10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-10824

OSCIENT PHARMACEUTICALS CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts	04-2297484
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
1000 Winter Street Suite 2200 Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number: (781) 398-2300

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.10 Par Value	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of June 30, 2006, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $82,969,566 as reported on the NASDAQ Global Market. The number of shares outstanding of the registrant’s common stock as of March 6, 2007 was 13,642,361.

Oscient Pharmaceuticals Corporation

ANNUAL REPORT

ON FORM 10-K

INDEX

		PAGE
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	20
Item 1B.	Unresolved Staff Comments	38
Item 2.	Properties	38
Item 3.	Legal Proceedings	38
Item 4.	Submission of Matters to a Vote of Security Holders	38
PART II
Item 5.	Market for the Registrant’s Common Stock and Related Security Holder Matters	39
Item 6.	Selected Consolidated Financial Data	41
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	63
Item 8.	Financial Statements and Supplementary Data	63
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	64
Item 9A.	Controls and Procedures	64
Item 9B.	Other Information	66
PART III
Item 10.	Directors and Executive Officers of the Registrant	66
Item 11.	Executive Compensation	69
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	84
Item 13.	Certain Relationships and Related Transactions and Director Independence	87
Item 14.	Principal Accountant Fees and Services	88
PART IV
Item 15.	Exhibits and Financial Statement Schedules	89
SIGNATURES		93

PART I

Item 1. Business

OVERVIEW

We are a commercial-stage biopharmaceutical company marketing two U.S. Food and Drug Administration (FDA)-approved products with our national primary care sales force. We are focused on selling and marketing products to community-based primary care physicians.

We currently market two FDA-approved products in the United States—a cardiovascular product, ANTARA^® (fenofibrate) capsules, and a fluoroquinolone antibiotic, FACTIVE^® (gemifloxacin mesylate) tablets. ANTARA is approved by the FDA, to treat hypercholesterolemia (high blood cholesterol) and hypertriglyceridemia (high triglycerides) in combination with a healthy diet. Our national sales force began marketing ANTARA in late August 2006. The market for fenofibrate products was approximately $1.5 billion in 2006 and the U.S. market for treating dyslipidemias was approximately $25 billion in 2006. We license the U.S. rights to ANTARA from Ethypharm S.A. FACTIVE is FDA-approved for the treatment of community-acquired pneumonia, or CAP, of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis, or AECB. We license the rights to gemifloxacin, the active ingredient in FACTIVE tablets, from LG Life Sciences. We launched FACTIVE in the U.S. in September 2004. The market for fluoroquinolones in the U.S. was approximately $3.5 billion in 2006.

Additionally, we have a novel, late-stage antibiotic candidate, Ramoplanin, under investigation for the treatment of Clostridium difficile-associated disease, and we are exploring partnering and other strategic opportunities for the continued development of Ramoplanin.

Our strategy is to identify new products to acquire, in-license or co-promote for the U.S. marketplace in order to leverage our existing commercial infrastructure, including our national primary care sales force.

ANTARA

The Fenofibrate and Cholesterol-Treatment Markets

Nearly 37 million Americans have total cholesterol values above recommended levels and heart disease remains the number one cause of death in the U.S. Abnormal cholesterol and lipid levels, known as dyslipidemia, can lead to the development of atherosclerosis, a dangerous hardening of blood vessels and a primary cause of coronary heart disease. Managing cholesterol levels is a complex undertaking and there are several therapeutic options available, tailored to the different types of abnormalities. Statins are the standard of care for lowering high levels of LDL (low density lipoprotein) cholesterol. Fenofibrate products have demonstrated their utility in managing “atherogenic dyslipidemia,” or “mixed dyslipidemia” also known as lipid abnormalities, which is characterized by high triglycerides, low HDL (high density lipoprotein) cholesterol, high levels of remnant-like particle cholesterol and a high proportion of cholesterol carried by small, dense LDL particles. Other drugs commonly used to treat lipid abnormalities include niacin and omega-3 fatty acids.

In 2006, total U.S. sales of fenofibrate products were approximately $1.5 billion, a 25% increase over 2005 sales. The fenofibrate market has experienced a 35% average annual growth in sales since 2002. Net sales from August 2006, when we began marketing ANTARA, through December 31, 2006, totaled $16.8 million.

Indications and Efficacy

ANTARA is a once-daily formulation of fenofibrate approved for use in combination with a diet restricted in saturated fat and cholesterol to reduce elevated LDL cholesterol (“bad” cholesterol), triglyceride and apolipoprotein B (free floating fats in the blood) levels and to increase HDL cholesterol (“good” cholesterol) in adult patients with high cholesterol or an abnormal concentration of lipids in the blood. Fenofibrate products

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work primarily to lower triglycerides and increase HDL cholesterol. ANTARA received FDA approval in November 2004 and is approved and marketed in 43 mg and 130 mg doses. The predominantly prescribed dose is the 130 mg strength, with the 43 mg dose generally used for titration and in patients with impaired renal function. ANTARA is the lowest dose fenofibrate product currently approved by the FDA. ANTARA was approved based in part on demonstrating its bioequivalence to Abbott Laboratories’ fenofibrate product Tricor^®, meaning that, under FDA guidelines, the bioequivalence of the two products does not differ significantly when the two products are given under similar conditions. ANTARA was also studied in the Triglyceride Reduction in Metabolic Syndrome study, known as TRIMS, to measure the impact of ANTARA on cholesterol levels in patients with multiple cardiovascular risk factors and to assess the use of ANTARA without regard to meals.

For the treatment of hypercholesterolemia, ANTARA is approved as adjunctive therapy to diet to reduce elevated LDL-C, total C, triglycerides and apolipoprotein B (apo B) and to increase HDL-C in adult patients with primary hypercholesterolemia or mixed dyslipidemia. The effects of fenofibrate at a dose equivalent to 130 mg ANTARA per day were assessed in four randomized, placebo-controlled, double-blind, parallel-group studies. Fenofibrate therapy lowered LDL-C, total-C, and the LDL-C/HDL-C ratio. In these studies, fenofibrate therapy also lowered triglycerides, raised HDL-C and significantly reduced apo B as compared with placebo.

ANTARA is also indicated as adjunctive therapy to diet for the treatment of hypertriglyceridemia, which affects an estimated 10% of American men over the age of 30 and 10% of American women over the age of 55. In clinical studies, the effects of fenofibrate on serum triglycerides were studied in two randomized, double-blind, placebo-controlled clinical trials of 147 hypertriglyceridemic patients for eight weeks. In patients with hypertriglyceridemia, treatment with fenofibrate at dosages equivalent to 130 mg ANTARA per day effectively decreased very low density lipoprotein (VLDL) triglycerides and VLDL cholesterol.

Mechanism of Action: ANTARA increases lipolysis and elimination of triglyceride-rich particles from plasma by activating lipoprotein lipase and reducing production of apoprotein C-III (an inhibitor of lipoprotein lipase activity). The resulting fall in triglycerides produces an alteration in the size and composition of LDL from small, dense particles (which are thought to be atherogenic due to their susceptibility to oxidation), to large buoyant particles. These larger particles have a greater affinity for cholesterol receptors and are catabolized rapidly. ANTARA also activates PPAR-alpha, which induces an increase in the synthesis of apoproteins A-I, A-II and HDL-cholesterol.

Competitive Advantages: ANTARA is distributed in 130 mg and 43 mg formulations, as compared to the 145 mg and 48 mg formulations of the market leader Tricor, which is marketed by Abbott Laboratories. The TRIMS study produced exclusive clinical data for ANTARA. In the study, ANTARA was evaluated in patients with elevated triglyceride levels and multiple cardiovascular risk factors. Of the 146 patients studied, 70% had hypertension and 32% had diabetes. The double-blind, placebo-controlled trial measured levels of total cholesterol, triglycerides, HDLs and LDLs, as well as other types of cholesterol, during eight weeks of therapy. In the study, ANTARA demonstrated the ability to reduce triglyceride and increase HDL-C levels after two weeks of therapy. At the end of therapy, patients treated with ANTARA had a statistically significant 37% reduction in their triglyceride levels and a statistically significant 14% increase in their HDL levels.

License Agreement

On August 18, 2006, we acquired rights to ANTARA in the Unites States from Reliant Pharmaceuticals Inc., or Reliant, for $78.0 million plus a $4.3 million payment for ANTARA inventory, excluding estimated transaction costs. Under the terms of our acquisition of ANTARA, we assumed certain of Reliant’s liabilities related to ANTARA, including obligations to make certain royalty and milestone payments on sales of ANTARA, and we were assigned rights to an exclusive license to the rights to ANTARA from Ethypharm S.A. (Ethypharm). In order to maintain the exclusivity of our rights, we must achieve minimum annual sales in the United States until February 2012 or pay amounts to Ethypharm to compensate for any shortfall. During the term of the agreement with Ethypharm, we are obligated to pay a royalty on net sales of ANTARA in the U.S., including a royalty on other fenofibrate monotherapy products in formulations and dosage forms that may be

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substantially similar or identical to ANTARA developed by us. The license term expires in February 2020 and, absent notice of termination by either party, automatically renews for additional two year periods. Under the terms of the agreement, at our option, Ethypharm is obligated to either manufacture and deliver to us finished ANTARA capsules or deliver bulk product to us for encapsulation and packaging. Ethypharm also has a right of first refusal on any divestiture of the ANTARA rights by us. Additional Oscient obligations under the Ethypharm agreement include using commercially reasonable efforts to maintain a sales force of at least 150 representatives through February 2008 and funding a portion of the active pharmaceutical ingredient safety stock that Ethypharm is required to maintain.

Pursuant to the terms of our acquisition of ANTARA from Reliant, we also acquired the New Drug Application, or NDA, and the Investigational New Drug application, or IND, covering the ANTARA products in the United States, clinical data, inventory, the ANTARA^® trademark in the United States and certain related contracts and licenses covering intellectual property rights related to the ANTARA products. We also assumed certain of Reliant’s liabilities related to the ANTARA products.

We are not required to pay Reliant a royalty on the sale of the ANTARA products; however, we are required to pay a low single-digit royalty to Reliant for a specified time period on net sales of any line extensions and improvements to the ANTARA products which we develop, which include all products containing fenofibrate as its active pharmaceutical ingredient. We currently pay no royalties to Reliant. We also agreed that we would not, at any time prior to August 2016, develop or sell any product in the United States that is a combination of fenofibrate and an omega-3 compound without the prior written consent of Reliant.

