmental Authorization that is held by such independent contractor and that relates to the business of Parent.
 
(p)   No Misclassified Employees .  No current or former independent contractor of Parent or any of its Subsidiaries could be deemed to be an employee.  No independent contractor is eligible to participate in any Parent Employee Plan other than any Parent Stock Option Plan.  Neither Parent nor any of its Subsidiaries has ever had any temporary or leased employees that were not treated and accounted for in all respects as employees of Parent or any of its Subsidiaries.
 
(q)   Labor-Related Claims .  Except as set forth in Part ‎3.17(q) of the Parent Disclosure Schedule, there is no Legal Proceeding, claim, labor dispute or grievance pending or, to the Knowledge of Parent, threatened relating to any employment Contract, compensation, wages and hours, leave of absence, pla nt closing notification, employment statute or regulation, privacy right, labor dispute, workers’ compensation policy, long-term disability policy, safety, retaliation, immigration or discrimination matter involving any Parent Employee, including charges of unfair labor practices or harassment complaints.
 
3.18   Environmental Matters
 
Parent and each of its Subsidiaries is in compliance with all applicable Environmental Laws in all material respects, which compliance includes the possession by Parent and each of its Subsidiaries of all material Environmental Licenses and other Governmental Authorizations required under applicable Environmental Laws for the operation of its business and use of the Parent Leased Real Property, and compliance with the terms and conditions thereof in all material respects.  Neither the Parent nor any of its Subsidiaries has received any written notice or to the Knowledge of the Parent any other communication from a Governmental Body that alleges that Parent or any of its Subsidiaries is not in material compliance with any Environmental Law.  Except in compliance with all applicable Environmental Laws, including any applicable Environmental Licenses, neither Parent nor any of its Subsidiaries has caused or contributed to any Environmental Release and, to the Parent’s Knowledge, there are no circumstances which would reasonably be expected to give rise to any Environmental Release by Parent or any of its Subsidiaries.   To the Knowledge of Parent, no other Person has caused any Environmental Release on, at, to, from or underneath the Parent Leased Real Property or any other real property or facility that is, or was formerly, used, leased or operated by Parent or any of its Subsidiaries.  To the Knowledge of Parent, no Contaminants are stored or contained on or under any of the Parent Leased Real Properties whether in storage tanks, land fills, pits, ponds, lagoons or otherwise.  All Governmental Authorizations currently held by Parent or any of its Subsidiaries pursuant to Environmental Laws are identified in Part 3.18 of the Parent Disclosure Schedule and Parent has made available to the Company copies of all written environmental investigation, study, audit, test, review or other analysis conducted in the possession or control of Parent or any of its Subsidiaries in relation to the current or prior business of Parent or any of its Subsidiaries, the Parent Leased Real Property or any property or facility now or previously used, leased or operated by Parent or any of its Subsidiaries.  Parent has not received any notice or any other communication that alleges that Parent is required to indemnify Merck & Co., Inc. or any of its affiliates for any Liabilities arising under any Environmental Law pursuant to that certain Asset Purchase Agreement dated as of February 12, 2009, by and among Protein Transaction, LLC, Parent and Merck & Co., Inc.
 
3.19   Compliance with Legal Requirements
 
(a)   Compliance .  Parent and each of its Subsidiaries is, and, to the Knowledge of Parent, has at all times been, in compliance in all material respects with each Legal Requirement that is applicable to it or to the conduct of its business or the ownership of its assets, including the FD&C Act.  Except as set forth in Part 3.19 of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries has received any written notice or to the Knowledge of Parent any other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement.
 
(b)   No Debarment .  None of Parent or any of its Subsidiaries or any of their respective directors, officers, consultants or employees or affiliates, or to the Knowledge of Parent, suppliers, in each case to the extent any such party was responsible for the development or had responsibilities that involve the development of commercialization of any product or potential product under development or investigation by Parent or any of its Subsidiaries, (i) are debarred under Section 306(a) or 306(b) of the FD&C Act; (ii) have been charged with, or convicted of, any felony under applicable laws related to any of the following:  (A) the development or approval of any drug product or the regulation of any drug product under the FD&C Act; (B) a conspiracy to commit, aid or abet the development or approval of any drug product or regulation of any drug product; (C) health care program-related crimes (involving Medicare or any other health care program administered by any Governmental Body); (D) patient abuse, controlled substances, bribery, payment of illegal gratuities, fraud, perjury, false statement, racketeering, blackmail, extortion, falsification or destruction of records; (E) interference with, obstruction of an investigation into, or prosecution of, any criminal offense; or (F) a conspiracy to commit, aid or abet any of these listed felonies or misdemeanors; or (iii) is excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any Federal or State health care programs or any health care programs administered by any other Governmental Body (including convicted of a criminal offense that falls within the scope of 42 U.S.C. 1320a-7 but not yet excluded, debarred, suspended, or otherwise declared ineligible), or excluded, suspended or debarred from participation, or otherwise ineligible to participate, in any Federal procurement or nonprocurement programs.
 
(c)   FDA Compliance . Parent and its Subsidiaries are in material compliance with all applicable statutes, rules and regulations of the FDA, and, to the extent applicable, other Governmental Bodies, with respect to the clinical testing, manufacture, labeling, storing, testing, or distribution of their compounds and products, including, to the extent applicable, current “Good Manufacturing Practice,” or cGMP regulations, “Good Clinical Practice” or GCP regulations to the extent the clinical data from any of their clinical studies is used to support regulatory approval of Parent’s products, “Good Laboratory Practice” (as such terms are defined in applicable Legal Requirements) or GLP regulations to the extent the non-clinical data from the Parent’s or its Subsidiaries’ non-clinical studies is used to support regulatory approval of any products of Parent and its Subsidiaries, “Informed Consent” and “Institutional Review Board” regulations, and all applicable requirements relating to the protection of human subjects for its clinical trials as required by the FDA and all applicable Governmental Bodies.
 
(d)   Reporting Requirements . Parent and its Subsidiaries are in compliance in all material respects with all applicable reporting requirements set forth in the FD&C Act.
 
(e)   No Investigation .  None of Parent or its Subsidiaries, or to the Parent’s Knowledge any Person providing services to Parent (including Parent Third Party Suppliers), is in receipt of written notice of, or is subject to, any adverse inspection, finding of non-compliance, compelled or voluntary recall, investigation, penalty for corrective or remedial action or other compliance or enforcement action, in each case relating to any of Parent’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled, by the FDA or any other applicable Governmental Body.  There are no pending or, to the Knowledge of Parent, threatened actions, proceedings or complaints by the FDA or any other applicable Governmental Body against Parent or its Subsidiaries, or to Parent’s Knowledge any Person providing services to Parent (including Parent Third Party Suppliers), relating to any of Parent’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled or which would otherwise prohibit or impede the conduct of Parent’s business as currently conducted or contemplated to be conducted.  Without limiting the generality of the foregoing, Part 3.19(e) of the Parent Disclosure Schedule sets forth each FDA Form 483 or similar inspection report and any warning letter or other similar notice that Parent or its Subsidiaries, or to Parent’s Knowledge any Person providing services to Parent (including Parent Third Party Suppliers), has received from the FDA or any other applicable Governmental Body relating to any of Parent’s or its Subsidiaries’ compounds or products or to the facilities in which such compounds or products are manufactured, collected or handled.  True, correct and complete copies of any item set forth in Part 3.19(e) of the Parent Disclosure Schedule and all responses and other correspondence submitted by, or on behalf of, Parent or its Subsidiaries to or from the FDA or any applicable Governmental Body (and to the extent available to Parent any similar correspondence to or from any Person providing services to the Company or its Subsidiaries (including Parent Third Party Suppliers)) with respect to such items have been made available to the Company.  Parent and its Subsidiaries have promptly responded to each of the items set forth in Part 3.19(e) of the Parent Disclosure Schedule and have taken all steps required to remedy any deficiencies or deviations noted in any such items.
 
(f)   Third Party Suppliers . Part 3.19(f) of the Parent Disclosure Schedule sets forth all of the third party manufacturers and suppliers of materials, reagents, active pharmaceutical ingredients, compounds and products used by Parent or its Subsidiaries (each a “ Parent Third Party Supplier ”).  Parent has inspected all Parent Third Party Suppliers and to Parent’s Knowledge, each such Parent Third Party Supplier (i) has complied and is complying in all material respects with all applicable statutes, rules and regulations of the FDA, and, to the extent applicable, other Governmental Bodies, and (ii) has all material Governmental Authorizations necessary to conduct its business and perform its obligations as Parent Third Party Supplier and all such Governmental Authorizations are in full force and effect.
 
(g)   Good Manufacturing Practice . To the Knowledge of Parent, the inventory of Parent of key materials, reagents, active pharmaceutical ingredients, compounds and products, has been manufactured, handled, stored and distributed in accordance in all material respects with applicable Legal Requirements, including current “Good Manufacturing Practice,” or cGMP regulations.
 
(h)   Adverse Experiences . Parent has made available to the Company information regarding all serious as well as non-serious adverse events, which, to the Knowledge of Parent, have occurred during the course of any studies conducted by or on behalf of Parent with respect to any products or compounds of Parent or its Subsidiaries. Parent has made available to the Company information regarding all reportable adverse events relating to investigational or marketed products, which, to the Knowledge of Parent, have occurred with respect to the products or compounds of Parent or its Subsidiaries.  There have been no requests from the FDA or any other applicable Governmental Bodies requesting Parent or its Subsidiaries to cease to investigate, test, manufacture or distribute any products, compounds or study drugs of Parent or its Subsidiaries.
 
(i)   Studies and Trials .  All studies and trials conducted by or on behalf of Parent and its Subsidiaries on all products, compounds or study drugs of Parent or its Subsidiaries have been made available to the Company, and Parent has otherwise provided for review all material preclinical and clinical studies and trials regarding the efficacy and safety of all products, compounds or study drugs of Parent or its Subsidiaries.  Parent has heretofore made available to the Company all material written correspondence between Parent and its Subsidiaries with the FDA and any other applicable Governmental Body regarding any products, compounds or study drugs of Parent or its Subsidiaries.
 
(j)   FDA Disclosure .  Neither Parent and its Subsidiaries nor, to Parent’s Knowledge, any officer, employee or agent of Parent, has made an untrue statement of a material fact or fraudulent statement to the FDA or any other Governmental Body, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Body, or committed an act, made a statement or failed to make a statement that, at the time such disclosure was made, would reasonably be expected to provide a basis for any investigation by, and no such investigation has been instituted or threatened by, (i) the FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991), (ii) Department of Health and Human Services Officer of Inspector General or Department of Justice pursuant to the Federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)) or the Federal False Claims Act (31 U.S.C. § 3729 et seq.) or (iii) any equivalent statute of any country in the European Union.
 
(k)   No Suspension of Clinical Trials . No clinical trial of a product of Parent or its Subsidiaries has been suspended, put on hold or terminated prior to completion by any Governmental Body.
 
(l)   Human Derived Materials . Parent and its Subsidiaries have complied in all material respects with all applicable laws, guidelines and regulations relating to the collection and/or use of the human cell lines, tissue, human clinical isolates or similar human-derived materials and Parent or its Subsidiaries have obtained any material approvals, consents, and/or authorization required by law (including the Health Insurance Portability and Accountability Act and regulations promulgated thereunder) for the collection, use, and/or transfer of such human cell lines, tissue, human clinical isolates or similar human-derived materials.  Such human cell lines, tissue, human clinical isolates or similar human-derived materials may be used without any obligations to the individuals or entities who contributed the materials, including any obligations of compensation to such individuals or entities who contributed the materials for any purposes, including any obligations of compensation to such individuals or entities who contributed the materials or any other third party for the intellectual property associated with, or commercial use of, such materials for any purposes.
 
3.20   Governmental Authorizations; No Subsidies
 
(a)   Governmental Authorizations .   Part 3. 20(a) of the Parent Disclosure Schedule identifies each Governmental Authorization held by Parent and each of its Sub sidiaries that is material to the operation of its business, and Parent has made available to the Company or its Representatives accurate and complete copies of all Governmental Authorizations identified in Part ‎3.20(a) of the Parent Disclosure Schedule. The Governmental Authorizations identified in Part 3. 20(a) of the Parent Disclosure Schedule are valid and in full force and effect, and collectively co nstitute all Governmental Authorizations necessary to enable Parent and each of its Subsidiaries to conduct its business in the manner in which its business is currently being conducted in all material respects .   Parent and each of its Subsidiaries is in material compliance with the terms and requirements of the respective Governmental Authorizations identi fied in Part ‎3.20(a) of the Parent Disclosure Schedule.  Neither Parent nor any of its Subsidiaries has received any written notice from any Governmental Body regarding: (i) any actual or possible violation of or failure to comply with any material term or requirement of any Governmental Authorization listed or required to be listed in Part ‎3.20(a) of the Parent Disclosure Schedule; or (ii) any actual or possible revocation, withdrawal, suspension, cancellation, termination or modification of any Governmental Authorization listed or required to be listed in Part ‎3.20(a) of the Parent Disclosure Schedule.
 
(b)   No Subsidies .  Part 3.20(b) of the Parent Disclosure Schedule provides a complete list of all pending and outstanding Grants from any Governmental Body or other Person, granted to Parent or any of its Subsidiaries.  Parent has made available to the Company or its Representatives accurate and complete copies of all material documents requesting Grants or amendments thereto submitted by Parent or any of its Subsidiaries and of all letters of approval, and supplements thereto, granted to Parent or any of its Subsidiaries, as well as all correspondence or written summaries pertaining thereto.  Parent and each of its Subsidiaries are in material compliance with all of the material terms, conditions and requirements of their respective Grants and have, as and when required by the Grants, duly fulfilled all the material undertakings relating thereto.  Except as set forth on Part 3.20(b) of the Parent Disclosure Schedule, neither the execution, delivery or performance of this Agreement, nor the consummation of the Mergers or any of the other transactions contemplated by this Agreement, does, will or would reasonably be expected to (with or without notice or lapse of time or both) give any Person the right to revoke, withdraw, suspend, cancel, terminate or modify an y Grant identified or required to be identified in Part ‎ 3.20( b) of the Parent Disclosure Schedule.  Except as set forth in Part 3.20( b) of the Parent Discl osure Schedule, none of Parent or any of its Subsidiaries has developed any Intellectual Property through the application of any financing made available by any of the Grants.
 
(c)   Export Compliance .  Parent and its Subsidiaries have obtained all approvals necessary for: (i) exporting all products of Parent and its Subsidiaries that are exported by Parent or its Subsidiaries in the current operation of its business, whether for sale or for use in research and development, in accordance with all material Legal Requirements related to export control; and (ii) importing all products of Parent and its Subsidiaries into any country in which any such products are now sold, used or licensed for use.  To Parent’s Knowledge, all such export and import licenses and approvals throughout the world are current, outstanding and in full force and effect, and Parent and its Subsidiaries are in material compliance with the terms of all such export and import licenses or approvals.  There are no pending Legal Proceedings and to the Knowledge of Parent, threatened Legal Proceedings, against Parent or any of its Subsidiaries with respect to such export and import licenses and approvals.  To the Knowledge of Parent, there are no facts or circumstances which are reasonably expected to result in a Legal Proceeding against Parent or any of its Subsidiaries or any of their respective businesses or assets or any of the directors or officers of Parent or any of its Subsidiaries, pertaining to export or import transactions.
 
(d)   Foreign Corrupt Practices Act .  Parent and each Subsidiary and, to the Parent’s Knowledge, each employee, officer, director and agent thereof, have complied with and are in compliance with in all material respects and none of them has taken any action that has materially violated or would reasonably be expected to result in a failure to comply in all material respects with or a material violation of the Foreign Corrupt Practices Act of 1977, as amended.
 
3.21   Related Party Transactions
 
(a)   E xcept as set forth in Part ‎3.21 of the Parent Disclosure Schedule: (a) no Parent Related Party, and to the Knowledge of Parent, no immediate family member of a Parent Related Party, has and no Parent Related Party and, to the Knowledge of Parent no immedi ate family member of a Parent Related Party, has had, any direct interest or, to the Knowledge of Parent any indirect interest, in any material asset used in the business of Parent or any of its Subsidiaries except for any interest resulting from the ownership of shares of Parent Capital Stock; (b) no Parent Related Party and no immediate family member of a Parent Related Party is, or has been, indebted to Parent or any of its Subsidiaries (other than for ordinary travel advances); (c) no Parent Related Party and no immediate family member of a Parent Related Party has entered into, or, to the Knowledge of Parent, has had any financial interest in, any material Contract or transaction involving Parent or any of its Subsidiaries (other than transactions involving Parent’s securities); and (d) to the Knowledge of Parent, no Parent Related Party and no immediate family member of a Parent Related Party has any claim or right against Parent or any of its Subsidiaries (other than rights under Parent Options and rights to receive compensation for services performed as an employee of Parent or any of its Subsidiaries or as a consultant to Parent pursuant to a written consulting agreement or other rights arising in the ordinary course of employment or pursuant to a written consulting agreement).
 
(b)   To Parent’s Knowledge, except as set forth in Part ‎3.21 of the Parent Disclosure Schedule, no Parent Related Party has any direct or indirect financial interest in any competitor, supplier, manufacturer, distributor or customer of Parent or any Subsidiary; provided , however , that the ownership of securities representing no more than 5% of the outstanding voting power of any creditor, competitor, supplier, manufacturer, agent, representative, distributor or customer, and which are listed on any national securities exchange or traded actively in the national over-the-counter market, shall not be deemed to be a “financial interest” as long as the Person owning such securities has no other connection or relationship with such creditor, competitor, supplier manufacturer, agent, representative, distributor or customer and has not filed a report on Schedule 13D or 13G or Form 3 or 4 relating to such entity.
 
3.22   Insurance
 
Part 3.22 of the Parent Disclosure Schedule identifies each insurance policy maintained by, at the expense of or for the benefit of Parent  or any of its Subsidiaries as of the date of this Agreement and identifies any material claims made thereunder as of the date of this Agreement within the past three (3) years.  Parent has made available to the Company or its Representatives accurate and complet e copies of the insurance policies identified on Part ‎3.22 of the Parent Disclosure Schedule.  All premiums due on such policies have been paid, and Parent and each Subsidiary is otherwise in compliance with the terms of such policies.  Since December 31, 2007, neither Parent nor any of its Subsidiaries has received any notice or to the Knowledge of Parent any other communication regarding any actual or possible: (i) cancellation or invalidation of any insurance policy; (ii) refusal of any coverage or rejection of any claim under any insurance policy; or (iii) material adjustment in the amount of the premiums payable with respect to any insurance policy.
 
3.23   Contracts
 
(a)   Parent Material Contracts .  Part 3.23(a) of the Parent Disclosure Schedule accurately identifies each of the following contracts and agreements of Parent or any of its Subsidiaries as of the date hereof:
 
(i)   each Parent Contract relating to the employment of, or the performance of services by, any Parent Employee earning annual base compensation in excess of $75,000; (B) any Parent Contract pursuant to which the Parent or any of its Subsidiaries is obligated to make any severance, termination or similar payment to any Parent Employee; and (C) any Parent Contract pursuant to which Parent or any of its Subsidiaries is obligated to make any bonus or similar payment (other than payment in respect of salary) to any Parent Employee;
 
(ii)   each Parent Contract which provides for indemnification of any Parent Employee or any director of Parent;
 
(iii)   each Parent Contract relating to the voting and any other rights or obligations of a stockholder of Parent;
 
(iv)   each Parent Contract, with obligations remaining to be performed (or liabilities continuing) after the date of this Agreement, relating to the merger, consolidation, reorganization or any similar transaction with respect to the Parent or any of its Subsidiaries;
 
(v)   each Parent Contract (other than (A) Parent’s standard employee inventions assignment agreement a form of which has been made available to the Company and (B) non-exclusive licenses to third-party software) relating to the acquisition, transfer, development or sharing of any technology, Intellectual Property or Intellectual Property Right (including any joint development agreement, collaboration agreement or similar agreement entered into by Parent or any of its Subsidiaries);
 
(vi)   each Parent Contract (other than (A) Parent’s standard employee inventions assignment agreement a form of which has been made available to the Company and (B) non-exclusive licenses to third-party software) relating to the license of any patent, copyright, trade secret or other Intellectual Property or Intellectual Property Right: (x) to Parent or any of its Subsidiaries; or (y) from Parent or any of its Subsidiaries;
 
(vii)   each Parent Contract relating to the acquisition, sale, spin-off or outsourcing of any Subsidiary or business unit or operation of Parent or any of its Subsidiaries;
 
(viii)   each Parent Contract creating or relating to any partnership or joint venture or any sharing of revenues, profits, losses, costs or liabilities;
 
(ix)   each Parent Contract imposing any restriction or requirement on Parent or any of its Subsidiaries: (A) to compete with any other Person in any geographic area or during any period of time; (B) to acquire any product or other asset or any services from any other Person, to sell any product or other asset to or perform any services for any other Person or to transact business or deal in any other manner with any other Person; or (C) to develop or distribute any product technology;
 
(x)   each Parent Contract granting exclusive rights to license, market, sell or deliver any products or services of Parent or any of its Subsidiaries or otherwise contemplating an exclusive relationship between Parent and other Person;
 
(xi)   each Parent Contract creating or involving any agency relationship, distribution or reseller arrangement or franchise relationship;
 
(xii)   each Parent Contract regarding the acquisition, issuance or transfer of any securities and each Parent Contract affecting or dealing with any securities of the Parent or any of its Subsidiaries including any restricted share agreements or escrow agreements;
 
(xiii)   each Parent Contract relating to Indebtedness other than trade Indebtedness of Parent or any Subsidiary that is not material in amount;
 
(xiv)   each Parent Contract relating to the purchase or sale of any asset (other than the Parent’s securities) by or to, or the performance of any services by or for, any Parent Related Party;
 
(xv)   any Parent Contract pursuant to which Parent or any of its Subsidiaries made payments of cash or other consideration in excess of $50,000 during the twelve months ended December 31, 2009 or that involves or contemplates the payment or delivery of cash or other consideration by Parent or any of its Subsidiaries in an amount or having a value reasonably expected to be in excess of $50,000 in the aggregate during the twelve month periods ending December 31, 2010;
 
(xvi)   any Parent Contract relating to a Grant; and
 
(xvii)   any other Parent Contract the absence of which would be reasonably expected to have a Parent Material Adverse Effect.
 
(Contracts in the respective categories described in clauses “‎(i)” through “‎(xvii)” above and all Contracts identified, or required to be identified, in Part ‎3.26(a) of the Parent Disclosure Schedule are referred to in this Agreement as “ Parent Material Contracts .”)
 
(b)   Delivery and Status of Parent Material Contracts .  Parent has made available to the Company or its Representatives accurate and complete copies of all written Parent Material Contracts identified in Part 3.23(a) of the Parent Disclosure Sched ule, including all amendments thereto.  Part ‎3.23(b) of the Parent Disclosure Schedule provides an accurate and complete description of the material terms of each Parent Material Contract that is not in written form, if any.  Each Parent Material Contract is in full force and effect in all material respects, and is enforceable by Parent or its Subsidiaries, as applicable, in accordance with its terms, subject to: (A) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (B) rules of law governing specific performance, injunctive relief and other equitable remedies.
 
(c)   No Breach .  Except as set forth in Part ‎3.23(c) of the Parent Disclosure Schedule: (i) neither Parent nor any of its Subsidiaries has committed any material violation or breach, and neither Parent nor any of its Subsidiaries has committed any material default unde r, any Parent Material Contract, which remains uncured, and, to the Knowledge of Parent, no other Person has committed any material violation or breach, or committed any material default under, any Parent Material Contract which remains uncured; (ii) to the Knowledge of Parent, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time or both) will, or would reasonably be expected to: (A) result in a material violation or breach of any of the provisions of any Parent Material Contract; (B) give any Person the right to declare a default or exercise any remedy under any Parent Material Contract; (C) give any Person the right to accelerate the maturity or performance of any Parent Material Contract; or (D) give any Person the right to cancel, terminate or modify any Parent Material Contract; (iii) neither Parent nor any of its Subsidiaries has received any written notice or to the Knowledge of Parent other communication regarding any actual or possible material violation or breach of, or material default under, any Parent Material Contract; and (iv) neither Parent nor any of its Subsidiaries has waived any of its respective material rights under any Parent Material Contract.
 
3.24   Rights Plan
 
Parent has taken all necessary action so that (i) none of the Eligible Stockholders shall be an “Acquiring Person” under the Parent Rights Agreement solely by virtue of the entering into of this Agreement and the performance of the transactions contemplated hereby, including the Mergers, and (ii) the entering into of this Agreement and the Mergers and the performance of the transactions contemplated hereby will not result in the grant of any rights to any Person under the Parent Rights Agreement or enable or require the Rights to be exercised, distributed or triggered.
 
3.25   Full Disclosure
 
This Agreement (including the Disclosure Schedule) does not, and the Officer’s Certificate will not: (i) contain any representation, warranty or information that is false or misleading with respect to any material fact; or (ii) omit to state any material fact necessary in order to make the representations, warranties and information contained and to be contained herein and therein (in the light of the circumstances under which such representations, warranties and information were or will be made or provided) not false or misleading.
 
3.26   Disclaimer of Other Representations and Warranties; Knowledge
 
(a)   NEITHER PARENT, ITS SUBSIDIARIES, ANY AFFILIATE THEREOF, NOR ANY OF THEIR RESPECTIVE REPRESENTATIVE, HAS MADE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER RELATING TO PARENT, ITS SUBSIDIARIES OR THEIR RESPECTIVE BUSINESS OR OTHERWISE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, OTHER THAN THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS ARTICLE 3.
 
(b)   Without limiting the generality of the foregoing, neither Parent, its Subsidiaries, nor any Representative has made, and shall not be deemed to have made, any representations or warranties in the materials relating to the business of Parent or its Subsidiaries made available to the Company or its Representatives, including due diligence materials, or in any presentation of the business of Parent by management of Parent or others in connection with the transactions contemplated hereby, and no statement contained in any of such materials or made in any such presentation shall be deemed a representation or warranty hereunder or otherwise or deemed to be relied upon by the Company in executing, delivering and performing this Agreement and the transactions contemplated hereby.  It is understood that any cost estimates, projections or other predictions, any data, any financial information or any memoranda or offering materials or presentations, including but not limited to, any offering memorandum or similar materials made available by Parent and its Representatives are not and shall not be deemed to be or to include representations or warranties of Parent, and are not and shall not be deemed to be relied upon by the Company in executing, delivering and performing this Agreement and the transactions contemplated hereby.
 
4.  
 
4.1   Certain Employee Benefit Plan Matters
 
(a)   Termination of 401(k) Plan .  The Company has taken (or caused to have been taken) all actions necessary or appropriate to terminate, effective as of the Closing Date, any Plan that contains a cash or deferred arrangement intended to qualify under Section 401(k) of the Code (the “ 401(k) Plans ”).  Parent has received from the Company evidence that the Company Board has adopted resolutions to terminate the 401(k) Plans.  In the event that the distributions of assets from the trust of a 401(k) Plan which is terminated is reasonably anticipated to trigger liquidation charges, surrender charges, or other fees to be imposed upon the account of any participant or beneficiary of such terminated plan or upon any Company or plan sponsor, then the Company has taken such actions as are necessary to reasonably estimate the amount of such charges and/or fees and provided such estimate in writing to Parent.
 
(b)   Benefits .  Following the Effective Time, the employees of the Company and its Subsidiaries who remain employed after the Effective Time (the “ Company Employees ”) will be entitled to participate in either (i) the Company Employee Plans (other than equity-based plans) on the same terms, or terms which in the aggregate provide substantially comparable benefits, as those in effect immediately prior to the Effective Time, (ii) the employee benefit plans of Parent and its Subsidiaries on substantially the same terms as similarly situated employees of Parent and its Subsidiaries or (iii) a combination of (i) and (ii), in each case in the reasonable discretion of Parent, and Parent in its reasonable discretion may terminate any of the Company Employee Plans or merge any of the Company Employee Plans with Parent’s employee benefit plans.  Subject to applicable Legal Requirements and unless such recognition of service would result in a duplication of benefits, Parent shall, and shall cause the Surviving Company to, treat, and cause the applicable benefit plans to treat, the service of the Company Employees with the Company or its Subsidiaries attributable to any period before the Effective Time as service rendered to Parent or the Surviving Company for all purposes, including, but not limited to, eligibility to participate, vesting, benefit levels for vacation benefits and the applicability of any minimum waiting periods for participation, excluding for these purposes benefit accrual under any defined benefit plan.  Without limiting the foregoing, Parent shall not, and shall cause the Surviving Company not to, treat any the Company Employee as a “new” employee for purposes of any exclusions under any health or similar welfare plan of Parent or the Surviving Company for a preexisting medical condition, except to the extent such exclusions were applicable under a the Company Employee Plan immediately prior to the Effective Time.
 
(c)   Change-of-Control Severance Plan .  Parent shall assume all of the Company’s obligations under the Company’s 2009 Change-of-Control Severance Plan.
 
4.2   Directors’ and Officers’ Indemnification and Insurance
 
(a)   Parent, Merger Sub and LLC Sub agree that all rights to indemnification, exculpation or advancement of expenses now existing in favor of, and all limitations on the personal Liability of each present and former director, officer, employee, fiduciary, or agent of the Company provided for in the Company’s Charter Documents in effect as of the date hereof, shall continue to be honored and in full force and effect for a period of six (6) years after the Effective Time; provided , however , that all rights to indemnification in respect of any claims asserted or made within such period shall continue until the disposition of such claim.  The Organizational Documents of the Surviving Company will contain provisions with respect to indemnification, exculpation from Liability and advancement of expenses that are at least as favorable as those currently provided in Article 8 of the Company’s certificate of incorporation and during such six (6) year period following the Effective Time, the Surviving Company shall not, and Parent shall cause the Surviving Company not to, amend, repeal or otherwise modify such provisions in any manner that would materially and adversely affect the rights thereunder of individuals who at or prior to the Effective Time were directors, officers, employees, fiduciaries, or agents of the Company in respect to actions or omissions occurring at or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement), unless such modification is required by applicable Legal Requirements.  From and after the Effective Time, Parent and the Surviving Corporation also agree, jointly and severally, to indemnify and hold harmless the present and former officers, directors, employees, fiduciaries and agents of the Company or its Subsidiaries in respect of acts or omissions occurring prior to the Effective Time to the extent (i) provided in any written indemnification agreements currently in effect between the Company or its Subsidiaries and such individuals or (ii) required by the Company’s Charter Documents, in each case as in effect immediately prior to the Effective Time.
 
(b)   For a period of six (6) years after the Effective Time, Parent shall maintain in effect the current level and scope of directors’ and officers’ liability insurance as in effect at the Company immediately prior to the Effective Time covering those persons who are covered by the Company’s directors’ and officers’ liability insurance policy immediately prior to the Effective Time; provided , however , that if the aggregate annual premiums for such insurance at any time during such period exceed 200% of the per annum rate of premium currently paid by the Company for such insurance on the date hereof, then Parent will provide the maximum coverage that will then be available at an annual premium equal to 200% of such rate.  Notwithstanding the foregoing, Parent may satisfy its obligations under this Section 4.2(b) by procuring an equivalent six (6) year “tail” policy under the Company’s existing directors’ and officers’ liability insurance policy, the equivalent annual premium for which “tail” policy shall not exceed 200% of the per annum rate of premium currently paid by the Company for directors’ and officers’ liability insurance; provided that if the equivalent annual premium for such “tail” policy exceeds 200% of the per annum rate of premium currently paid by the Company for directors’ and officers’ liability insurance, then Parent will provide the maximum coverage that will then be available at an equivalent annual premium equal to 200% of such rate and in doing so will be deemed to have satisfied its obligations pursuant to this Section 4.2(b).
 