FACTIVE

Infectious Diseases Market

Infectious diseases represent the second leading cause of death worldwide accounting for over 14 million deaths each year, with lower respiratory tract infections alone causing 3.9 million deaths annually. Sales of antibiotics in the U.S. totaled $13 billion in 2006. Within the antibiotic market, fluoroquinolones, a product class with close to $3.5 billion in annual sales in the U.S. in 2006, have been gaining market share at the expense of older classes of antibiotics, according to Wolters Kluwer, a leading provider of pharmaceutical market data. This is a trend that is expected to continue as resistance to older antibiotic classes increases. Bacterial infections are the ninth leading cause of death in the U.S.

The principal classes of antibiotics include beta-lactams, fluoroquinolones, macrolides, ketolides, tetracyclines, aminoglycosides, glycopeptides and trimethoprim combinations. Bacterial resistance to existing antibiotics has been increasing in recent years, leading to bacterial infection recurrences, treatment failures and higher costs. These factors have fueled a growing need for more effective products in existing antibiotic classes, as well as for products with new mechanisms of action.

Acute Bacterial Exacerbations of Chronic Bronchitis: Chronic bronchitis is a health problem associated with significant morbidity and mortality. It is estimated that chronic bronchitis affects more than 9 million adults in the United States. Patients with chronic bronchitis are prone to frequent exacerbations, characterized by increased cough and other symptoms of respiratory distress. Longitudinal studies have estimated that 1 to 4 exacerbations occur each year in patients with chronic bronchitis; studies estimate that two-thirds are caused by bacteria. Exacerbations are estimated to account for approximately 12 million physician visits per year in the U.S. Antibiotic therapy, the standard treatment for acute bacterial exacerbations of chronic bronchitis, or AECB, is typically effective in reducing the course of illness for patients. Fluoroquinolones are frequently used to treat AECB due to their activity versus Haemophilus influenzae and Moraxella catarrhalis, two of the most common causes of these infections. Newer fluoroquinolones have enhanced activity versus Streptococcus pneumoniae, another common cause of these infections.

Community-Acquired Pneumonia: Community-acquired pneumonia, or CAP, is a common and serious illness in the United States. Of the estimated 4 to 5 million cases per year of CAP, nearly 1 million cases occur in

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patients over the age of 65. CAP cases result in approximately 10 million physician visits and as many as 1 million hospitalizations annually. Antibiotics are the mainstay of treatment for most patients with pneumonia, and where possible, antibiotic treatment should be specific to the pathogen responsible for the infection and individualized. However, since the responsible pathogen is not identified in a high proportion of patients with CAP, physicians usually take an empiric approach to treatment in the first instance. Over the last decade, resistance to penicillins and macrolides has increased significantly, and in many cases, fluoroquinolones are now recommended as a first line of therapy due to their efficacy against a wide range of respiratory pathogens, including many antibiotic resistant strains. The most recent treatment guidelines from the Infectious Diseases Society of America and the American Thoracic Society recommend fluoroquinolones as a first-line treatment for certain higher-risk patients with CAP and as therapy for treating patients with pneumonia in geographic regions of the U.S. with high levels of macrolide-resistant S. pneumoniae.

Indications and Efficacy

FACTIVE is a member of the fluoroquinolone class of antibiotics. In April 2003, FACTIVE was approved by the FDA for the treatment of AECB and CAP of mild to moderate severity. In July 2003, FACTIVE was also approved by the FDA to treat CAP caused by multi-drug resistant Streptococcus pneumoniae, or S. pneumoniae, a growing clinical concern. Multi-drug resistant S. pneumoniae, or MDRSP, is defined as S. pneumoniae resistant to two or more of the following antibiotics: penicillin, second-generation cephalosporins (such as cefuroxime), macrolides, tetracyclines, and trimethoprim/sulfamethoxazole.

In 2006, FACTIVE generated $21.5 million in net revenues. FACTIVE has potent in vitro activity against a wide range of Gram-positive, Gram-negative and atypical pathogens, including key respiratory pathogens, such as S. pneumoniae, H. influenzae and M. catarrhalis. FACTIVE is bactericidal at clinically achievable concentrations. Gemifloxacin, the active ingredient in FACTIVE, has minimum inhibitory concentrations, or MICs, as low as 0.032 µg/ml for S. pneumoniae. In clinical trials, FACTIVE has been administered to approximately 8,000 patients and had a good overall safety and tolerability profile. FACTIVE has been the subject of over 200 scientific publications and has been mentioned in nearly 300 scientific articles. Among the research published are data from a study involving 438 subjects indicating that a statistically significant higher percentage of patients treated with FACTIVE (71%) remained free of AECB recurrences than those treated with a comparator agent (58.5%) over a six-month period following treatment.

Mechanism of Action: FACTIVE tablets act by inhibiting bacterial DNA synthesis through the inhibition of both DNA gyrase and topoisomerase IV, two enzymes essential for bacterial growth and survival. Strains of S. pneumoniae showing mutations in both DNA gyrase and topoisomerase IV (double mutants) are resistant to most fluoroquinolones. Since gemifloxacin has the ability to inhibit both target enzymes at therapeutically relevant drug levels, some of these S. pneumoniae double mutants remain susceptible to FACTIVE. FACTIVE is also active against many strains of S. pneumoniae that are resistant to other classes of antibiotics.

Clinical Efficacy: The clinical development program for FACTIVE included 19 Phase III trials in respiratory tract infections. FACTIVE was studied for the treatment of acute bacterial exacerbations of chronic bronchitis in three pivotal, non-inferiority, double-blind, randomized, active-controlled clinical trials using 320 mg once daily for 5 days. In these principal Phase III AECB studies FACTIVE given once daily for 5 days was at least as effective as the comparators given for 7 days, with clinical response rates in the FACTIVE arms ranging from 85.4% to 93.6%. FACTIVE was also studied for the treatment of CAP in three double-blind, randomized, active-controlled clinical studies, one open, active-controlled study, and two uncontrolled studies. The results of these studies showed that gemifloxacin was effective in the treatment of mild to moderate CAP.

Safety and Tolerability: FACTIVE tablets have been studied in approximately 8,000 patients in clinical trials and we estimate that to date, nearly 600,000 prescriptions have been written for FACTIVE since its launch in September 2004. In clinical trials, the incidence of adverse events reported for FACTIVE tablets was low and comparable to comparator drugs, namely beta-lactam antibiotics, macrolides and other fluoroquinolones. Most

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adverse events were described as mild to moderate. The most common adverse events reported in FACTIVE clinical trials were diarrhea, rash and nausea. In clinical trials, rash was reported in 2.8% of patients receiving gemifloxacin and was more commonly observed in patients with treatment durations greater than seven days and patients less than 40 years of age, particularly females. Since the launch of the drug, the post-marketing adverse events reported have been consistent with those observed in the clinical development program, and with the fluoroquinolone class as a whole.

Competitive Advantages: We believe the competitive advantages of FACTIVE tablets include:

• FACTIVE has been shown in in vitro studies to be active against many bacterial isolates resistant to other classes of antibiotics.

• FACTIVE is the most active fluoroquinolone against S. pneumoniae, one of the most prevalent pathogens found in lower respiratory tract infections, compared to the currently marketed fluoroquinolones (MIC90 0.032 µg/mL).

• FACTIVE has a dual mechanism of action in bacteria, targeting two enzymes essential for bacterial growth and survival at therapeutically relevant drug levels, and as a result we believe FACTIVE has low potential for resistance generation.

• FACTIVE is effective in the treatment of CAP due to penicillin-resistant S. pneumoniae and due to MDRSP. In clinical trials, of 22 patients with MDRSP treated with FACTIVE for 7 days, 19 (87%) achieved both clinical and bacteriological success at follow-up.

• FACTIVE can be dosed once daily, with short courses of therapy for both AECB (5 days) and CAP (7 days).

• FACTIVE achieves high concentration levels in lung and bronchial tissues and in secretions.

• FACTIVE has composition of matter patent protection which extends into 2018, longer than the composition of matter patent protection for any currently marketed fluoroquinolone or other antibiotic widely used to treat respiratory tract infections.

Post-Marketing Commitments: As a post-marketing commitment to the FDA, we are conducting a Phase IV trial of FACTIVE. This prospective, randomized study is examining the activity of FACTIVE tablets (5,000 patients) versus an active comparator (2,500 patients) in treating patients with mild-to-moderate CAP or AECB. The study includes patients of different ethnicities so that safety information in populations not substantially represented in the existing clinical trial program could be collected, specifically as it relates to rash. This Phase IV trial was initiated in the fall of 2004 and enrollment was completed in January 2007. In connection with the approval of FACTIVE tablets, the FDA has also required us to perform a utilization study to obtain data on the prescribing patterns and use of FACTIVE tablets for the first three years after initial marketing in the U.S. As part of this requirement, we furnish interim reports to the FDA on an annual basis on the number of prescriptions issued, including refills and the diagnoses for which the prescriptions are dispensed.

Development of FACTIVE

Five-Day Treatment of CAP: We have completed a clinical trial to demonstrate that a five-day course of FACTIVE for the treatment of mild to moderate CAP is as effective as the currently approved seven-day course of treatment. On September 21, 2006, we received an approvable letter from the FDA for the supplemental New Drug Application (sNDA) seeking approval for the five-day treatment of CAP with FACTIVE tablets. In accordance with the letter, we provided clarification and additional interpretation regarding certain data included in the application to assist the FDA in its evaluation. The FDA accepted the response as complete and we expect to receive an action letter from the FDA by May 1, 2007. The receipt of the approvable letter from the FDA does not assure ultimate approval of the sNDA.

In the five-day CAP clinical trial, a five-day course of therapy with FACTIVE was shown to be as effective as the FDA-approved seven-day course of treatment, with both arms displaying excellent clinical response rates.

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Further, data showed that the bacteriological and radiologic success rates with five days of therapy were also non-inferior to the success rates with seven days of therapy. The multicenter, randomized, double-blind study enrolled 510 patients with CAP, with 469 patients comprising the per protocol group. Investigators measured clinical and bacteriological response at end of therapy as well as clinical, bacteriological and radiologic response at follow-up (two to three weeks post therapy). Clinical response at follow-up, the primary endpoint, in the per protocol group was 95% for the five-day treatment arm and 92% for the seven-day treatment arm (95% CI: -1.48, 7.42), demonstrating non-inferiority between the two groups. Further, clinical response at end of therapy in the per protocol group was 96% for the five-day group and 96% for the seven-day group (95% CI: -3.85, 3.42). The study also yielded encouraging results for bacteriological response. Bacteriological response in the per protocol population was 91% for the five-day and seven-day groups at follow-up (95% CI: -6.89, 7.93) and 94% for the five-day group and 96% for the seven-day group (95% CI: -8.27, 3.25) at end of therapy. The study demonstrated radiologic response at follow-up in the per protocol population of 98% for the five-day arm and 93% for the seven-day arm (95% CI: 0.35, 7.91). FACTIVE was well-tolerated in the study, with a low withdrawal rate due to adverse events: 1.2% for the five-day group and 2.0% for the seven-day group. The most common adverse event reported was a laboratory finding of elevated liver enzymes (increased ALT and increased AST). Analysis of all ALT/AST values demonstrated that the elevations were significantly associated with baseline ALT levels (elevated in many patients) with no significance or association with a particular treatment group. There was also no evidence of symptomatic hepatic events. In addition, the rate of drug-related rash in both treatment groups was low: 0.4% for the five-day arm and 2.8% for the seven-day arm. There were no withdrawals due to rash.