(c)   The provisions of this Section 4.2 are intended to be for the benefit of, and shall be enforceable by, each of the Persons indemnified hereby, and his or her heirs and Representatives.  The provisions in this Section 4.2 are intended to be in addition to the rights otherwise available to the current directors, officers, employees, fiduciaries and/or agents of the Company or its Subsidiaries by Legal Requirements, charters, bylaws or agreements.
 
(d)   If Parent or the Surviving Company or any of the successors or assigns of Parent or the Surviving Company (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or Entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the Surviving Company, as the case may be, shall assume the obligations set forth in this Section 4.2.
 
4.3   Parent Stockholders’ Meeting; SEC Filings and Related Documents
 
Parent agrees to use its reasonable best efforts to call and hold as promptly as reasonably practicable following the Closing Date (but in no event later than June 9, 2011 unless otherwise consented in writing by the Stockholders’ Agent) a meeting of the shareholders of Parent (the “ Parent Shareholders’ Meeting ”) to vote on a proposal to approve the issuance of shares of Parent Common Stock upon conversion of the Parent Series B Preferred Stock in accordance with the terms of the Articles of Amendment (the “ Shareholder Proposal ”), and as promptly as reasonably practicable following the Closing Date, Parent will prepare and file with the SEC a proxy statement to be sent to Parent’s shareholders in connection with the Parent Shareholders’ Meeting (the “ Proxy Statement ”); provided , however , that prior to filing the Proxy Statement with the SEC, Parent shall provide the Shareholders’ Representative the opportunity to review and comment upon the Proxy Statement, which comments shall reasonably be considered by Parent.  Subject to the directors’ fiduciary duties as determined in good faith by Parent’s board of directors (the “ Parent Board ”) after consultation with outside legal counsel, the Proxy Statement shall include the recommendation of the Parent Board that Parents’ shareholders entitled to vote thereon vote in favor of the Shareholder Proposal and the Parent Board shall not withdraw or modify, or propose to withdraw or modify, in a manner adverse to the former stockholders of the Company, such recommendation. If the Shareholder Proposal is not approved at the Parent Shareholders’ Meeting, then Parent will use its reasonable best efforts (including continuing to include the recommendation of the Parent Board subject to the directors’ fiduciary duties as determined in good faith by the Parent Board after consultation with outside legal counsel) to obtain the approval of Shareholder Proposal at each subsequent annual meeting of the shareholders of Parent until the earlier of (i) the approval of the Shareholder Proposal or (ii) the redemption of all shares of Parent Series B Preferred Stock in accordance with the terms of the Articles of Amendment. Parent shall use its reasonable best efforts to solicit from its shareholders proxies in favor of the Shareholder Proposal and to obtain approval of the Shareholder Proposal. The Stockholders’ Representative agrees to furnish to Parent all information concerning the former stockholders of the Company and their Affiliates as Parent may reasonably request in connection with any Parent Shareholders’ Meeting. Parent shall respond promptly to any comments received from the SEC with respect to the Proxy Statement, and Parent shall cause the Proxy Statement to be mailed to Parent’s shareholders as promptly as reasonably practicable thereafter. Parent shall provide to the Stockholders’ Representative, as promptly as reasonably practicable after receipt thereof, any written comments from the SEC or any written request from the SEC or its staff for amendments or supplements to the Proxy Statement and shall provide the Stockholders’ Representative with copies of all correspondence between Parent, on the one hand, and the SEC and its staff, on the other hand, relating to the Proxy Statement and Parent shall provide the Stockholders’ Representative the opportunity to review and comment upon any proposed responses, which comments shall reasonably be considered by Parent.
 
4.4   Parent’s Board of Directors and Officers
 
(a)   Prior to the Effective Time, the size of the Parent Board shall be fixed at four (4) directors, and Parent shall obtain the resignations of all of the directors of Parent then in office (other than the three (3) directors set forth on Exhibit C under the heading “Parent Directors”), such that, as of the Effective Time, at least one (1) vacancy will exist on the Parent Board.  Effective immediately following the Effective Time, Parent shall cause the individual named on Exhibit C under the heading “Company Nominee” (the “ Company Nominee ”) to be appointed to the Parent Board to serve as chairman of the Parent Board and shall cause all of the directors to be placed into classes set forth in Exhibit C hereto.  The Company Nominee and each member of the Parent Board at the Effective Time shall meet the criteria provided in Parent’s Corporate Governance Guidelines, as in effect as of the Effective Time.
 
(b)   Immediately following the Effective Time, the officers of Parent shall include, but not be limited to, the individuals named on Exhibit C under the heading “Officers” who shall each hold the positions set forth opposite each such individual’s name on Exhibit C.
 
4.5   Reorganization
 
The parties intend that, for federal income tax purposes, the Mergers shall constitute an integrated transaction that is characterized as a merger of Company into Parent and that qualifies as a reorganization within the meaning of Section 368(a)(1)(A) of the Code and that Parent, Merger Sub, LLC Sub and Company are parties to such reorganization within the meaning of Section 368(b) of the Code.  Notwithstanding anything herein to the contrary, each of Parent, Merger Sub, LLC Sub and the Company shall use commercially reasonable efforts to cause the Mergers to qualify, and will not take any actions, or fail to take any action, which would reasonably be expected to prevent the Mergers from qualifying as a reorganization under the provisions of Section 368(a) of the Code.  Parent, Merger Sub, LLC Sub, the Company and the Surviving Company shall report, to the extent required by the Code or the regulations thereunder, the Mergers for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code.  The parties hereto hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations.
 
4.6   Tax Matters
 
(a)   Parent shall be responsible for making proper and timely filings of all Tax Returns required to be filed by the Company after the Closing Date for periods ending on or prior to the Closing Date and for all any Taxable period that includes (but does not end on) the Closing Date and will pay (or cause to be paid) all Taxes required to be paid with respect to such Tax Returns.  All such Tax Returns will be prepared in a manner consistent with past practices of Company unless otherwise required by applicable Tax law.  Parent shall provide (or cause to be provided) all such Tax Returns to the Stockholders’ Agent for review and approval (which will not be unreasonably withheld or delayed) at least thirty (30) days prior to the due date for filing such Tax Returns (including any applicable extensions).
 
(b)   All transfer, documentary, sales, use, stamp, registration and other substantially similar Taxes and fees incurred in connection with this Agreement (collectively, “ Transfer Taxes ”) shall be paid by Parent when due, and Parent will, at its own expense, file all necessary Returns and other documentation with respect to all such Transfer Taxes.
 
(c)   Any indemnification payment to an Indemnitee under this Agreement shall be treated by the parties for U.S. federal, state, local and non-U.S. income Tax purposes as a purchase price adjustment unless otherwise required by applicable law.
 
(d)   The parties hereto agree to furnish or cause to be furnished to each other at any time after the Closing Date, upon request, as promptly as practicable, such information (including access to books and records) and assistance relating to the Company, as is reasonably requested for the filing of any Returns, for the preparation of any audit and for the prosecution or defense of any pending or threatened audit or assessment, suit, proposed adjustment, deficiency, dispute, administrative or judicial proceeding or other similar claim.
 
4.7   Further Action
 
(a)   Subject to the terms and conditions herein provided, if at any time after the Effective Time or the Second Effective Time, any further action is reasonably necessary to carry out the purposes of this Agreement or to vest the Surviving Company or Parent with full right, title and possession of and to all rights and property of Merger Sub, LLC Sub or the Company, the proper officers and directors of each party to this Agreement and their respective subsidiaries shall use its or their commercially reasonable efforts to take, or cause to be taken, all such necessary action as may be reasonably requested by, and at the sole expense of, Parent.
 
4.8   Reservation of Parent Common Stock; Issuance of Shares of Parent Common Stock
 
For as long as any shares of Parent Series B Preferred Stock remain outstanding, Parent shall at all times reserve and keep available, free from preemptive rights and liens, out of its authorized but unissued Parent Common Stock or shares of Parent Common Stock held in treasury by Parent, for the purpose of effecting the conversion of the Parent Series B Preferred Stock, the full number of shares of Parent Common Stock then issuable upon the conversion of all Parent Series B Preferred Stock (after giving effect to all anti-dilution adjustments, if any) then outstanding. All shares of Parent Common Stock delivered upon conversion or repurchase of the Parent Series B Preferred Stock shall be newly issued shares or shares held in treasury by Parent, shall have been duly authorized and validly issued and shall be fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or liens.
 
5.  
 
5.1   Survival of Representations, Etc.
 
(a)   General Survival .  Subject to Section ‎ 5 .1‎(c) , the representations and warranties made by the Company in this Agreement and the representations and warranties set forth in the Merger Consideration Certificate, shall survive the Effective Time and shall expire on June 1, 2012 (the “ Termination Date ”); provided , however , that if, at any time prior to the Termination Date, any Parent Indemnitee properly delivers to the Stockholders’ Agent a Claim Notice, then the claim asserted in such notice shall survive the Termination Date until such time as such claim is fully and finally resolved.
 
(b)   Parent Representations .  Subject to Section 5.1(c), the representations and warranties made by Parent, Merger Sub and LLC Sub in this Agreement shall survive the Effective Time and shall expire on the Termination Date, provided , however , that if, at any time prior to the Termination Date, any Stockholder Indemnitee properly delivers to Parent a Claim Notice, then the claim asserted in such Claim Notice shall survive the Termination Date until such time as such claim is fully and finally resolved
 
(c)   Intentional Misrepresentation; Fraud .  Notwithstanding anyt hing to the contrary contained in Section ‎ 5 .1(a) or Section 5.1(b), the limitations set forth in Sections ‎ 5.1(a) and 5.1(b) shall not apply in the case of claims based upon intentional misrepresentation or fraud.
 
(d)   Representations Not Limited .  The representations, warranties, covenants and obligations of the parties set forth in this Agreement and the Merger Consideration Certificate and the rights and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Indemnitees or any of their Representatives.
 
(e)   Survival of Covenants . The respective covenants and obligations of the parties hereto set forth in this Agreement shall survive until satisfied in accordance with their respective terms.
 
(f)   General . The parties acknowledge that the time periods set forth in this Section 5.1 and elsewhere in this Agreement for the assertion of claims and notices under this Agreement are the result of arms’-length negotiation among the parties and that they intend for the time periods to be enforced as agreed by the parties.  The parties further acknowledge that the time periods set forth in this Section 5.1 and elsewhere in the Agreement may be shorter than otherwise provided by law.
 
5.2   Indemnification
 
(a)   Stockholder Indemnification Obligations . From and after the Effective Time (but subject to the limitations on indemnification set forth in this Article 5), each Eligible Stockholder (collectively, the “ Stockholder Indemnitors ”), severally in proportion to the value of such Eligible Stockholder’s pro rata interest in the Aggregate Holdback Share Amount and not jointly, shall hold harmless and indemnify each of the Parent Indemnitees from and against, and shall compensate and reimburse each of the Parent Indemnitees for, any Damages which are directly suffered or incurred by any of the Parent Indemnitees or to which any of the Parent Indemnitees may otherwise directly become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise directly from or as a result of, or are directly connected with:
 
(i)   any inaccuracy in or breach of any representation or warranty made by the Company in this Agreement (without giving effect to any materiality, Company Material Adverse Effect or similar qualification limiting the scope of such representation or warranty) or the Merger Consideration Certificate;
 
(ii)   any breach of any covenant or obligation of the Company in this Agreement;
 
(iii)   the proper exercise by any stockholder of the Company of such stockholder’s appraisal rights under the DGCL for any amount in excess of what is payable by Parent in accordance with this Agreement with respect to such stockholders’ shares of Company Capital Stock; or
 
(iv)   any Legal Proceeding relating to any breach or alleged breach or any other matter of the type referred to in clauses (i), (ii) or (iii) above (including any Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of its rights under this Article ‎5) (it being, understood, however, that the Parent Indemnitees shall not be entitled to recover more than once for the same Damages).
 
(b)   Parent Indemnification Obligations . From and after the Effective Time (but subject to the limitations on indemnification set forth in this Article 5), Parent shall hold harmless and indemnify each of the Stockholder Indemnitees from and against, and shall compensate and reimburse each of the Stockholder Indemnitees for, any Damages which are directly suffered or incurred by any of the Stockholder Indemnitees or to which any of the Stockholder Indemnitees may otherwise directly become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise directly from or as a result of, or are directly connected with:
 
(i)   any inaccuracy in or breach of any representation or warranty made by Parent, Merger Sub or LLC Sub in this Agreement (without giving effect to any materiality, Parent Material Adverse Effect or similar qualification limiting the scope of such representation or warranty);
 
(ii)   any breach of any covenant or obligation of Parent, Merger Sub or LLC Sub in this Agreement; and
 
(iii)   any Legal Proceeding relating to any breach or alleged breach or any other matter of the type referred to in clauses ( i) or (ii) above (including any Legal Proceeding commenced by any Stockholders Indemnitee for the purpose of enforcing any of its rights under this Article ‎5) (it being, understood, however, that the Stockholder Indemnitees shall not be entitled to recover more than once for the same Damages).
 
(c)   Damage to Parent .  The parties acknowledge and agree that, if the Surviving Company suffers, incurs or otherwise becomes subject to any Damages as a result of or in connection with any inaccuracy in or breach of any representation, warranty, covenant or obligation of the Company, then (without limiting any of the rights of the Surviving Company as a Parent Indemnitee) Parent shall also be deemed, by virtue of its ownership of equity interest in the Surviving Company, to have incurred Damages as a result of and in connection with such inaccuracy or breach (it being, understood, however, that the Parent Indemnitees shall not be entitled to recover more than once for the same Damages).
 
(d)   Calculation of Damages .  The Stockholder Indemnitors shall not be liable under this Article 5 for any Damages relating to any matter to the extent that there is included a specific Liability or reserve relating to such matter in the Unaudited Interim Balance Sheet; provided , that the Stockholder Indemnitors shall be liable for any Damages in excess of the amount stated in the Unaudited Interim Balance Sheet. Parent shall not be liable under this Article 5 for any Damages relating to any matter to the extent that there is a specific Liability or reserve relating to such matter included in the Parent Financial Statements; provided , that Parent shall be liable for any Damages in excess of the amount stated in the Parent Financial Statements.  The Indemnitee shall use commercially reasonable efforts to collect any amounts subject to indemnification pursuant to this Article 5 under applicable insurance policies covering such Damages or from such other Person alleged to have responsibility therefor, if any, and the amount of any Damages payable under this Article 5 by an Indemnitor shall be reduced by any amounts actually recovered by the Indemnitee under such insurance policies or from such other Person alleged to be responsible.  If an Indemnitee receives any amounts under applicable insurance policies, or from any other Person alleged to be responsible for any Damages, subsequent to an indemnification payment hereunder, then such Indemnitee shall promptly reimburse the Indemnitors for any payment made or expense incurred by such Indemnitor in connection with providing such indemnification payment in the amount received by the Indemnitee, net of any expenses reasonably incurred by such Indemnitee in collecting such amount.  If the Indemnitee receives any payment from an Indemnitor in respect of any Losses and the Indemnitee could have recovered all or a part of such Losses from a third party based on the underlying claim asserted against the Indemnitor, the Indemnitee shall assign such of its rights to proceed against such third party as are necessary to permit the Stockholders’ Agent, if the Indemnitee is a Parent Indemnitee, or Parent, if the Indemnitee is a Stockholder Indemnitee, to recover from such third party the amount of such indemnification payment.
 
5.3   Limitations
 
(a)   Deductible .  Subject to Sect ion ‎ 5.3(b), (i) the Stockholder Indemnitors shall not be required to make any indemnification payment pursuant to Section 5.2(a)(i) or Section 5.2(a)(iv) (solely to the extent directly related to any of the matters referred to in Section 5.2(a)(i)) for any inaccuracy in or breach of any representation or warranty in this Agreement until such time as the total amount of all Damages (including the Damages arising from such inaccuracy or breach and all other Damages arising from any other inaccuracies or breaches of any representations or warranties) that have been directly or indirectly suffered or incurred by any one or more of the Parent Indemnitees, or to which any one or more of the Parent Indemnitees has or have otherwise directly or indirectly become subject, exceeds $500,000 in the aggregate, and (ii) Parent shall not be required to make any indemnification payment pursuant to Section 5.2(b)(i) or Section 5.2(b)(iii) (solely to the extent directly related to any of the matters referred to in Section 5.2(b)(i)), for any inaccuracy in or breach of any representation or warranty in this Agreement until such time as the total amount of all Damages (including the Damages arising from such inaccuracy or breach and all other Damages arising from any other inaccuracies or breaches of any representations or warranties) that have been directly suffered or incurred by any one or more of the Stockholder Indemnitees, or to which any one or more of the Stockholder Indemnitees has or have otherwise directly become subject, exceeds $500,000 in the aggregate. If the total amount of the Damages referenced in clause (i) or (ii) above exceeds $500,000 in the aggregate, then the Stockholder Indemnitees or Parent Indemnitees, as applicable, shall be entitled to be indemnified against and compensated and reimbursed only for the amount of such Damages in excess of $500,000.  Any claim for which the Indemnitees seek indemnification pursuant to this Article 5 involving Damages of less than $10,000 shall be disregarded for all purposes of Article 5;
 
(b)   Applicability of Deductible .  The lim itations set forth in Section ‎ 5.3(a) shall not apply: (i) in the case of intentional misrepresentation or fraud; (ii) to the matters referred to in Section 5.2(a)(ii), Section 5.2(a)(iii) or Section 5.2(b)(ii); or (iii) to the matters referred to in Section 5.2(a)(iv) or 5.2(b)(iii)(solely to the extent directly related to any of the matters referred to in clauses (i) and (ii) of this sentence).
 
(c)   Cap .  Except in the case of intentional misrepresentation or fraud, the total amount of indemnification payments that the Stockholder Indemnitors can be required to make to the Parent Indemnitees pursuant to this Article 5 shall be limited to the Aggregate Holdback Share Amount as determined in accordance with Article 6. Except in the case of intentional misrepresentation or fraud, the total amount of indemnification payments that Parent can be required to make to the Stockholder Indemnitees pursuant to this Article 5 shall be $12,558,136 (the “ Parent Cap ”).
 
(d)   Other Limitations .  The aggregate maximum Liability of any Stockholder Indemnitor for any and all Damages shall be limited to such Stockholder Indemnitor’s pro rata interest in the Aggregate Holdback Share Amount.
 
5.4   No Contribution
 
Each Stockholder Indemnitor waives, and acknowledges and agrees that he shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of contribution, right of indemnity or other right or remedy against Merger Sub, LLC Sub or the Company in connection with any indemnification obligation or any other Liability to which he may become subject under or in connection with this Agreement or any other agreement or document delivered to Parent in connection with this Agreement.
 
5.5   Defense of Third-Party Claims
 
In the event of the assertion or commencement by any Person of any claim or Legal Proceeding (whether against Merger Sub, LLC Sub, the Company, Parent, any Eligible Stockholder or any other Person) with respect to which any Indemnitor may become obligated to hold harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this Article 5 (“ Third Party Claims ”), the obligations and liabilities of any Indemnitor shall be governed by and contingent upon the following additional terms and conditions:
 
(a)   if an Indemnitee shall receive notice of any Third Party Claim, the Indemnitee shall give the Stockholders’ Agent, if the Indemnitee is a Parent Indemnitee, or Parent, if the Indemnitee is a Stockholder Indemnitee, notice of such Third Party Claim promptly following the receipt by the Indemnitee of such notice; provided , however , that the failure to provide such notice shall not release an Indemnitor from any of its obligations under this Article 5 except to the extent such failure materially prejudices the defense of such Legal Proceeding.  The notice of claim shall describe in reasonable detail the facts known to the Indemnitee giving rise to such indemnification claim, and to the extent determinable the amount or good faith estimate of the amount arising therefrom.
 
(b)   The Stockholders’ Agent shall be entitled to assume and control the defense of a Third Party Claim that is subject to indemnification by the Stockholder Indemnitors and Parent shall be entitled to assume and control the defense of a Third Party Claim that is subject to indemnification by Parent, in each case at its own expense and through counsel of its choice (such counsel to be reasonably acceptable to the Indemnitee) if it gives notice of its intention to do so to the Indemnitee within thirty (30) days of the receipt of such notice from the Indemnitee; provided , however , that (A) the Stockholders’ Agent shall not have the right to assume the defense of a Third Party Claim subject to indemnification by the Stockholder Indemnitors if (i) any such claim seeks, in addition to or in lieu of monetary losses or Damages, any injunctive or other equitable relief, (ii) the Stockholders’ Agent fails to provide reasonable assurance to the Parent Indemnitee of the adequacy of the Holdback Merger Consideration to provide indemnification in accordance with the provisions of this Agreement with respect to such proceeding, (iii) there is reasonably likely to exist a conflict of interest that would make it inappropriate (in the judgment of the Parent Indemnitee in its reasonable discretion) for the same counsel to represent both the Parent Indemnitee and the Stockholders’ Agent, or (iv) settlement of, or an adverse judgment with respect to, the Third Party Claim may establish (in the reasonable good faith judgment of the Parent Indemnitee) a precedential custom or practice adverse to the business interests of the Parent Indemnitee or would increase the Tax Liability of the Parent Indemnitee or affect any of its Intellectual Property rights or (iv) such Third Party Claim relates to Taxes or Intellectual Property, and (B) Parent shall not have the right to assume any Third Party Claim if (i) any such claim seeks, in addition to or in lieu of monetary losses or Damages, any injunctive or other equitable relief, or (ii) there is reasonably likely to exist a conflict of interest that would make it inappropriate (in the judgment of the Stockholders’ Agent in its reasonable discretion) for the same counsel to represent both the Stockholder Indemnitee and Parent.  If the Stockholders’ Agent or Parent, as the case may be, assumes the defense of a Third Party Claim, it will conduct the defense actively, diligently and at its own expense, and it will hold all Indemnitees harmless from and against all Damages caused by or arising out of any settlement thereof, subject to the limitations on indemnifications set forth in Article 5.  The Indemnitee shall cooperate with the Stockholders’ Agent or Parent, as the case may be, in such defense and make available to the Stockholders’ Agent or Parent at the Stockholders’ Agent’s or Parent’s expense, as the case may be, all witnesses, pertinent records, materials and information in the Indemnitee’s possession or under the Indemnitee’s control relating thereto as is reasonably requested by the Stockholders’ Agent or Parent.  Except with the written consent of the Indemnitee, or in the case of a Stockholder Indemnitee, the Stockholders’ Agent (such consent not to be unreasonably withheld), the Stockholders’ Agent or Parent, as the case may be, will not, in the defense of a Third Party Claim, consent to the entry of any judgment or enter into any settlement (i) which does not include as an unconditional term thereof the giving to the Indemnitee by the third party of a release from all Liability with respect to such suit, claim, action, or proceeding; (ii) unless there is no finding or admission of (A) any violation of Legal Requirements by the Indemnitee (or any affiliate thereof), (B) any Liability on the part of the Indemnitee (or any affiliate thereof) or (C) any violation of the rights of any Person and no effect on any other claims of a similar nature that may be made by the same third party against the Indemnitee (or any affiliate thereof); or (iii) in the case of a Parent Indemnitee, which exceeds the reimbursement available through reduction of the Aggregate Holdback Share Amount at the next Distribution Date, or in the case of a Stockholder Indemnitee, which exceeds the amount remaining under the Parent Cap.
 
(c)   In the event that the Stockholders’ Agent  fails or elects not to assume the defense of a Parent Indemnitee against such Third Party Claim which the Stockholders’ Agent had the right to assume pursuant to Section 5.5(b), the Parent Indemnitee shall have the right, at the expense of the Stockholders’ Agent, to defend or prosecute such claim in any manner as it may reasonably deem appropriate and may settle such claim after giving written notice thereof to the Stockholders’ Agent, on such terms as such Parent Indemnitee may deem appropriate, and the Parent Indemnitee may seek prompt reimbursement from the Aggregate Holdback Share Amount, subject to the limitations set forth in this Section 5, for any Damages incurred in connection with such settlement.  If the Stockholders’ Agent does not elect to assume the defense of a Third Party Claim which it has the right to assume hereunder, the Indemnitee shall have no obligation to do so.
 
(d)   In the event Parent fails or elects not to assume the defense of a Stockholder Indemnitee against such Third Party Claim which Parent had the right to assume pursuant to Section 5.5(b), the Stockholder Indemnitee shall have the right, at the expense of Parent, to defend or prosecute such claim in any manner as it may reasonably deem appropriate and may settle such claim after giving written notice thereof to Parent, on such terms as such Stockholder Indemnitee may deem appropriate, and the Stockholder Indemnitee may seek prompt reimbursement from Parent, subject to the limitations set forth in this Article 5, for any Damages incurred in connection with such settlement.  If Parent does not elect to assume the defense of a Third Party Claim which it has the right to assume hereunder, the Stockholder Indemnitee shall have no obligation to do so.
 
(e)   In the event that the Stockholders’ Agent is not entitled to assume the defense of the Parent Indemnitee against such Third Party Claim pursuant to Section 5.5(b), the Parent Indemnitee shall have the right, at the expense of the Stockholders’ Agent (through reduction of the Aggregate Holdback Share Amount at the next Distribution Date as if such expenses were Agreed Amounts), to defend or prosecute such claim and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner it may reasonably deem appropriate after giving written notice thereof to the Stockholders’ Agent, and, subject to the limitations set forth in this Section 5, the Parent Indemnitee may seek reimbursement from the Aggregate Holdback Share Amount (through reduction of the Aggregate Holdback Share Amount at the next Distribution Date as if such expenses were Agreed Amounts) for any Damages incurred in connection with such judgment or settlement.  In such case, the Parent Indemnitee shall conduct the defense of the Third Party Claim actively and diligently, and the Stockholders’ Agent shall cooperate with the Parent Indemnitee in such defense and make available to the Parent Indemnitee, at the Stockholders’ Agent’s expense (through reduction of the Aggregate Holdback Share Amount at the next Distribution Date as if such expenses were Agreed Amounts), all such witnesses, records, materials and information in the Stockholders’ Agent’s possession or under the Stockholders’ Agent’s control relating thereto as is reasonably requested by the Parent Indemnitee.
 
(f)   In the event that Parent is not entitled to assume the defense of the Stockholder Indemnitee against such Third Party Claim pursuant to Section 5.5(b), the Stockholders’ Agent shall have the right, at the expense of Parent, to defend or prosecute such claim and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner it may reasonably deem appropriate after giving written notice thereof to Parent, and, subject to the limitations set forth in this Section 5, the Stockholders’ Agent may seek prompt reimbursement from Parent for any Damages incurred in connection with such judgment or settlement.  In such case, the Stockholders’ Agent shall conduct the defense of the Third Party Claim actively and diligently, and Parent shall cooperate with the Stockholders’ Agent in such defense and make available to the Stockholders’ Agent, at Parent’s expense, all such witnesses, records, materials and information in Parent’s possession or under Parent’s control relating thereto as is reasonably requested by the Stockholders’ Agent.
 
5.6   Remedies Exclusive
 
From and after the Effective Time, the rights of the Indemnitees to indemnification relating to this Agreement or the transactions contemplated hereby shall be strictly limited to those contained in this Article 5 and Article 6, and such indemnification rights shall be the sole and exclusive remedies of the parties subsequent to the Effective Time with respect to any matter in any way relating to this Agreement or the Mergers or arising in connection herewith or therewith.  The release of amounts from the Holdback Merger Consideration shall be the Parent Indemnitee’s sole recourse for all Damages, subject to the limitations set forth in this Article 5 and the provisions of Article 6.  Except as provided in this Article 5, no claim, action or remedy shall be brought or maintained by any party against any other party, and no recourse shall be brought or granted against any of them, by virtue of or based upon any alleged misstatement or omission respecting an inaccuracy in or breach of any of the representations, warranties or covenants of any of the parties hereto set forth or contained in this Agreement.
 
6.  
 
6.1   Purpose of Holdback
 
An aggregate of 17,652,707 shares of Parent Series B Preferred Stock constituting Merger Consideration shall be retained by Parent following the Effective Time as security for any indemnification payments required pursuant to Article 5 hereof (the “ Aggregate Holdback Share Amount ”).  The shares of Parent Series B Preferred Stock constituting the Aggregate Share Amount shall accrue dividends as if such shares were issued as Merger Consideration as of the Effective Time, provided that no dividends that would otherwise be required to be paid on such shares shall be paid unless and until such shares are released to the Eligible Stockholders in accordance with this Article 6.  The Aggregate Holdback Share Amount shall be reduced from time to time as set forth in this Article 6 and shall be delivered to the Eligible Stockholders at the times and in the manner set forth in this Article 6.
 
6.2   Claims Against Aggregate Holdback Share Amount
 
(a)   If any Indemnitee has or claims in good faith to have incurred or suffered Damages for which it is or may be entitled to indemnification, compensation or reimbursement under Article 5 (a “ Claim ”) on or prior to 5:00 p.m. (Eastern Standard Time) on the Termination Date, subject to the limitations set forth in Article 5, such Indemnitee may deliver a claim notice (a “ Claim Notice ”) to the Stockholders’ Agent, in the a case of a Parent Indemnitee, or to the Parent, in the case of a Stockholder Indemnitee (such recipient being, the “ Claim Notice Recipient ”).  Each Claim Notice shall: (i) state that the Indemnitee believes in good faith that the Indemnitee is entitled to indemnification, compensation or reimbursement under Article 5; (ii) contain a brief description of the facts and circumstances supporting the Indemnitee’s claim; and (iii) if practicable, contain a non-binding, preliminary, good faith estimate of the amount to which the Indemnitee claims to be entitled (the aggregate amount of such estimate, as it may be modified by the Indemnitee in good faith from time to time, being referred to as the “ Claimed Amount ”).
 
(b)   During the thirty (30)-day period commencing upon receipt by the Claim Notice Recipient of a Claim Notice from an Indemnitee (the “ Dispute Period ”), the Claim Notice Recipient may deliver to the Indemnitee who delivered the Claim Notice a written response (the “ Response Notice ”) in which the Claim Notice Recipient: (i) agrees that the full Claimed Amount is due and payable to the Indemnitee; (ii) agrees that part, but not all, of the Claimed Amount (the “ Agreed Amount ”) is due and payable to the Indemnitee; (iii) indicates that no part of the Claimed Amount is due and payable to the Indemnitee or (iv) requests such additional information as the Claim Notice Recipient may reasonably require in order to determine whether all or part of such Claimed Amount is due and payable to the Indemnitee.  If a Response Notice is delivered in accordance with clause “(ii)” or “(iii)” of the preceding sentence, the Response Notice shall also contain a brief description of the facts and circumstances supporting the Claim Notice Recipient’s claim that only a portion or no part of the Claimed Amount is owed to the Indemnitee, as the case may be (any part of the Claimed Amount that is not agreed to be due and payable to the Indemnitee pursuant to the Indemnitee’s Claim Notice being referred to as the “ Contested Amount ”.)  If a Response Notice is not received by the Indemnitee from the Claim Notice Recipient prior to the expiration of the Dispute Period, then the Claim Notice Recipient shall be conclusively deemed to have agreed that the full Claimed Amount referred to in the applicable Claim Notice is due and payable to the Indemnitee and such amount shall also be deemed to be an “Agreed Amount.”
 
(c)   If the Claim Notice Recipient delivers a Response Notice in accordance with Section 6.2(b)(iv), the Indemnitee will respond (a “ Further Information Notice ”) to such Response Notice within thirty (30) days after receipt of such Response Notice, and the Claim Notice Recipient shall provide a Response Notice in accordance with Section 6.2(b)(i), (ii) or (iii) within fifteen (15) Business Days after receipt of such Further Information Notice.  If any Response Notice expressly indicates that there is a Contested Amount, the Claim Notice Recipient and the Indemnitee shall attempt in good faith for a period not to exceed ten (10) Business Days, unless otherwise mutually agreed, to resolve the dispute related to the Contested Amount.  If the Claim Notice Recipient and the Indemnitee resolve such dispute, such resolution shall be binding on all of the Eligible Stockholders, Parent, Merger Sub, LLC Sub, the Surviving Company and such Indemnitee, and a settlement agreement stipulating the amount owed to such Indemnitee shall be signed by such Indemnitee and the Claim Notice Recipient and the amount so stipulated in such settlement agreement shall be treated as an Agreed Amount.
 