Acute Bacterial Sinusitis: As part of the FACTIVE development program, several studies relating to acute bacterial sinusitis, or ABS, were completed, and, in November 2005, we filed an sNDA for ABS. In September 2006, the FDA’s Anti-Infective Drugs Advisory Committee voted not to recommend approval of this sNDA. In November 2006, we voluntarily withdrew our sNDA seeking approval of the ABS indication.

FACTIVE IV: An intravenous formulation of gemifloxacin has also been studied. If we elect to further pursue such a formulation, additional formulation development will be necessary before initiating a bioequivalence study.

License Agreement with LG Life Sciences

We license the rights to gemifloxacin, the active ingredient in FACTIVE tablets, from LG Life Sciences, Ltd. (LG Life Sciences). We have the rights to commercialize gemifloxacin in North America, France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino, Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia. The term of the agreement with respect to each country extends at least through the life of the patents covering gemifloxacin in such country. In the United States, the last of the currently issued patents for composition of matter expires in 2018. The patent term could extend further in countries outside of the U.S. depending upon several factors, including whether we obtain patent extensions and the timing of our commercial sale of the product in a particular country.

Under the terms of the agreement, LG Life Sciences has agreed to supply and we are obligated to purchase from LG Life Sciences all of our anticipated commercial requirements for the FACTIVE active pharmaceutical ingredient, or API. LG Life Sciences currently supplies the FACTIVE API from its manufacturing facility in South Korea.

The agreement with LG Life Sciences also requires a minimum sales commitment over a period of time, which if not met, would result in the technology being returned to LG Life Sciences. Under this agreement, we are responsible, at our expense and through consultation with LG Life Sciences, for the clinical and commercial development of gemifloxacin in the countries covered by the license, including the conduct of clinical trials, the

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filing of drug approval applications with the FDA and other applicable regulatory authorities and the marketing, distribution and sale of gemifloxacin in our territory; provided, that LG Life Sciences has the right to co-promote the product in the U.S., on terms to be negotiated, commencing in 2008 and for periods thereafter, in which case our royalty obligations to LG Life Sciences would cease. Pursuant to an amendment dated March 31, 2005 as further described below, LG Life Sciences’ right to co-promote in the U.S. will terminate upon our reaching a certain level of sales.

We are obligated to pay a royalty on sales of FACTIVE in North America and the territories covered by the license in Europe. These royalty obligations expire with respect to each country covered by the agreement on the later of (i) the expiration of the patents covering FACTIVE in such country or (ii) the expiration of data exclusivity in Mexico, Canada or the European Union respectively, or 2014 in the U.S. We are also obligated to make aggregate milestone payments of up to approximately $40 million (not including payments to LG Life Sciences previously made pursuant to up-front obligations or achievements of certain milestones) to LG Life Sciences (including milestone payments required by the amendments described below) upon achievement of additional regulatory approvals and sales thresholds.

Collaborations and Partnerships for FACTIVE

Pfizer, S.A. de C.V. On February 6, 2006, we entered into a Sublicensing and Distribution Agreement with Pfizer, S.A. de C.V. (Pfizer Mexico), pursuant to which we sublicensed our rights to market FACTIVE tablets in Mexico to Pfizer Mexico. Pfizer Mexico is responsible for obtaining and maintaining regulatory approvals for FACTIVE in Mexico. In exchange for those rights, Pfizer Mexico has paid an up-front payment and has agreed to pay milestone payments upon obtaining certain regulatory approvals and sales goals as well as royalties on future sales. These royalty rates are subject to reduction upon expiration of certain patents in Mexico for FACTIVE or if a generic form of gemifloxacin has a material impact on Pfizer Mexico’s sales volumes in Mexico. Pfizer Mexico is obligated to exclusively purchase from us, and we must exclusively supply, all API for FACTIVE to be sold in Mexico. The agreement with Pfizer Mexico may be terminated by either party upon the occurrence of certain termination events, including Pfizer Mexico’s right to terminate at any time after the first anniversary of launch of FACTIVE tablets in Mexico upon six months prior written notice. Upon termination, Pfizer Mexico is obligated to assign any and all rights to regulatory approvals in Mexico to us or our designee.

In October 2006, Pfizer Mexico launched its promotion and marketing of FACTIVE-5 in Mexico for the five-day treatment of acute bacterial exacerbations of chronic bronchitis, acute bacterial sinusitis and community-acquired pneumonia.

Abbott Laboratories Ltd. On August 9, 2006, we granted the commercialization rights to FACTIVE tablets in Canada to Abbott Laboratories, Ltd. (Abbott Canada), the Canadian affiliate of Abbott. In exchange for those rights, Abbott Canada agreed to a transfer price on product purchases and to make certain payments to us upon achievement of certain regulatory and sales milestones. FACTIVE is currently approved in Canada for the treatment of acute bacterial exacerbations of chronic bronchitis (AECB), and Abbott Canada is responsible for obtaining regulatory approval, on behalf of the Company, for additional indications for FACTIVE. Pursuant to our agreement, Abbott Canada is obligated to exclusively purchase from us, and we must exclusively supply, finished tablets of FACTIVE to be sold in Canada; however, Abbott Canada may elect to transfer the fill-finish manufacturing to an alternate manufacturing source on terms to be determined by the parties. Our agreement with Abbott Canada may be terminated by either party upon the occurrence of certain termination events, including Abbott Canada’s right to terminate if approval in Canada for the treatment of CAP of mild to moderate severity is not achieved within two years of filing with the Canadian regulatory authorities.

Abbott Canada launched its promotion and marketing of FACTIVE for the treatment of acute bacterial exacerbations of chronic bronchitis in February 2007.

Menarini International Operation Luxembourg SA. We entered into a License, Supply and Marketing Agreement with Menarini International Operation Luxembourg SA (Menarini) a wholly-owned subsidiary of

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Menarini Industrie Farmaceutiche Riunite S.r.l. dated December 28, 2006, whereby we sublicensed our rights to sell FACTIVE tablets in Europe to Menarini. Under the terms of our agreement with Menarini, Menarini is responsible for obtaining regulatory approval for FACTIVE in the European Union, and we have agreed to reimburse Menarini for expenses associated with such regulatory development up to an agreed limit. Menarini has also paid us an up-front payment and agreed to pay us milestone payments upon obtaining certain regulatory and reimbursement approvals and upon achieving certain annual net sales goals, which could total up to $23 million if all the milestones are achieved. Menarini will pay us a transfer price on purchases of the active pharmaceutical ingredient, or API, for FACTIVE, which is determined based on a percentage of quarterly sales of FACTIVE by Menarini in Europe. Menarini is also obligated to exclusively purchase from us, and we must exclusively supply, all API for FACTIVE to be sold in Europe for the earlier to occur of the expiration of the life of certain patents covering the product or expiration of data exclusivity. Our agreement with Menarini may be terminated by either party upon the occurrence of certain termination events, including Menarini’s right to terminate if the European regulatory authorities do not recommend approval of FACTIVE at various stages of the approval process with a package insert, or label, that meets certain requirements as to the indications for which FACTIVE may be prescribed, safety and dosing. Menarini may also terminate the agreement if it does not receive approval for reimbursement from European member countries that is above a certain minimum price per tablet. Upon termination, Menarini is obligated to assign any and all rights to regulatory approvals in the European Union to Oscient or its designee.

RAMOPLANIN

Clostridium difficile-Associated Disease (CDAD)

CDAD, a serious form of colitis caused by toxins produced by the Gram-positive bacterium Clostridium difficile (C. difficile), is the most commonly recognized microbial cause of diarrhea, resulting from high rates of colonization in hospitalized patients and the frequent use of antimicrobials. About 3% of healthy adults and 16 to 35% of hospital patients are colonized with C. difficile either prior to or during admission. Because it is a spore-forming bacterium, C. difficile is readily spread from person to person, especially in the hospital and nursing home environment. Under certain conditions, such as extended antibiotic therapy and gastrointestinal surgery, C. difficile can colonize the gut and release toxins, leading to bowel inflammation and severe diarrhea. Severe cases can occur and involve the development of fulminant colitis (severe inflammation of the colon); such occurrences can be life threatening, especially in elderly or immunocompromised populations.

Over 400,000 patients are treated in U.S. hospitals each year for CDAD. CDAD is associated with an average increased length of stay in the hospital of 3.6 days and an average increase in hospital costs of over $3,600 per patient. It is estimated that the annual increase in hospital costs attributable to CDAD exceeds $1 billion.

Two studies published in The New England Journal of Medicine in December 2005 describe a new strain of C. difficile, one that produces 16 to 23 times more toxins in vitro than do other strains, thus potentially contributing to its virulence. Particularly concerning about this new strain are the very high incidence and mortality rates. Data support the concept that this highly virulent strain is causing epidemic disease at certain locations and is associated with more frequent and more severe disease.

Current therapies for the treatment of CDAD include oral metronidazole and oral vancomycin. Both of these agents are associated with a 15 to 20% relapse rate. The use of oral vancomycin has been associated with the emergence of vancomycin-resistant organisms, including vancomycin-resistant enterococci, or VRE. Resistance has also been reported for metronidazole.

Ramoplanin Overview

In October 2001, we in-licensed U.S. and Canadian rights to Ramoplanin from Vicuron Pharmaceuticals Inc., or Vicuron, a wholly-owned subsidiary of Pfizer Inc., and on February 3, 2006, acquired worldwide rights

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from Vicuron, assuming full control of Ramoplanin manufacturing, development and commercialization. Ramoplanin is a novel glycolipodepsipeptide antibiotic produced by fermentation of the bacteria Actinoplanes, with activity against Gram-positive aerobic and anaerobic microorganisms. In preclinical studies, Ramoplanin has been shown to be bactericidal against most Gram-positive species, including methicillin-resistant staphylococci, VRE and C. difficile, including the recent epidemic strains. Ramoplanin inhibits the bacterial cell wall peptidoglycan biosynthesis with a mechanism different from that of vancomycin, teicoplanin or other cell wall-synthesis inhibitors. No evidence of cross-resistance between Ramoplanin and other glycopeptide antibiotics has been observed in vitro to date. Ramoplanin has a unique profile that may make it particularly well-suited for killing bacteria in the GI tract.