6.3   Reduction of Aggregate Holdback Share Amount; Delivery of Holdback Merger Consideration
 
(a)   Promptly following 5:00 p.m. (Eastern Standard Time) on the Termination Date (the “ Initial Distribution Date ”), the Eligible Stockholders shall be entitled to receive, in the aggregate, a number of shares of Parent Series B Preferred Stock equal to (A)-(B)-(C), where (A) equals the Aggregate Holdback Share Amount; (B) equals all Agreed Shares; and (C) equals any outstanding Claimed Shares (such aggregate amount, the “ Aggregate Initial Distribution Date Amount ”).  Each Eligible Stockholder shall be entitled to receive its pro rata share of the Aggregate Initial Distribution Date Amount with respect to each share of Company Capital Stock set forth with respect to such Eligible Stockholder on Exhibit A, determined by multiplying the Pro Rata Ratio for such share by the Aggregate Initial Distribution Date Amount.  Following the Initial Distribution Date, the Aggregate Holdback Share Amount shall be reduced by the Agreed Shares as of such date and the number of shares distributed to Eligible Stockholders with respect to such Initial Distribution Date.
 
(b)   After the Initial Distribution Date, promptly following the date on which any Claims with respect to any outstanding Claimed Amount as of the Initial Distribution Date are fully and finally resolved pursuant to a Final Resolution (a “ Post-Initial Distribution Date ”), the Eligible Stockholders shall be entitled to receive, in the aggregate, a number of shares of Parent Series B Preferred Stock equal to (A)-(B)-(C), where (A) equals the then remaining Aggregate Holdback Share Amount, (B) equals all Agreed Shares and (C) equals any outstanding Claimed Shares (an “ Aggregate Post-Initial Distribution Date Amount ”).  Each Eligible Stockholder shall be entitled to receive its pro rata share of each such Aggregate Post-Initial Distribution Date Amount with respect to each share of Company Capital Stock set forth with respect to such Eligible Stockholder on Exhibit A, determined by multiplying the Pro Rata Ratio for such share by the Aggregate Post-Initial Distribution Date Amount.  Following a Post-Initial Distribution Date, the Aggregate Holdback Share Amount shall be reduced by the Agreed Shares as of such date and the number of shares distributed to Eligible Stockholders with respect to such Post-Initial Distribution Date.
 
(c)   To the extent that the shares of Parent Series B Preferred Stock constituting the Aggregate Holdback Share Amount have been converted to Parent Common Stock prior to any Distribution Date, then an equal number of shares of Parent Common Stock as determined pursuant to the formulas set forth in Section 6.3(a) and (b) shall be delivered on such Distribution Date, and Parent shall deliver to the Eligible Stockholders with respect to each such share required to be delivered to the Eligible Stockholders pursuant to Sections 6.3(a) and (b), a cash amount per share of Parent Common Stock equal to the amount of any cash dividends paid on the Parent Series B Preferred Stock prior to conversion and on the Parent Common Stock following conversion, provided , that no cash payment shall be made in lieu of any fractional shares of Parent Capital Stock in accordance with Section 1.9(f) and such amounts and formulas shall be subject to adjustment to reflect any adjustment to the Conversion Price (as defined in the Articles of Amendment) pursuant to the Articles of Amendment. Any shares of Parent Capital Stock or cash required to be delivered to the Eligible Stockholders pursuant to Section 6.3(a) or (b), shall be delivered by Parent directly to the Eligible Stockholders, provided that the Stockholders’ Agent shall deliver to Parent a certificate setting forth the pro rata portion of such shares and cash to be delivered to each Eligible Stockholder, the names of each Eligible Stockholder in which such shares are to be issued and cash paid and a mailing address where delivery of such shares and cash may be made to each such Eligible Stockholder.  Upon delivery of such shares of Parent Capital Stock and cash in accordance with the instructions set forth in the Stockholders’ Agent’s certificate, Parent shall have no further Liability to the Eligible Stockholders with respect to such shares.
 
7.  
 
7.1   Stockholders’ Agent
 
(a)   Appointment .  By virtue of the adoption of this Agreement, the Eligible Stockholders irrevocably nominate, constitute and appoint TVM V Life Science Ventures GmbH & Co. KG as the agent and true and lawful attorney in fact of the stockholders (the “ Stockholders’ Agent ”), with full power of substitution, to act in the name, place and stead of the Eligible Stockholders for purposes of executing any documents and taking any actions that the Stockholders’ Agent may, in its sole discretion, determine to be necessary, desirable or appropriate in connection with any matter set forth in this Agreement, including any claims for indemnification, compensation or reimbursement under Article 5 and any amendment to this Agreement following the Effective Time.  TVM V Life Science Ventures GmbH & Co. KG hereby accepts its appointment as Stockholders’ Agent.
 
(b)   Authority .  The Eligible Stockholders grant to the Stockholders’ Agent full authority to execute, deliver, acknowledge, certify and file on behalf of such Eligible Stockholders (in the name of any or all of the Eligible Stockholders or otherwise) any and all documents that the Stockholders’ Agent may, in its sole discretion, determine to be necessary, desirable or appropriate, in such forms and containing such provisions as the Stockholders’ Agent may, in its sole discretion, determine to be appropriate, in performing its duties as contemplated by Section 7.1(a).  Notwithstanding anything to the contrary contained in this Agreement or in any other agreement executed in connection with the transactions contemplated hereby: (i) each Indemnitee shall be entitled to deal exclusively with the Stockholders’ Agent on all matters relating to this Agreement, including any claim for indemnification, compensation or reimbursement under Article 5; and (ii) each Indemnitee shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Eligible Stockholder by the Stockholders’ Agent, and on any other action taken or purported to be taken on behalf of any stockholder by the Stockholders’ Agent, as fully binding upon such stockholder.
 
(c)   Power of Attorney .  The Eligible Stockholders recognize and intend that the p ower of attorney granted in Section ‎ 7.1(a): (i) is coupled with an interest and is irrevocable; (ii) may be delegated by the Stockholders’ Agent; and (iii) shall survive the death or incapacity of each of the Eligible Stockholders.
 
(d)   Binding Power .  The Eligible Stockholders shall be bound by all actions taken by the Stockholders’ Agent in its capacity thereof, except for any action that conflicts with the limitations set forth in this subsection (d).  The Stockholders’ Agent shall promptly, and in any event within five (5) Business Days, provide written notice to the Company Stockholders of any action taken on behalf of them by the Stockholders’ Agent pursuant to the authority delegated to the Stockholders’ Agent under this Section 7.1.  The Stockholders’ Agent shall at all times act in its capacity as Stockholders’ Agent in a manner that the Stockholders’ Agent believes to be in the best interest of the Eligible Stockholders.  Neither the Stockholders’ Agent nor any of its directors, officers, agents or employees, if any, shall be liable to any Person for any error of judgment, or any action taken, suffered or omitted to be taken under this Agreement, except in the case of its gross negligence, bad faith or willful misconduct.  The Stockholders’ Agent may consult with legal counsel, independent public accountants and other experts selected by it.  The Stockholders’ Agent shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement.  As to any matters not expressly provided for in this Agreement, the Stockholders’ Agent shall not exercise any discretion or take any action. Each Eligible Stockholder shall indemnify and hold harmless and reimburse the Stockholders’ Agent from and against such Eligible Stockholder’s ratable share of any and all liabilities, losses, Damages, claims, costs or expenses suffered or incurred by the Stockholders’ Agent arising out of or resulting from any action taken or omitted to be taken by the Stockholders’ Agent under this Agreement, other than such liabilities, losses, Damages, claims, costs or expenses arising out of or resulting from the Stockholders’ Agent’s gross negligence, bad faith or willful misconduct.  Notwithstanding anything to the contrary herein, the Stockholders’ Agent is not authorized to, and shall not, accept on behalf of any Eligible Stockholders any merger consideration to which such Eligible Stockholders is entitled under this Agreement and the Stockholders’ Agent shall not in any manner exercise, or seek to exercise, any voting power whatsoever with respect to shares of capital stock of the Company or Parent now or hereafter owned of record or beneficially by any Eligible Stockholders unless the Stockholders’ Agent is expressly authorized to do so in a writing signed by such Eligible Stockholders.
 
(e)   Replacement .  If the Stockholders’ Agent shall be dissolved or otherwise be unable to fulfill its responsibilities hereunder, the Eligible Stockholders shall (by consent of those Persons entitled to at least a majority of the Merger Consideration), within 10 days after such death, disability or inability, appoint a successor to the Stockholders’ Agent (who shall be reasonably satisfactory to Parent) and immediately thereafter notify Parent of the identity of such successor.  Any such successor shall succeed the Stockholders’ Agent as Stockholders’ Agent hereunder.  If for any reason there is no Stockholders’ Agent at any time, all references herein to the Stockholders’ Agent shall be deemed to refer to the Eligible Stockholders.
 
7.2   Further Assurances; Limitations
 
Each party hereto shall execute and cause to be delivered to each other party hereto such instruments and other documents, and shall take such other actions, as such other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.
 
7.3   Fees and Expenses
 
Subject to Article 5, each party to this Agreement shall bear and pay all fees, costs and expenses that have been incurred or that are incurred in the future by such party in connection with the transactions contemplated by this Agreement, including all fees, costs and expenses incurred by such party in connection with or by virtue of: (a) the negotiation, preparation and review of this Agreement (including the Disclosure Schedule) and all agreements, certificates, opinions and other instruments and documents delivered or to be delivered in connection with the transactions contemplated by this Agreement; (b) the preparation and submission of any filing or notice required to be made or given in connection with any of the transactions contemplated by this Agreement, and the obtaining of any Consent required to be obtained in connection with any of such transactions; and (c) the consummation of the Mergers; provided , however , that the stockholders of the Company shall bear and pay all such fees, costs and expenses that have been incurred or that are incurred by or on behalf of the Company and its Subsidiaries.
 
7.4   Attorneys’ Fees
 
If any Legal Proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).
 
7.5   Notices
 
Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent via facsimile with confirmation of receipt, when transmitted and receipt is confirmed; (c) if sent by electronic mail, telegram, cablegram or other electronic transmission, upon delivery; (d) if sent by registered, certified or first class mail, the third Business Day after being sent; and (e) if sent by overnight delivery via a national courier service, one Business Day after being sent, in each case to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):
 
If to Parent, Merger Sub or LLC Sub:
 
Insmed Incorporated
8720 Stony Point Parkway, Suite 200
                                          Richmond, VA 23235
Attention: Mr. W. McIlwaine Thompson
Facsimile: (434) 977-7920

 
With a copy (which shall not constitute notice) to:
 
Greenberg Traurig, LLP
MetLife Building
200 Park Avenue
New York, NY 10166
Attention: Joseph A. Herz
Facsimile: 212-805-5539

 
If to the Company:
 
Princeton Corporate Plaza IV
11 Deer Park Drive, Suite 117
Monmouth Junction, NJ  08852
Attention: Timothy Whitten
Facsimile: 732-438-9630

 
with a copy (which shall not constitute notice) to:
 
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
850 Winter Street
Waltham, MA  02451
Attention: Gregg A. Griner
Facsimile: 781-622-1622

 
If to the Stockholders’ Agent:
 
                                    TVM V Life Science Ventures GmbH & Co. KG
c/o Mark Cipriano
TVM Capital
101 Arch Street, Suite 1950
Boston, MA 02110
Attention: Mark Cipriano
Facsimile: 617-345-9377

 
Notwithstanding anything to the contrary contained herein, any notice received on any Business Day after 5:00 p.m. (addressee’s local time) or on a day that is not a Business Day shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day.
 
7.6   Headings
 
The bold-faced headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
 
7.7   Counterparts and Exchanges by Electronic Transmission or Facsimile
 
This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.  The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.
 
7.8   Governing Law; Dispute Resolution
 
(a)   Governing Law .  This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of New York (without giving effect to principles of conflicts of laws).
 
(b)   Venue .  Any Legal Proceeding relating to this Agreement or the enforcement of any provision of this Agreement (including a Legal Proceeding based upon intentional misrepresentation or fraud) may be brought or otherwise commenced in any state or federal court located in the Borough of Manhattan in the State of New York.  Each party to this Agreement: (i) expressly and irrevocably consents and submits to the exclusive jurisdiction of each state and federal court located in the Borough of Manhattan in the State of New York (and each appellate court located in the State of New York) in connection with any such Legal Proceeding; (ii) agrees that each state and federal court located in the Borough of Manhattan in the State of New York shall be deemed to be a convenient forum; and (iii) agrees not to assert (by way of motion, as a defense or otherwise), in any such Legal Proceeding commenced in any state or federal court located in the Borough of Manhattan in the State of New York, any claim that such party is not subject personally to the jurisdiction of such court, that such Legal Proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.
 
7.9   Successors and Assigns
 
Except as provided below, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by any of the parties hereto in whole or in part (whether by operation of law or otherwise) without the prior written consent of the other parties and any attempt to make any such assignment without such consent shall be null and void; provided , that after the Effective Time, Parent may freely assign any or all of its rights under this Agreement (including its indemnification rights under Article 5), in whole or in part, to any other Person without obtaining the consent or approval of any other party hereto or of any other Person.  Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by: (a) the Company and its successors and assigns (if any); (b) Parent and its successors and assigns (if any); and (c) Merger Sub and its successors and assigns (if any).
 
7.10   Specific Performance
 
The parties to this Agreement agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms or were otherwise breached.  It is accordingly agreed that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement, for the benefit of any other party to this Agreement: (a) such other party shall be entitled (in addition to any other remedy that may be available to it at law or in equity) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach; and (b) such other party shall not be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action or Legal Proceeding.
 
7.11   Waiver
 
No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.  No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
 
7.12   Waiver of Jury Trial
 
Each of the parties hereto hereby irrevocably waives any and all right to trial by jury in any Legal Proceeding or counterclaim arising out of or related to this Agreement or the transactions contemplated hereby.
 
7.13   Amendments
 
This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered: (a) prior to the Effective Time, by the parties hereto by action taken by or on behalf of their respective boards of directors; provided , however , that no amendment of this Agreement shall be made, that by Legal Requirements or in accordance with the rules of any stock exchange requires approval by the stockholders of the Company and/or requires approval of the stockholders of Parent, without obtaining such approval; and (b) after the Effective Time, on behalf of Parent and the Stockholders’ Agent (acting exclusively for and on behalf of all of the Eligible Stockholders).
 
7.14   Severability
 
In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent by any court of competent jurisdiction, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law and the parties shall use their commercially reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practicable, implements the original purposes and intents of this Agreement.
 
7.15   Parties-in-Interest
 
Except for the provisions of Section 1.6 (Treatment of Stock Options; Restricted Stock), Section 4.2 (Directors’ and Officers’ Indemnification and Insurance), Section 4.5 (Reorganization), and Article 5 (Indemnification), none of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any).  Without limiting the generality of the foregoing, no Company Employee (other than as an Eligible Stockholder or as set forth in Section 4.1) shall have any rights or remedies under any of the provisions of this Agreement.
 
7.16   Entire Agreement
 
This Agreement and the other agreements and documents delivered by the parties in connection herewith constitute the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof and thereof; provided , however , that the Confidentiality Agreement shall not be superseded by this Agreement and shall remain in effect in accordance with its terms until the earlier of: (a) the Effective Time; or (b) the date on which such Confidentiality Agreement is terminated in accordance with its terms.
 
7.17   Construction
 
(a)   Gender; Etc.   If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless indicated otherwise, terms defined in the singular have the corresponding meanings in the plural, and vice versa.  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The words “ hereof, ” “ hereto, ” “ hereby, ” “ herein, ” “ hereunder ” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular section or article in which such words appear.  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.  Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.  The use of “ or ” is not intended to be exclusive unless expressly indicated otherwise.  No provision of this Agreement shall be construed to require the Company, Parent or Merger Sub, or any of their respective Subsidiaries or affiliates to take action that would violate applicable Legal Requirements.  Unless otherwise indicated, all sums of money referred to in this Agreement, including references to “dollars” or “$”, are expressed in lawful money of the United States of America.
 
(b)   Ambiguities .  Each party hereto acknowledges that it and its attorney has reviewed this Agreement and agrees that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.
 
(c)   Including .  As used in this Agreement, the words “ include ” and “ including, ” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “ without limitation. ”
 
(d)   References .  All article, section, schedule, exhibit and annex references used in this Agreement are to articles, sections, schedules, exhibits and annexes to this Agreement unless otherwise specified.  All terms defined in this Agreement shall have their defined meanings when used in any Annex, Exhibit or Schedule to this Agreement or any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein.  The schedules, exhibits and annexes attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.  The table of contents and captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
 

 
 
 

The parties hereto have caused this Agreement to be executed and delivered as of the date first written above.
 
INSMED INCORPORATED
 

 
By:   /s/ Kevin P. Tully
 
 
Name:  Kevin P. Tully
 
Title:    Executive Vice President and Chief inancial Officer

RIVER ACQUISITION CO.
 

 
By:    /s/ Kevin P. Tully
 
Name:   Kevin P. Tully
Title:     Chief Executive Officer

 
TRANSAVE, LLC
 
 
By: Insmed Incorporated, Managing Member
 
 
By:      /s/ Kevin P. Tully                                                                          
Name:   Kevin P. Tully
 
Title:     Executive Vice President and Chief Financial Officer

TRANSAVE, INC.
 

 
By: /s/ Timothy Whitten                                                                          
 
Name: Timothy Whitten
 
Title:   President and Chief Executive Officer
 

 
TVM V LIFE SCIENCE VENTURES GMBH & CO. KG , as Stockholders’ Agent
 
By: /s/ Mark G. Cipriano   /s/ David Poltack
Name: Mark G. Cipriano   David Poltack
Title:  Managing Limited Partners
 

 


[SIGNATURE PAGE TO MERGER AGREEMENT]
 
 
 
 

ANNEX I
 
CERTAIN DEFINITIONS
 
For purposes of the Agreement (including this Annex I):
 
Articles of Amendment . “ Articles of Amendment ” shall mean the Articles of Amendment to Parent’s Articles of Incorporation establishing terms of Series B Preferred Stock, filed on the date hereof.
 
Agreed Shares .  “ Agreed Shares ” shall mean such number of shares of Parent Series B Preferred Stock equal to the quotient of (a) all Agreed Amounts with respect to claims of Parent Indemnitees since the previous Distribution Date (or in the case of the Initial Distribution Date, since the Effective Time), divided by (b) the Holdback Per Share Value as of the applicable Distribution Date.
 
Agreement .  “ Agreement ” shall mean the Agreement and Plan of Merger to which this Annex I is attached (including the Disclosure Schedule, the Parent Disclosure Schedule, and all other exhibits, schedules and annexes hereto), as it may be amended from time to time.
 
Balance Sheet Rules .  “ Balance Sheet Rules ” shall mean, collectively, the accounting principles, methods and practices used in preparing the Company’s Balance Sheet for the year ended December 31, 2009 included in the Company’s Financial Statements, applied on a consistent basis and in accordance with GAAP.
 
Business Day .  “ Business Day ” shall mean any day that is not a Saturday, Sunday or legal holiday in New York City or a federal holiday in the United States.
 
Certificate Amendment .  “ Certificate Amendment ” shall mean the Certificate of Amendment to the Company’s Restated Certificate of Incorporation which was filed prior to the date hereof in order, to among other things, authorize a sufficient number of shares of Company Common Stock, Company Preferred Stock and the Company’s Series D Preferred Stock to accommodate the conversion of the Company Notes and/or the exercise of Company Warrants in connection with the Closing.
 
Claimed Shares .  “ Claimed Shares ” shall mean such number of shares of Series B Preferred Stock equal to the quotient of (a) all outstanding Claimed Amounts, divided by (b) the Holdback Per Share Value as of the applicable Distribution Date.
 
Closing Merger Consideration .  “ Closing Merger Consideration ” shall mean with respect to each share of Company Capital Stock outstanding as of the Effective Time such number of validly issued, fully paid and nonassessable shares of Parent Common Stock and Parent Series B Preferred Stock and/or cash to be issued in exchange therefore as set forth on Exhibit A to the Agreement, promptly following the Effective Time in accordance with Section 1.5(c) of the Agreement.  The aggregate Closing Merger Consideration shall be 25,938,818 shares of Parent Common Stock, 74,093,185 shares of Parent Series B Preferred Stock and $561,280.17   in cash.
 
Code .  “ Code ” shall mean the Internal Revenue Code of 1986, as amended.
 
Company Capital Stock .  “ Company Capital Stock ” shall mean the shares of Company Common Stock and Company Preferred Stock (including Company Capital Stock issued or issuable upon conversion of the Company Notes).
 
Company Common Stock .  “ Company Common Stock ” shall mean the shares of common stock of the Company, par value $0.001 per share.
 
Company Contract .  “ Company Contract ” shall mean any Contract to which the Company or any of its Subsidiaries is a party.
 
Company Employee .  “ Company Employee ” shall mean any current or former employee, independent contractor or director of the Company or any Subsidiary of the Company.
 
Company Employee Agreement .  “ Company Employee Agreement ” shall mean each management, employment, severance, change in control, consulting, relocation, repatriation or expatriation agreement or other Contract between the Company or any Subsidiary of the Company, on the one hand, and any Company Employee, on the other hand, other than any such management, employment, severance, change in control, consulting, relocation, repatriation or expatriation agreement or other Contract with a Company Employee which is terminable “at will” without any obligation on the part of the Company or any Subsidiary of the Company to make any payments or provide any benefits in connection with such termination.
 
Company Employee Plan .  “ Company Employee Plan ” shall mean any plan, program, policy, practice, Contract or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, that is or has been maintained, contributed to, or required to be contributed to, by the Company or any Subsidiary of the Company for the benefit of any Company Employee, or with respect to which the Company or any Subsidiary of the Company has or may have any Liability or obligation, excluding any Company Employee Agreement, but including any employee benefit plans as defined in Section 3 of ERISA.
 
Company Financing Documents .  “ Company Financing Documents ” shall mean the agreements between the Company and certain of its stockholders, dated as of the date hereof, providing for financing to the Company in the amounts and upon the terms specified therein, accurate copies of which have been provided to Parent.
 
Company IP .  “ Company IP ” shall mean all Intellectual Property and Intellectual Property Rights in which the Company or any Subsidiary of the Company has (or purports to have) an ownership interest or an exclusive license or similar exclusive right.
 
Company IP Contract .  “ Company IP Contract ” shall mean any written Contract to which the Company or any Subsidiary of the Company is or was a party or by which the Company or any Subsidiary of the Company is or was bound, that contains any assignment or license of, or any covenant not to assert or enforce, any Intellectual Property Right or Company IP or any Intellectual Property developed by, with or for the Company or any Subsidiary of the Company.
 
Company Material Adverse Effect .  “ Company Material Adverse Effect ” shall mean any change, event, effect, claim, circumstance or matter (each, an “ Effect ”) that (considered together with all other Effects) is, or would reasonably be expected to be, materially adverse to: (i) the business, condition (financial or otherwise), assets, Liabilities, operations or results of operations of the Company and its Subsidiaries, taken as a whole or (ii) the ability of the Company or the Surviving Corporation to perform any of its material covenants or obligations under this Agreement; provided that none of the following shall be taken into account in determining whether there has been a Company Material Adverse Effect: any Effect to the extent attributable to: (a) changes in general economic, business or political conditions or the securities markets in general; (b) changes in or affecting the industries in which Company and its Subsidiaries operate; (c) an earthquake or other natural disaster; (d) a change in applicable Legal Requirements or accounting rules, (e) the commencement, continuation or escalation of a war, civil unrest, material armed hostilities or other material international or national calamity or act of terrorism, (f) changes, effects or circumstances resulting from the announcement or pendency of this Agreement or the consummation of the transactions contemplated by this Agreement or compliance with the terms of this Agreement (including the loss or departure of employees or adverse developments in relationships with suppliers, or other business partners), but not including, for the avoidance of doubt, any breach or violation of a contract resulting from the Company’s execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby (g) any specific action taken at the request of Parent or Merger Sub or expressly required by this Agreement; (h) actions taken with Parent’s prior written consent; (i) the Company’s failure to take any action as a result of the prohibitions and restrictions set forth in this Agreement; (j) continued losses from operations or decreases in cash balances of the Company and its Subsidiaries (on a consolidated basis) which, in the case of any of the foregoing clauses (a) through (e) does not disproportionately affect the Company and its Subsidiaries, taken as a whole, relative to other companies in the industries in which it operates.
 
Company 2009 Notes .  “ Company 2009 Notes ” shall mean those convertible promissory notes issued pursuant to that certain Note and Warrant Purchase Agreement dated as of October 26, 2009 by and between the Company and certain of the Company’s stockholders and as amended.
 
Company 2010 Notes .  “ Company 2010 Notes ” shall mean those convertible promissory notes issued pursuant to (i) that certain Note and Warrant Purchase Agreement dated as of June 16, 2010 by and between the Company and certain of the Company’s stockholders and as amended and (ii) that certain Note and Warrant Purchase Agreement dated as of September 17, 2010 by and between the Company and certain of the Company’s stockholders.
 
Company Notes .  “ Company Notes ” shall mean the Company 2009 Notes, the Company 2010 Notes and any convertible promissory notes issued pursuant to the Company Financing Documents.
 
Company Option .  “ Company Option ” shall mean each option to purchase shares of Company Capital Stock (or exercisable for cash) outstanding under the Company Option Plan or otherwise.
 
Company Option Plan .  “ Company Option Plan ” shall mean the Amended and Restated 2000 Stock Incentive Plan, as amended.
 
Company Preferred Stock .  “ Company Preferred Stock ” shall mean the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.
 
Company Privacy Policy .  “ Company Privacy Policy ” shall mean each external or internal, past or present privacy policy of the Company and any Subsidiary of the Company, including any policy relating to: (a) the privacy of users of any website owned or operated by the Company or any Subsidiary of the Company; (b) the collection, storage, disclosure, and transfer of any User Data or Personal Data; and (c) any employee information.
 
Company Related Party .  “ Company Related Party ” shall mean: (a) each current executive officer or director of the Company or any Subsidiary of the Company, and (b) any owner of more than ten percent (10%) of the voting power of the outstanding capital stock of the Company.
 
Company Restricted Stock Award .  “ Company Restricted Stock Award ” shall mean any shares of Company Capital Stock outstanding immediately prior to the Effective Time that are unvested or are subject to a repurchase option, risk of forfeiture or other condition under the Company Option Plan or any applicable restricted stock purchase agreement or other agreement with the Company.
 
Company Stockholder Agreements .  “ Company Stockholder Agreements ” shall mean each of: (a) the Amended and Restated Stockholder Rights Agreement, dated as of December 14, 2007, among the Company and the persons and entities listed on Schedule A thereto, as amended, (b) the Amended and Restated Registration Rights Agreement, dated as of December 14, 2007, among the Company and the persons and entities listed on Schedule I thereto, as amended, (c) the First Refusal and Co-Sale Agreement, dated as of December 14, 2007, among the Company, the persons and entities listed on Schedule A thereto and the persons listed on Schedule B thereto, as amended, (d) the Voting Agreement, and (e) the Amended and Restated Stock Restriction Agreement, dated as of February 17, 2006, among the Company and the Stockholders (as defined therein), as amended.
 
Company Stockholder Approval .  “ Company Stockholder Approval ” shall mean approval of the adoption of this Agreement and the consummation of the transactions contemplated hereby by the Required Merger Stockholder Votes in accordance with the DGCL and the Company’s Charter Documents.
 
Company Warrant .  “ Company Warrant ” shall mean each warrant to purchase shares of Company Capital Stock (or exercisable for cash).
 
Confidentiality Agreement .  “ Confidentiality Agreement ” shall mean that certain Bilateral Confidentiality Agreement dated April 8, 2010 between Parent and the Company, as amended.
 
Consent .  “ Consent ” shall mean any approval, clearance, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).
 
Contaminant .  “ Contaminant ” includes any material, substance, chemical, gas, liquid, waste, effluent, pollutant or contaminant which, whether on its own or admixed with another, is identified or defined in or regulated by or pursuant to any Environmental Laws or which upon release into the Environment presents a danger to the Environment or to the health or safety or welfare of any Person.
 
Contract .  “ Contract ” shall mean any written, oral or other agreement, contract, subcontract, lease, license, sublease, sublicense, understanding, arrangement, instrument, note, warranty, insurance policy, benefit plan or legally binding commitment or undertaking of any nature.
 
Current Assets .  “ Current Assets ” shall mean the cash and cash equivalents of the Company, as determined in accordance with the Balance Sheet Rules.
 
Current Liabilities .  “ Current Liabilities ” shall mean the accounts payable and accrued expenses of the Company, as determined in accordance with the Balance Sheet Rules.
 
Damages .  “ Damages ” shall include any loss, damage, injury, Liability, claim, demand, settlement, judgment, award, fine, penalty, Tax, fee (including reasonable attorneys’ fees), charge, cost (including costs of investigation) or expense of any nature (excluding any consequential, incidental, indirect, punitive or special damages, decline in value and lost opportunity or profit); provided that, for the avoidance of doubt, any such damages required to be paid by an indemnitee to a third party shall be considered “Damages” subject to indemnification under the Agreement.
 
Distribution Date .  “ Distribution Date ” shall mean the Initial Distribution Date and each Post-Initial Distribution Date.
 
Eligible Stockholders .  “ Eligible Stockholders ” shall mean the Non-Dissenting Stockholders.
 
Encumbrance .  “ Encumbrance ” shall mean any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim or restriction of any nature.
 
Entity .  “ Entity ” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.
 
Environment .  “ Environment ” includes: (a) any and all buildings, structures, fixtures, fittings, appurtenances, pipes, conduits, valves, tanks, vessels and containers whether above or below ground level; and (b) ambient air, land surface, sub-surface strata, soil, surface water, ground water, river sediment, marshes, wet lands, flora and fauna.
 
Environmental Law .  “ Environmental Law ” shall mean: (a) the common law; and (b) all Legal Requirements, by-laws, orders, instruments, directives, decisions, injunctions and judgments of any government, local government, international, supranational, executive, administrative, judicial or regulatory authority or agency and all approved codes of practice (whether voluntary or compulsory) relating to the protection of the Environment or of human health or safety or welfare or to the manufacture, formulation, processing, treatment, storage, containment, labeling, handling, transportation, distribution, recycling, reuse, release, disposal, removal, remediation, abatement or clean-up of any Contaminant or to the packaging of any product, and any amendment thereto and any and all regulations, orders and notices made or served thereunder or pursuant thereto).
 
Environmental Licenses .  “ Environmental License ” means any Consent or Governmental Approval required by or pursuant to any applicable Environmental Laws.
 
Environmental Release .  “ Environmental Release ” means the spilling, leaking, pumping, pouring, emitting, releasing, emptying, discharging, injecting, escaping, leaching, dumping, leaving, discarding or disposing of any Contaminant into or upon the Environment.
 
ERISA .  “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.
 
Exchange Act .  “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
FDA .  “ FDA ” shall mean the United States Food and Drug Administration.
 
Final Resolution . “ Final Resolution ” (a) a final, non-appealable order or judgment from a court of competent jurisdiction that resolves any dispute arising under, in connection with or relating to this Agreement or (b) a written agreement executed by Parent and the Stockholders’ Agent that resolves any dispute arising under, in connection with or relating to this Agreement.
 