In July 2004, we completed a Phase II trial to assess the safety and efficacy of Ramoplanin in the treatment of CDAD. The open-label study enrolled 87 patients in 24 U.S. sites. The trial compared two doses of Ramoplanin (200 mg and 400 mg twice daily) to vancomycin (125 mg four times daily). Both agents were administered for ten days, during which data on Ramoplanin was collected to measure safety and efficacy. The primary endpoint of the study was response rate at the test-of-cure visit, 7 to 14 days post-therapy. For this trial, the response rates were 60% for Ramoplanin 200 mg, 71% for Ramoplanin 400 mg, and 78% for vancomycin 125 mg in the clinically evaluable population. While the study did not meet its primary endpoint, non-inferiority at the test-of-cure visit, the response rates for all three arms were comparable. A potentially more clinically relevant endpoint, response at the end of therapy, was also assessed. At the end of therapy, the response rates were 83% for Ramoplanin 200 mg, 85% for Ramoplanin 400 mg and 86% for vancomycin 125 mg.

We agreed with the FDA to a Special Protocol Assessment regarding the specific components of a Phase III program that, if completed successfully, would support regulatory approval for the indication. With the acquisition of ANTARA, we have made the strategic decision to concentrate our financial resources on building our primary care business in the United States and are currently seeking to out-license, co-develop or sell our rights to Ramoplanin to a partner. There can be no assurance that we will be able to license or divest Ramoplanin to a partner on acceptable terms, or at all.

Potential Competitive Advantages: We believe the potential competitive advantages of Ramoplanin are:

• Ramoplanin belongs to a novel class of antibiotics and there have been no observed cases of bacterial resistance or cross-resistance with other antibiotics to date.

• Ramoplanin is orally administered, but not absorbed into the bloodstream, so it concentrates and exerts its killing effects in the GI tract.

• Its bactericidal effect may result in lower potential for bacteria to develop resistance.

• Ramoplanin has a Gram-positive spectrum of activity and low potency against Gram-negative anaerobes that normally colonize the GI tract making it less likely that its use will result in the overgrowth of other opportunistic organisms or in the elimination of normal, healthy bacteria.

• Along with its activity against C. difficile, Ramoplanin has demonstrated in vitro activity against methicillin-resistant Staphylococcus aureus (MRSA) and VRE. Both organisms are associated with causing serious infections.

Acquisition of Expanded Rights: In exchange for the assignment of the rights for Ramoplanin under the acquisition agreement with Pfizer, we made a one-time, up-front payment to Pfizer and agreed to make additional milestone payments for regulatory filings and approvals in various countries. We will also pay mid-single-digit to low double-digit royalties to Pfizer on net sales of Ramoplanin dependent upon the territory.

LEGACY ASSETS FROM DISCONTINUED OPERATIONS

Prior to our merger with GeneSoft Pharmaceuticals, Inc. in 2004, we were engaged in genomics research, including gene sequencing. We entered into alliances with pharmaceutical companies to pursue drug discovery,

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development and commercialization based on our gene discoveries. While we are no longer engaged in gene discovery research and gene sequencing activities, we may potentially earn future milestones and royalties from these alliances.

SALES AND MARKETING

We market ANTARA and FACTIVE through our sales and marketing organization in the U.S, which is currently comprised of approximately 280 field sales personnel, including sales representatives, district managers and regional sales directors. Our sales representatives focus on high-prescribing primary care physicians and opinion leaders who represent high prescribers of fluoroquinolones and/or fenofibrate products. We have also built a team of professionals with experience in insurance and government reimbursement, medical affairs and marketing. Our strategy is to continue to leverage our existing commercial infrastructure through the acquisition, in-license or co-promotion of additional marketed products to market to primary care physicians. Longer term, we anticipate expanding our commercial infrastructure to include additional physicians.

Our strategy has been to grant commercialization rights to FACTIVE tablets in territories outside of the U.S. to third parties to leverage the additional resources that a pharmaceutical marketing partner with expertise in such countries can provide. Thus, we have partnered with following entities:

• On February 6, 2006, we sublicensed our rights to sell FACTIVE tablets in Mexico to Pfizer, S.A. de C.V. (Pfizer Mexico), the largest pharmaceutical company in Mexico. Pfizer Mexico is commercializing FACTIVE for community-acquired pneumonia, acute bacterial exacerbations of chronic bronchitis and acute bacterial sinusitis with three national field sales forces and one specialty field sales force.

• On August 9, 2006, we granted the commercialization rights to FACTIVE tablets in Canada to Abbott Laboratories, Ltd. (Abbott Canada), the Canadian affiliate of Abbott. Abbott Canada has extensive expertise in the commercialization of anti-infectives in Canada. Initially marketing FACTIVE for the treatment of acute bacterial exacerbations of chronic bronchitis, Abbott Canada will use its knowledge of the Canadian regulatory system to pursue other indications.

• On December 27, 2006, we sublicensed our rights to sell FACTIVE tablets in Europe to Menarini International Operation Luxembourg SA (Menarini), the second largest primary care pharmaceutical company in Europe. Menarini is responsible for obtaining regulatory approval for FACTIVE in Europe and will leverage its regulatory and marketing experience to pursue approval and launch of FACTIVE in Europe.

COMPETITION

The biopharmaceutical industry generally is characterized by rapidly evolving technology and intense competition. Our competitors include pharmaceutical and biotechnology companies both in the United States and abroad. Many of our competitors have substantially greater capital resources, facilities and human resources than we do.

Competition with respect to our products and product candidates is and will be based on, among other things:

• our sales and marketing expertise,

• our clinical trial results and post marketing experience,

• our ability to obtain appropriate regulatory approvals for our product candidates in a cost-efficient and timely manner and subsequently remain in regulatory compliance,

• our ability to secure adequate reimbursement for our products from public and private healthcare payors,

• our ability to attract and retain qualified personnel,

• our ability to obtain patent protection and defend our patent challenges,

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• our ability to in-license product candidates for clinical development,

• our ability to gain access to new products via co-promotion or in-license agreements or product acquisitions,

• our ability to secure sufficient capital resources to fund our clinical development and sales and marketing operations, and

• our partners’ ability to develop and commercialize therapeutic, vaccine and diagnostic products based upon our legacy genomics discoveries.

Because we rely primarily on in-licensing, co-promotion and acquisitions of products and product candidates to expand our portfolio, it is important to note that we may also face increasing competition for in-licensing, co-promotion and acquisition opportunities from leading pharmaceutical and biotechnology companies. We cannot be certain that we will be able to in-license product opportunities in the future or acquire new products.

ANTARA

ANTARA is a fenofibrate product approved by the FDA to treat hypercholesterolemia and hypertriglyceridemia in combination with a healthy diet. The marketing of branded versions of fenofibrate could reduce our net sales of ANTARA and adversely impact our revenues. The primary competition for ANTARA in the fenofibrate market is Tricor, a product manufactured by Abbott Laboratories, which accounted for approximately 94% of U.S. fenofibrate sales for the twelve month period ended December 31, 2006. ANTARA also competes with Triglide, a fenofibrate marketed by Sciele Pharma, Inc., which accounted for approximately 1.2% of U.S. fenofibrate sales for the twelve month period ended December 31, 2006.

Additionally, several generic versions of fenofibrate in varying doses are also available for the treatment of dyslipidemias. Revenues from these products account for approximately 1% of total U.S. sales of fenofibrate products. In May 2005, Teva Pharmaceutical Industries, Ltd. obtained final FDA approval to market a generic version of Abbott Laboratories’ 160 mg Tricor tablet (which is no longer marketed or sold). In January 2006, Cipher Pharmaceuticals, Inc. obtained final FDA approval to market a 150 mg strength of fenofibrate. There are also several non-fenofibrate FDA-approved products with similar indications as ANTARA which could compete with ANTARA, including statins, omega-3 fatty acids, niacin and fixed-dose, combination products.

We are also aware that LifeCycle Pharma A/S is developing a 40 mg and a 120 mg fenofibrate product and, on December 27, 2006, we received notice that LifeCycle Pharma had filed a new drug application with the FDA referencing ANTARA in accordance with the provisions of section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. Under current FDA policies, a section 505(b)(2) new drug application may be used to seek approval based in part on the FDA’s prior findings of safety and efficacy for another entity’s application, including for a product whose strength, dosage form, route of administration or labeling differs from the application for the other drug being referenced, known as the reference listed drug. A 505(b)(2) application can be based in part on a showing that the proposed product is bioequivalent to the reference listed drug. LifeCycle Pharma’s 505(b)(2) application included a certification, known as a Paragraph IV certification, alleging that its fenofibrate product does not infringe the patents that have been submitted to the FDA for ANTARA and listed in FDA’s publication known as the Orange Book. We decided, based on ANTARA’s current patent estate and Lifecycle Pharma’s product description, not to pursue litigation.

The growth of any of these competitive branded products or the marketing of generic fenofibrate products could result in a decrease in ANTARA sales, create pressure on the price at which we are able to sell ANTARA, reduce our profit margins, reduce our net sales of ANTARA and adversely impact our revenues.

FACTIVE

FACTIVE tablets are approved for the treatment of community-acquired pneumonia of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis. There are several classes of antibiotics that are

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primary competitors for the treatment of these indications, including other fluoroquinolones (levofloxacin, ciprofloxacin and moxifloxacin), macrolides (clarithromycin and azithromycin), telithromycin and penicillins (amoxicillin/clavulanate potassium).

Many generic antibiotics are also currently prescribed to treat these infections. Moreover, a number of the antibiotic products that are competitors of FACTIVE tablets have composition of matter patents which have gone or will be going off patent at dates ranging from 2003 to 2016. As these competitors lose patent protection, their manufacturers will likely decrease their promotional efforts. However, makers of generic drugs will likely begin to produce some of these competing products and this could result in pressure on the price at which we are able to sell FACTIVE tablets and reduce our profit margins.

Ramoplanin

Ramoplanin is in clinical development for the treatment of CDAD. We are aware of two products currently utilized in the marketplace—Vancocin^® pulvules (vancomycin), a product marketed by ViroPharma Inc., and metronidazole, a generic product—for treatment of this indication. We are also aware of several other companies with products in development for the treatment of CDAD.

Legacy Assets

Our alliance-related product development programs are all in preclinical stages, and it is therefore not possible to identify any product profiles or competitors for these product development programs at this time. Our industry is very competitive and it therefore is likely that if and when product candidates from our early stage internal programs or our alliance programs reach the clinical development stage or are commercialized for sale, these products will also face competition.