GAAP .  “ GAAP ” shall mean generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, that are applicable to the circumstances of the date of determination, consistently applied.
 
Governmental Authorization .  “ Governmental Authorization ” shall mean (a) any permit, license, certificate, franchise, permission, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) any right under any Contract with any Governmental Body.
 
Governmental Body .  “ Governmental Body ” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Entity and any court or other tribunal).
 
Holdback Per Share Value.   “ Holdback Per Share Value ” shall mean with respect to the Holdback Merger Consideration (a) prior to the conversion of the Parent Series B Preferred Stock into Parent Common Stock, the sum of (i) the then current Stated Value (as defined in the Articles of Amendment) per share of Parent Series B Preferred Stock, plus (ii) any accrued dividends on a share of Parent Series B Preferred Stock, plus (iii) the value of any cash dividends previously paid on a share of Parent Series B Preferred Stock as of the applicable determination date; and (b) following the conversion of the Parent Series B Preferred Stock into Parent Common Stock, the sum of (i) the Stated Value per share of Parent Series B Preferred Stock as of the date of such conversion, plus (ii) any accrued dividends on a share of Parent Series B Preferred Stock as of the date of such conversion, plus (iii) the value of any cash dividends previously paid on a share of Parent Series B Preferred Stock as of the date of conversion, plus (iv) the value of any dividends previously paid on the share(s) of Parent Common Stock issued upon conversion of the Parent Series B Preferred Stock, provided that the Holdback Per Share Value shall be equitably adjusted to reflect the effect of any stock split, reverse stock split, stock dividend, reorganization, recapitalization, reclassification or similar change with respect to the shares of Parent Series B Preferred Stock or Parent Common Stock.
 
Holdback Merger Consideration .  “ Holdback Merger Consideration ” shall mean with respect to each share of Company Capital Stock the number of shares of Parent Series B Preferred Stock representing the pro rata portion of the Aggregate Holdback Share Amount to be delivered with respect to such share of Company Capital Stock in accordance with Article 6.
 
Indemnitees . “ Indemnitees ” shall mean the Parent Indemnitees and the Stockholder Indemnitees, as applicable.
 
Indemnitors . “ Indemnitors ” shall mean the Stockholder Indemnitors or Parent, as the case may be.
 
Indebtedness .  “ Indebtedness ” shall mean, with respect to any Person, (a) all indebtedness of such Person, whether or not contingent, for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services, (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (h) all indebtedness of others referred to in clauses (a) through (g) above guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or purchase such indebtedness or to advance or supply funds for the payment or purchase of such indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such indebtedness or to assure the holder of such indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss, and (i) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any lien, mortgage or other encumbrance on property (including accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness.
 
Intellectual Property .  “ Intellectual Property ” shall mean all rights in, to or arising out of (a) United States, international or foreign patent, utility model or registered design or any applications therefore and any and all reissues, re-examinations, divisions, continuations, renewals, extensions and continuations-in-part or their international equivalent thereof, and (b) invention disclosures, improvements, proprietary information, know-how, technology, formulations, compounds, materials, protocols, methodologies, processes, techniques, training protocols and similar methods and processes, algorithms, APIs, ideas, solutions, test results of any kind, adaptations, derivations, documentation, libraries, apparatus, circuit designs and assemblies, gate arrays, net lists, test vectors, data, databases, data collections, diagrams, formulae, inventions (whether or not patentable in any country), know-how, logos, marks (including brand names, product names, logos, and slogans), methods, network configurations and architectures, processes, proprietary information, protocols, schematics, specifications, software, software code (in any form, including source code and executable or object code), subroutines, techniques, user interfaces, URLs, web sites, works of authorship and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as instruction manuals, laboratory notebooks, prototypes, samples, studies and summaries).
 
Intellectual Property Rights .  “ Intellectual Property Rights ” shall mean all rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights and moral rights; (b) trademark and trade name rights and similar rights; (c) trade secret rights; (d) patent and industrial property rights; (e) other proprietary rights in Intellectual Property; and (f) rights in or to registrations, renewals, extensions, combinations, divisions, and reissues of, and applications for, any of the rights referred to in clauses “ (a) ” through “ (e) ” above.
 
Knowledge .  An individual shall be deemed to have “ Knowledge ” of a particular fact or other matter if such individual is actually aware of such fact or other matter after due and reasonable inquiry.  The Company shall be deemed to have “ Knowledge ” of a particular fact or other matter if any Person identified on Annex II to the Agreement under the heading “Company Knowledge” has Knowledge of such fact or other matter.  Parent shall be deemed to have “ Knowledge ” of a particular fact or other matter if any Person identified on Annex II to the Agreement under the heading “Parent Knowledge” has Knowledge of such fact or other matter.
 
Leased Real Property .  “ Leased Real Property ” shall mean the Company Leased Real Property and/or the Parent Leased Real Property.
 
Legal Proceeding .  “ Legal Proceeding ” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.
 
Legal Requirement .  “ Legal Requirement ” shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling, order or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.
 
Liability .  “ Liability ” shall mean any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.
 
Merger Consideration .  “ Merger Consideration ” shall mean the Closing Merger Consideration and the Holdback Merger Consideration.
 
Merger Consideration Certificate . “ Merger Consideration Certificate ” shall mean a copy of Exhibit A, accompanied by a certificate duly executed on behalf of the Company by the chief financial officer of the Company confirming the information on such exhibit.
 
Net Working Capital . “ Net Working Capital ” shall mean Current Assets minus Current Liabilities as determined in accordance with the Balance Sheet Rules, each calculated immediately before and without giving effect to, the Closing.
 
Non-Dissenting Stockholder .  “ Non-Dissenting Stockholder ” shall mean each stockholder of the Company that does not perfect such stockholder’s appraisal rights under the DGCL and is otherwise entitled to receive consideration pursuant to Arti cle ‎1.
 
Organizational Document .  “ Organizational Document ” shall mean, with respect to any Person that is not a natural person, such Person’s charter, certificate or articles of incorporation or formation, bylaws, memorandum and articles of association, operating agreement, limited liability company agreement, partnership agreement, limited partnership agreement, limited liability partnership agreement or other constituent or organizational documents of such Person.
 
Parent Capital Stock .  “ Parent Capital Stock ” shall mean the shares of Parent Common Stock and Parent Preferred Stock.
 
Parent Common Stock .  “ Parent Common Stock ” shall mean the common stock, par value $0.01 per share, of Parent together with each Right relating thereto.
 
Parent Common Stock Price .  “ Parent Common Stock Price ” shall mean $0.7114, provided that such amount shall be adjusted to appropriately and equitably reflect any stock split, division or subdivision of shares, stock dividend, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction with respect to the Parent Common Stock.
 
Parent Contract .  “ Parent Contract ” shall mean any Contract to which Parent or any of its Subsidiaries is a party.
 
Parent’s Current Products .  “ Parent’s Current Products ” shall mean each of IPLEX, INSM-18 and rhIGFBP-3 and all inventory, equipment and other tangible assets and all Intellectual Property and Intellectual Property Rights, in each case to the extent directly related thereto.
 
Parent Employee .  “ Parent Employee ” shall mean any current or former employee, independent contractor or director of Parent or any Subsidiary of Parent.
 
Parent Employee Agreement .  “ Parent Employee Agreement ” shall mean each management, employment, severance, change in control, consulting, relocation, repatriation or expatriation agreement or other Contract between Parent or any Subsidiary of Parent, on the one hand, and any Parent Employee, on the other hand, other than any such management, employment, severance, change in control, consulting, relocation, repatriation or expatriation agreement or other Contract with a Parent Employee which is terminable “at will” without any obligation on the part of Parent or any Subsidiary of Parent to make any payments or provide any benefits in connection with such termination.
 
Parent Employee Plan .  “ Parent Employee Plan ” shall mean any plan, program, policy, practice, Contract or other arrangement providing for compensation, severance, termination pay, deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or unfunded, that is or has been maintained, contributed to, or required to be contributed to, by Parent or any Subsidiary of Parent for the benefit of any Parent Employee, or with respect to which Parent or any Subsidiary of Parent has or may have any Liability or obligation, excluding any Parent Employee Agreement, but including any employee benefit plans as defined in Section 3 of ERISA.
 
Parent Indemnitees .  “ Parent Indemnitees ” shall mean Parent and its affiliates (including, after the Effective Time, the Surviving Corporation) and their respective officers, directors, employees, successors and assigns; provided, however, that the Eligible Stockholders shall not be deemed to be “ Parent Indemnitees .”
 
Parent IP .  “ Parent IP ” shall mean all Intellectual Property and Intellectual Property Rights in which Parent or any Subsidiary of Parent has (or purports to have) an ownership interest or an exclusive license or similar exclusive right.
 
Parent Leased Real Property .  “ Parent Leased Real Property ” shall mean all real property leased to Parent and its Subsidiaries, including all buildings, structures, fixtures and other improvements leased to Parent and its Subsidiaries.
 
Parent Material Adverse Effect .  “ Parent Material Adverse Effect ” shall mean any Effect that (considered together with all other Effects) is, or would reasonably be expected to be, materially adverse to: (a) the business, condition (financial or otherwise), assets, Liabilities or results of operations of Parent and its Subsidiaries, taken as a whole or (b) the ability of Parent or Merger Sub to perform any of its material covenants or obligations under this Agreement; provided that none of the following shall be taken into account in determining whether there has been a Parent Material Adverse Effect: any Effect to the extent attributable to: (a) changes in general economic, business or political conditions or the securities markets in general; (b) changes in or affecting the industries in which Parent and its Subsidiaries operate; (c) an earthquake or other natural disaster; (d) a change in applicable Legal Requirements or accounting rules, (e) the commencement, continuation or escalation of a war, civil unrest, material armed hostilities or other material international or national calamity or act of terrorism, (f) changes, effects or circumstances resulting from the announcement or pendency of this Agreement or the consummation of the transactions contemplated by this Agreement or compliance with the terms of this Agreement (including the loss or departure of employees or adverse developments in relationships with suppliers, or other business partners), but not including, for the avoidance of doubt, any breach or violation of a contract resulting from the Parent’s execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby (g) actions taken with the Company’s prior written consent; (h) any decreases in revenue from Parent’s Current Products; or (i) Parent’s failure to take any action as a result of the prohibitions and restrictions set forth in this Agreement, in the case of any of the foregoing clauses (a) through (e) does not disproportionately affect Parent and its Subsidiaries, taken as a whole, relative to other companies in the industries in which it operates.
 
Parent Net Cash .  “ Parent Net Cash ” shall mean the amount of (A) Parent’s cash and cash equivalents and current amounts receivable of Parent, as reflected in Parent’s financial records as of the Closing Date, minus (B) the cash Liabilities of Parent as reflected in Parent’s financial records as of the Closing Date, each calculated taking into account only the line items set forth in the calculation of Parent Net Cash in Part 3.5(d) of the Parent Disclosure Schedule and applying the principles and methods applied to the calculation set forth in Part 3.5(d) of the Parent Disclosure Schedule.
 
Parent Option .  “ Parent Option ” shall mean each option to purchase shares of Parent Common Stock (or exercisable for cash) outstanding under the Parent Stock Option Plans or otherwise.
 
Parent Related Party .  “ Parent Related Party ” shall mean: (a) each current executive officer or director of Parent or any Subsidiary of Parent; and (b) any owner of more than ten percent (10%) of the voting power of the outstanding capital stock of Parent.
 
Parent Series B Preferred Stock .  “ Parent Series B Preferred Stock ” shall mean the Series B Conditional Convertible Preferred Stock, par value $0.01 per share, of Parent.
 
Permitted Encumbrances .  “ Permitted Encumbrances ” shall mean (a) Encumbrances for Taxes, assessments and other governmental levies, fees or charges not yet due and payable or which the taxpayer is contesting in good faith; (b) cashiers’, landlords’, mechanics’, materialmens’, carriers’, workmens’, repairmens’, contractors’ and warehousemens’ Liens and similar Liens incurred in the ordinary course of business for amounts which are not delinquent and which would not, in the aggregate, be material; (c) zoning, building codes and other land use Legal Requirements regulating the use or occupancy of any Company Leased Property or Parent Leased Property or the activities conducted thereon which are imposed by any Governmental Body having jurisdiction over such Leased Real Property, and which are not violated by the current use or occupancy of such Leased Real Property or the operation of the Company and its Subsidiaries or the Parent and its Subsidiaries, as applicable; (d) purchase money Encumbrances securing rental payments under capital lease or operating lease arrangements; (e) minor Encumbrances that have arisen in the ordinary course of business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of the Company or any of its Subsidiaries; and (f) easements, covenants, conditions, rights of way, restrictions and other similar charges and encumbrances of record and other encroachments and title and survey defects, none of which interfere materially with the ordinary conduct of the Company and its Subsidiaries or the Parent and its Subsidiaries, as applicable, or detract materially from the use, occupancy, value or marketability of title of the assets subject thereto.
 
Person .  “ Person ” shall mean any individual, Entity or Governmental Body.
 
Personal Data .  “ Personal Data ” shall mean a natural person’s name, street address, telephone number, e-mail address, photograph, social security number, driver’s license number, passport number, or customer or account number, or any other piece of information that allows the identification of a natural person.
 
Pro Rata Ratio .  “ Pro Rata Ratio ” means the ratio set forth on Exhibit A with respect to each share of Company Capital Stock, which shall be used to determine the pro rata share of the Aggregate Hold Back Amount to be delivered with respect each such share of Company Capital Stock in accordance with Article 7.
 
Registered IP .  “ Registered IP ” shall mean all Intellectual Property Rights in Company-Owned IP that are registered, filed or issued under the authority of, with or by any Governmental Body, including all patents, registered copyrights, registered trademarks and all applications for any of the foregoing.
 
Representatives .  “ Representatives ” shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives.
 
Right .  “ Right ” shall mean each right to purchase a share of Parent Common Stock pursuant to the Parent Rights Agreement.
 
Sarbanes-Oxley Act .  “ Sarbanes-Oxley Act ” shall mean the Sarbanes-Oxley Act of 2002.
 
SEC .  “ SEC ” shall mean the Securities and Exchange Commission.
 
Securities Act .  “ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
 
Series A Preferred Stock .  “ Series A Preferred Stock ” shall mean the shares of Series A Preferred Stock of the Company, par value of $0.001 per share.
 
Series B Preferred Stock .  “ Series B Preferred Stock ” shall mean the shares of Series B Preferred Stock of the Company, par value of $0.001 per share.
 
Series C Preferred Stock .  “ Series C Preferred Stock ” shall mean the shares of Series C Preferred Stock of the Company, par value of $0.001 per share.
 
Series D Preferred Stock .  “ Series D Preferred Stock ” shall mean the shares of Series D Preferred Stock of the Company, par value of $0.001 per share.
 
Stockholder Indemnitees .  “ Stockholder Indemnitees ” shall mean each Eligible Stockholder and such Eligible Stockholder’s respective Affiliates, and their respective successors and assigns.
 
Subsidiary .  An Entity shall be deemed to be a “ Subsidiary ” of another Person if such Person directly or indirectly owns or purports to own, beneficially or of record: (a) an amount of voting securities of or other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body; or (b) at least 50% of the outstanding equity, voting, beneficial or financial interests in such Entity.
 
Tax .  “ Tax ” or “ Taxes ” shall mean, however denominated, any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, escheats, unclaimed property, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp and taxes arising under Treasury Regulation Section 1.1502-6 (or any comparable state or local Law) as a transferee or successor, by contract, or otherwise), together with any interest thereon, penalties, fines, Damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by any federal, state or local taxing authority of any jurisdiction, regardless of whether any such taxes, impositions, duties, contributions, charges and levies are chargeable directly or primarily against or attributable directly or primarily to the Company or any of its Subsidiaries, or any other Person and of whether any amount in respect of any of them is recoverable from any other Person.
 
Tax Return .  “ Tax Return ” shall mean any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate, claim for refund or other document or information, including any schedule or attachment thereto or any amendment thereof, filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.
 
User Data .  “ User Data ” shall mean any Personal Data or other data or information collected by or on behalf of the Company or any of its Subsidiaries from users of any website owned or operated by the Company or any Subsidiary of the Company.
 
Venture Loan .  “ Venture Loan ” shall mean the Venture Loan and Security Agreement dated August 27, 2008 by and among CIT Healthcare LLC and Compass Horizon Funding Company LLC,  as lenders, and the Company, as borrower.
 
Voting Agreement .   “ Voting Agreement ” shall mean the Amended and Restated Voting Agreement, dated as of December 14, 2007, among the Company, the persons and entities listed on Schedule I thereto and the Common Holders (as defined therein).
 
In addition, the following terms have the meanings set forth in the Sections indicated in the table below:
 
Defined Term
Location of Definition
   
401(k) Plans                                                                                              
Section 4.1(a)
Aggregate Holdback Share Amount                                                                                                
Section 6.1
Aggregate Initial Distribution Date Amount                                                                                              
Section 6.3(a)
Aggregate Post-Initial Distribution Date Amount                                                                                              
Section 6.3(b)
Agreed Amount                                                                                                
Section 6.2 (b)
Assets                                                                                              
Section 2.7(a)
Certificate of Merger                                                                                              
Section 1.3
Charter Documents                                                                                              
Section 2.2
Claim                                                                                              
Section 6.2(a)
Claim Notice                                                                                              
Section 6.2(a)
Claim Notice Recipient                                                                                              
Section 6.2(a)
Claimed Amount                                                                                              
Section 6.2(a)
Closing                                                                                              
Section 1.3
Closing Date                                                                                              
Section 1.3
Company                                                                                              
Preamble
Company Board                                                                                              
Section 1.6
Company Databases                                                                                              
Section 2.10(l)
Company Employees                                                                                              
Section 4.1(b)
Company Financial Statements                                                                                              
Section 2.4(a)
Company IP Form Contracts                                                                                              
Section 2.10(e)
Company Leased Real Property                                                                                              
Section 2.9(b)
Company Material Contracts                                                                                              
Section 2.11(a)
Company Nominee                                                                                              
Section 4.4(a)
Company-Owned IP                                                                                              
Section 2.10(f)(i)
Company Stock Certificates                                                                                              
Section 1.9(c)
Company Stock Option Plans                                                                                              
Section 1.6(a)
Company Subsidiary                                                                                              
Section 2.1(d)
Contested Amount                                                                                              
Section 6.2(b)
Delaware Law                                                                                              
Recitals
DGCL                                                                                              
Recitals
DLLC                                                                                              
Recitals
Disclosure Schedule                                                                                              
Article 2 Preamble
Dispute Period                                                                                              
Section 6.2(b)
Dissenting Shares                                                                                              
Section 1.8 (a)
Effective Time                                                                                              
Section 1.3
FD&C Act                                                                                              
Section 2.12(a)
First Merger                                                                                              
Recitals
Further Information Notice                                                                                              
Section 6.2(c)
Grant Date                                                                                              
Section 2.3(b)
Grants                                                                                              
Section 2.13(b)
Indemnitors                                                                                              
Section 5.2(a)
Initial Distribution Date                                                                                              
Section 6.3(a)
Letter of Transmittal                                                                                              
Section 1.9(a)
LLC Sub                                                                                              
Preamble
LLC Sub Certificate                                                                                              
Section 1.4(b)
LLC Sub Operating Agreement                                                                                              
Section 1.4(b)
Mergers                                                                                              
Recitals
Merger Sub                                                                                              
Preamble
Merger Sub Common Stock                                                                                              
Section 3.7
Parent                                                                                              
Preamble
Parent Board                                                                                              
Section 4.3
Parent Balance Sheet                                                                                              
Section 3.14
Parent Cap                                                                                              
Section 5.3(c)
Parent Charter Documents                                                                                              
Section 3.10(c)
Parent Disclosure Schedule                                                                                              
Article 3 Preamble
Parent Material Contracts                                                                                              
Section 3.23(a)
Parent Financial Statements                                                                                              
Section 3.5(d)
Parent Preferred Stock                                                                                              
Section 3.6
Parent Rights Agreement                                                                                              
Section 3.6
Parent SEC Documents                                                                                              
Section 3.5(a)
Parent Stock Option Plans                                                                                              
Section 3.6
Parent Stockholders’ Meeting                                                                                              
Section 4.3
Parent Third Party Supplier                                                                                              
Section 3.19(f)
Parent Warrants                                                                                              
Section 3.6
Post-Initial Distribution Date                                                                                              
Section 6.3(b)
Proxy Statement                                                                                              
Section 4.3
Registration Rights Agreement                                                                                              
Recitals
Required Merger Stockholder Votes                                                                                              
Section 2.22
Response Notice                                                                                              
Section 6.2(b)
Second Certificate of Merger                                                                                              
Section 1.3
Second Effective Time                                                                                              
Section 1.3
Second Merger                                                                                              
Recitals
Stockholders’ Agent                                                                                              
Section 7.1(a)
Stockholder Indemnitors                                                                                              
Section 5.2(a)
Stockholder Proposal                                                                                              
Section 4.3
Subsidiary Capital Stock                                                                                              
Section 2.3(d)
Surviving Company                                                                                              
Recitals
Surviving Corporation                                                                                              
Recitals
Surviving LLC                                                                                              
Recitals
Tangible Property                                                                                              
Section 2.9(a)
Termination Date                                                                                              
Section 5.1(a)
Third Party Claims                                                                                              
Section 5.5
Third Party Suppler                                                                                              
Section 2.12(f)
Transfer Taxes                                                                                              
Section 4.6(b)
Unaudited Interim Balance Sheet                                                                                              
Section 2.4(a)
Unaudited Interim Balance Sheet Date                                                                                              
Section 2.4(a)
   


A-
 
 
 

ANNEX II
 
Company Knowledge
 
Timothy Whitten
 
Michio Soga
 
Renu Gupta, M.D.
 
Nicholas Gurreri
 
Walter Perkins
 

 
Parent Knowledge
 
Kevin P. Tully
 
Nicholas A. LaBella Jr.
 
Steve Glover
 


A-
 
 
 


ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION, AS AMENDED,
 of
INSMED INCORPORATED
TO CREATE A NEW SERIES OF PREFERRED STOCK
DESIGNATED AS
SERIES B CONDITIONAL CONVERTIBLE PREFERRED STOCK
 
 
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act
 

I.
 
The name of the corporation is Insmed Incorporated (the “ Company ”).
 
II.
 
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act and the authority conferred upon the Board of Directors by the Articles of Incorporation, as amended, the Articles of Incorporation are hereby amended to create a new series of shares of Preferred Stock, designated as “Series B Conditional Convertible Preferred Stock” by adding the following additional paragraph after the last paragraph of Article III:
 
10.            Series B Conditional Convertible Preferred Stock
 
(a)   Designation .  The designation of the series of preferred stock of the Company is “Series B Conditional Convertible Preferred Stock”, par value $0.01 per share (the “ Series B Preferred Stock ”).  Each share of Series B Preferred Stock shall be identical in all respects to every other share of Series B Preferred Stock.

(b)   Number of Shares .  The authorized number of shares of Series B Preferred Stock is 92,000,000.  Shares of Series B Preferred Stock that are purchased or otherwise acquired by the Company, shall revert to authorized but unissued shares of Preferred Stock.

(c)   Defined Terms .  As used herein with respect to the Series B Preferred Stock:

“ Affiliate ” shall mean, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such specified Person.  For the purposes of this definition, the term “control,” when used with respect to any specified Person, means the power to direct or cause the direction of the management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have correlative meanings.
 
“ Articles of Amendment ” shall mean these Articles of Amendment relating to the Series B Preferred Stock, as it may be amended from time to time.
 
“ Articles of Incorporation ” shall mean the Articles of Incorporation of the Company, as amended from time to time, including by these Articles of Amendment.
 
“ Beneficially Own ” shall mean “beneficially own” as defined in Rule 13d-3 under the Exchange Act.
 
“ Board of Directors ” shall mean the board of directors of the Company.
 
“ Business Day ” shall mean any day that is not a Saturday, Sunday or legal holiday in New York City or a federal holiday in the United States.
 
“ Bylaws ” shall mean the Amended and Restated Bylaws of the Company in effect on the Original Issue Date, as they may be amended from time to time.
 
“ Capital Stock ” shall mean: (1) any shares, interests, participations or other equivalents (however designated) of capital stock of a corporation; (2) any ownership interests in a Person other than a corporation, including membership interests, partnership interests, joint venture interests and beneficial interests; and (3) any warrants, options, convertible or exchangeable securities, subscriptions, rights (including any preemptive or similar rights), calls or other rights to purchase or acquire any of the foregoing.
 
“ Change of Control ” shall mean the occurrence of any of the following: (1) the direct or indirect sale, transfer, conveyance, lease or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than a pledge or grant of a security interest to a bona fide lender; (2) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), shall Beneficially Own, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, shares of the Company’s Capital Stock entitling such Person to exercise a majority of the total voting power of all classes of Voting Stock of the Company; (3) the Company merges or consolidates with or into any other “person” (as that term is used in Section 13(d)(3) of the Exchange Act) or another “person” (as that term is used in Section 13(d)(3) of the Exchange Act) merges with or into the Company and, as a result of such transaction, the shareholders of the Company immediately prior to such transaction shall Beneficially Own less than a majority of the total voting power of all classes of Voting Stock of the Company; or (4) the Company engages in any recapitalization, reclassification or other transaction in which a majority of the Common Stock is exchanged for or converted into cash, securities or other property, in each case, other than a merger, consolidation, recapitalization, reclassification or other transaction (A) that does not result in a reclassification, conversion, exchange or cancellation of the Company’s outstanding Common Stock; (B) which is effected solely to change the Company’s jurisdiction of incorporation and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity; or (C) where the Voting Stock of the Company outstanding immediately prior to such transaction is converted or exchanged for Voting Stock of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance).

For purposes of this definition, (i) any direct or indirect holding company of the Company shall not itself be considered a “person” or “group” for purposes of clauses (2) and (3) above, provided   that no “person” or “group” (other than another such holding company) Beneficially Owns, directly or indirectly, a majority of the voting power of the Voting Stock of such holding company, and a majority of the Voting Stock of such holding company immediately following it becoming the holding company of the Company is Beneficially Owned by the Persons who Beneficially Owned the voting power of the Voting Stock of the Company immediately prior to it becoming such holding company and (ii) a Person shall not be deemed to have beneficial ownership of securities subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement.
 
“ Close of Business ” shall mean 5:00 p.m., eastern time, on any Business Day.
 
“ Closing Price ” shall mean, with respect to a share of Capital Stock of a Person, on the applicable Trading Day (a) if the Capital Stock is listed on a national securities exchange, the closing price per share of Capital Stock on such date published in The Wall Street Journal (National Edition) or, if no such closing price on such date is published in The Wall Street Journal (National Edition) , the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which the Capital Stock is then listed or admitted to trading; or (b) if the Capital Stock is not listed or admitted to trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices on the automatic quotation system on which the Capital Stock is then listed, as reported by Bloomberg Financial Markets (or any successor thereto); or (c) if on any such date the Capital Stock is not quoted on any such automatic quotation system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Capital Stock selected by the Company; or (d) if none of (a), (b) or (c) is applicable, a market price per share determined in good faith by the Board of Directors and the holders of at least 62.5% of the then outstanding Series B Preferred Stock.
 
“ Code ” shall mean the Internal Revenue Code of 1986, as amended.
 
“ Commission ” shall mean the U.S. Securities and Exchange Commission, including the staff thereof.
 
“ Common Stock ” shall mean the common stock, par value $0.01 per share, of the Company.
 
“ Company ” shall mean Insmed Incorporated, a corporation organized and existing under the laws of the Commonwealth of Virginia, and any successor thereof.
 
“ Conversion Price ” shall mean $0.7114, subject to adjustment as set forth in Paragraph (g) of this Section 10.
 
“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.
 
“ Governmental Authority ” means: (1) any federal, state, local, foreign or international government or governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court, tribunal, arbitrator or arbitral body (public or private); (2) any self-regulatory organization; or (3) any political subdivision of any of the foregoing.
 
“ Junior Stock ” shall mean the Common Stock, the Series A Preferred Stock and any other class or series of Capital Stock that ranks junior to the Series B Preferred Stock (i) as to the payment of dividends or (ii) as to the distribution of assets on any liquidation, dissolution or winding up of the Company, or both.
 
“ Mandatory Conversion Date ” shall mean the date the Shareholder Approval is obtained.
 
“ Milestone Date ” shall mean the earlier of (i) December 1, 2011 and (ii) the first date upon which at least 50 patients have been given at least one dose in Phase III clinical trials for Arikace™, but in no event earlier than September 1, 2011.
 
“ Original Issue Date ” shall mean December 1, 2010.
 
“ Original Holders ” shall mean the holders of the Series B Preferred Stock as of the Original Issue Date and their respective Affiliates and any limited partners, members or other similar equity holders of any holder of Series B Preferred Stock as of the Original Issue Date that receive shares of Series B Preferred Stock as a distribution pursuant to such holder’s limited partnership agreement, limited liability company agreement, operating agreement or similar governing document.
 
“ Parity Stock ” shall mean any class or series of Capital Stock that ranks equally with the Series B Preferred Stock both (i) in the priority of payment of dividends and (ii) in the distribution of assets upon any liquidation, dissolution or winding up of the Company (in each case, without regard to whether dividends accrue cumulatively or non-cumulatively).
 
“ Person ” means any natural person, business, corporation, company, partnership, association, limited liability company, limited partnership, limited liability partnership, joint venture, business enterprise, trust or other legal entity, including any Governmental Authority.
 
“ Preferred Stock ” shall mean any and all series of preferred stock of the Company, including the Series B Preferred Stock.
 
“ Record Date ” shall mean the date fixed for determination of shareholders of the Company entitled to notice of or to vote at any meeting of shareholders of the Company or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of the shareholders of the Company for any other proper purpose (whether such date is fixed by the Board of Directors or by statute, contract, these Articles of Amendment or otherwise).
 
“ Series A Preferred Stock ” shall mean the Series A Junior Participating Preferred Stock of the Company.
 
“ Series B Preferred Stock ” shall have the meaning ascribed to it in Paragraph (a) of this Section 10.
 
“ Shareholder Approval ” shall mean all approvals of the shareholders of the Company necessary to approve, for purposes of the NASDAQ Listing Rules, the conversion of the Series B Preferred Stock into shares of Common Stock.
 
“ Stated Value ” shall mean $0.7114 per share of Series B Preferred Stock, which may increased as provided in Paragraph (d)(2) of this Section 10. The Stated Value shall be equitably adjusted from time to time by the Board of Directors to reflect fully the appropriate effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Series B Preferred Stock), reorganization, recapitalization, reclassification or similar change with respect to shares of Series B Preferred Stock having a Record Date on or after the Original Issue Date.
 
“ Subsidiary ” shall mean any company, partnership, limited liability company, joint venture, joint stock company, trust, unincorporated organization or other entity for which the Company owns at least 50% of the Voting Stock of such entity.
 
“ Trading Day ” shall mean any Business Day on which the Common Stock is traded, or able to be traded, on the principal national securities exchange on which the Common Stock is listed or admitted to trading; provided that if the Common Stock is not listed or admitted to trading on a national securities exchange, Trading Day shall mean any Business Day on which the NASDAQ Capital Market is generally open.
 
“ Voting Stock ” shall mean Capital Stock of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances (determined without regard to any classification of directors) to elect one or more members of the Board of Directors (without regard to whether or not, at the relevant time, Capital Stock of any other class or classes (other than Common Stock) shall have or might have voting power by reason of the happening of any contingency).
 
(d)   Dividends .
 