GOVERNMENT REGULATION

Regulation by governmental entities in the United States and other countries will be a significant factor in the development, manufacturing, distribution and marketing of any product candidates that we develop or commercialize. The extent to which such regulation may apply to us and our licensees will vary depending on the nature of the product. Virtually all of our pharmaceutical products, including expanded uses of our pharmaceutical products, will require regulatory approval by governmental agencies prior to commercialization. In particular, the FDA in the United States and similar health authorities in foreign countries subject human therapeutic and vaccine products to rigorous preclinical and clinical testing, and require review and approval of extensive data in order to permit commercial marketing.

Virtually all aspects of our activities are regulated by federal and state statutes and regulations, and government agencies. The research, development, manufacturing, processing, packaging, labeling, distribution, sale, advertising, promotion, import and export of our products, and disposal of waste products arising from these activities, are subject to regulation by one or more federal agencies and their state equivalents, including the FDA, the Consumer Product Safety Commission, the Occupational Safety and Health Administration and the Environmental Protection Agency, as well as by state and local governments and governmental authorities in those foreign countries in which we or our partners operate.

Noncompliance with applicable regulatory policies or requirements of the FDA or other governmental authorities could subject us to enforcement actions, such as suspensions of product distribution, seizure of products, product recalls, civil monetary and other penalties, criminal prosecution and penalties, injunctions, “whistleblower” lawsuits, failure to approve pending drug product applications or total or partial suspension of product marketing approvals. Similar civil or criminal penalties could be imposed by other government agencies or the agencies of the states and localities in which our products are manufactured, sold or distributed, and could have ramifications for our contracts with government agencies. These enforcement actions would detract from management’s ability to focus on our daily business and would have an adverse effect on the way we conduct our daily business, which could severely impact future profitability.

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Product Approval

For innovative, or non-generic, new drugs, an FDA-approved new drug application, or NDA, is required before the drugs may be marketed in the United States. The NDA must contain data to demonstrate that the drug is safe and effective for its labeled uses, and that it will be manufactured to appropriate quality standards. In order to demonstrate safety and effectiveness, an NDA typically must include or reference preclinical data from animal and laboratory testing and clinical data from controlled trials in humans. For a new chemical entity, this generally means that lengthy, uncertain and rigorous pre-clinical and clinical testing must be conducted. For compounds that have a record of prior or current use, it may be possible to utilize existing data or medical literature and limited new testing to support an NDA. Any preclinical laboratory and animal testing must comply with FDA’s good laboratory practice and other requirements. Clinical testing in human subjects must be conducted in accordance with FDA’s good clinical practice and other requirements. In order to initiate a clinical trial, the sponsor must submit an investigational new drug application, or IND, to the FDA or meet one of the narrow exemptions that exist from the IND requirement. Clinical research must also be reviewed and approved by independent institutional review boards, or IRBs, at the sites where the research will take place, and the study subjects must provide informed consent. The FDA also regulates and typically inspects manufacturing facilities, equipment and processes used in the manufacturing of pharmaceutical products before granting approval to market any drug. Each NDA submission requires a substantial user fee payment, unless a waiver or exemption applies. FDA has committed generally to review and make a decision concerning approval on an NDA within 10 months, and on a new priority drug within six months. However, final FDA action on the NDA can take substantially longer, and where novel issues are presented there may be review and recommendation by an independent FDA advisory committee. The FDA can also refuse to file and review an NDA it deems incomplete or not properly reviewable.

Clinical trial programs in humans generally follow a three-phase process. Typically, Phase I studies are conducted in small numbers of healthy volunteers or, on occasion, in patients afflicted with the target disease, to determine the metabolic and pharmacological action of the product candidate in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence of effectiveness. In Phase II, studies are generally conducted in larger groups of patients having the target disease or condition in order to validate clinical endpoints, and to obtain preliminary data on the effectiveness of the product candidate and optimal dosing. This phase also helps determine further the safety profile of the product candidate. In Phase III, large-scale clinical trials are generally conducted in hundreds of patients having the target disease or condition to provide sufficient data for the statistical proof of effectiveness and safety of the product candidate as required by U.S. and foreign regulatory agencies.

The FDA can, and does, reject new drug applications, require additional clinical trials, grant approvals on only a restricted basis even when product candidates performed well in clinical trials, or require further studies as a condition of approval.

Generic drugs are approved through an abbreviated process based on the submission to FDA of an abbreviated new drug application, or ANDA. The ANDA must seek approval of a drug product that has the same active ingredient(s), dosage form, strength, route of administration, and labeling as a so-called “reference listed drug” approved under an NDA, although some limited exceptions may be permitted. The ANDA also generally contains limited clinical data to demonstrate that the product covered by the ANDA is absorbed in the body at the same rate and to the same extent as the reference listed drug. This is known as bioequivalence. In addition, the ANDA must contain information regarding the manufacturing processes and facilities that will be used to ensure product quality, and must contain certifications to patents listed with the FDA for the reference listed drug. Special procedures apply when an ANDA contains certifications stating that a listed patent is invalid or not infringed, and if the owner of the patent or the NDA for the reference listed drug brings a patent infringement suit within a specified time, an automatic stay bars FDA approval of the ANDA for a specified period of time pending resolution of the suit or other action by the court. The amount of testing and effort that is required to prepare and submit an ANDA is generally substantially less than that required for an NDA.

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In addition to the NDA and ANDA procedures, there is an additional approval mechanism known as a 505(b)(2) application. A 505(b)(2) application is a form of an NDA where the applicant does not have a right to reference all or some of the data being relied upon for approval. Under current regulations and FDA policies, 505(b)(2) applications can be used where the applicant is relying in part on published literature or on findings of safety or effectiveness in another company’s NDA. This might be done, for example, where the applicant is seeking approval for a new use for a drug that has already been approved for a different use or for a different formulation of the same drug that is already approved for the same use. The use of 505(b)(2) applications is the subject of ongoing legal controversy, and it is thus not clear what the permitted use of a 505(b)(2) application might be in the future.

In European Union countries and Canada (where our partners are currently attempting to gain marketing approval for certain indications of FACTIVE), regulatory requirements and approval processes are similar in principle to those in the United States and can be at least as rigorous, costly and uncertain. Additionally, depending on the type of drug for which an applicant is requesting approval, there are currently two potential tracks for marketing approval in European Union countries: the centralized procedure and a de-centralized process which requires requesting approval on a country-by-country basis. These review mechanisms may ultimately lead to approval in all European Union countries, but each method grants all participating countries some decision making authority in product approval.

Post-Approval Requirements

Products on the market are subject to continual review by the FDA. If previously unknown problems are discovered or if there is a failure to comply with applicable regulatory requirements, the FDA may restrict the marketing of an approved product, cause the withdrawal of the product from the market, or under certain circumstances seek recalls, seizures, injunctions or criminal sanctions. For example, the FDA may require a change in labeling for an approved marketing application or additional studies for any marketed drug product if new information reveals questions about a drug’s safety or effectiveness. In addition, changes to the product, the manufacturing methods or locations, or labeling are subject to additional FDA approval, which may or may not be received, and which may be subject to a lengthy FDA review process.

Manufacturing facilities that produce drugs are subject to extensive regulation both by the FDA, state and local governments, and foreign regulatory authorities. These laws and regulations require, among other things, that our facilities and the facilities of third parties, such as LG Life Sciences, Ethypharm S.A., Patheon Pharmaceuticals Inc. (our third party finished-product manufacturer for FACTIVE tablets) and Cardinal Health PTS (our third party packager of ANTARA capsules), be registered with the FDA and other regulatory authorities, comply with current good manufacturing practices requirements, and pass periodic inspections by the FDA and other regulators. Facilities in foreign countries may be subject to inspection by the FDA, local regulators or both. Current good manufacturing practices, or cGMP, require extensive recordkeeping, quality control, documentation and auditing to ensure that products meet applicable specifications. Failure to comply with these requirements can result in warning letters, requirements of remedial action, and, in the case of more serious failures, suspension of manufacturing, seizure, injunctions or recall of product and fines and other penalties. Compliance with these requirements can be time consuming, costly and can result in delays in product approval or product sales.

In addition to cGMP requirements, certain of our products must also be packaged with child-resistant and senior friendly packaging under the Poison Prevention Packaging Act and Consumer Product Safety Commission regulations. Products that do not comply with these requirements can be considered misbranded and subject to seizure, recall, monetary fines, and other penalties.

The distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. States require the registration of manufacturers and distributors who provide pharmaceuticals, including in certain states even if these manufacturers or distributors have no place of business within the state but satisfy other nexus requirements, for

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example, the shipment of products into such state. States also impose requirements on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that are requiring manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution chain. Both the PDMA and state laws limit the distribution of prescription drug product samples to licensed practitioners and impose other requirements to ensure accountability in the distribution of samples.

Other reporting and recordkeeping requirements also apply for marketed drugs, including for most products requirements to review and report cases of adverse events. Product advertising and promotion are subject to FDA and state regulation, including requirements that promotional claims conform to any applicable FDA approval, and be appropriately balanced and substantiated. We are also subject to various federal and state laws pertaining to health care “fraud and abuse,” including the anti-kickback provisions of the Social Security Act, the False Claims Act, the Veterans Healthcare Act, and the implementing regulations and policies of the United States Health and Human Services Office of Inspector General and United States Department of Justice, as well as similar state laws. Anti-kickback laws make it illegal for a prescription drug manufacturer or marketer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase, recommendation or prescription of a particular drug, covered by a federal healthcare program, unless one of several narrow safe harbors or other exceptions applies. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented, for payment to third-party government payors, including Medicare and Medicaid, claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.

Similar laws apply in other countries, including anti-bribery prohibitions in the European Union and member countries of the European Union.

Other Regulatory and Compliance Requirements

Under the laws of the United States, the countries of the European Union and other nations, we and the institutions where we sponsor research are subject to obligations to ensure the protection of personal information of human subjects participating in our clinical trials. In the United States, these laws include the privacy provisions of the Health Insurance Portability and Accountability Act, or HIPAA, the implementing regulations of the United States Department of Health and Human Services, and state medical records privacy laws. We have instituted procedures that we believe will enable us to comply with these requirements and the contractual requirements of our data sources. The laws and regulations in this area are evolving and further regulation, if adopted, could affect the timing and the cost of future clinical development activities.

We are subject to the United States Foreign Corrupt Practices Act, which prohibits corporations and individuals from engaging in specified activities to obtain or retain business or to influence a person working in an official capacity. Under this act, it is illegal to pay, offer to pay, or authorize the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity. Our present and future business has been and will continue to be subject to various other laws and regulations.