1.           In the event that the Company shall declare a dividend or make any other distribution (including in cash, in Capital Stock (including any options, warrants or other rights to acquire Capital Stock) of the Company, whether or not pursuant to a shareholder rights plan, “poison pill” or similar arrangement, or other property or assets) to holders of Common Stock, then the Board of Directors shall declare, and the holder of each share of Series B Preferred Stock shall be entitled to receive, a dividend or distribution, as applicable, in an amount equal to the amount of such dividend or distribution, as applicable, received by a holder of the number of shares of Common Stock for which such share of Series B Preferred Stock is convertible on the Record Date for such dividend or distribution (whether or not such holder of shares of Series B Preferred Stock had been eligible to convert its shares of Series B Preferred Stock on such date).  Any such amount shall be paid to the holders of shares of Series B Preferred Stock at the same time such dividend or distribution, as applicable, is paid to holders of Common Stock.

 
2.           Commencing on the Milestone Date, in addition to participation in dividends on Common Stock as set forth in Paragraph (d)(1) of this Section 10, holders of shares of Series B Preferred Stock shall be entitled to receive, on each share of Series B Preferred Stock, dividends at an annual rate of 12.5% of the Stated Value payable at the end of each six month period following the Milestone Date.  Dividends payable pursuant to this Paragraph (d)(2) with respect to any share of Series B Preferred Stock shall accrue daily from and after the Milestone Date, whether or not the Company has funds legally available for such dividends or such dividends are declared and shall be calculated on the basis of a 360-day year.  Dividends that are payable on shares of Series B Preferred Stock pursuant to this Paragraph (d)(2) shall be payable in cash except that, at the option of the Board of Directors, such dividends may be paid in kind by increasing the Stated Value by the amount of such dividend.  Dividends that are payable on shares of Series B Preferred Stock shall be payable to holders of record of the shares of Series B Preferred Stock as they appear on the stock register of the Company on the Record Date for such dividend, which shall be no more than sixty (60) days or less than ten (10) days prior to the date fixed for payment thereof.
 
3.           The holders of shares of Series B Preferred Stock shall not be entitled to receive any dividends or other distributions except as provided herein.
 
(e)   Liquidation Rights .
 
1.            Voluntary or Involuntary Liquidation .  In the event of (i) any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, or (ii) any Change of Control (clauses (i) and (ii) are herein referred to as a “ Deemed Liquidation Event ”), holders of the Series B Preferred Stock shall be entitled to receive for each share of Series B Preferred Stock, out of the assets of the Company or proceeds thereof (whether capital or surplus) available for distribution to shareholders of the Company, and after satisfaction of all liabilities and obligations to creditors of the Company, on par with each share of Parity Stock but before any distribution of such assets or proceeds is made to or set aside for the holders of Junior Stock, an amount equal to the greater of (x) the sum of (A) the Stated Value per share of Series B Preferred Stock plus (B) an amount per share of Series B Preferred Stock equal to the accrued but unpaid dividends to which such holder of shares of Series B Preferred Stock is entitled to receive pursuant to Paragraph (d)(2) of this Section 10 to but excluding the date fixed for such Deemed Liquidation Event, if any, and (y) the per share amount of all cash, securities and other property (such securities or other property having a value equal to its fair market value as reasonably determined by the Board of Directors) to be distributed in respect of the Common Stock that such holder of Series B Preferred Stock would have been entitled to receive had it converted such Series B Preferred Stock immediately prior to the date fixed for such Deemed Liquidation Event (whether or not such holder of shares of Series B Preferred Stock had been eligible to convert its shares of Series B Preferred Stock on such date) (such greater amount being the “ Series B Liquidation Amount ”).  To the extent such amount is paid in full to all holders of Series B Preferred Stock and all the holders of Parity Stock, the holders of Junior Stock of the Company shall be entitled to receive all remaining assets of the Company (or proceeds thereof) according to their respective rights and preferences.
 
2.            Partial Payment .  If, in connection with any distribution described in Paragraph (e)(1) of this Section 10, the assets of the Company or proceeds thereof are not sufficient to pay the Series B Liquidation Amount in full to all holders of Series B Preferred Stock and all holders of Parity Stock, if any, the amounts paid to the holders of Series B Preferred Stock and to the holders of all such other Parity Stock shall be paid pro rata in accordance with the respective aggregate amounts payable to the holders of Series B Preferred Stock and the amounts payable to holders of all such other Parity Stock pursuant to Paragraph (e)(1) of this Section 10.
 
(f)   Conversion .
 
1.            Mandatory Conversion .  Each share of Series B Preferred Stock shall be automatically converted, immediately at the Close of Business on the Mandatory Conversion Date, with no further action required to be taken by the Company or the holder thereof, into the number of shares of Common Stock equal to the number obtained by dividing (x) the sum of (A) the Stated Value plus (B) except to the extent paid in cash as contemplated by Paragraph (f)(2) of this Section 10 at the time of the conversion, an amount per share of Series B Preferred Stock equal to the accrued but unpaid dividends to which such holder of shares of Series B Preferred Stock is entitled to receive pursuant to Paragraph (d)(2) of this Section 10 through, but excluding, the conversion date, if any, by (y) the Conversion Price in effect at such time.  Immediately upon conversion as provided herein (i) each holder of Series B Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon conversion of such holder’s shares of Series B Preferred Stock, notwithstanding that the share register of the Company shall then be closed or that book-entry evidence shall not then actually be delivered to such Person and (ii) each converted shares of Series B Preferred Stock as provided herein shall be retired and cancelled automatically with no further action required to be taken by the Company or the holder thereof.  As promptly as practicable on or after the Mandatory Conversion Date (and in any event no later than five Trading Days thereafter), the Company shall provide notice to the holders of the Series B Preferred Stock of the occurrence of the Mandatory Conversion Date, which notice shall set forth procedures for the surrender of the shares of Series B Preferred Stock which have been converted to the office of the Company.  The Company shall promptly issue the number of whole shares of Common Stock issuable upon conversion against the surrender of the shares of Series B Preferred Stock.  Any shares of Common Stock issuable upon conversion of shares of Series B Preferred Stock shall be delivered by the Company to the appropriate holder on a book-entry basis.  To the extent that Company has a shareholders rights plan, “poison pill” or similar arrangement in effect with respect to the Common Stock on the Mandatory Conversion Date, upon conversion of any shares of the Series B Preferred Stock, the holders thereof will receive, in addition to the shares of Common Stock, the rights under such shareholders rights plan, “poison pill” or similar arrangement.
 
2.            Option to Pay Accrued Dividends in Cash .  When shares of Series B Preferred Stock are converted pursuant to this Paragraph (f), all dividends accrued but not yet paid on the Series B Preferred Stock so converted from and including the Milestone Date to and including the date of conversion may, at the election of the Company, be paid, in whole or in part, in cash; it being understood that the amount of any accrued dividend so paid in cash shall reduce the amount added to the Stated Value pursuant to clause (B) of Paragraph (f)(1) of this Section 10.
 
3.            Common Stock Reserved for Issuance .  The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock and Series A Preferred Stock, solely for issuance upon the conversion of the Series B Preferred Stock, such number of shares of Common Stock (and associated rights evidenced by the Series A Preferred Stock) as shall from time to time be issuable upon the conversion of all the shares of Series B Preferred Stock then outstanding.  Any shares of Common Stock (and associated rights evidenced by the Series A Preferred Stock) issued upon conversion of Series B Preferred Stock shall be (i) duly authorized, validly issued and fully paid and nonassessable, (ii) shall rank pari passu with the other shares of Common Stock outstanding from time to time and (iii) shall be free from any preemptive rights or similar rights and any liens, charges, security interest or other encumbrances (unless created by the holder thereof).  The Company hereby covenants and agrees that, if at any time the Common Stock shall be listed on The NASDAQ Capital Market or any other national securities exchange or automated quotation system, the Company will, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all the Common Stock issuable upon conversion of the Series B Preferred Stock; provided, however , that if the rules of such exchange or automated quotation system permit the Company to defer the listing of such Common Stock until the first conversion of Series B Preferred Stock into Common Stock in accordance with the provisions hereof, the Company covenants to list such Common Stock issuable upon conversion of the Series B Preferred Stock in accordance with the requirements of such exchange or automated quotation system at such time.
 
4.            Taxes .  The Company shall pay any and all transfer taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Series B Preferred Stock.  The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Series B Preferred Stock so converted were registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.
 
5.            No Impairment .  The Company will not by amendment of its Articles of Incorporation or through any or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Articles of Amendment and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holders of the Series B Preferred Stock against impairment.
 
6.            Fractional Shares .   No fractional shares of Common Stock shall be issued upon conversion of Series B Preferred Stock but, in lieu of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of Series B Preferred Stock so converted at one time by the same holder, the Company shall pay in cash an amount equal to the product of (i) the Closing Price of a share of Common Stock on the last Trading Day before the Mandatory Conversion Date and (ii) such fraction of a share of Common Stock otherwise issuable upon conversion of the shares of Series B Preferred Stock. 
 
(g)   Conversion Price Adjustments .  The Conversion Price shall be adjusted from time to time (successively and for each event described) by the Company as follows:
 
1.         In the event that the Company shall at any time or from time to time after the Original Issue Date (i) pay a dividend or make a distribution (other than a dividend or distribution paid or made to holders of shares of Series B Preferred Stock in the manner provided in Paragraph (d)(1) of this Section 10) on the outstanding shares of Common Stock in capital stock (which, for purposes of this Paragraph (g) shall include, without limitation, any options, warrants or other rights to acquire Capital Stock) of the Company, (ii) subdivide the outstanding shares of Common Stock into a larger number of shares, (iii) combine the outstanding shares of Common Stock into a smaller number of shares, (iv) issue any shares of its capital stock in a reclassification of the Common Stock or (v) pay a dividend or make a distribution (other than a dividend or distribution paid or made to holders of shares of Series B Preferred Stock in the manner provided in Paragraph (d)(1) of this Section 10) on the outstanding shares of Common Stock in securities of the Company pursuant to a shareholder rights plan, “poison pill” or similar arrangement, then, and in each such case, the Conversion Price in effect immediately prior to such event shall be increased or decreased, as applicable, (and any other appropriate actions shall be taken by the Company) so that the holder of any share of Series B Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Company that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Series B Preferred Stock been converted immediately prior to the occurrence of such event (whether or not such holder of shares of Series B Preferred Stock had been eligible to convert its shares of Series B Preferred Stock on such date).  An adjustment made pursuant to this Paragraph (g)(1) shall become effective retroactively (i) in the case of any such dividend or distribution, to a date immediately following the Close of Business on the Record Date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (ii) in the case of any such subdivision, combination or reclassification, to the Close of Business on the day upon which such corporate action becomes effective.
 
2.           In the event that the Company, at any time or from time to time after the Original Issue Date, shall take any action affecting its Common Stock similar to or having an effect similar to any of the actions described in Paragraph (g)(1) of this Section 10 (but not including any action described in any such Paragraph and without any duplication of any adjustments made pursuant to such Paragraphs) and the Board of Directors in good faith determines that it would be equitable in the circumstances to adjust the Conversion Price as a result of such action, then, and in each such case, the Conversion Price shall be decreased, if applicable, in such manner and at such time as the Board of Directors in good faith determines would be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be sent to the holders of the Series B Preferred Stock).  For the avoidance of doubt, in no event shall the Conversion Price be increased pursuant to the provisions of this Paragraph (g)(2).
 
3.           Notwithstanding anything herein to the contrary, no adjustment under this Paragraph (g) need be made to the Conversion Price unless such adjustment is greater than one-tenth of one cent per share.  Any lesser adjustment shall be carried forward and shall be made at the time of and together with the next subsequent adjustment, which, together with any adjustment or adjustments so carried forward, shall amount to an increase or decrease of at least 1% of such Conversion Price.  Any adjustment to the Conversion Price carried forward and not theretofore made shall be made immediately prior to the conversion of any shares of Series B Preferred Stock pursuant to Paragraphs (f)(1) and (f)(2) of this Section 10.
 
(h)   Redemption .
 
1.            Election .  At the written election (the “ Series B Election ”) of the holders of at least 62.5% of the then outstanding shares of Series B Preferred Stock made at any time on or after the fifth year anniversary of the Original Issue Date, the Company shall call for redemption, and shall redeem all, and not less than all, of the outstanding shares of Series B Preferred Stock on the date set forth in the Series B Election, provided that such date shall be at least 180 days after delivery to the Company of the Series B Election (the “ Series B Redemption Date ”), provided that if the Series B Redemption Date falls on a day other than a Business Day, the Series B Redemption Date shall be the next succeeding Business Day.  The redemption price per share (the “ Series B Redemption Price ”) shall be equal to the greater of (x) the sum of (a) the Stated Value per share of the Series B Preferred Stock plus (b) an amount per share of Series B Preferred Stock equal to the accrued but unpaid dividends to which such holder of shares of Series B Preferred Stock is entitled to receive pursuant to Paragraph (f)(2) of this Section 10 to but excluding the date fixed for such redemption, if any, and (y) the product of (a) the Market Price per share of Common Stock and (b) the number of shares of Common Stock that such holder of Series B Preferred Stock would have been entitled to receive had it converted each such share of Series B Preferred Stock (whether or not such holder of Series B Preferred Stock had been eligible to convert its shares of Series B Preferred Stock on such Series B Redemption Date).  For purposes of this Paragraph (h)(1), “ Market Price ” means the average Closing Price for the ten (10) consecutive Trading Days immediately preceding, but not including, the Redemption Date.
 
2.            Notice of Redemption .  Promptly following receipt of a Series B Election the Company shall provide written notice (the “ Series B Redemption Notice ”) to all holders of Series B Preferred Stock entitled to redemption under this Paragraph (h).  Such Series B Redemption Notice shall set forth (i) the Series B Redemption Date and place of redemption; (ii) that all shares of Series B Preferred Stock held by such holder are to be redeemed; and (iii) the Series B Redemption Price.
 
3.            Procedures .  If, on or before the Series B Redemption Date, the funds necessary for such redemption shall have been set aside by the Company and deposited with a bank or trust company, in trust for the pro rata benefit of the holders of the Series B Preferred Stock, then, notwithstanding that any certificates for shares that have been called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding from and after such Series B Redemption Date, and all rights of holders of such shares so called for redemption shall forthwith, after such Series B Redemption Date, cease and terminate with respect to such shares, excepting only the right to receive the applicable Series B Redemption Price to which they are entitled.  Any interest accrued on funds so deposited and unclaimed by shareholders entitled thereto shall be paid to such shareholders at the time their respective shares are redeemed or to the Company at the time unclaimed amounts are paid to it.  In case any holder of Series B Preferred Stock shall not, within one (1) year after the final Series B Redemption Date, claim the amounts so deposited with respect to the redemption thereof, any such bank or trust company, shall, upon demand, pay over to the Company such unclaimed amounts and thereupon such bank or trust company shall be relieved of all responsibility in respect thereof to such holder and such holder shall look only to the Company for the payment thereof.  Any funds so deposited with a bank or trust company which shall not be required for such redemption by reason of the exercise subsequent to the date of such deposit of the right of conversion of any shares or otherwise shall be returned to the Company forthwith.
 
4.            Failure to Redeem .  If the funds of the Company legally available for redemption of shares of Series B Preferred Stock on the Series B Redemption Date are insufficient to redeem the total number of shares of Series B Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the holders of the Series B Preferred Stock, ratably among the holders thereof in proportion to the redemption amounts otherwise payable to them, in the maximum amount of the Series B Redemption Price to which such holders of Series B Preferred Stock are entitled.  The shares of Series B Preferred Stock not redeemed shall remain outstanding and entitled to all rights and preferences provided herein.   At any time thereafter when additional funds of the Company are legally available for the redemption of such shares of Series B Preferred Stock, such funds will be used to redeem the remaining balance of any shares of Series B Preferred Stock that were required to be redeemed at the prior Series B Redemption Date.  Notwithstanding anything to the contrary contained herein, interest shall accrue on any shares of Series B Preferred Stock required to be redeemed pursuant to this Paragraph (h) that have not been redeemed within thirty (30) days of the Series B Redemption Date at a rate of 15.0% per annum of the Series B Redemption Price from the Series B Redemption Date for so long as such shares remain outstanding.
 
5.            Conversion Prior to Redemption .  Notwithstanding the foregoing, if the Shareholder Approval is obtained prior to the Series B Redemption Date, whether or not a notice of Series B Election has been delivered to the Company, and whether or not the Company shall have previously sought, but failed to receive, the Shareholder Approval, the Series B shares shall be automatically converted into shares of Common Stock pursuant to and in accordance with Paragraph (f)(1) of this Section 10, and the Company shall have no obligation under this Paragraph (h) to redeem any shares of Series B Preferred Stock or any shares of Common Stock issued upon such conversion.
 
(i)   Voting Rights; Information Rights .
 
1.           The holders of shares of Series B Preferred Stock shall not be entitled to vote, except as otherwise provided in paragraphs (i)(2) and (i)(3) of this Section 10 or as otherwise required by applicable law.
 
2.           For so long as at least 10% of the Series B Preferred Stock issued on the Original Issue Date remain outstanding, the Company shall not (by amendment, merger, consolidation or otherwise and either directly or through a subsidiary) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least 62.5% of the then outstanding shares of Series B Preferred Stock, voting together as a single class:
 
(A) alter or change the rights, preferences, powers or privileges of the shares of Series B Preferred Stock pursuant to an amendment to the Articles of Incorporation or Bylaws or otherwise;
 
(B) increase or decrease (other than by conversion) the total number of authorized or issued shares of Series B  Preferred Stock;
 
(C) authorize or issue, or obligate itself to issue, any equity security (including any other security convertible into or exercisable for any such equity security) having a preference over or on parity with the Series B Preferred Stock with respect to dividends or liquidation or amend the terms of any existing security to have a preference over or on parity with the Series B  Preferred Stock with respect to dividends or liquidation ;
 
(D) redeem, purchase or otherwise acquire any shares of Junior Stock or any series of preferred stock other than the Series B  Preferred Stock;
 
(E) declare, pay or set aside for payment any dividends on the Common Stock.
 
3.           For so long as at least 10% of the Series B Preferred Stock issued on the Original Issue Date remain outstanding, the Company shall not (by amendment, merger, consolidation or otherwise and either directly or through a subsidiary) without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock, voting together as a single class, effect a Deemed Liquidation Event, provided that the provisions of this paragraph (i)(3) shall expire, and no such approval of the Series B Preferred Stock shall be required with respect to the matters set forth in this paragraph (i)(3), from and after such time as the Original Holders no longer Beneficially Own at least a majority of the outstanding shares of Series B Preferred Stock.
 
4.           Notwithstanding whether or not the Shareholder Approval shall have been obtained, the holders of shares of Series B Preferred Stock shall be entitled to notice of any shareholders’ meeting delivered to the holders of Common Stock in accordance with the Bylaws and to otherwise receive all other notices and information made available or delivered by the Company to the holders of Common Stock.
 
(j)   Record Holders .  To the fullest extent permitted by applicable law, the Company may deem and treat the record holder of any share of Series B Preferred Stock as the true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice to the contrary.
 
(k)   Notices .
 
1.            General .  All notices or communications in respect of the Series B Preferred Stock shall be given to the holders of the Series B Preferred Stock in any manner permitted by the Depository Trust Company or any similar facility through which the Series B Preferred Stock is issued in book-entry form.
 
2.            Notice of Certain Events .  The Company shall, to the extent not included in the Exchange Act reports of the Company, provide reasonable written notice to each holder of the Series B Preferred Stock of any event the occurrence of which would result in an adjustment to the Conversion Price, including the then applicable Conversion Price.
 
(l)   Other Rights .  The shares of Series B Preferred Stock shall not have any rights, preferences, privileges or voting powers or relative, participating, optional or other special rights, or qualifications, limitations or restrictions thereof, other than as set forth herein or in the Articles of Incorporation or as provided by applicable law and regulation.
 
(m)   Maturity .  The Series B Preferred Stock shall be perpetual unless converted or redeemed in accordance with the terms of this Articles of Amendment.
 
(n)   Replacement Certificates .
 
1.   If physical certificates are issued, the Company shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Company’s transfer agent (the “ Transfer Agent ”). The Company shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
 
2.   If physical certificates are issued, the Company shall not be required to issue any certificates representing the Series B Preferred Stock on or after the Mandatory Conversion Date. In place of the delivery of a replacement certificate following the Mandatory Conversion Date, the Transfer Agent, upon delivery of the evidence and indemnity described in clause (1) above, shall deliver the shares of Common Stock pursuant to the terms of the Series B Preferred Stock formerly evidenced by the certificate.
 
III.
 
The foregoing amendment was duly adopted by the Company’s Board of Directors on December 1, 2010.  No shareholder action was required.
 

 
INSMED INCORPORATED
 
Dated: December 1, 2010
 
 
By:
/s/ Kevin P. Tully
 
 
Name: Kevin P. Tully
 
Title:   Executive Vice President and Chief Financial Officer

 
 
 
 


 
Amendment to Amended and Restated Bylaws of Insmed Incorporated

Section 1 of Article II of the Amended and Restated Bylaws of Insmed Incorporated shall be amended and restated as set forth below:

SECTION 1. Number, Classification, Term, Election .  The property, business and affairs of the Corporation shall be managed under the direction of the Board as from time to time constituted.  The Board shall be divided into three classes having staggered terms of office as specified in the Articles of Incorporation.  The number of directors constituting the Board of Directors shall be designated by a resolution of the Board of Directors, but shall not be less than four nor more than 10, a majority of whom must be “independent directors” as defined in the rules of The Nasdaq Stock Market.  No director need be a shareholder.  Directors shall be elected at each annual meeting to succeed to those directors whose terms have expired and to fill any vacancies then existing.  Each director who is re-elected or elected to succeed a director whose term has expired shall hold office for the term of three years as specified in the Articles of Incorporation and until his successor is elected.

 
 
 



SHAREHOLDERS’ AGREEMENT
 
Shareholders’ Agreement, dated as of December 1, 2010 (this “ Agreement ”), by and among Insmed Incorporated, a Virginia corporation (“ Insmed ”), and the Persons listed on Schedule I attached hereto (each, a “ Shareholder ” and collectively the “ Shareholders ”).
 
WHEREAS, on the date of this Agreement, Insmed,  Transave, Inc., a Delaware corporation (“ Transave ”) and certain other parties entered into an Agreement and Plan of Merger (as amended or modified from time to time, the “ Merger Agreement ”) pursuant to which River Acquisition Co., a Delaware corporation and a wholly owned subsidiary of Insmed (“ Merger Sub ”), will merge with and into Transave after which Transave will continue as the surviving entity, and immediately thereafter and as part of an integrated plan, Transave will merge with and into Transave, LLC, a Delaware limited liability company and a wholly owned subsidiary of Insmed, with Transave, LLC as the surviving entity (the “ Merger ”);
 
WHEREAS, at the Effective Time of the merger of Merger Sub with and into Transave, certain capital stock of the Transave that is owned by the stockholders of Transave shall be converted into the right to receive shares of Insmed Common Stock (as defined below) and Insmed Preferred Stock (as defined below), as set forth in the Merger Agreement; and
 
WHEREAS, in connection with the execution of the Merger Agreement and the contemplated consummation of the transactions contemplated therein, Insmed and the Shareholders agree to enter into this Agreement as of the date hereof.
 
NOW, THEREFORE, in consideration of the foregoing and the agreements contained in this Agreement, and intending to be legally bound by this Agreement, Insmed and the Shareholders agree as follows:
 
 
1.   Definitions .  Capitalized terms used and not otherwise defined in this Agreement that are defined in the Merger Agreement shall have the meanings given such terms in the Merger Agreement.  As used in this Agreement, the following terms shall have the respective meanings set forth in this Section  1 :
 
 
“ Affiliate ” means, with respect to a Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to a Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.   Notwithstanding the foregoing, solely with respect to Beacon Bioventures Limited Partnership (formerly known as Fidelity Biosciences Limited Partnership) and Beacon Bioventures Principals Limited Partnership (formerly known as Fidelity Biosciences Principals Limited Partnership) (collectively, the “Beacon Bioventures Funds”), for purposes of Sections 3.3, 3.4, 4, 5, and 8, an "Affiliate" shall be deemed to only include the general partner of the Beacon Bioventures Funds and their officers.  

“ Articles of Amendment ” means the Articles of Amendment, dated December 1, 2010 to Articles of Incorporation of Insmed setting forth the terms of the Insmed Preferred Stock.

“ Board ” shall mean the Board of Directors of Insmed.
 
“ Bylaws ” shall mean the Amended and Restated Bylaws of Insmed in effect on the date hereof, as they may be amended or restated from time to time.
 
“ Competitor ” shall mean any Person who engages in the business of inhaled treatments for lung infections or that engages in any other business which is in competition with or substantially similar to the business of Insmed (as of a Transfer date) in any line of business in which Insmed is engaged; provided , however , that a Person shall not be deemed a Competitor if less than two percent (2%) of its consolidated annual revenue is generated from such businesses described above.
 
“ Insmed Common Stock ” means shares of common stock, par value $0.01 per share, of Insmed.
 
“ Insmed Preferred Stock ” means the shares of Series B Conditional Convertible Preferred Stock, par value $0.01 per share, of Insmed with such terms and conditions set forth in the Articles of Amendment.
 
“ Registration Rights Agreement ” means the Registration Rights Agreement, dated December 1, 2010, by and among Insmed and the shareholders named therein.
 
“ Shareholder Approval ” has the meaning set forth in the Articles of Amendment.
 
“ Transfer ” means to offer, sell, exchange, pledge, hypothecate, encumber, transfer, distribute, assign or otherwise dispose of, whether directly or indirectly or to enter into any swap or any other agreement, transaction or series of transactions that hedges or transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of Insmed Common Stock or Insmed Preferred Stock.
 
 
2.   Governance Matters.
 
2.1   Board Composition .
 
(a)    Shareholders holding 62.5% of the outstanding Insmed Common Stock and Insmed Preferred Stock (on an as converted to Insmed Common Stock basis assuming the Shareholder Approval) then held by all Shareholders (the “ Designating Shareholders ”), shall have the right to nominate for election to the Board one (1) director (the “ Designee ”) at the first annual or special meeting of shareholders of Insmed after the Effective Time at which the Company Nominee (as defined in the Merger Agreement) or any director appointed to replace such Company Nominee is subject to election and at any subsequent annual or special meeting of shareholders of Insmed at which such Designee or any director appointed to replace such Designee is subject to election,  and Insmed shall, at any such annual or special meeting of shareholders of Insmed, subject to the fulfillment of the requirements set forth in Section 2.1(b), nominate the Designee for election to the Board and use commercially reasonable efforts to cause the Designee to be elected as a director of the Board.
 
Notwithstanding the foregoing in this Section 2.1(a), the Designating Shareholders shall cease to have any right to nominate the Designee for election to the Board following the earliest of (i) the five (5) year anniversary Effective Time, (ii) the conversion of the Insmed Preferred Stock into Insmed Common Stock and (iii) such time that the Shareholders and their Affiliates (including any limited partners, members or other similar equity holders of the forgoing that receive Insmed Preferred Stock or Common Stock as a distribution pursuant to such holder’s limited partnership agreement, limited liability company agreement, operating agreement or similar governing document) collectively no longer hold at least 6,484,705 shares of Insmed Common Stock issued pursuant to the Merger and at least 22,936,473 shares of Insmed Preferred Stock issued pursuant to the Merger (the “ Minimum Share Amount ”), provided that the Minimum Share Amount shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations recapitalizations and the like occurring after the date of this Agreement.
 
(b)   Any designee for election to the Board in accordance with this Section 2 shall (i) be reasonably acceptable to the Board and the Board’s Corporate Governance Committee (the “ Governance Committee ”), it being agreed that Donald Hayden, Jr. is so acceptable, and (ii) shall comply in all respects with Insmed’s corporate governance guidelines and Insmed’s code of business conduct and ethics as in effect from time to time. The Designating Shareholders shall notify Insmed of any proposed Designee in writing no later than the latest date on which shareholders of Insmed may make nominations to the Board in accordance with the Bylaws, together with all information concerning such nominee required to be delivered to Insmed by the Bylaws then in effect and such other information reasonably requested by Insmed; provided that in each such case, all such information is generally required to be delivered to Insmed by the other outside directors of Insmed (the “ Nominee Disclosure Information ”); provided, further that in the event the Designating Shareholders fail to provide any such notice, the Designee shall be the Person then serving as the Designee as long as the Designating Shareholders provide the Nominee Disclosure Information to Insmed promptly upon request by Insmed.
 
(c)   For so long as the Designated Shareholders shall have the right to nominate the Designee for election to the Board, Insmed shall invite a representative of the Designated Shareholders to attend all meetings of the Board in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents and other materials that it provides to its directors; provided , however , that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further , that Insmed reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between Insmed and its counsel.
 
2.2   Compensation and Benefits . The Designee will be entitled to receive at a minimum the same compensation, benefits, reimbursement, indemnification and insurance coverage for their service as directors as the other outside directors of Insmed. Following the Effective Time, for so long as Insmed maintains directors and officers liability insurance, Insmed shall include the Designee as “insured” for all purposes under such insurance policy for so long as such Person is a director of Insmed and for the same period as for other former directors of Insmed when such Designee ceases to be a director of Insmed.
 
 
3.   Restrictions on Transfer .
 
3.1   No Transfer of Capital Stock . Until May 30, 2011 each of the Shareholders agrees that it will not, directly or indirectly, Transfer any portion of any shares of Insmed Common Stock or any shares of Insmed Preferred Stock or shares of Insmed Common Stock issued upon a conversion of the Insmed Preferred Stock to any Person without the prior written consent of Insmed (which consent may be given or withheld, or made subject to such conditions as are determined by Insmed, in its sole discretion) other than (i) to its Affiliates (including its limited partners, members or other similar equity holders) or Affiliates of other Shareholders who execute a written joinder agreement in a form approved by Insmed pursuant to which such Affiliate agrees to be bound by the terms of Sections 3 and 4 of this Agreement, (ii) to other Shareholders, (iii) pursuant to a tender or exchange offer recommended by the Board, (iv) pursuant to a merger or consolidation recommended by the Board, or (v) solely with respect to the Beacon Bioventures Funds, Transfers to any Person in a private placement; provided that the maximum number of shares of Insmed Common Stock or Insmed Preferred Stock that Beacon Bioventures Funds is permitted to transfer pursuant to this clause (v) until May 30, 2011 shall be 7,600,000 (assuming that the Insmed Preferred Stock is converted into Insmed Common Stock on a one for one basis), and subject to adjustments for any stock splits, reverse stock splits, stock dividends and other similar transaction (transferees under clauses (i) through (v), are herein referred to as “ Permitted Assigns ”).  Any purported Transfer which is not in accordance with the terms and conditions of this Section  3.1 shall be, to the fullest extent permitted by law, null and void ab initio and, in addition to other rights and remedies at law and in equity, Insmed shall be entitled to injunctive relief enjoining the prohibited action.  
 
3.2   No Transfer to Competitors .  Each Shareholder agrees that it will not at any time knowingly directly Transfer any shares of Insmed Common Stock or any shares of Insmed Preferred Stock or any shares of Insmed Common Stock issuable upon conversion of the Insmed Preferred Stock to any Competitor of Insmed without the prior written consent of Insmed (which consent may be given or withheld, or made subject to such conditions as are determined by Insmed, in its sole and absolute discretion); provided , that the provisions of this Section 3.2 shall not apply to any tender or exchange offer with respect to a majority of the issued and outstanding capital stock of Insmed made by any such Competitor or to any sales made pursuant to open market transactions through a broker in which the transferring Shareholder does not know that the ultimate purchaser of such capital stock is a Competitor.
 
3.3   No Block Transfers to Individual Persons .  Each Shareholder agrees that it will not, and will cause its Affiliates not to, individually or acting together with any other Shareholder or its Affiliates, at any time knowingly directly Transfer any shares of Insmed Common Stock or any shares of Insmed Preferred Stock or any shares of Insmed Common Stock issuable upon conversion of the Insmed Preferred Stock, unless consented to by Insmed: (a) to any individual Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) in an amount constituting 5% or more of the voting capital stock of Insmed then outstanding or (b) to any individual Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) that, immediately following such Transfer, would beneficially own in the aggregate more than 15% of the voting capital stock of Insmed then outstanding (other than, in each case of clauses (a) or (b), to (i) any of its Permitted Assigns or (ii) an underwriter in connection with a bona fide public offering or distribution or a Person in a sale made pursuant to open market transactions through a broker in which the transferring Shareholder does not know that the ultimate purchaser of such capital stock would beneficially own in the aggregate more than 15% of the voting capital stock of Insmed then outstanding).
 
3.4   Registration Rights Agreement .  Each Shareholder hereby agrees that it will not, and will cause its Affiliates not to, sell any of its or their Registrable Securities (as defined in the Registration Rights Agreement) pursuant to Section 3, Section 4 or Section 5 of the Registration Rights Agreement, other than in accordance with this Section 3.4 and the terms of the Registration Rights Agreement.  Notwithstanding the foregoing, each Shareholder, together with its Affiliates, may only sell, in the aggregate, pursuant to Section 3, Section 4 or Section 5 of the Registration Rights Agreement, (i) one-third (1/3) of the Registrable Securities owned by such Shareholder as of the Closing Date during the period beginning on May 30, 2011 through the date that is six months from such date and (ii) an additional one-third (1/3) of the Registrable Securities owned by such Shareholder as of the date hereof during each six-month period thereafter (for the avoidance of doubt, each additional one-third (1/3) shall be cumulative and in addition to the amount such Shareholder and its Affiliates was otherwise permitted to sell pursuant to this Section 3.4 but did not sell).
 
 
4.   Standstill Restrictions .  Commencing from the date hereof until June 1, 2012 (the “Standstill Termination Date”), each of the Shareholders shall not, and shall cause its respective Affiliates (including commonly controlled or managed investment funds) not to, unless consented to or requested by Insmed, as a director of Insmed or as otherwise permitted hereby: (i) directly acquire, agree to acquire, or offer to acquire, beneficial ownership of any equity or debt securities of Insmed, any warrant or option to purchase such securities, any security convertible into any such securities, or any other right to acquire such securities, other than the Insmed Common Stock received upon conversion of shares of Insmed Preferred Stock and any shares of Insmed Preferred Stock or Insmed Common Stock paid as dividends, (ii)  enter into or agree to enter into any merger, business combination, recapitalization, restructuring, change of control transaction or other extraordinary transaction involving Insmed or any of its Subsidiaries, other than in connection with a third party tender or exchange offer or other transaction approved by Insmed, (iii) make, or in any way participate or engage in, directly or indirectly, any solicitation of proxies to vote, or seek to advise or influence any Person with respect to the voting of, any voting securities of Insmed, (iv) bring any action or otherwise act to contest the validity of the restrictions set forth in this Section 4, or seek a release of such restrictions, (v) form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of Insmed or any Subsidiary of Insmed (including, without limitation, any group constituting of Shareholders and their respective Affiliates) (other than to nominate and vote for a Designee following a breach by Insmed of its covenants in Section 2 hereof), (vi)  propose or enter into any discussions, negotiations, arrangements, understandings or agreements (whether written or oral) with any other Person regarding any possible purchase of any securities or assets of Insmed, (vii) call, request the calling of, or otherwise seek or assist in the calling of a special meeting of the shareholders of Insmed, (viii) grant any proxy with respect to any shares of Insmed Common Stock, Insmed Preferred Stock or Insmed Common Stock issuable upon conversion of the Insmed Preferred Stock to any Person not affiliated with the Shareholder or Insmed (other than in connection with the granting of a proxy to vote for a Designee following a breach of Insmed of its covenants in Section 2 hereof); or (x) disclose any intention, plan or arrangement prohibited by, or inconsistent with, the foregoing; provided , however , that the foregoing shall not restrict the ability of the Designees or other directors appointed or elected to the Board pursuant to the terms of this Agreement from exercising their fiduciary duties.
 
 
5.   Capital Stock of Insmed .  Each Shareholder represents and warrants to Insmed that, as of the date of this Agreement, neither it nor any of its Affiliates, directly or indirectly, owns any capital stock of Insmed.
 
 
6.   Public Announcements .  The Shareholders shall consult with Insmed before issuing, and provide Insmed the opportunity to review, comment upon and concur with, any press release or other public statement with respect to this Agreement, the Merger Agreement, the Merger and the other transactions contemplated by this Agreement or the Merger Agreement and none of the Shareholders shall issue any press release or make any such public statement prior to such consultation, except as may be required by Legal Requirement.
 
 
7.   Termination .  Other than the termination provisions applicable to particular Sections of this Agreement that are specifically provided elsewhere in this Agreement, this Agreement shall terminate (except for Section 8 ) (a) upon the mutual written agreement of Insmed and the Designating Shareholders or (b) with respect to any Shareholder, at such time as the Shareholder no longer beneficially owns any shares of Insmed Common Stock or any shares of Insmed Preferred Stock.
 
 
8.   Confidentiality .
 
8.1   Each Shareholder (each a “ Receiving Party ”) hereby agrees to keep, and to cause each of its Affiliates and each of their respective employees, officers, directors, accountants, counsel, consultants, advisors and agents to keep confidential, any and all confidential information of Transave, Insmed and their respective Subsidiaries, including non-public information relating to Transave’s, Insmed’s and their respective Subsidiaries’ technologies, clinical studies, regulatory affairs, finances and results, trade secrets, know-how, customers, business plans, marketing activities, financial data and other business affairs that was disclosed to Receiving Party by Transave or Insmed or their respective Subsidiaries on or prior to the date of this Agreement or that is disclosed to Receiving Party on or after the date of this Agreement by Transave or Insmed or their respective Subsidiaries or any other Shareholder or their respective Affiliates or representatives, (collectively, the “ Insmed Proprietary Information ”), and to utilize Insmed Proprietary Information only for the purpose for which such information was disclosed (the “ Utilization Restriction ”); provided , however , that the Utilization Restriction shall not restrict the sale by Receiving Party of the shares of Insmed Common Stock or Insmed Preferred Stock or the Insmed Common Stock issuable upon conversion of the Insmed Preferred Stock so long as such Receiving Party complies with the confidentiality restrictions of this section; provided , further , however , that Insmed Proprietary Information shall not include any information that (i) is or subsequently becomes generally publicly available without breach of this Section 7 or (ii) is or subsequently becomes known or available to a Receiving Party on a non-confidential basis from a source other than Insmed, Transave or their respective Subsidiaries and representatives that, to such Receiving Party’s knowledge, is not prohibited from disclosing such Insmed Proprietary Information to the Receiving Party by a contractual, legal or fiduciary obligation owed by such other third party.  For the avoidance of doubt, subject to the terms of this Section  8.1 , any Receiving Party may disclose Insmed Proprietary Information to its Affiliates and its and its Affiliates’ employees, officers, directors, accountants, counsel, consultants, advisors and agents.  Each Receiving Party shall be responsible for any failure of its and its Affiliates' employees, officers, directors, accountants, counsel, consultants, advisors and agents to keep confidential the Insmed Proprietary Information and to comply with the Utilization Restriction.  The obligation of each Receiving Party to hold and to cause its Affiliates to hold any such information in confidence shall be satisfied if it exercises at least the same care with respect to such information as it would take to preserve the confidentiality of its own information, but not less than reasonable care.
 
8.2   In the event that any Receiving Party is required by applicable law, regulation or legal process to disclose any Insmed Proprietary Information, then (to the extent reasonably practicable, before substantively responding to any such request or requirement) such Receiving Party will provide Insmed with prompt written notice of any such request or requirement so that Insmed may (at its sole cost and expense) seek a protective order or other appropriate remedy, or both, or waive compliance with the provisions of this Section  8.2 or other appropriate remedy, or if Insmed so directs, such Receiving Party will exercise its own commercially reasonable efforts to assist Insmed in obtaining a protective order or other appropriate remedy at Insmed’s sole cost and expense.  If, failing the entry of a protective order or other appropriate remedy or the receipt of a waiver hereunder, disclosure of any Insmed Proprietary Information is required by law, regulation or legal process then such Receiving Party may furnish only that portion of the Insmed Proprietary Information that is required to be so furnished pursuant to law, regulation or legal process.  In any event, such Receiving Party will, to the extent practicable and permissible by law cooperate fully with any action by Insmed (at its sole cost and expense) to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Insmed Proprietary Information.  Notwithstanding the foregoing, the Receiving Party shall not be obligated to provide Insmed with notice of any request for Insmed Proprietary Information from any Governmental Body if disclosing such request would be in violation of any applicable law, rule or regulation or if such request is received pursuant to regulatory oversight (and the Receiving Party shall be entitled to comply with any such request without providing such notification).
 
 
9.   Miscellaneous .
 
9.1   Notices .  Any notice or other communication required or permitted to be delivered to any party under this Agreement shall be in writing and shall be deemed properly delivered, given and received: (a) if delivered by hand, when delivered; (b) if sent via facsimile with confirmation of receipt, when transmitted and receipt is confirmed; (c) if sent by electronic mail, telegram, cablegram or other electronic transmission, upon delivery; (d) if sent by registered, certified or first class mail, the third Business Day after being sent; and (e) if sent by overnight delivery via a national courier service, one Business Day after being sent, in each case to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party shall have specified in a written notice given to the other parties hereto):
 
If to Insmed, to:

8720 Stony Point Parkway, Suite 200
Richmond, Virginia, 23235
Attention: Mr. W. McIlwaine Thompson, Secretary
Telecopy:  (434) 977-7920
 

 
with a copy (which shall not constitute notice) to:
 

 
Greenberg Traurig, LLP
 
200 Park Avenue
 
New York, NY 10166
 
Attention:  Joseph A. Herz
 
Facsimile:  (212) 805-5539
 
If to any Shareholder, to the address specified in Schedule I.
 

 
Notwithstanding anything to the contrary contained herein, any notice received on any Business Day after 5:00 p.m. (addressee’s local time) or on a day that is not a Business Day shall be deemed to have been received at 9:00 a.m. (addressee’s local time) on the next Business Day.
 
9.2   Headings .  The underlined headings contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.
 
9.3   Counterparts and Exchanges by Electronic Transmission or Facsimile .  This Agreement may be executed in several counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one agreement.  The exchange of a fully executed Agreement (in counterparts or otherwise) by electronic transmission in PDF format or by facsimile shall be sufficient to bind the parties to the terms and conditions of this Agreement.
 
9.4   Governing Law .  This Agreement shall be construed in accordance with, and governed in all respects by, the internal laws of the State of New York (without giving effect to principles of conflicts of laws).
 
9.5   Venue .  Any Legal Proceeding relating to this Agreement or the enforcement of any provision of this Agreement (including a Legal Proceeding based upon intentional misrepresentation or fraud) may be brought or otherwise commenced in any state or federal court located in the Borough of Manhattan in the State of New York.  Each party to this Agreement: (i) expressly and irrevocably consents and submits to the exclusive jurisdiction of each state and federal court located in the Borough of Manhattan in the State of New York (and each appellate court located in the State of New York) in connection with any such Legal Proceeding; (ii) agrees that each state and federal court located in the Borough of Manhattan in the State of New York shall be deemed to be a convenient forum; and (iii) agrees not to assert (by way of motion, as a defense or otherwise), in any such Legal Proceeding commenced in any state or federal court located in the Borough of Manhattan in the State of New York, any claim that such party is not subject personally to the jurisdiction of such court, that such Legal Proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.
 
9.6   Successors and Assigns .  Except as otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties; provided , however , the rights of the Shareholders under this Agreement shall not be assignable to any Person without the consent of Insmed; provided , further , that the provisions of this Agreement shall not apply to any Person to whom any shares of Insmed Preferred Stock or shares of Insmed Common Stock are Transferred (and who has not entered into a joinder agreement) so long as such Transfer is not made in violation of this Agreement.
 
9.7   Specific Performance .  The parties to this Agreement agree that irreparable damage would occur in the event that the provisions contained in this Agreement were not performed in accordance with its specific terms or were otherwise breached.  It is accordingly agreed that, in the event of any breach or threatened breach by any party to this Agreement of any covenant, obligation or other provision set forth in this Agreement, for the benefit of any other party to this Agreement: (a) such other party shall be entitled (in addition to any other remedy that may be available to it at law or in equity) to: (i) a decree or order of specific performance or mandamus to enforce the observance and performance of such covenant, obligation or other provision; and (ii) an injunction restraining such breach or threatened breach; and (b) such other party shall not be required to provide any bond or other security in connection with any such decree, order or injunction or in connection with any related action or Legal Proceeding.
 
9.8   Waiver .  No failure on the part of any Person to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Person in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.  No Person shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.
 
9.9   Waiver of Jury Trial .   EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
9.10   Amendments .  This Agreement may not be amended, modified, altered or supplemented other than by means of a written instrument duly executed and delivered by the parties hereto or, in the case of a waiver, by the party against whom the waiver is to be effective.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each party hereto.
 
9.11   Severability .  In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, shall be determined to be invalid, unlawful, void or unenforceable to any extent by any court of competent jurisdiction, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise affected and shall continue to be valid and enforceable to the fullest extent permitted by law and the parties shall use their commercially reasonable efforts to substitute a valid, legal and enforceable provision which, insofar as practicable, implements the original purposes and intents of this Agreement.
 
9.12   Parties-in-Interest .  None of the provisions of this Agreement is intended to provide any rights or remedies to any Person other than the parties hereto and their respective successors and assigns (if any).
 
9.13   Entire Agreement .  This Agreement, the Merger Agreement, the Registration Rights Agreement and the other agreements and documents delivered by the parties in connection herewith constitute the entire understanding of the parties hereto relating to the subject matter hereof and thereof and supersede all prior agreements and understandings among or between any of the parties relating to the subject matter hereof and thereof.
 
9.14   Construction .
 
(a)   Gender; Etc.   If a term is defined as one part of speech (such as a noun), it shall have a corresponding meaning when used as another part of speech (such as a verb).  Unless indicated otherwise, terms defined in the singular have the corresponding meanings in the plural, and vice versa.  Unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral genders and vice versa.  The words “ hereof, ” “ hereto, ” “ hereby, ” “ herein, ” “ hereunder ” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular section or article in which such words appear.  Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified.  Whenever any action must be taken hereunder on or by a day that is not a Business Day, then such action may be validly taken on or by the next day that is a Business Day.  The use of “ or ” is not intended to be exclusive unless expressly indicated otherwise.  No provision of this Agreement shall be construed to require any party to this Agreement to take action that would violate applicable Legal Requirements.
 
(b)   Ambiguities .  Each party hereto acknowledges that it and its attorney has reviewed this Agreement and agrees that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.
 
(c)   Including .  As used in this Agreement, the words “ include ” and “ including, ” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “ without limitation .”
 
(d)   References .  All article, section, schedule, exhibit and annex references used in this Agreement are to articles, sections, schedules, exhibits and annexes to this Agreement unless otherwise specified.  The schedules, exhibits and annexes attached to this Agreement constitute a part of this Agreement and are incorporated herein for all purposes.  The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.
 

 
 
 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
 
INSMED INCORPORATED
 
 
 
By:
/s/ Kevin P. Tully
 
 
Name:  Kevin P. Tully
 
Title:    Executive Vice President and Chief   Financial Officer
 
 
 
 
 

 
Shareholders
 
PROSPECT VENTURES PARTNERS III, L.P.
 
By: Prospect Management Co. III, L.L.C.
Its: General Partner
 
 
 
By:
/s/ Alex Barkas
 
 
 
Name:  Alex Barkas
 
 
Title:    Managing Member
 
 

 
QUAKER BIOVENTURES II, L.P.
 
By: QUAKER BIOVENTURES CAPITAL II, L.P.
Its: General Partner
 
By: QUAKER BIOVENTURES CAPITAL II, LLC
Its: General Partner

By: __/s/ Richard Kollender__________________
Name: Richard Kollender
Title:   Vice President
 

 
BESSEMER VENTURE PARTNERS VII INSTITUTIONAL L.P.
 
 
By: Deer VII & Co. L.P.
 
Its:  General Partner
By: Deer VII & Co. Ltd.
Its: General Partner

 
 
By:
/s/ J.Edmond Colloton
 
 
Name:  J. Edmond Colloton
 
 
Title:   Director
 
 
BESSEMER VENTURE PARTNERS VII, L.P.
 
 
By: Deer VII & Co. L.P.
 
Its:  General Partner
By: Deer VII & Co. Ltd.
Its: General Partner

 
 
By:
/s/ J.Edmond Colloton
 
 
Name:  J. Edmond Colloton
 
 
Title:   Director
 
CHRISTOPHER GABRIELI
 
By: / s/ Christopher Gabrieli                                                                            
 

 
SETH ORLOW
 
By: / s/ Seth Orlow                                                                            
 

 
TVM V LIFE SCIENCE VENTURES GmbH & Co. KG

 
By: /s/ Mark G. Cipriano   /s/ David Poltack
Name: Mark G. Cipriano   David Poltack
Title:  Managing Limited Partners


TVM IV GmbH & Co. KG

 
By: /s/ Mark G. Cipriano   /s/ David Poltack
Name: Mark G. Cipriano   David Poltack
Title:  Authorized Signatories

 
EASTON HUNT CAPITAL PARTNERS, L.P.

 
By: EHC GP, L.P.
 
Its:  General Partner
By: EHC, Inc.
Its: General Partner

 
 
By:
/s/ Richard P. Schneider
 
 
 
Name:  Richard P. Schneider
 
 
Title:    Vice President & Secretary
 
 
 
BEACON BIOVENTURES LIMITED PARTNERSHIP

 
By:  Beacon Bioventures Advisors, L.P.
 
Its:  General Partner
By: Fidelity Biosciences Corp.
Its: General Partner

 
 
By:
/s/ Richard W. Fedorowich, Jr.
 
 
 
Name:  Richard P. Fedorowich, Jr.
 
 
Title:    Chief Financial Officer
 
 
 
BEACON BIOVENTURES PRINCIPALS LIMITED PARTNERSHIP

 
By:  Beacon Bioventures Advisors, L.P.
 
Its:   General Partner
By: Fidelity Biosciences Corp.
Its: General Partner

 
 
By:
/s/ Richard W. Fedorowich, Jr.
 
 
 
Name:  Richard P. Fedorowich, Jr.
 
 
Title:    Chief Financial Officer
 
 
 
COOPERATIEVE AAC LS U.A.
 
 
  By: /s/ M.A. van Osch   /s/ G.J. Mulder
Name: M.A. van Osch G.J. Mulder
Title:  Partners
 
 
 
 


REGISTRATION RIGHTS AGREEMENT
 

 

 
by and among
 

 

 
INSMED INCORPORATED
 
and the SHAREHOLDERS named herein
 

 
Dated:  December 1, 2010
 


 
 
 

TABLE OF CONTENTS
 
Interpretation
 
(b)
Grant of Rights
 
(a)
Registrable Securities
 
(b)
Holders of Registrable Securities
 
(c)
Transfer of Registration Rights
 
(d)
Request for Demand Registration
 
(a)
Incidental or “Piggy-Back” Rights with Respect to a Demand Registration
 
(b)
Effective Demand Registration
 
(c)
Expenses
 
(d)
Underwriting Procedures
 
(e)
Selection of Underwriters
 
(f)
Withdrawal
 
(g)
Request for Incidental or “Piggy-Back” Registration
 
(a)
Expenses
 
(b)
Form S‑3 Registration
 
(a)
Form S-3 Underwriting Procedures
 
(b)
Limitations on Form S‑3 Registrations
 
(c)
Expenses
 
(d)
Automatic Shelf Registration Statement
 
(e)
Shelf Take-Downs
 
(f)
Restrictions on Public Sale by Designated Shareholders
 
(a)
Restrictions on Public Sale by Insmed
 
(b)
Obligations of Insmed
 
(a)
Seller Requirements
 
(b)
Notice to Discontinue
 
(c)
Registration Expenses
 
(d)
Indemnification by Insmed
 
(a)
Indemnification by Designated Shareholders
 
(b)
Conduct of Indemnification Proceedings
 
(c)
Contribution
 
(d)
Stock Splits, etc.
 
(a)
Inconsistent Agreements
 
(b)
Remedies
 
(c)
Amendments and Waivers
 
(d)
Notices
 
(e)
Permitted Assignees; Third Party Beneficiaries
 
(f)
Aggregation of Stock
 
(g)
Counterparts
 
(h)
Headings
 
(i)
Governing Law
 
(j)
Jurisdiction
 
(k)
Waiver of Jury Trial
 
(l)
Severability
 
(m)
Rules of Construction
 
(n)
Entire Agreement
 
(o)
Further Assurances
 
(p)
Other Agreements
 
(q)

 
 
 

REGISTRATION RIGHTS AGREEMENT
 
REGISTRATION RIGHTS AGREEMENT, dated as of December 1, 2010, by and among Insmed Incorporated, a Virginia corporation (the “ Insmed ”), and the shareholders that are party to this Agreement from time to time, as set forth on the signature page hereto (each, a “ Designated Shareholder ”).
 
WHEREAS, pursuant to that certain Agreement and Plan of Merger, dated as of December 1, 2010 (the “ Merger Agreement ”), by and among Insmed, River Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Insmed, Transave, LLC, a Delaware limited liability company, the sole member of which is Insmed, Transave, Inc., a Delaware corporation, and the Shareholders’ Agent (as defined therein), the Designated Shareholders have been or may be issued, under the circumstances described in Section 1.5 of the Merger Agreement, shares of common stock, par value $0.01 per share, of Insmed (“ Common Stock ”) and shares of Series B Conditional Convertible Preferred Stock, par value $0.01 per share, of Insmed (“ Preferred Stock ”) which are convertible into shares of Common Stock subject to the terms of the Articles of Amendment to the Articles of Incorporation of Insmed, as amended, creating such Preferred Stock;
 
WHEREAS, the shares of Common Stock and Preferred Stock issued (and to be issued) to the Designated Shareholders in connection with the transactions contemplated in the Merger Agreement have not been registered under the Securities Act (as hereinafter defined) or any state securities laws; and the certificates representing such shares bear a legend restricting their transfer; and
 
WHEREAS, Insmed desires to provide for, among other things, the grant of registration rights with respect to the Registrable Securities (as hereinafter defined) to the Designated Shareholders.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
 
1.   (a)            Definitions
 
As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:
 
“ Affiliate ” means, with respect to a Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to a Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
 
“ Agreement ” means this Registration Rights Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof.
 
“ Approved Underwriter ” has the meaning set forth in Section 3(f) hereof.
 
“ Automatic Shelf Registration Statement ” means an “automatic shelf registration statement” as defined in Rule 405 promulgated under the Securities Act.
 
“ Board of Directors ” means the Board of Directors of Insmed (or any duly authorized committee thereof).
 
“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close.
 
“ Closing Price ” means, with respect to the Registrable Securities, as of the date of determination, (a) if the Registrable Securities are listed on a national securities exchange, the closing price per share of a Registrable Security on such date published in The Wall Street Journal (National Edition) or, if no such closing price on such date is published in The Wall Street Journal (National Edition) , the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which the Registrable Securities are then listed or admitted to trading; or (b) if the Registrable Securities are not listed or admitted to trading on any national securities exchange, the last sale price or, if such last sale price is not reported, the average of the high bid and low asked prices on the automatic quotation system on which the Registrable Securities are then listed, as reported by Bloomberg Financial Markets (or any successor thereto); or (c) if on any such date the Registrable Securities are not quoted on any such automatic quotation system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Registrable Securities selected by Insmed; or (d) if none of (a), (b) or (c) is applicable, a market price per share determined in good faith by the Board of Directors or, if such determination is not satisfactory to the Designated Shareholders for whom such determination is being made, by a nationally recognized investment banking firm selected by Insmed and such Designated Shareholders, the expenses for which shall be borne by such Designated Shareholders.  If trading is conducted on a continuous basis on any exchange, then the closing price shall be as set forth at 4:00 P.M. New York City time.
 
“ Commission ” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act.
 
“ Common Stock ” means (i) the Common Stock of Insmed, (ii) any securities of Insmed or any successor or assign of Insmed into which such stock described in clause (i) is reclassified or reconstituted or into which such stock is converted or otherwise exchanged in connection with a combination of shares, recapitalization, merger, sale of assets, consolidation or other reorganization or otherwise or (iii) any securities received as a dividend or distribution in respect of the securities described in clauses (i) or (ii) above.
 
“ Demand Registration ” has the meaning set forth in Section 3(a) hereof.
 
“ Designated Shareholder ” has the meaning set forth in the preamble to this Agreement.
 
“ Designated Shareholders’ Counsel ” has the meaning set forth in Section 7(a)(i) hereof.
 
“ Disclosure Package ” means, with respect to any offering of Registrable Securities, (i) the preliminary Prospectus, (ii) each Free Writing Prospectus and (iii) all other information, in each case, that is deemed, under Rule 159 promulgated under the Securities Act, to have been conveyed to purchasers of securities at the time of sale of such securities (including, without limitation, a contract of sale).
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder.
 
“ FINRA ” means the Financial Industry Regulatory Authority, Inc.
 
“ Form S-3 Shelf Registration Statement ” has the meaning set forth in Section 5(a) hereof.
 
“ Free Writing Prospectus ” means any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.
 
“ Incidental Registration ” has the meaning set forth in Section 4(a) hereof.
 
“ Incidental Registration Notice ” has the meaning set forth in Section 4(a) hereof.
 
“ Indemnified Party ” has the meaning set forth in Section 8(c) hereof.
 
“ Indemnifying Party ” has the meaning set forth in Section 8(c) hereof.
 
“ Initiating Holders ” means, at any time, the Majority Designated Shareholders.
 
“ Initiating Shelf Holder ” has the meaning set forth in Section 5(f) hereof.
 
“ Insmed ” has the meaning set forth in the preamble to this Agreement.
 
“ Insmed Free Writing Prospectus ” means each Free Writing Prospectus prepared by or on behalf of Insmed or used or referred to by Insmed in connection with an offering of Registrable Securities.
 
“ Insmed Underwriter ” has the meaning set forth in Section 4(a) hereof.
 
“ Inspector ” has the meaning set forth in Section 7(a)(i) hereof.
 
“ Liability ” has the meaning set forth in Section 8(a) hereof.
 
“ Majority Designated Shareholders ” means beneficial owners of Registrable Securities representing more than 50% of the total number of outstanding Registrable Securities.
 
“ Majority Initiating Holders ” means Initiating Holders holding a majority of the Registrable Securities held by all of the Initiating Holders.
 
“ Majority S-3 Participating Shareholders ” means S-3 Participating Shareholders holding a majority of the Registrable Securities included in an S-3 Registration.
 
“ Majority Shelf Take-Down Shareholders ” means S-3 Participating Shareholders holding a majority of the Registrable Securities included in a Shelf Take-Down.
 
“ Market Price ” means, on any date of determination, the average of the daily Closing Price of the Registrable Securities for the immediately preceding thirty days on which the national securities exchanges are open for trading; provided , however , that if the Closing Price is determined pursuant to clause (d) of the definition of Closing Price, the “Market Price” means such Closing Price on the date of determination.
 
“ Marketed Underwritten Shelf Take-Down ”  has the meaning set forth in Section 5(f) hereof.
 
“ Non-Marketed Underwritten Shelf Take-Down ”  has the meaning set forth in Section 5(f) hereof.
 
“ Permitted Assignee ” means, with respect to any Person, to the extent applicable, (i) such Person’s parents, spouse, siblings, siblings’ spouses, children (including stepchildren and adopted children), children’s spouses, grandchildren or grandchildren’s spouses (“ Family Members ”), (ii) a corporation, partnership or limited liability company, a majority of the beneficial interests of which shall be held by such Person, such Person’s Affiliates and/or such Person’s Family Members, (iii) a trust, the beneficiaries of which are such Person and/or such Person’s Family Members, (iv) such Person’s heirs, executors, administrators, estate or a trust under such Person’s will, (v) an entity described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, that is established by such Person, (vi) any Affiliate of such Person, (vii) another Designated Shareholder or Affiliate of another Designated Shareholder, and (viii) if such Person is a corporation, partnership or limited liability company, any wholly-owned subsidiary of such entity or the partners, members, stockholders or Affiliates of such entity.
 
“ Permitted Withdrawal ” has the meaning set forth in Section 3(g) hereof.
 
“ Person ” means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.
 
“ Pledgee ” has the meaning set forth in Section 2(d)(i) hereof.
 
“ Prospectus ” means the prospectus related to any Registration Statement (including, without limitation, a prospectus or prospectus supplement that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance on Rule 415, 430A, 430B or 430C under the Securities Act, as amended or supplemented by any amendment or prospectus supplement), including post-effective amendments, and all materials incorporated by reference in such prospectus.
 
“ Records ” has the meaning set forth in Section 7(a)(viii) hereof.
 
“ Registrable Securities ” means, subject to Section 2(b) and Section 2(d)(i) hereof, (i) any and all shares of Common Stock issued or to be issued to the Designated Shareholders in connection with the transactions contemplated by the Merger Agreement, (ii) any and all shares of Common Stock issued upon conversion of shares of Preferred Stock issued or to be issued to the Designated Shareholders in connection with the transactions contemplated by the Merger Agreement, and (iii) any shares of capital stock of any Person issued or issuable with respect of such shares of Common Stock as a result of any stock split, stock dividend, recapitalization, exchange, merger, consolidation or similar event.
 
“ Registration Expenses ” has the meaning set forth in Section 7(d) hereof.
 
“ Registration Statement ” means a registration statement filed pursuant to the Securities Act.
 
“ S-3 Participating Shareholders ” means all Designated Shareholders whose shares are included in an S-3 Registration.
 
“ S-3 Registration ” has the meaning set forth in Section 5(a) hereof.
 
“ Seasoned Issuer ” means an issuer eligible to use Form S-3 or F-3 for a primary offering of securities in reliance on General Instruction I.B.1 to such Form.
 
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
 
“ Shelf Take-Down ”  has the meaning set forth in Section 5(f) hereof.
 
“ Specified Period ” means 90 days; provided that if (i) Insmed issues an earnings release or other material news or a material event relating to Insmed and its subsidiaries occurs during the last 17 days of such period or (ii) prior to the expiration of such period, Insmed announces that it will release earnings results during the 16-day period beginning upon the expiration of such period, then to the extent necessary for a managing or co-managing underwriter of a registered offering required hereunder to comply with NASD Rule 2711(f)(4), such period shall be extended until 18 days after the earnings release or the occurrence of the material news or event, as the case may be.
 
“ Target Filing Date ”  means May 30, 2011.
 
“ underwritten public offering ” of securities means a public offering of such securities registered under the Securities Act in which an underwriter, placement agent or other intermediary participates in the distribution of such securities.
 
“ Underwritten Shelf Take-Down ”  has the meaning set forth in Section 5(f) hereof.
 
“ Underwritten Shelf Take-Down Notice ”  has the meaning set forth in Section 5(f) hereof.
 
“ Valid Business Reason ” has the meaning set forth in Section 3(a) hereof.
 
“ Well-Known Seasoned Issuer ” means a “well-known seasoned issuer” as defined in Rule 405 promulgated under the Securities Act and which (a) is a “well-known seasoned issuer” under paragraph (1)(i)(A) of such definition or (b) is a “well-known seasoned issuer” under paragraph (1)(i)(B) of such definition and is also eligible to use Form S-3 to register a primary offering of securities in reliance on General Instruction I.B.1 to such Form.
 
(b)   Interpretation
 
Unless otherwise noted:
 
(i)   All references to laws, rules, regulations and forms in this Agreement shall be deemed to be references to such laws, rules, regulations and forms, as amended from time to time or, to the extent replaced, the comparable successor laws, rules, regulations and forms thereto in effect at the time.
 