Pricing and Third-Party Reimbursement

In the United States and elsewhere, sales of therapeutic and other pharmaceutical products are dependent in part on the availability of reimbursement to the consumer from third party payors, such as government and private insurance plans. Increasingly, third party payors are challenging the prices charged for medical products and services. As a result, in the future, our products could be considered not cost effective or reimbursement to the consumer could become unavailable or could be insufficient to allow us to sell our products on a competitive and profitable basis. For example, in some foreign markets, pricing reimbursement or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In Canada this practice has led to lower priced products than in the United States. As a result, importation of products from Canada into the United States may result in reduced product revenues. In the United States there have been, and we expect that there will

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continue to be, a number of federal and state proposals to implement similar governmental pricing reimbursement controls. For example, Congress may give the federal government authority to negotiate drug prices for the Medicare Part D outpatient prescription drug benefit. Currently under Part D, prices are negotiated by the manufacturer with individual Part D plan sponsors or their administrators. Medicare Part B provides separate reimbursement for a limited universe of prescription drugs (primarily physician administered drugs). Currently, reimbursement for most Part B drugs is set at 106% of average sales price (which a manufacturer must report quarterly). Congress may consider proposals to reduce reimbursement for Part B drugs.

In many foreign markets, including the countries in the European Union, pricing of pharmaceutical products is subject to governmental control. In the United States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing controls. While we cannot predict whether such legislative or regulatory proposals will be adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and results.

Through the commercialization of FACTIVE and ANTARA, we became a participant in the Medicaid rebate program established by the Omnibus Budget Reconciliation Act of 1990, and most recently amended under the Deficit Reduction Act of 2005. Under the Medicaid rebate program, we pay a rebate for each unit of our product reimbursed by Medicaid. The amount of the rebate for each product is set by law as a minimum of 15.1% of the average manufacturer price, or AMP, of that product, or if it is greater, the difference between AMP and the best price available from us to any commercial customer. The rebate amount also includes an inflation adjustment if AMP increases faster than inflation. The rebate amount is recomputed each quarter based on our reports of our current average manufacturer price and best price for each of our products to the Centers for Medicare & Medicaid Services or CMS. In order to meet the requirements of the Deficit Reduction Act of 2005, these prices must now be reported to CMS monthly in addition to quarterly.

Participation in the Medicaid rebate program requires participation in the Public Health Service, or PHS, pharmaceutical pricing program. The PHS pricing program extends discounts comparable to the Medicaid rebate to a variety of community health clinics and other entities that receive health services grants from the PHS, as well as hospitals that serve a disproportionate share of poor Medicare and Medicaid beneficiaries.

FACTIVE and ANTARA are available to authorized users of the Federal Supply Schedule of the General Services Administration. Since 1993, as a result of the Veterans Health Care Act of 1992, or VHC Act, federal law has required that product prices for purchases by the Veterans Administration, the Department of Defense, Coast Guard, and the PHS, including the Indian Health Service, be discounted by a minimum of 24% off the non-federal average manufacturer price, or non-FAMP. Our computation and report of non-FAMP is used in establishing the price, and the accuracy of the reported non-FAMP may be audited by the government under applicable federal procurement laws.

PATENTS AND PROPRIETARY TECHNOLOGY

Our success will depend, in part, on our ability to obtain commercially valuable patent claims and protect our intellectual property. We currently own or license approximately 75 issued U.S. patents, approximately 87 pending U.S. patent applications, 148 issued foreign patents and approximately 201 pending foreign patent applications. These patents and patent applications primarily relate to (1) the chemical composition, use, and method of manufacturing FACTIVE, (2) pharmaceutical compositions, methods of their use and treatment, and methods of manufacturing ANTARA, (3) metalloenzyme inhibitors, their uses and their targets, (4) anti-infective compounds and their uses, and (5) the field of human and pathogen genetics. Our material patents are as follows:

• U.S. Patent No. 4,800,079 granted January 24, 1989, relating to pharmaceutical compositions containing fenofibrate and methods of preparing the same; licensed from Ethypharm, S.A.; expiring August 10, 2007.

• U.S. Patent No. 5,633,262 granted May 27, 1997, relating to quinoline carboxylic acid derivatives having 7-(4-amino-methyl-3-oxime) pyrrolidine substituent; licensed from LG Life Sciences; expiring June 15, 2015;

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• U.S. Patent No. 5,776,944 granted July 7, 1998, relating to 7-(4-aminomethyl-3-methyloxyiminopyrroplidin-1-yl)-1-cyclopropyl-6-fluoro-4-oxo-1,4-dihydro-1, 8-naphthyridine-3-carboxylic acid; licensed from LG Life Sciences; expiring April 4, 2017;

• U.S. Patent No. 5,869,670 granted February 9, 1999, relating to 7-(4-aminomethyl-3-methyloxyiminopyrrolidin-1-yl)-1-cyclopropyl-6-fluoro-4-oxo-1,4-dihydro-1, 8-naphthyridine-3-carboxylic acid; licensed from LG Life Sciences; expiring June 15, 2015;

• U.S. Patent No. 5,962,468 granted October 5, 1999, relating to 7-(4-aminomethyl-3-methyloxyiminopyrrolidin-1-yl)-1-cyclopropyl-6-fluoro-4-oxo-1,4-dihydro-1, 8-naphthyridine-3 carboxylic acid; licensed from LG Life Sciences; expiring June 15, 2015;

• U.S. Patent No. 6,340,689 granted January 22, 2002, relating to methods of using quinolone compounds against atypical upper respiratory pathogenic bacteria; licensed from LG Life Sciences; expiring September 14, 2019;

• U.S. Patent No. 6,262,071 granted July 17, 2001, relating to methods of using antimicrobial compounds against pathogenic Mycoplasma bacteria; licensed from LG Life Sciences; expiring September 21, 2019;

• U.S. Patent No. 6,331,550 granted December 18, 2001, relating to methods of using quinolone compounds against anaerobic pathogenic bacteria; licensed from LG Life Sciences; expiring September 21, 2019;

• U.S. Patent No. 6,455,540 granted September 24, 2002, relating to methods of use of quinolone compounds against anaerobic pathogenic bacteria; licensed from LG Life Sciences; expiring September 21, 2019;

• U.S. Patent No. 6,723,734 granted April 20, 2004, relating to the salt of naphythyridine carboxylic acid derivative; licensed from LG Life Sciences; expiring March 20, 2018;

• U.S. Patent No. 6,803,376 granted October 12, 2004, relating to methods of use of quinolone compounds against pneumococcal pathogenic bacteria; licensed from LG Life Sciences; expiring September 21, 2019; and

• U.S. Patent No. 7,101,574 granted September 5, 2006, relating to pharmaceutical compositions containing fenofibrate and methods of preparing the same; licensed from Ethypharm, S.A.; expiring August 20, 2020.

We are not currently involved in any litigation, settlement negotiations, or other legal action regarding patent issues and we are not aware of any patent litigation threatened against us. Our patent position involves complex legal and factual questions, and legal standards relating to the validity and scope of claims in the applicable technology fields are still evolving. Therefore, the degree of future protection for our proprietary rights is uncertain.

Under our development, license and supply agreement with Ethypharm, S.A., we assumed all of the rights and obligations related to the development, manufacturing, marketing and sale of ANTARA in the United States. This license includes two issued U.S. patents and several pending patent applications. In conjunction with the financing of our acquisition of ANTARA, we entered into a Security Agreement with Paul Royalty Fund Holdings II, LP, an affiliate of Paul Capital Partners, or Paul Capital, under which our wholly-owned subsidiary granted Paul Capital a security interest in all of its assets, including all rights to ANTARA intellectual property, in order to secure its performance under the financing agreements with Paul Capital. These patents and applications include claims that relate to pharmaceutical compositions containing fenofibrate using the drug delivery technologies incorporated in ANTARA, methods of their use and treatment, and methods of preparing the same. The latest patent issued to Ethypharm is set to expire in 2020.

Under our license agreement with LG Life Sciences, we obtained an exclusive license to develop and market gemifloxacin in certain territories. This license covers 16 issued U.S. patents and a broad portfolio of corresponding foreign patents and pending patent applications. These patents include claims that relate to the

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chemical composition of FACTIVE, methods of manufacturing and its use for the prophylaxis and treatment of bacterial infections. We have received a Notice of Final Determination from the U.S. Patent and Trademark Office on our patent term extension application for U.S. Patent 5,776,944 extending its patent term 659 days to April 4, 2017. The principal U.S. patents are currently set to expire at various dates, ranging from 2015 to 2019.

The patents relating to Ramoplanin include claims relating to methods of manufacturing Ramoplanin as well as methods of increasing the yield of the active compound. We also have applications pending relating to various novel uses of Ramoplanin as well as a formulation containing Ramoplanin. The patent covering the chemical composition of Ramoplanin has expired. To provide additional protection for Ramoplanin, we rely on proprietary know-how relating to maximizing yields in the manufacture of Ramoplanin, and intend to rely on the five years of data exclusivity we believe we would receive under the Hatch-Waxman Act in the U.S. and the ten years of market exclusivity in Europe available through the European Medicines Agency (EMEA), because Ramoplanin would be a new chemical entity not previously marketed commercially.

We also have the exclusive right to use FACTIVE trademarks, trade names, domain names and logos in conjunction with the use or sale of the product in the territories covered by the license. We acquired exclusive rights to ANTARA trademarks, trade names, domain names and logos. We have recently become aware that Antara Biosciences, Inc. has filed a trademark application with the U.S. Patent and Trademark Office for the ANTARA and ANTARA BIOSCIENCES marks in connection with biotechnology related goods and services. We are currently investigating the impact which these marks may have on our ANTARA brand and products and are in discussions with the company.

We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements that provide that all confidential information developed or made known to others during the course of the employment, consulting or business relationship shall be kept confidential except in specified circumstances. Agreements with employees provide that all inventions conceived by the individual while employed by us are our exclusive property. We cannot guarantee, however, that these agreements will be honored, that we will have adequate remedies for breach if they are not honored or that our trade secrets will not otherwise become known or be independently discovered by competitors.

MANUFACTURING

Under the terms of our agreement with LG Life Sciences, LG Life Sciences has agreed to supply and we are obligated to purchase from LG Life Sciences all of our anticipated commercial requirements for FACTIVE API. LG Life Sciences supplies the FACTIVE API from its manufacturing facility in South Korea. Patheon Pharmaceuticals Inc. currently provides the manufacture of finished products of FACTIVE sold in the U.S. With respect to our sublicense of commercialization rights to FACTIVE in ex-US territories:

• Pfizer Mexico must purchase all of its commercial requirements in Mexico for FACTIVE API from us, but has the option to receive FACTIVE product from us or to fill and finish the final tableted FACTIVE product at its manufacturing facilities in Mexico. We currently supply blistered product to Pfizer Mexico but anticipate that Pfizer Mexico will begin to fill-finish the product itself by the end of 2007.

• Abbott Canada must purchase its commercial requirements for Canada of FACTIVE finished product from us; however, Abbott Canada may elect to transfer the fill-finish manufacturing to an alternate manufacturing source on terms to be determined by the parties.