(ii)   All references to agencies, self-regulatory organizations or governmental entities in this Agreement shall be deemed to be references to the comparable successor thereto.
 
(iii)   All references to agreements and other contractual instruments shall be deemed to be references to such agreements or other instruments as they may be amended, waived, supplemented or modified from time to time.
 
(iv)   All references to any amount of securities (including Registrable Securities) shall be deemed to be a reference to such amount measured on an as-converted or as-exercised basis.
 
2.   General; Securities Subject to this Agreement
 
(a)   Grant of Rights
 
Insmed hereby grants registration rights to the Designated Shareholders with respect to the Registrable Securities held by such Designated Shareholders upon the terms and conditions set forth in this Agreement.
 
(b)   Registrable Securities
 
For the purposes of this Agreement, Registrable Securities held by any Designated Shareholder will cease to be Registrable Securities, when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) in the opinion of counsel reasonably satisfactory to Insmed, the entire amount of the Registrable Securities held by any Designated Shareholder may be sold in a single sale, without any limitation as to volume or manner of sale pursuant to Rule 144 promulgated under the Securities Act or (iii) the Registrable Securities have ceased to be outstanding.
 
(c)   Holders of Registrable Securities
 
A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities.  If Insmed receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, Insmed may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities.
 
(d)   Transfer of Registration Rights
 
(i)   Subject to the Shareholders’ Agreement, dated as of the date hereof, between Insmed and each of the Designated Holders, each Designated Shareholder may transfer or pledge Registrable Securities with the associated registration rights under this Agreement (including transfers occurring by operation of law or by reason of intestacy) to a Permitted Assignee or a pledgee (“ Pledgee ”) only if (1) such Permitted Assignee or Pledgee agrees in writing to be bound as a Designated Shareholder by the provisions of this Agreement, such agreement being substantially in the form of Annex A hereto, and (2) immediately following such transfer or pledge, the further disposition or transfer of such Registrable Securities by such Permitted Assignee or Pledgee would be restricted under the Securities Act and, in the opinion of counsel reasonably satisfactory to Insmed, the entire amount of all such Registrable Securities could not be sold in a single sale, without any limitation as to volume or manner of sale pursuant to Rule 144 promulgated under the Securities Act.  Upon any transfer or pledge of Registrable Securities other than as set forth in this Section 2(d), such securities shall no longer constitute Registrable Securities.
 
(ii)   Subject to Section 2(b) hereof, if a Designated Shareholder assigns its rights under this Agreement in connection with the transfer of less than all of its Registrable Securities, the Designated Shareholder shall retain its rights under this Agreement with respect to its remaining Registrable Securities.  If a Designated Shareholder assigns its rights under this Agreement in connection with the transfer of all of its Registrable Securities, such Designated Shareholder shall have no further rights or obligations under this Agreement, except under Section 8 hereof in respect of offerings in which it participated.
 
3.   Demand Registration
 
(a)   Request for Demand Registration
 
.  To the extent permitted by applicable law and regulations, at any time that Insmed is not eligible to use Form S-3 under the Securities Act in connection with a secondary public offering of its equity securities after May 30, 2011, the Initiating Holders may make a written request to Insmed to register, and Insmed shall register, under the Securities Act (other than pursuant to a Registration Statement on Form S-4 or S-8), in accordance with the terms of this Agreement (a “ Demand Registration ”), the number of Registrable Securities stated in such request; provided , however , that Insmed shall not be obligated to effect (i) more than two (2) such Demand Registrations, (ii) a Demand Registration if the Initiating Holders propose to sell Registrable Securities in such Demand Registration at an anticipated aggregate offering price (calculated based upon the Market Price of the Registrable Securities on the date on which Insmed receives the written request for such Demand Registration) to the public of less than $10,000,000 unless such Demand Registration includes all of the then-outstanding Registrable Securities or (iii) any such Demand Registration within the Specified Period (or such shorter period as Insmed may determine in its sole discretion) after the effective date of any other Registration Statement of Insmed (other than a Registration Statement on Form S-4 or S-8).  For purposes of the preceding sentence, two or more Registration Statements related to the same offering by virtue of Rule 462(b) filed in response to one demand shall be counted as one Demand Registration.  In addition, if (1) the Board of Directors, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would materially impede, delay or interfere with any material financing, offer and sale of securities, acquisition, merger, tender offer, business combination, corporate reorganization or other significant transaction involving Insmed or because such registration would require Insmed to disclose material nonpublic information that would not otherwise be required to be disclosed under applicable law and (2) Insmed has a bona fide business purpose for preserving the confidentiality of such transaction or information (a “ Valid Business Reason ”), (x) Insmed may postpone filing a Registration Statement (but not the preparation of the Registration Statement) relating to a Demand Registration until such Valid Business Reason no longer exists, but in no event for more than sixty (60) days after the date when the Demand Registration was requested or, if later, after the occurrence of the Valid Business Reason and (y) in case a Registration Statement has been filed relating to a Demand Registration, Insmed may postpone amending or supplementing such Registration Statement (in which case, if the Valid Business Reason no longer exists or if more than sixty (60) days have passed since such postponement, the Initiating Holders may request a new Demand Registration (which request shall not be counted as an additional Demand Registration for purposes of clause (i) above) or request the prompt amendment or supplement of such Registration Statement).  Insmed shall give written notice to all Designated Shareholders of its determination to postpone filing, amending or supplementing a Registration Statement and of the fact that the Valid Business Reason for such postponement no longer exists, in each case, promptly after the occurrence thereof.  Notwithstanding anything to the contrary contained herein, Insmed may not postpone a filing, amendment or supplement under this Section 3(a) due to a Valid Business Reason more than once in any twelve (12)-month period.  Each request for a Demand Registration by the Initiating Holders shall state the type and amount of the Registrable Securities proposed to be sold and the intended method of disposition thereof.
 
(b)   Incidental or “Piggy-Back” Rights with Respect to a Demand Registration
 
Any Designated Shareholder that has not requested a registration under Section 3(a) hereof may, pursuant to this Section 3(b), offer its Registrable Securities under any Demand Registration.  Insmed shall (i) as promptly as practicable, but in no event later than five Business Days after the receipt of a request for a Demand Registration from the Initiating Holders, give written notice thereof to all of the Designated Shareholders (other than Initiating Holders which have requested a registration under Section 3(a) hereof), which notice shall specify the type and number of Registrable Securities subject to the request for Demand Registration, the names of the Initiating Holders and the intended method of disposition of such Registrable Securities, and (ii) subject to Section 3(e) hereof, include in the Registration Statement filed pursuant to the Demand Registration all of the Registrable Securities held by such Designated Shareholders from whom Insmed has received a written request for inclusion therein within five Business Days of the date on which such Designated Shareholders received the written notice referred to in clause (i) above.  Each such request by such Designated Shareholders shall specify the type and number of Registrable Securities proposed to be registered.  The failure of any Designated Shareholder to respond within such five Business Day period referred to in clause (ii) above shall be deemed to be a waiver of such Designated Shareholder’s rights under this Section 3(b) with respect to such Demand Registration.  Any Designated Shareholder may waive its rights under this Section 3(b) by giving written notice to Insmed.
 
(c)   Effective Demand Registration
 
Subject to Section 3(a), Insmed shall use its reasonable best efforts (taking into account, among other things, accounting and regulatory matters) to file a Registration Statement relating to the Demand Registration and to use its reasonable best efforts to cause such Registration Statement to become effective as promptly as practicable but in no event later than one hundred twenty days after it receives a request under Section 3(a) hereof and to remain continuously effective for the lesser of (i) the period during which all Registrable Securities registered in the Demand Registration are sold or (ii) one hundred eighty (180) days; provided , however , that a registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Designated Shareholders and such interference is not thereafter eliminated or (y) the conditions specified in the underwriting agreement, if any, entered into in connection with such Demand Registration are not satisfied or waived as a result of an action or inaction by Insmed.
 
(d)   Expenses
 
Except as provided in Section 3(g) or the last sentence of Section 7(d) hereof, Insmed shall pay all Registration Expenses in connection with a Demand Registration, whether or not such Demand Registration becomes effective.
 
(e)   Underwriting Procedures
 
If the Majority Initiating Holders so elect, Insmed shall use its reasonable best efforts to cause the offering made pursuant to such Demand Registration pursuant to this Section 3 to be in the form of a firm commitment underwritten public offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(f) hereof.  In connection with any Demand Registration under this Section 3 involving an underwritten public offering, none of the Registrable Securities held by any Designated Shareholder making a request for inclusion of such Registrable Securities pursuant to Section 3(a) or 3(b) hereof shall be included in such underwritten public offering unless such Designated Shareholder accepts the terms of the offering as agreed upon by Insmed, the Majority Initiating Holders and the Approved Underwriter (including, without limitation, offering price, underwriting commissions or discounts and lockup agreement terms), and then only in such quantity as set forth below.  If the Approved Underwriter advises Insmed that the aggregate amount of such Registrable Securities requested to be included in such offering is sufficiently large to have a material adverse effect on the distribution or sales price of the Registrable Securities in such offering, then Insmed shall include in such Demand Registration, to the extent of the amount that the Approved Underwriter believes may be sold without causing such material adverse effect, first , such number of Registrable Securities of the Designated Shareholders that are participating in such offering pursuant to Section 3(a) or 3(b) hereof, which Registrable Securities shall be allocated pro rata among such Designated Shareholders participating in the offering, based on the number of Registrable Securities held by each such Designated Shareholder, second , any other securities of Insmed requested by any other holders thereof to be included in such registration, pro rata among such other holders based on the number of securities held by each such holder, and third , securities offered by Insmed for its own account.
 
(f)   Selection of Underwriters
 
If any Demand Registration or S-3 Registration, as the case may be, of Registrable Securities is in the form of an underwritten public offering, Insmed shall select and obtain one or more investment banking firms of national reputation to act as the managing underwriter or underwriters of the offering; provided , however , that such firm or firms shall, in any case, also be approved by the Majority Initiating Holders or Majority Shelf Take-Down Shareholders, as the case may be, such approval not to be unreasonably delayed or withheld.  An investment banking firm or firms selected pursuant to this Section 3(f) shall be referred to as the “ Approved Underwriter ” herein.
 
(g)   Withdrawal
 
The Majority Initiating Holders shall be entitled to withdraw or revoke a request for a Demand Registration without the prior written consent of Insmed if (i) such withdrawal or revocation is as a result of facts or circumstances arising after the date on which a request for a Demand Registration was made and the Majority Initiating Holders reasonably determine that participation in such registration would have a material adverse effect on the Initiating Holders or (ii) the Initiating Holders agree to pay all fees and expenses incurred by Insmed in connection with such withdrawn registration (each, a “ Permitted Withdrawal ”).  If a Permitted Withdrawal occurs under clause (i) above, the related Demand Registration shall be counted as a Demand Registration for purposes of Section 3(a) hereof, and if a Permitted Withdrawal occurs under clause (ii) above, the related Demand Registration shall not be counted as a Demand Registration for purposes of Section 3(a) hereof.  Any Permitted Withdrawal shall constitute and effect an automatic withdrawal by all other Initiating Holders and any other Designated Shareholder participating in such Demand Registration pursuant to the provisions of Section 3(b) hereof.
 
4.   Incidental or “Piggy-Back” Registration
 
(a)   Request for Incidental or “Piggy-Back” Registration
 
After May 30, 2011, if Insmed proposes to file a Registration Statement with respect to an offering of Common Stock by Insmed for its own account (other than a Registration Statement on Form S-4 or S-8) or for the account of any stockholder of Insmed other than Designated Shareholders pursuant to Sections 3 and 5 hereof, then Insmed shall give written notice (an “ Incidental Registration Notice ”) of such proposed filing to each of the Designated Shareholders at least thirty (30) days before the anticipated filing date, which notice shall describe the proposed registration and distribution, the proposed date of filing of such Registration Statement, any proposed managing underwriter or underwriters and a good faith estimate by Insmed of the proposed maximum offering price thereof, as such price is proposed to appear on the facing page of such Registration Statement, and offer such Designated Shareholders the opportunity to register the number of Registrable Securities that each such Designated Shareholder may request (an “ Incidental Registration ”).  Any such request by a Designated Shareholder must be made in writing and received by Insmed within five Business Days of the date on which the Designated Shareholder received the Incidental Registration Notice.  The failure of any Designated Shareholder to respond to an Incidental Registration Notice within ten (10) Business Days shall be deemed a waiver of such Designated Shareholder’s rights under this Section 4(a) with respect to such Incidental Registration.  Insmed shall use its reasonable best efforts to cause the managing underwriter or underwriters in the case of a proposed underwritten public offering (the “ Insmed Underwriter ”) to permit each Designated Shareholder who has requested in writing to participate in the Incidental Registration pursuant to this Section 4(a) to include the number of such Designated Shareholder’s Registrable Securities indicated by such Designated Shareholder in such offering on the same terms and conditions as the Common Stock of Insmed or the account of such other stockholder, as the case may be, included therein.  Any withdrawal of the Registration Statement by Insmed for any reason shall constitute and effect an automatic withdrawal of any Incidental Registration related thereto.  In connection with any Incidental Registration under this Section 4(a) involving an underwritten public offering, Insmed shall not be required to include any Registrable Securities in such underwritten public offering unless the Designated Shareholders thereof accept the terms of the underwritten public offering as agreed upon between Insmed, such other stockholders, if any, and Insmed Underwriter (including, without limitation, offering price, underwriting commissions or discounts and lock-up agreement terms), and then only in such quantity as set forth below.  If the Insmed Underwriter determines that the aggregate amount of the securities requested to be included in such offering is sufficiently large to have a material adverse effect on the distribution or sales price of the securities in such offering, then Insmed shall include in such Incidental Registration, to the extent of the amount that the Insmed Underwriter believes may be sold without causing such material adverse effect, first , (i) all of the securities to be offered for the account of Insmed, in the case of an Insmed initiated Incidental Registration or (ii) all of the securities to be offered for the account of the stockholders who have requested such Incidental Registration, in the case of a stockholder initiated Incidental Registration, second , any Registrable Securities and any other shares of Common Stock requested by holders thereof (including the Designated Shareholders) to be included in such registration (to the extent that the holders of such securities do not have priority to be included in such registration), pro rata among the Designated Shareholders and such other holders based on the number of securities held by each such holder, and third , all of the securities to be offered for the account of Insmed, in the case of an Incidental Registration initiated by any stockholder of Insmed.
 
(b)   Expenses
 
Except as provided in the last sentence of Section 7(d) hereof, Insmed shall bear all Registration Expenses in connection with any Incidental Registration pursuant to this Section 4, whether or not such Incidental Registration becomes effective.
 
5.   Form S-3 Registration
 
(a)   Form S-3 Registration
 
If Insmed is eligible to use Form S-3 under the Securities Act in connection with a secondary public offering of its equity securities, Insmed shall register under the Securities Act on Form S-3 (an “ S-3 Registration ”) the sale of all of the Registrable Securities (which S-3 Registration shall be a shelf registration pursuant to Rule 415 promulgated under the Securities Act) provided herein.  Subject to the terms of this Agreement, Insmed shall use its reasonable best efforts to file a Registration Statement relating to the S-3 Registration (taking into account, among other things, accounting and regulatory matters) and to use its reasonable best efforts to cause such Registration Statement to become effective, in each case, as promptly as practicable but in no event later than the Target Filing Date.  Subject to the terms of this Agreement, if the Registration Statement for an S-3 Registration ceases to be effective after the third anniversary of its effectiveness, if Insmed is eligible to use Form S-3 under the Securities Act in connection with a secondary public offering of its equity securities, at the written request of the Majority Designated Shareholders, Insmed shall use its reasonable best efforts to file a new Registration Statement relating to the S-3 Registration (taking into account, among other things, accounting and regulatory matters) and to use its reasonable best efforts to cause such Registration Statement to become effective, in each case, as promptly as practicable but in no event later than ninety (90) days after the prior Registration Statement ceases to be effective; provided , that the Designated Shareholders request for inclusion in the new Registration Statement relating to such S-3 Registration at least $10,000,000 of Registrable Securities (calculated based upon the Market Price of the Registrable Securities on the date which the Majority Designated Shareholders make such request).  If the Majority S-3 Participating Shareholders request, and if Insmed is a Well-Known Seasoned Issuer, Insmed shall cause such S-3 Registration to be made pursuant to an Automatic Shelf Registration Statement and may omit the names of the S-3 Participating Shareholders and the amount of the Registrable Securities to be offered thereunder.  Any Registration Statement filed under this Section 5(a) shall be referred to as a “ Form S-3 Shelf Registration Statement .”
 
(b)   Form S-3 Underwriting Procedures
 
In an Underwritten Shelf Take-Down, the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter selected in accordance with Section 3(f) hereof.  In connection with an Underwritten Shelf Take-Down, none of the Registrable Securities held by any Designated Shareholder having such Registrable Securities included pursuant to Section 5(a) hereof shall be included in such Underwritten Shelf Take-Down unless such Designated Shareholder accepts the terms of the offering as agreed upon by Insmed, the Majority Shelf Take-Down Shareholders and the Approved Underwriter (including, without limitation, offering price, underwriting commissions and discounts and lock-up agreement terms) and then only in such quantity as set forth below.  If the Approved Underwriter advises Insmed that the aggregate amount of such Registrable Securities requested to be included in such offering is sufficiently large to have a material adverse effect on the distribution or sales price of the Registrable Securities in such offering then Insmed shall include in such offering, to the extent of the amount that the Approved Underwriter believes may be sold without causing such material adverse effect, first , such number of Registrable Securities of the Designated Shareholders that are participating in such Underwritten Shelf Take-Down, which Registrable Securities shall be allocated pro rata among such Designated Shareholders participating in such Undewritten Shelf Take-Down, based on the number of Registrable Securities held by each such Designated Shareholder, second , any other securities of Insmed requested by any other holders thereof to be included in such Underwritten Shelf Take-Down and third , securities offered by Insmed for its own account.  Notwithstanding the foregoing, immediately upon determination of the price at which such Registrable Securities are to be sold in an offering in an S-3 Registration that is an Underwritten Shelf Take-Down, if such price is below the price which the Majority Shelf Take-Down Shareholders find acceptable, then such Majority Shelf Take-Down Shareholders shall then have the right, by written notice to Insmed, to withdraw their Registrable Securities from being included in such offering; provided , that such a withdrawal by such Majority Shelf Take-Down Shareholders shall constitute and effect an automatic withdrawal by all other S-3 Participating Shareholders.
 
(c)   Limitations on Form S-3 Registrations
 
If the Board of Directors determines that a Valid Business Reason exists, (x) Insmed may postpone filing a Registration Statement relating to an S-3 Registration (but not the preparation of the Registration Statement) until such Valid Business Reason no longer exists, but in no event for more than sixty (60) days after the Target Filing Date or, if later, after the occurrence of the Valid Business Reason and (y) in case a Registration Statement has been filed relating to an S-3 Registration, Insmed may postpone amending or supplementing such Registration Statement (in which case, if the Valid Business Reason no longer exists or if more than sixty (60) days have passed since such postponement, the Majority S-3 Participating Shareholders may request the prompt amendment or supplement of such Registration Statement or a new S-3 Registration).  Insmed shall give written notice to all Designated Shareholders of its determination to postpone or delay amending or supplementing a Registration Statement and of the fact that the Valid Business Reason for such postponement or delay no longer exists, in each case, promptly after the occurrence thereof.  Notwithstanding anything to the contrary contained herein, Insmed may not postpone a filing or delay amending or supplementing a filing under this Section 5(c) due to a Valid Business Reason more than once in any six-month period.
 
(d)   Expenses
 
Except as provided in the last sentence of Section 7(d) hereof, Insmed shall bear all Registration Expenses in connection with any S-3 Registration pursuant to this Section 5, whether or not such S-3 Registration becomes effective.
 
(e)   Automatic Shelf Registration Statement
 
After the Registration Statement with respect to an S-3 Registration that is an Automatic Shelf Registration Statement becomes effective, upon written request by the S-3 Participating Shareholders, Insmed shall, as promptly as practicable after receiving such request, (i) file with the Commission a prospectus supplement naming the S-3 Participating Shareholders as selling stockholders and the amount of Registrable Securities to be offered and include, to the extent not included or incorporated by reference in the Registration Statement, any other information omitted from the Prospectus used in connection with such Registration Statement as permitted by Rule 430B promulgated under the Securities Act (including the plan of distribution and the names of any underwriters, placement agents or brokers) and (ii) pay any necessary filing fees to the Commission within the time period required.
 
(f)   Shelf Take-Downs
 
(i)   Any Designated Shareholder (an “ Initiating Shelf Holder ”) that holds Registrable Securities included in a Form S-3 Shelf Registration Statement may initiate an offering or sale of all or part of such Registrable Securities (a “ Shelf Take-Down ”), in which case the provisions of this Section 5(f) shall apply.
 
(ii)   If in connection with any Shelf Take-Down, the Majority Shelf Take-Down Shareholders so elect in a written request delivered to Insmed (an “ Underwritten Shelf Take-Down Notice ”), a Shelf Take-Down may be in the form of an underwritten public offering (an “ Underwritten Shelf Take-Down ”) and, subject to the limitations set forth in the proviso to Section 5(b), Insmed shall file and effect an amendment or supplement to its Form S-3 Shelf Registration Statement for such purpose as soon as practicable.   Such Majority Shelf Take-Down Shareholders shall indicate in such Underwritten Shelf Take-Down Notice whether it intends for such Underwritten Shelf Take-Down to involve a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the underwriters (a “ Marketed Underwritten Shelf Take-Down ”).  Upon receipt of an Underwritten Shelf Take-Down Notice indicating that such Underwritten Shelf Take-Down will be a Marketed Underwritten Shelf Take-Down, Insmed shall promptly (but in any event no later than ten Business Days prior to the expected date of such Marketed Underwritten Shelf Take-Down) give written notice of such Marketed Underwritten Shelf Take-Down to all other S-3 Participating Shareholders and shall permit the participation of all such S-3 Participating Shareholders that request inclusion in such Marketed Underwritten Shelf Take-Down who respond in writing within five Business Days after the receipt of such notice of their election to participate.  The provisions of Section 5(b) shall apply with respect to the right of the Initiating Shelf Holder and any other Shelf Holder to participate in any Underwritten Shelf Take-Down.
 
(iii) If any Initiating Shelf Holder desires to effect a Shelf Take-Down that does not constitute a Marketed Underwritten Shelf Take-Down (a “ Non-Marketed Underwritten Shelf Take-Down ”), such Initiating Shelf Holder shall so indicate in a written request delivered to Insmed no later than two Business Days prior to the expected date of such Non-Marketed Underwritten Shelf Take-Down, which request shall include (i) the total number of Registrable Securities expected to be offered and sold in such Non-Marketed Underwritten Shelf Take-Down, (ii) the expected plan of distribution of such Non-Marketed Underwritten Shelf Take-Down and (iii) the action or actions required (including the timing thereof) in connection with such Non-Marketed Underwritten Shelf Take-Down (including the delivery of one or more stock certificates representing shares of Registrable Securities to be sold in such Non-Marketed Underwritten Shelf Take-Down), and, subject to the limitations set forth in Sections 5(a) and (b), Insmed shall file and effect an amendment or supplement to its Form S-3 Shelf Registration Statement for such purpose as soon as practicable.
 
6.   Holdback Agreements
 
(a)   Restrictions on Public Sale by Designated Shareholders
 
(i)   To the extent requested by the Approved Underwriter or the Insmed Underwriter, as the case may be, in the case of an underwritten public offering, each Designated Shareholder (other than any Pledgee) agrees (x) not to effect any public sale or distribution of any Registrable Securities or of any securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 (or any successor rule or regulation) promulgated under the Securities Act, or offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or enter into any hedging or similar transaction with the same economic effect as a sale of, any Registrable Securities and (y) except as otherwise consented to by Insmed, not to make any request for a Demand Registration or S-3 Registration under this Agreement, in each case, during the Specified Period following the effective date of such Registration Statement, except in each case as part of such underwritten public offering.
 
(ii)   Notwithstanding anything herein to the contrary, no Pledgee shall be required to agree to any restriction on its ability to trade in any securities, including the restrictions set forth in this Section 6(a).  The Designated Shareholders hereby agree that they shall act in good faith with respect to the restrictions set forth in this Section 6(a) and shall take no action or omit to take any action with the intention of circumventing or evading the restrictions applicable to them under this Section 6(a).
 
(b)   Restrictions on Public Sale by Insmed
 
Unless Insmed shall have received the prior written consent of the Majority Designated Shareholders, Insmed agrees not to (i) effect any public sale or distribution of any of its securities, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to registrations on Form S-4 or S-8), (ii) file any Registration Statements relating to the registration of securities for Insmed’s account (except pursuant to registrations on Form S-4 or S-8) or (iii) make any public announcements related to clause (i) or (ii), in each case, during the period beginning on the effective date of any Registration Statement relating to an underwritten public offering in which the Designated Shareholders of Registrable Securities are participating pursuant to Section 3 or 5 hereof and ending on the earlier of (x) the date on which all Registrable Securities registered on such Registration Statement are sold and (y) the Specified Period after the effective date of such Registration Statement (except as part of such registration).
 
7.   Registration Procedures
 
(a)   Obligations of Insmed
 
Whenever registration of Registrable Securities has been requested or required pursuant to Section 3, Section 4 or Section 5 hereof, Insmed shall use its reasonable best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as quickly as practicable, and in connection with any such request, Insmed shall:
 
(i)   use its reasonable best efforts (taking into account, among other things, accounting and regulatory matters) to prepare and file with the Commission a Registration Statement on any form for which Insmed then qualifies or which counsel for Insmed shall deem appropriate and which form shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and use its reasonable best efforts to cause such Registration Statement to become effective; provided , however , that (x) before filing a Registration Statement or Prospectus or any amendments or supplements thereto (including, without limitation, any documents incorporated by reference therein), or before using any Free Writing Prospectus, Insmed shall provide one firm of legal counsel selected by the Designated Shareholders holding a majority of the Registrable Securities being registered in such registration (“ Designated Shareholders’ Counsel ”), any managing underwriter or broker/dealer participating in any disposition of such Registrable Securities pursuant to a Registration Statement and any attorney retained by any such managing underwriter or broker/dealer (each, an “ Inspector ” and collectively, the “ Inspectors ”) with an adequate and appropriate opportunity to review and comment on such Registration Statement and each Prospectus included therein (and each amendment or supplement thereto) and each Free Writing Prospectus to be filed with the Commission, subject to such documents being under Insmed’s control, and (y) Insmed shall promptly notify the Designated Shareholders’ Counsel and each seller of Registrable Securities pursuant to such Registration Statement of any stop order issued or threatened by the Commission and take all reasonable best efforts required to prevent the entry of such stop order or to remove it if entered;
 
(ii)   prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the lesser of (x) one hundred eighty (180) days (or, in the case of an S-3 Registration, three years from the effective date of the Registration Statement if such Registration Statement is filed pursuant to Rule 415 promulgated under the Securities Act) and (y) such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold (or, if such Registration Statement is an Automatic Shelf Registration Statement, on the third anniversary of the date of filing of such Automatic Shelf Registration Statement); and shall comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement.  Notwithstanding the foregoing, Insmed shall be entitled at all reasonable times to suspend a Registration Statement that includes Registrable Securities during the pendency of any amendments required by this Section 7(a)(ii).  Such suspension or suspensions shall be effective upon transmittal of notice to an affected Designated Shareholder, in compliance with, and using the most expeditious practical means of communication permitted by Section 10(e) below.
 
(iii)   furnish to each seller of Registrable Securities, prior to filing a Registration Statement relating to Registrable Securities, at least one copy of such Registration Statement as is proposed to be filed, and thereafter such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the Prospectus included in such Registration Statement (including each preliminary Prospectus), any Prospectus filed under Rule 424 under the Securities Act and any Free Writing Prospectus as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller;
 
(iv)   register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as any seller of Registrable Securities may reasonably request, and continue such registration or qualification in effect in such jurisdiction for as long as permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided , however , that Insmed shall not be required to (x) qualify generally to do business as a foreign entity in any jurisdiction where it is not then so qualified, (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction;
 
(v)   promptly notify each seller of Registrable Securities: (A) when a Prospectus, any Prospectus supplement, any Free Writing Prospectus, a Registration Statement or a post-effective amendment to a Registration Statement has been filed with the Commission, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (B) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement, related Prospectus or Free Writing Prospectus or for additional information; (C) of the issuance by the Commission or any other governmental authority of any stop order suspending the effectiveness of a Registration Statement relating to Registrable Securities or of any order suspending or preventing the use of any related prospectus or the initiation or threatening of any proceedings for that purpose; (D) of the receipt by Insmed of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; (E) of the existence of any fact or happening of any event (including the passage of time) of which Insmed has knowledge which makes any statement of a material fact in such Registration Statement, related Prospectus or Free Writing Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue or which would require the making of any changes in the Registration Statement, Prospectus or Free Writing Prospectus in order that, in the case of the Registration Statement, it will not 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 not misleading, and that in the case of such Prospectus or Free Writing Prospectus, it will not 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 the light of the circumstances under which they were made, not misleading; and (F) determination by counsel of Insmed that a post-effective amendment to a Registration Statement relating to Registrable Securities is advisable;
 
(vi)   use its reasonable best efforts to, upon the occurrence of any event contemplated by Section 7(a)(v)(E) hereof or, subject to Sections 3(a) and 5(c) hereof, the existence of a Valid Business Reason, prepare a supplement or amendment to such Registration Statement, related Prospectus or Free Writing Prospectus and furnish to each seller of Registrable Securities a reasonable number of copies of such supplement to, or amendment of, such Registration Statement, Prospectus or Free Writing Prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, in the case of the Registration Statement, it will not 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 not misleading, and that in the case of such Prospectus or Free Writing Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
 
(vii)   enter into and perform customary agreements (including an underwriting agreement in customary form with the Approved Underwriter or Insmed Underwriter, if any, selected as provided in Section 3, Section 4 or Section 5 hereof, as the case may be) and take such other reasonable best actions as are reasonably required in order to facilitate the disposition of such Registrable Securities, including causing its officers to participate in “road shows” and other information meetings organized by the Approved Underwriter or Insmed Underwriter;
 
(viii)   make available at reasonable times for inspection by any Inspector all pertinent financial and other records, pertinent corporate documents and properties of Insmed and its subsidiaries (collectively, the “ Records ”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause Insmed’s and its subsidiaries’ officers, directors and employees, and the independent public accountants of Insmed, to supply all information reasonably requested by any such Inspector in connection with such Registration Statement.  Records that Insmed determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to Insmed if Insmed shall so request) unless (x) the disclosure of such Records is necessary, in Insmed’s judgment, to avoid or correct a misstatement or omission in the Registration Statement, (y) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after exhaustion of all appeals therefrom or (z) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by Insmed or has been made generally available to the public.  Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, promptly give notice to Insmed and allow Insmed, at Insmed’s expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.  In the event that Insmed is unsuccessful in preventing the disclosure of such Records, such seller agrees that it shall furnish only such portion of those Records that it is advised by counsel is legally required and shall exercise all reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to those Records;
 
(ix)   if such sale is pursuant to an underwritten offering, obtain a “cold comfort” letter dated the effective date of the Registration Statement and the date of the closing under the underwriting agreement from Insmed’s independent public accountants in customary form and covering such matters of the type customarily covered by “cold comfort” letters as the managing underwriter reasonably requests;
 
(x)   if such sale is pursuant to an underwritten offering, furnish, at the request of any seller of Registrable Securities on the date such securities are delivered to the underwriters for sale pursuant to such registration, an opinion, dated such date, of counsel representing Insmed for the purposes of such registration, addressed to the underwriters, covering such legal matters with respect to the registration in respect of which such opinion is being given as the underwriters may reasonably request and are customarily included in such opinions;
 
(xi)   comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable but no later than fifteen months after the effective date of the Registration Statement, an earnings statement covering a period of twelve months beginning after the effective date of the Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated under the Securities Act;
 
(xii)   cause as of the effective date of the Registration Statement, any shares of Common Stock included in the Registration Statement to be listed on each securities exchange on which the Common Stock is then listed, including but not limited to the Nasdaq Capital Market, provided that the applicable listing requirements are satisfied;
 
(xiii)   keep Designated Shareholders’ Counsel reasonably advised in writing as to the initiation and progress of any registration hereunder; provided, that Insmed shall provide Designated Shareholders’ Counsel with all correspondence with the Commission in connection with any Registration Statement filed hereunder to the extent that such Registration Statement has not been declared effective on or prior to the date required hereunder;
 
(xiv)   cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA;
 
(xv)   cause the Registrable Securities covered by such Registration Statement to be registered with or approved by such other governmental agencies or authorities, as may be reasonably necessary by virtue of the business and operations of Insmed to enable the seller or sellers of Registrable Securities to consummate the disposition of such Registrable Securities;
 
(xvi)   within the deadlines specified by the Securities Act and the rules promulgated thereunder, make all required filings of all Prospectuses and Free Writing Prospectuses with the Commission;
 
(xvii)   within the deadlines specified by the Securities Act and the rules promulgated thereunder, make all required filing fee payments in respect of any Registration Statement or Prospectus used under this Agreement (and any offering covered thereby); and
 
(xviii)   take all other steps reasonably necessary and advisable to effect the registration of the Registrable Securities contemplated hereby and reasonably cooperate with the holders of such Registrable Securities to facilitate the disposition of such Registrable Securities pursuant thereto.
 
(b)   Seller Requirements
 
In connection with any offering under any Registration Statement under this Agreement, each Designated Shareholder (i) shall promptly furnish to Insmed in writing such information with respect to such Designated Shareholder and the intended method of disposition of its Registrable Securities as Insmed may reasonably request or as may be required by law or regulations for use in connection with any related Registration Statement or Prospectus (or amendment or supplement thereto) and all information required to be disclosed in order to make the information previously furnished to Insmed by such Designated Shareholder not contain a material misstatement of fact or necessary to cause such Registration Statement or Prospectus (or amendment or supplement thereto) not to omit a material fact with respect to such Designated Shareholder necessary in order to make the statements therein not misleading; (ii) shall comply with the Securities Act and the Exchange Act and all applicable state securities laws and comply with all applicable regulations in connection with the registration and the disposition of the Registrable Securities; and (iii) shall not use any Free Writing Prospectus without the prior written consent of Insmed.  If any seller of Registrable Securities fails to provide such information required to be included in such Registration Statement by applicable securities laws or otherwise necessary or desirable in connection with the disposition of such Registrable Securities in a timely manner after written request therefor, Insmed may exclude such seller’s Registrable Securities from a registration under Sections 3, 4 or 5 hereof.
 
(c)   Notice to Discontinue
 
Each Designated Shareholder agrees that, upon receipt of any notice from Insmed of the happening of any event of the kind described in Section 7(a)(v)(E) hereof or, subject to Section 3(a) and 5(c) hereof, the existence of Valid Business Reason, such Designated Shareholder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Designated Shareholder’s receipt of the copies of the supplemented or amended Prospectus or Free Writing Prospectus contemplated by Section 7(a)(vi) hereof (or if no supplemental or amended prospectus or Free Writing Prospectus is required, upon confirmation from Insmed that use of the Prospectus or Free Writing Prospectus is once again permitted) and, if so directed by Insmed, such Designated Shareholder shall deliver to Insmed (at Insmed’s expense) all copies, other than permanent file copies then in such Designated Shareholder’s possession, of the Prospectus or Free Writing Prospectus covering such Registrable Securities which is current at the time of receipt of such notice.  If Insmed shall give any such notice, Insmed shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement  by the number of days during the period from and including the date of the giving of such notice and including the date when sellers of such Registrable Securities under such Registration Statement shall have received the copies of the supplemented or amended Prospectus or Free Writing Prospectus contemplated by and meeting the requirements of Section 7(a)(v) hereof (or if no supplemental or amended prospectus or Free Writing Prospectus is required, upon confirmation from Insmed that use of the Prospectus or Free Writing Prospectus is once again permitted); provided, that, no single suspension under this Section 7(c) shall exceed forty-five (45) days in any one hundred and eight (180) day period and in no event shall more than one suspension event exceed, in the aggregate, sixty (60) days in any twelve (12) month period.
 
(d)   Registration Expenses
 
Except as otherwise provided herein, including but not limited to the last sentence of this Section 7(d), Insmed shall pay all expenses arising from or incident to its performance of, or compliance with, this Agreement, including, without limitation (i) all expenses, including filing fees, in connection with the preparation and filing of the Registration Statement, preliminary prospectus or final prospectus and amendments and supplements thereto, (ii) Commission, stock exchange and FINRA registration (including any counsel retained in connection with FINRA registration) and filing fees, (iii) transfer agents’ and registrars’ fees and expenses, (iv) all fees and expenses incurred in complying with state securities or “blue sky” laws (including reasonable fees, charges and disbursements of counsel to any underwriter incurred in connection with “blue sky” qualifications of the Registrable Securities as may be set forth in any underwriting agreement), (v) all printing, messenger and delivery expenses, (vi) the fees, charges and expenses of counsel to Insmed and of its independent registered public accounting firm and any other accounting fees, charges and expenses incurred by Insmed (including, without limitation, any expenses arising from any “cold comfort” letters or any special audits incident to or required by any registration or qualification), (vii) the reasonable fees, charges and expenses of the Designated Shareholders’ Counsel (including without limitation the reasonable fees, charges and expenses incurred in connection with any amendments to a Registration Statement) and (viii) any liability insurance or other premiums for insurance obtained in connection with any Demand Registration or piggy-back registration thereon, Incidental Registration or S-3 Registration pursuant to the terms of this Agreement, regardless of whether such Registration Statement is declared effective.  All of the expenses described in the preceding sentence of this Section 7(d) are referred to herein as “ Registration Expenses .”  The Designated Shareholders of Registrable Securities sold pursuant to a Registration Statement shall bear the expense of any broker’s commission or underwriter’s discount or commission relating to the registration and sale of such Designated Shareholders’ Registrable Securities and shall bear the fees and expenses of their own counsel (other than the Designated Shareholders’ Counsel).
 
8.   Indemnification; Contribution
 
(a)   Indemnification by Insmed
 
Insmed agrees to indemnify and hold harmless each Designated Shareholder, its general or limited partners, directors, officers, Affiliates, stockholders, members, employees, trustees and each Person who controls (within the meaning of Section 15 of the Securities Act) such Designated Shareholder from and against any and all losses, claims, damages, liabilities and expenses, or any action or proceeding in respect thereof (including, but not limited to, reasonable costs and expenses of legal counsel arising from any investigation, action or proceeding in respect of any of the foregoing) (each, a “ Liability ” and collectively, “ Liabilities ”), arising out of or based upon (a) any untrue, or allegedly untrue, statement of a material fact contained in the Disclosure Package, the Registration Statement, the Prospectus, any Free Writing Prospectus or in any amendment or supplement thereto; and (b) the omission or alleged omission to state in the Disclosure Package, the Registration Statement, the Prospectus, any Free Writing Prospectus or in any amendment or supplement thereto any material fact required to be stated therein or necessary to make the statements therein not misleading under the circumstances such statements were made; provided , however , that Insmed shall not be held liable in any such case to the extent that any such Liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission contained in such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto in reliance upon and in conformity with written information concerning such Designated Shareholder furnished to Insmed by or on behalf of such Designated Shareholder expressly for use therein, including, without limitation, the information furnished to Insmed pursuant to Sections 7(b) and 8(b) hereof.  Insmed shall also provide customary indemnities to any underwriters of the Registrable Securities, their officers, directors and employees and each Person who controls such underwriters (within the meaning of Section 15 of the Securities Act) to the same extent as provided above with respect to the indemnification of the Designated Shareholders of Registrable Securities.
 
(b)   Indemnification by Designated Shareholders
 
In connection with any offering in which a Designated Shareholder is participating pursuant to Section 3, 4 or 5 hereof, such Designated Shareholder agrees severally to indemnify and hold harmless Insmed, the other Designated Shareholders, any underwriter retained by Insmed and each Person who controls Insmed, the other Designated Shareholders or such underwriter (within the meaning of Section 15 of the Securities Act) to the same extent as the foregoing indemnity from Insmed to the Designated Shareholders (including indemnification of their respective partners, directors, officers, Affiliates, stockholders, members, employees, trustees and Controlling Persons), but only to the extent that Liabilities arise out of or are based upon a statement or alleged statement or an omission or alleged omission that was made in reliance upon and in conformity with information with respect to such Designated Shareholder furnished in writing to Insmed by or on behalf of such Designated Shareholder expressly for use in such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto, including, without limitation, the information furnished to Insmed pursuant to Section 7(b) hereof; provided , however , that the total amount to be indemnified by such Designated Shareholder pursuant to this Section 8(b) shall be limited to the net proceeds received by such Designated Shareholders in the offering to which such Disclosure Package, Registration Statement, Prospectus, Free Writing Prospectus or such amendment or supplement thereto relates.
 
(c)   Conduct of Indemnification Proceedings
 
Any Person entitled to indemnification or contribution hereunder (the “ Indemnified Party ”) agrees to give prompt written notice to the indemnifying party (the “ Indemnifying Party ”) after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided , however , that the failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of any Liability that it may have to the Indemnified Party hereunder (except to the extent that the Indemnifying Party is materially prejudiced or otherwise forfeits substantive rights or defenses by reason of such failure).  If notice of commencement of any such action is given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party.  Each Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the reasonable and documented out-of-pocket fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and such parties have been advised by such counsel that either (x) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (y) there may be one or more legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party.  In any of such cases, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not be liable for the reasonable and documented out-of-pocket fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all Indemnified Parties and all such reasonable and documented out-of-pocket fees and expenses shall be reimbursed as incurred.  No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the consent of such Indemnified Party, which consent shall not be unreasonably withheld, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is a party and indemnity has been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such proceeding.
 
(d)   Contribution
 
If the indemnification provided for in this Section 8 from the Indemnifying Party is unavailable to an Indemnified Party hereunder or insufficient to hold harmless an Indemnified Party in respect of any Liabilities referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Liabilities, as well as any other relevant equitable considerations.  The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action.  The amount paid or payable by a party as a result of the Liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 8(a), 8(b) and 8(c) hereof, any reasonable and documented out-of-pocket legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding; provided , that the total amount to be contributed by any Designated Shareholder shall be limited to the net proceeds (after deducting the underwriters’ discounts and commissions) received by such Designated Shareholder in the offering.
 
The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution or indemnification from any Person who was not guilty of such fraudulent misrepresentation.
 
9.   Rule 144
 
Insmed covenants that it shall take such action as may be required from time to time to enable such Designated Shareholder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or Regulation S under the Securities Act or(ii) any similar rules or regulations hereafter adopted by the Commission.  Insmed shall, upon the request of any Designated Shareholder, deliver to such Designated Shareholder a written statement as to whether it has complied with such requirements.
 
10.   Miscellaneous
 
(a)   Stock Splits, etc.
 
  The provisions of this Agreement shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations recapitalizations and the like occurring after the date hereof.
 
(b)   Inconsistent Agreements
 
Insmed hereby represents and warrants that it has not previously entered into any agreement granting registration rights to any Person with respect to any securities of Insmed.  So long as any Registrable Securities or shares of Preferred Stock remain outstanding, Insmed shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Designated Shareholders in this Agreement or grant any additional registration rights to any Person or with respect to any securities that are not Registrable Securities which rights are senior or on par with the rights granted in this Agreement without the prior written consent of the Designated Shareholders holding greater than 62.5% of the Registrable Securities then held by the Designated Shareholders.
 
(c)   Remedies
 
The Designated Shareholders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement.  Insmed agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate.
 
(d)   Amendments and Waivers
 
Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless consented to in writing by Insmed and the Majority Designated Shareholders; provided , however , that no amendment, modification, supplement, waiver or consent to depart from the provisions hereof shall be effective if such amendment, modification, supplement, waiver or consent to depart from the provisions hereof materially and adversely affects the substantive rights or obligations of one Designated Shareholder, or group of Designated Shareholders, without a similar and proportionate effect on the substantive rights or obligations of all Designated Shareholders, unless each such disproportionately affected Designated Shareholder consents in writing thereto.
 
(e)   Notices
 
All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be made by registered or certified first-class mail, return receipt requested, telecopy, electronic transmission, courier service or personal delivery:
 
(i)   If to Insmed:
 
Insmed Incorporated
8720 Stony Point Parkway, Suite 200
Richmond, Virginia, 23235
Telecopy:  (434) 977-7920
Attention:  Mr. W. McIlwaine Thompson, Secretary

 
with a copy to:
 
Greenberg Traurig LLP
 
200 Park Avenue
 
New York, New York 10166
 
Telecopy: (212) 805-5539
 
Attention:  Joseph A. Herz
 
(ii)  
If to any Designated Shareholder, at its address as it appears in the books and records of Insmed.
 
All such notices, demands and other communications shall be deemed to have been duly given, and received by the recipient, when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service, but in any event two Business Days after being sent by Insmed; two Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied, or electronically transmitted, but in any event one Business Day after being sent by Insmed.  Any party may by notice given in accordance with this Section 10(e) designate another address or Person for receipt of notices hereunder.
 
(f)   Permitted Assignees; Third Party Beneficiaries
 
This Agreement shall inure to the benefit of and be binding upon the permitted assignees of the parties hereto as provided in Section 2(d) hereof.  Except as provided in Section 8 hereof, no Person other than the parties hereto and their permitted assignees is intended to be a beneficiary of this Agreement.
 
(g)   Aggregation of Stock
 
All shares of Registrable Securities held or acquired by Affiliated entities or Persons or entities or Persons under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
 
(h)   Counterparts
 
This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts (and by facsimile or portable document format (pdf) transmission), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
 
(i)   Headings
 
The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
 
(j)   GOVERNING LAW
 
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
 
(k)   Jurisdiction
 
Any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement may be brought or otherwise commenced in any state or federal court located in the Borough of Manhattan in the State of New York.  Each party to this Agreement: (i) expressly and irrevocably consents and submits to the exclusive jurisdiction of each state and federal court located in the Borough of Manhattan in the State of New York (and each appellate court located in the State of New York) in connection with any such action or proceeding; (ii) agrees that each state and federal court located in the Borough of Manhattan in the State of New York shall be deemed to be a convenient forum; and (iii) agrees not to assert (by way of motion, as a defense or otherwise), in any such action or proceeding commenced in any state or federal court located in the Borough of Manhattan in the State of New York, any claim that such party is not subject personally to the jurisdiction of such court, that such action or proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the subject matter of this Agreement may not be enforced in or by such court.
 
(l)   WAIVER OF JURY TRIAL
 
EACH PARTY, ON BEHALF OF ITSELF AND ITS RESPECTIVE SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION BASED UPON, OR ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
(m)   Severability
 
If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired.
 
(n)   Rules of Construction
 
Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement.  Terms defined in the singular have a comparable meaning when used in the plural, and vice versa.
 
(o)   Entire Agreement
 
This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein.  There are no restrictions, promises, representations, warranties or undertakings with respect to the subject matter contained herein, other than those set forth or referred to herein.  This Agreement supersedes all prior agreements and understandings among the parties with respect to such subject matter.
 
(p)   Further Assurances
 
Each of the parties shall execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.
 
(q)   Other Agreements
 
Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of Insmed imposed by, any other agreement.
 

 
 
 

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Registration Rights Agreement on the date first written above.
 
 
INSMED INCORPORATED
 
 
By: /s/ Kevin P. Tully                                                                            
 
 
Name:  Kevin P. Tully
 
 
Title:    Executive Vice President and Chief Financial Officer
 

 
 
 

 
 
Shareholders
 
PROSPECT VENTURES PARTNERS III, L.P.
 
By: Prospect Management Co. III, L.L.C.
Its: General Partner
 
 
 
By:
/s/ Alex Barkas
 
 
 
Name:  Alex Barkas
 
 
Title:    Managing Member
 
 
 
QUAKER BIOVENTURES II, L.P.
 
By: QUAKER BIOVENTURES CAPITAL II, L.P.
Its: General Partner
 
By: QUAKER BIOVENTURES CAPITAL II, LLC
Its: General Partner

By: __/s/ Richard Kollender__________________
Name: Richard Kollender
Title:   Vice President
 
 
BESSEMER VENTURE PARTNERS VII INSTITUTIONAL L.P.
 
 
By: Deer VII & Co. L.P.
 
Its:  General Partner
By: Deer VII & Co. Ltd.
Its: General Partner

 
 
By:
/s/ J.Edmond Colloton
 
 
Name:  J. Edmond Colloton
 
 
Title:   Director
 
 
 
BESSEMER VENTURE PARTNERS VII, L.P.
 
 
By: Deer VII & Co. L.P.
 
Its:  General Partner
By: Deer VII & Co. Ltd.
Its: General Partner

 
 
By:
/s/ J.Edmond Colloton
 
 
Name:  J. Edmond Colloton
 
 
Title:   Director
 
 
 
CHRISTOPHER GABRIELI
 
By: / s/ Christopher Gabrieli                                                                            
 

 
SETH ORLOW
 
By: / s/ Seth Orlow                                                                            
 

 
TVM V LIFE SCIENCE VENTURES GmbH & Co. KG

 
By: /s/ Mark G. Cipriano   /s/ David Poltack
Name: Mark G. Cipriano   David Poltack
Title:  Managing Limited Partners


TVM IV GmbH & Co. KG

 
By: /s/ Mark G. Cipriano   /s/ David Poltack
Name: Mark G. Cipriano   David Poltack
Title:  Authorized Signatories

 
EASTON HUNT CAPITAL PARTNERS, L.P.

 
By: EHC GP, L.P.
 
Its:  General Partner
By: EHC, Inc.
Its: General Partner

 
 
By:
/s/ Richard P. Schneider
 
 
 
Name:  Richard P. Schneider
 
 
Title:    Vice President & Secretary
 
 
 
BEACON BIOVENTURES LIMITED PARTNERSHIP

 
By:  Beacon Bioventures Advisors, L.P.
 
Its:  General Partner
By: Fidelity Biosciences Corp.
Its: General Partner

 
 
By:
/s/ Richard W. Fedorowich, Jr.
 
 
 
Name:  Richard P. Fedorowich, Jr.
 
 
Title:    Chief Financial Officer
 
 
 
BEACON BIOVENTURES PRINCIPALS LIMITED PARTNERSHIP

 
By:  Beacon Bioventures Advisors, L.P.
 
Its:   General Partner
By: Fidelity Biosciences Corp.
Its: General Partner

 
 
By:
/s/ Richard W. Fedorowich, Jr.
 
 
 
Name:  Richard P. Fedorowich, Jr.
 
 
Title:    Chief Financial Officer
 
 
 
COOPERATIEVE AAC LS U.A.
 
 
  By: /s/ M.A. van Osch   /s/ G.J. Mulder
Name: M.A. van Osch G.J. Mulder
Title:  Partners

 

 
 
 

[Name and Address of Transferee]
 
Insmed Incorporated
 
8720 Stony Point Parkway
 
Richmond, VA  23235
 
[Name and Address of Transferor]
 
________, 20__
 
Ladies and Gentlemen:
 
Reference is made to the Registration Rights Agreement, dated as of ______ __, 2010 (the “ Registration Rights Agreement ”), by and among Insmed Incorporated, a Virginia corporation, and the certain stockholders named therein.  All capitalized terms used herein but not otherwise defined shall have the meanings given to them in the Registration Rights Agreement.
 
In connection with the transfer by [Name of Transferor] of Registrable Securities with associated registration rights under the Registration Rights Agreement to [Name of Transferee] as transferee (the “ Transferee ”), the Transferee hereby agrees to be bound as a Designated Shareholder by the provisions of the Registration Rights Agreement as provided under Section 2(d)(i) thereto.
 
This consent shall be governed by Delaware law.
 
 
Yours sincerely,
 
 
[Name of Transferee]
 
 
 
By:
   
 
 
 
Name:
 
 
 
Title:
 
 
 
 

Investor Relations Contact:
Brian Ritchie - FD
212-850-5683
brian.ritchie@fd.com

Media Contact:
Irma Gomez-Dib - FD
212-850-5761
Irma.gomez-dib@fd.com
 

INSMED INCORPORATED AND TRANSAVE, INC. ANNOUNCE BUSINESS COMBINATION

INSMED INCORPORATED AND TRANSAVE, INC. COMBINE TO CREATE A BIOPHARMACEUTICAL COMPANY WITH NEAR-TERM COMMERCIAL OPPORTUNITIES

COMPANY TO HOST CONFERENCE CALL AT 8:30 AM ET TODAY
 

 
RICHMOND, VA . – December 2, 2010 - Insmed Incorporated (Nasdaq CM: INSM), a biopharmaceutical company, announced today that it has entered into a business combination, effective immediately, with Transave, Inc., a privately-held, NJ-based biopharmaceutical company focused on the development of differentiated, innovative inhaled pharmaceuticals for the site-specific treatment of serious lung infections.
 
Under the terms of the merger agreement, Insmed acquired all of the outstanding capital stock of Transave and paid off all of Transave’s $7.8 million debt, for approximately 25.9 million shares of Insmed common stock, and approximately 91.7 million shares of Insmed Series B Conditional Convertible Preferred Stock with a stated value of $0.7114 per share and cash consideration of $561,280.  After giving effect to the merger, former Transave stockholders have approximately a 46.7% equity interest in the combined company (on an as-converted, fully diluted basis), and Insmed Incorporated shareholders have a 53.3% interest on a fully diluted, as exercised, basis.

Transition logistics for the combined company, which are expected to be completed in the first quarter of 2011, are already underway.  The combined company will be governed by a four person Board of Directors with three directors remaining from the Insmed board and one director joining them from the former Transave board.  Mr. Donald J. Hayden, Jr., Transave’s former Chairman, will serve as Chairman of the combined entity.  The executive team will include from Transave, Mr. Timothy Whitten, who will be President and Chief Executive Officer (CEO) of the combined company, and Dr. Renu Gupta, who will serve as Executive Vice President, Development, and Chief Medical Officer, along with Mr. Kevin Tully, who will remain as Insmed’s Chief Financial Officer, and Nicholas LaBella, Jr., who will remain as Insmed’s Chief Scientific Officer.

Transave was backed by multiple well-known biotechnology venture capital funds, including Quaker BioVentures, Fidelity Biosciences, Prospect Venture Partners, TVM Capital, Forbion Capital Partners, Bessemer Venture Partners, and Easton Hunt Capital Partners.

Transave’s lead product candidate, ARIKACE™ (liposomal amikacin for inhalation), is initially being developed for cystic fibrosis (CF) patients with Pseudomonas lung infections and lung infections due to non-TB Mycobacteria (NTM).  The combined company intends to initiate phase 3 clinical trials for ARIKACE™ in both indications in parallel during the second half of 2011. The results of these trials are expected in the first half of 2013, and will be followed by regulatory filings in the U.S. and Europe for both indications, pending successful trial outcomes.  Based on current assumptions, the combined company believes it will have sufficient cash to progress ARIKACE™ to commercialization in the U.S.

Transave, which holds worldwide rights to ARIKACE™, was previously granted orphan drug status for the drug candidate from the U.S. Food and Drug Administration (FDA), as well as the European Medicines Agency (EMEA), for the CF indication. The combined company intends to file for orphan status with the FDA and EMEA for the NTM indication in 2011.

ARIKACE™ has the potential to be differentiated from other marketed drugs for the treatment of chronic lung infections due to its ability to deliver high, sustained levels of amikacin directly to the lung, providing sustained improvement in lung function.  ARIKACE™ has been shown to improve lung function both during and between treatment periods in patients with cystic fibrosis and could potentially be the first inhaled antibiotic to be administered once-daily.

ARIKACE™ will be administered once daily via inhalation using an optimized, investigational eFlow® Nebulizer System (PARI Pharma GmbH).  The optimized, investigational eFlow® Nebulizer System significantly reduces treatment time, thereby easing a patient's treatment burden and potentially improving patient compliance.

“We believe this transaction has the potential to create substantial shareholder value,” said Dr. Melvin Sharoky, Insmed’s previous Chairman and current board member.  “Throughout Insmed’s strategic review, we were committed to identifying a high-value, late-stage product candidate, and we believe we have been successful in doing that through the addition of ARIKACE™.  The drug’s previously completed Phase 2 and earlier stage clinical studies highlighted the potential of ARIKACE™ to become a leading treatment in two high-growth orphan indications with significant unmet medical needs.  In addition, we believe the strength of the combined company’s balance sheet, which after fees, debt payoff and other current liabilities, is presently estimated to be approximately $110 million, provides Insmed with the appropriate leverage to continue advancing ARIKACE™ through to commercialization.”

“I’m excited about the opportunity presented by combining the strengths of Transave and Insmed,” said Donald J. Hayden, Jr., Insmed’s new Chairman.  “Transave provides a differentiated, innovative late-stage opportunity in ARIKACE™ and Insmed provides the capital to support the continued development of this important drug.  In addition, we have drawn upon the leadership in both companies to put in place a strong, experienced management team.  It is an exciting combination that I believe will produce benefits for patients and shareholders alike.”

“I’m looking forward to working with the new board and our employees to continue the development of ARIKACE™ with a goal of commercialization,” said Timothy Whitten, Insmed’s new President and CEO.  “We have a substantial opportunity with ARIKACE™ in multiple indications and we are now in a strong financial position with the appropriate resources to move the drug forward.”

The development of Insmed’s IPLEX™ product in areas such as Retinopathy of Prematurity will continue, and the company will also maintain the shipment of IPLEX™ to Amyotrophic lateral sclerosis patients currently receiving drug until the present inventory is fully depleted.

RBC Capital Markets, LLC served as exclusive financial advisor to Insmed on the transaction.  Lazard Frères & Co. LLC served as exclusive financial advisor to Transave on the transaction.  Greenberg Traurig, LLP served as Insmed’s legal counsel in connection with the transaction, and Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP served as Transave’s legal counsel.
 
Additional Details
 
·  
The Series B Conditional Convertible Preferred Stock issued in connection with the transaction is non-voting and will convert into shares of Insmed common stock upon the approval of Insmed’s shareholders.  Insmed expects to file a proxy statement with respect to the conversion of the Series B Conditional Convertible Preferred Stock with the Securities and Exchange Commission in the first half of 2011.  Immediately following such approval, the Series B Conditional Convertible Preferred Stock will convert into Insmed common stock at a conversion rate of one-to-one, subject to adjustment.  The conversion rate will increase in the event that there are accrued but unpaid dividends on the Series B Conditional Convertible Preferred Stock at the time of conversion.
 
 
·  
The Series B Conditional Convertible Preferred Stock, if not converted, will receive dividends at a rate of 12.5% per annum starting the earlier of (i) the one-year anniversary of the closing of the transaction and (ii) the first date upon which at least 50 patients have been given at least one dose in Phase III clinical trials for ARIKACE™, but in no event less than nine months from the closing of the transaction. These dividends may be paid in cash or stock at Insmed’s discretion.
 
·  
As part of this transaction, Insmed has paid off Transave’s existing debt facility of $7.8 million.


Conference Call
Insmed will host a conference call today at 8:30 AM ET to discuss this transaction.  To participate in the live conference call, please dial 800-510-0146 (U.S. callers) or 617-614-3449 (international), and provide passcode 29839294.  A live webcast of the call will also be available at http://phx.corporate-ir.net/playerlink.zhtml?c=122332&s=wm&e=3566307 .  Please allow extra time prior to the webcast to register, download and install any necessary audio software.

The webcast will be archived for 30 days, and a telephone replay of the call will be available for seven days, beginning today at 11:30 AM ET, at 888-286-8010 (U.S. callers) or 617-801-6888 (international), using passcode 69293823.   

About Insmed
Insmed Incorporated is a biopharmaceutical company with unique protein process development and manufacturing experience and a proprietary protein platform aimed at niche markets with unmet medical needs.  For more information, please visit http://www.insmed.com .

About Transave
Transave, Inc. is a biopharmaceutical company focused on the development of innovative inhaled pharmaceuticals for the site-specific treatment of serious lung diseases.  The company's major focus is on the development of inhaled antibiotic therapy delivered via proprietary advanced pulmonary liposome technology in areas of high unmet need in lung diseases.  The Transave team is dedicated to leveraging its development and commercialization expertise, along with its intellectual property, to bring life-extending and life-enhancing medicines to patients.  For more information about Transave's technology and development programs, visit www.transaveinc.com .

About eFlow® Technology and PARI Pharma
ARIKACE™ is delivered by an investigational eFlow® Nebulizer System developed by PARI Pharma and optimized specifically for ARIKACE™.  The investigational eFlow Nebulizer System uses eFlow Technology to enable highly efficient aerosolization of medication including liposomal formulations via a vibrating, perforated membrane that includes thousands of laser-drilled holes.  Compared to other nebulization technologies, eFlow Technology produces aerosols with a very high density of active drug, a precisely defined droplet size, and a high proportion of respirable droplets delivered in the shortest possible period of time.  eFlow Technology is not an ultrasonic nebulizer technology.  Combined with its quiet mode of operation, small size (it fits in the palm of the patient’s hand), light weight, and battery use, eFlow Technology reduces the burden of taking daily, inhaled treatments.  PARI Pharma focuses on the development of aerosol delivery devices and comprehensive inhalation drug development to advance aerosol therapies where drug and device can be optimized together.  Online at www.paripharma.com .


Forward-Looking Statements
This release contains forward-looking statements which are made pursuant to provisions of Section 21E of the Securities Exchange Act of 1934. Investors are cautioned that such statements in this release, including statements relating to expectations regarding the anticipated benefits of the business combination, the results of clinical trials, the development of the combined company’s products, the anticipated shareholder vote and the business strategies, plans and objectives of management, constitute forward-looking statements which involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the forward-looking statements.  The risks and uncertainties include, without limitation, we may be unsuccessful in integrating the operations of the combined company, we may be unsuccessful in developing our product candidates, our expenses may be higher than anticipated and other risks and challenges detailed in our filings with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2010, June 30, 2010 and September 30, 2010.  Readers are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this release.  We undertake no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances that occur after the date of this release or to reflect the occurrence of unanticipated events.

Important Information
Insmed intends to file a proxy statement and other relevant materials with the Securities and Exchange Commission (the “SEC”) to obtain shareholder approval of the conversion of the Series B Conditional Convertible Preferred Stock issued in the business combination into Insmed common stock (the “Shareholder Approval”). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE SHAREHOLDER APPROVAL. The proxy statement, any amendments or supplements to the proxy statement and other relevant documents filed by Insmed with the SEC will be available free of charge through the web site maintained by the SEC at www.sec.gov or by calling the SEC at telephone number 1-800-SEC-0330. Free copies of these documents may also be obtained from Insmed’s website at www.insmed.com or by writing to: Insmed Incorporated, 8720 Stony Point Parkway, Suite 200, Richmond, Virginia 23235, Attention: Mr. W. McIlwaine Thompson, Corporate Secretary.

Insmed and its directors and executive officers are deemed to be participants in the solicitation of proxies from the shareholders of Insmed in connection with the Shareholder Approval. Information regarding Insmed’s previous directors and executive officers is included in Insmed’s definitive proxy statement for its 2010 annual meeting of stockholders held on June 9, 2010, which was filed with the SEC on April 30, 2010. Other information regarding the participants in such proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement to be filed in connection with the Shareholder Approval.

Cautionary Statement
The issuance of the securities in the transactions described in this press release have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor shall there be any sale of the securities in any jurisdiction or state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction or state.