• With respect to the anticipated commercialization of FACTIVE in Europe, Menarini must purchase all of its requirements for FACTIVE active pharmaceutical ingredient from us, but may request that we supply finished FACTIVE product to it for an interim period of time during its initial launch for commercializing FACTIVE in Europe after receipt of marketing authorization.

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Currently, our source of supply of bulk capsules of ANTARA is Ethypharm, S.A, which produces the capsules at its facilities in Grand Quevilly, France and Chateauneuf-en-Thymerais, France. We have an agreement with Cardinal Health to package finished ANTARA capsules.

Pursuant to our acquisition of worldwide rights to Ramoplanin, we are responsible for the manufacture of both the active pharmaceutical ingredient and finished dosage form of Ramoplanin. Although we plan to seek a partner for Ramoplanin, a contract manufacturer would be required to produce both the active pharmaceutical ingredient and the final dosage form to support related manufacturing activities.

HUMAN RESOURCES

As of December 31, 2006, we had 336 full-time equivalent employees. None of our employees are covered by a collective bargaining agreement, and we consider our relations with our employees to be good.

AVAILABILITY OF INFORMATION

We maintain a website with the address www.oscient.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission.

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Item 1A. Risk Factors

The following are significant factors known to us that could materially adversely affect our business, financial condition, or operating results. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

RISKS RELATED TO OUR BUSINESS

We have a history of significant operating losses and expect losses to continue for some time.

We have a history of significant operating losses and expect losses to continue for some time. We had a net loss of approximately $78,477,000 for the year ended December 31, 2006 and at that date had an accumulated deficit of approximately $415,905,000. The losses have resulted primarily from costs incurred in research and development, including our clinical trials and product acquisitions, from sales and marketing, and from general and administrative costs associated with our operations and product sales. These costs have exceeded our revenues which to date have been generated principally from sales of FACTIVE and ANTARA, co-promotion revenues based on the sale of TESTIM gel (which we no longer promote), and our legacy collaborations, government grants and sequencing services.

We anticipate that we will incur additional losses in the current year and in future years and cannot predict when, if ever, we will achieve profitability. These losses are expected to continue, principally in the sales and marketing area as we seek to grow sales of FACTIVE tablets and ANTARA capsules and as we seek to acquire additional approved products or product candidates. Additionally, our partners’ product development efforts that utilize our genomic discoveries are at an early stage and, accordingly, we do not expect our losses to be substantially mitigated by revenues from milestone payments or royalties under those agreements for a number of years, if ever.

Our business is very dependent on the commercial success of FACTIVE and ANTARA.

FACTIVE tablets and ANTARA capsules are currently our only commercial products and we expect that they will likely account for substantially all of our product revenues for at least the next several years or until we successfully acquire, in-license or enter into co-promotion agreements for additional products.

FACTIVE tablets have FDA marketing approval for the treatment of community-acquired pneumonia of mild to moderate severity, or CAP, and acute bacterial exacerbations of chronic bronchitis, or AECB. ANTARA is approved by the FDA to treat hypercholesterolemia (high blood cholesterol) and hypertriglyceridemia (high triglycerides) in combination with a healthy diet. The commercial success of FACTIVE and ANTARA will depend upon their continued acceptance by regulators, physicians, patients and other key decision-makers as a safe, therapeutic and cost-effective alternative to other products used, or currently being developed, to treat CAP and AECB, in the case of FACTIVE tablets, or hypercholesterolemia and hypertriglyceridemia, in the case of ANTARA capsules. If FACTIVE and ANTARA are not commercially successful, we will have to find additional sources of funding or curtail or cease operations.

If third parties challenge the validity of the patents or proprietary rights of our marketed products or assert that we have infringed their patents or proprietary rights, we may become involved in intellectual property disputes and litigation that would be costly, time consuming, and prevent the commercialization of ANTARA and/or FACTIVE.

The intellectual property rights of biopharmaceutical companies, including us, are generally uncertain and involve complex legal, scientific and factual questions. Our success in developing and commercializing biopharmaceutical products may depend, in part, on our ability to operate without infringing on the intellectual property rights of others and to prevent others from infringing on our intellectual property rights. There has been

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substantial litigation regarding patents and other intellectual property rights in the biopharmaceutical industry. We may become party to patent litigation or proceedings at the U.S. Patent and Trademark Office or a foreign patent office to determine our patent rights with respect to third parties which may include competitors in the biopharmaceutical industry. Interference proceedings in the U.S. Patent and Trademark Office or opposition proceedings in a foreign patent office may be necessary to establish which party was the first to discover such intellectual property. We may become involved in patent litigation against third parties to enforce our patent rights, to invalidate patents held by such third parties, or to defend against such claims. The cost to us of any patent litigation or similar proceeding could be substantial, and it may absorb significant management time. We do not expect to maintain separate insurance to cover intellectual property infringement. Our general liability insurance policy does not cover our infringement of the intellectual property rights of others. If infringement litigation against us is resolved unfavorably, we may be enjoined from manufacturing or selling certain of our products or services and be liable for damages. In certain cases, a license may be available, although we may not be able to obtain such a license on commercially acceptable terms, or at all.

We are aware of United States patents that are controlled by third parties that may be construed to encompass ANTARA. However, we believe that, if these patents were asserted against us, we would have valid defenses that ANTARA does not infringe any valid claims of these patents or that the patents would be found to be unenforceable. Nonetheless, in order to successfully challenge the validity of any United States patent, we would need to overcome the presumption of validity which is accorded to issued patents in the United States. If any of these patents were found to be valid and enforceable and we were found to infringe any of them, or any other patent rights of third parties, we would be required to pay damages, cease the sale of ANTARA or pay additional royalties on manufacture and sales of ANTARA. If we are unable to market or sell ANTARA, or if we are obligated to pay significant damages or additional royalties, our earnings attributable to ANTARA would be reduced and our business would be materially adversely affected. Even if we prevail, the cost to us of any patent litigation would likely be substantial, and it may absorb significant management time. If the other party in any such litigation has substantially greater resources than us, we may be forced, due to cost constraints, to seek to settle any such litigation on terms less favorable to us than we might be able to obtain if we had greater resources.

We intend to raise additional funds in the future.

We believe our existing funds and anticipated cash generated from operations should be sufficient to support our current plans through at least the end of 2007. We intend to raise additional capital in the future to fund our operations, to support our sales and marketing activities, fund clinical trials and other research and development activities, and other potential commercial or development opportunities. We may seek funding through additional public or private equity offerings, debt or other strategic financings or agreements with customers or vendors. Our ability to raise additional capital, however, will be impacted by, among other factors, the investment market for biopharmaceutical companies and the progress of the FACTIVE and ANTARA commercial programs, our ability to acquire, in-license or enter into co-promotion agreements for additional products, our progress in finding a development and commercialization partner for Ramoplanin and our progress with other business development transactions. Additional financing may not be available to us when needed, or, if available, may not be available on favorable terms. If we cannot obtain adequate financing on acceptable terms when such financing is required, our business will be adversely affected.

Future fundraising could dilute the ownership interests of our shareholders.

In order to raise additional funds, we may issue equity or convertible debt securities in the future. Depending upon the market price of our shares at the time of any transaction, we may be required to sell a significant percentage of the outstanding shares of our common stock in order to fund our operating plans, potentially requiring a shareholder vote. In addition, we may have to sell securities at a discount to the prevailing market price, resulting in further dilution to our shareholders.

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We need to continue to develop marketing and sales capabilities to successfully commercialize FACTIVE tablets, ANTARA capsules and our other product candidates, including effectively integrating the ANTARA product into our commercial operations.

FACTIVE tablets and ANTARA capsules are the first two FDA-approved products which we own and promote. To date, we still have limited marketing and sales experience. The launch of FACTIVE occurred in September of 2004, and we recently acquired the rights to ANTARA in August 2006. The continued development of these marketing and sales capabilities, including any expansion of our sales force, will require significant expenditures, management resources and time. Failure to continue to successfully integrate ANTARA and establish sufficient sales and marketing capabilities in a timely and regulatory compliant manner may adversely affect our ability to assume and continue to grow the ANTARA brand and related product sales.

Our product and product candidates face significant competition in the marketplace.

ANTARA

ANTARA is a fenofibrate product approved by the FDA to treat hypercholesterolemia and hypertriglyceridemia in combination with a healthy diet. The marketing of current and additional branded versions of fenofibrate could reduce our net sales of ANTARA and adversely impact our revenues. The primary competition for ANTARA in the fenofibrate market is Tricor 145 mg, a product manufactured by Abbott Laboratories, which accounted for approximately 94% of U.S. fenofibrate sales for the twelve month period ended December 31, 2006. ANTARA also competes with Triglide, a fenofibrate marketed by Sciele Pharma, Inc., which accounted for approximately 1.2% of U.S. fenofibrate sales for the twelve month period ended December 31, 2006.

Additionally, several generic versions of fenofibrate in varying doses are also available for the treatment of dyslipidemias. In May 2005, Teva Pharmaceutical Industries, Ltd. obtained final FDA approval to market a generic version of Abbott Laboratories’ 160 mg Tricor tablet (which is no longer marketed or sold). In January 2006, Cipher Pharmaceuticals, Inc. obtained final FDA approval to market a 150 mg strength of fenofibrate.

There are also several non-fenofibrate FDA-approved products with similar indications as ANTARA which could compete with ANTARA, including statins, omega-3 fatty acids, niacin and fixed-dose, combination products.

We are also aware that LifeCycle Pharma A/S is developing a 40 mg and a 120 mg fenofibrate product and, on December 27, 2006, we received notice that LifeCycle Pharma had filed a new drug application with the FDA referencing ANTARA in accordance with the provisions of section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act. Under current FDA policies, a section 505(b)(2) new drug application may be used to seek approval based in part on the FDA’s prior findings of safety and efficacy for another entity’s application, including for a product whose strength, dosage form, route of administration or labeling differs from the product covered by the application for the other drug being referenced, known as the reference listed drug. A 505(b)(2) application can be based in part on a showing that the proposed product is bioequivalent to the reference listed drug. LifeCycle Pharma’s 505(b)(2) application included a certification, known as a Paragraph IV certification, alleging that its fenofibrate product does not infringe the patents that have been submitted to the FDA for ANTARA and listed in FDA’s publication known as the Orange Book. We decided, based on the current patent estate for ANTARA and Lifecycle Pharma’s product description, not to pursue litigation.

The growth of any of these competitive branded products or the marketing of generic fenofibrate products could result in a decrease in ANTARA sales, pressure on the price at which we are able to sell ANTARA, reduce our profit margins, reduce our net sales of ANTARA and adversely impact our revenues.

FACTIVE

FACTIVE tablets are approved for the treatment of community-acquired pneumonia of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis. There are several classes of antibiotics that are

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primary competitors for the treatment of these indications, including other fluoroquinolones (levofloxacin, ciprofloxacin and moxifloxacin), macrolides (clarithromycin and azithromycin), telithromycin and penicillins (amoxicillin/clavulanate potassium).

Many generic antibiotics are also currently prescribed to treat these infections. Moreover, a number of the antibiotic products that are competitors of FACTIVE tablets have composition of matter patents which have gone or will be going off patent at dates ranging from 2003 to 2016. As these competitors lose patent protection, their manufacturers will likely decrease their promotional efforts. However, makers of generic drugs will likely begin to produce some of these competing products and this could result in pressure on the price at which we are able to sell FACTIVE tablets and reduce our profit margins.

Ramoplanin

Ramoplanin is in clinical development for the treatment of Clostridium difficile-associated disease (CDAD). We are aware of two products currently utilized in the marketplace—Vancocin^® pulvules (vancomycin), a product marketed by ViroPharma Inc., and metronidazole, a generic product—for treatment of this indication. We are also aware of several companies with products in development for the treatment of CDAD as well as the potential for generic vancomycin.

Many of our competitors have substantially greater capital resources and human resources than us. Furthermore, many of those competitors are more experienced than us in drug discovery, clinical development and commercialization, and in obtaining regulatory approvals. As a result, those competitors may discover, develop and commercialize pharmaceutical products or services before us. In addition, our competitors may discover, develop and commercialize products or services that are more effective than, or otherwise render non-competitive or obsolete, the products or services that we or our collaborators are seeking to develop and commercialize. Moreover, these competitors may obtain patent protection or other intellectual property rights that would limit our rights or the ability of our collaborators to develop or commercialize pharmaceutical products or services.

Our failure to in-license, co-promote or acquire and develop additional product candidates or approved products will impair our ability to grow.

As part of our growth strategy, we intend to acquire, develop and commercialize additional product candidates or approved products. The success of this strategy depends upon our ability to identify, select and acquire biopharmaceutical products that meet our criteria. We may not be able to acquire the rights to additional product candidates and approved products on terms that we find acceptable, or at all. The acquisition of rights to additional products would likely require us to make significant up-front cash payments, which could adversely affect our liquidity and/or accelerate our need to raise additional capital and/or secure external sources of financing. We may seek funding for product acquisitions through equity or debt offerings, through royalty-based financings or by a combination of these methods, such as the financing we completed with Paul Capital to fund the ANTARA acquisition. There is no assurance that we will be able to raise the funds necessary to complete any product acquisitions on acceptable terms or at all. If we raise funds it could dilute shareholders, or if we use existing resources it could adversely affect our liquidity and accelerate our need to raise additional capital.

New product candidates acquired or in-licensed by us may require additional research and development efforts prior to commercial sale, including extensive preclinical and/or clinical testing and approval by the FDA and corresponding foreign regulatory authorities. All product candidates are prone to the risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate will not be safe, effective or approved by regulatory authorities. In addition, it is uncertain whether any approved products that we develop or acquire will be:

• manufactured or produced economically;

• successfully commercialized; or

• widely accepted in the marketplace.

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We cannot expand the indications for which we will market FACTIVE unless we receive FDA approval for each additional indication. Failure to expand these indications will limit the size of the commercial market for FACTIVE.

In April 2003, FACTIVE tablets were approved by the FDA for the seven-day treatment of community-acquired pneumonia of mild to moderate severity (CAP) and the five-day treatment of acute bacterial exacerbations of chronic bronchitis (AECB). In our attempt to continue to develop the market for FACTIVE, we completed a clinical trial designed to demonstrate that a five-day course of FACTIVE for the treatment of mild to moderate CAP is as effective as the currently approved seven-day course of treatment. On September 21, 2006, we received an approvable letter from the FDA for the sNDA seeking approval for the five-day treatment CAP with FACTIVE tablets. According to the letter, we were required to provide clarification and additional interpretation regarding certain data included in the application to assist the FDA in its evaluation. We recently delivered this additional information to the FDA and the FDA has accepted our response as complete. We cannot be certain whether additional data will be required or if the five-day CAP sNDA will ultimately be approved. In November 2005, we filed an sNDA seeking approval for acute bacterial sinusitis. In September 2006, the FDA’s Anti-Infective Drugs Advisory Committee voted not to recommend approval of this sNDA and, in November 2006, we voluntarily withdrew our sNDA. If we encounter similar issues with the FDA in the future or are otherwise unsuccessful in expanding the approved indications for the use of FACTIVE, the size of the commercial market for FACTIVE will be limited.

Seasonal fluctuations in demand for FACTIVE may cause our operating results to vary significantly from quarter to quarter.

We expect demand for FACTIVE to be highest between December 1 and March 31 as the incidence of respiratory tract infections, including CAP and AECB, tends to increase during the winter months. In addition, fluctuations in the duration and severity of the annual respiratory tract infection season may cause our product sales to vary from year to year. Due to these seasonal fluctuations in demand, our results in one quarter may not be indicative of the results for any other quarter or for the entire year.

We, as well as our partners, are subject to numerous complex regulatory requirements and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.

Virtually all aspects of our and our partners’ activities are subject to regulation by numerous governmental authorities in the U.S., Europe, Canada, Mexico and elsewhere. These regulations govern or affect the testing, manufacture, safety, effectiveness, labeling, storage, record-keeping, approval, distribution, advertising and promotion of FACTIVE, ANTARA, Ramoplanin and our other product candidates, as well as safe working conditions and the experimental use of animals. Noncompliance with any applicable regulatory requirements or failure to obtain adequate documentation from any governmental agency can result in refusal of the government to approve products for marketing, criminal prosecution and fines, recall or seizure of products, injunctions, total or partial suspension of production, “whistleblower” lawsuits, prohibitions or limitations on the commercial sale of products or refusal to allow the entering into of federal and state supply contracts. These enforcement actions would detract from management’s ability to focus on our daily business and would have an adverse effect on the way we conduct our daily business, which could severely impact future profitability. Our corporate compliance program cannot fully ensure that we are in compliance with all applicable laws and regulations, and a failure to comply with such regulations or a failure to prevail in litigation related to noncompliance could harm our business.

For instance, we, along with many other pharmaceutical companies, recently received notification from the FDA that it had some concerns over the reliability of studies conducted by MDS Pharma Services between 2000 and 2004. The predecessor owner of the rights to ANTARA, Reliant Pharmaceuticals, had engaged MDS Pharma to perform certain bioequivalence studies for ANTARA, including some studies that were submitted in support of the original approval of bioequivalence. In its letter, the FDA requested that we confirm whether any of the analyses of our products were conducted by MDS Pharma in order for the FDA to determine whether we might

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have to validate, confirm or repeat certain studies. The FDA has stated that it has not detected any signals or any evidence that the products mentioned in the letters pose a safety risk or that there has been any impact on efficacy. Because the outcome of this issue is uncertain, we cannot predict whether this issue will have a material impact on our results of operations.

New legal and regulatory requirements could make it more difficult for us to obtain extended or new product approvals, and could limit or make more burdensome our ability to commercialize our approved products.

Numerous proposals have been made in recent months and years to impose new requirements on drug approvals, expand post-approval requirements, and restrict sales and promotional activities. For example, federal legislation has been proposed that would require all new drug applicants to submit risk evaluation and minimization plans to monitor and address potential safety issues for products upon approval, grant FDA the authority to impose risk management measures for marketed products and to mandate labeling changes in certain circumstances, and establish new requirements for disclosing the results of clinical trials. Additional measures have also been proposed to address perceived shortcomings in FDA’s handling of drug safety issues, and to limit pharmaceutical company sales and promotional practices that some see as excessive or improper. If these or other legal or regulatory changes are enacted, it may become more difficult or burdensome for us to obtain extended or new product approvals, and our current approvals may be restricted or subject to onerous post-approval requirements. Such changes may increase our costs and adversely affect our operations. The ability of us or our partners to commercialize approved products successfully may be hindered, and our business may be harmed as a result.

Failure to comply with or changes to the regulatory requirements that are applicable to FACTIVE, ANTARA or our other product candidates may result in a variety of consequences, including the following:

• restrictions on our products or manufacturing processes;

• notice of violation letters regarding promotional and marketing materials and activities;

• withdrawal of FACTIVE, ANTARA or a product candidate from the market;

• voluntary or mandatory recall of FACTIVE, ANTARA or a product candidate;

• fines against us or our partners;

• suspension or withdrawal of regulatory approvals for FACTIVE, ANTARA or a product candidate which subsequently receives regulatory approval;

• suspension or termination of any of our ongoing clinical trials of a product candidate;

• refusal to permit import or export of our products;

• refusal to approve pending applications or supplements to approved applications that we or our partners submit;

• denial of permission to file an application or supplement in a jurisdiction;

• product seizure; and

• injunctions or the imposition of civil or criminal penalties against us or our partners.

If we market products in a manner that violates health care fraud and abuse laws, we may be subject to civil or criminal penalties.

In addition to FDA and related regulatory requirements, we are subject to health care “fraud and abuse” laws, such as the federal False Claims Act, the anti-kickback provisions of the federal Social Security Act, and other state and federal laws and regulations. Federal and state anti-kickback laws prohibit, among other things,

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knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid, or other federally or state financed health care programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, patients, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing, or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, or off-label uses, that caused claims to be submitted to Medicaid for non-covered off-label uses; and submitting inflated best price information to the Medicaid Rebate Program.

The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines, and imprisonment. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which would also harm our financial condition. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

In recent years, several states and localities, including California, the District of Columbia, Maine, Minnesota, New Mexico, Vermont, and West Virginia, have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, and file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities. Similar legislation is being considered in other states. Many of these requirements are new and uncertain, and the penalties for failure to comply with these requirements are unclear. We are not aware of any companies against which fines or penalties have been assessed under these special state reporting and disclosure laws to date. Nonetheless, if we are found not to be in full compliance with these laws, we could face enforcement action and fines and other penalties, and could receive adverse publicity.

We depend on third parties to manufacture and distribute our products and product candidates.

We do not have the internal capability to manufacture pharmaceutical products. Under our agreement with LG Life Sciences, LG Life Sciences manufactures the API of FACTIVE, and we use Patheon Inc. (Patheon) to produce the finished FACTIVE tablets. Currently, our only source of supply of bulk capsules of ANTARA is Ethypharm which manufactures the bulk capsules in France and receives ANTARA API from two vendors in Spain and Italy. Further, we have an agreement with Cardinal Health PTS, LLC (Cardinal Health) to package finished ANTARA capsules. The only source of supply for FACTIVE API is LG Life Sciences’ facility in South Korea, and Patheon is currently our only source of finished FACTIVE tablets.

If LG Life Sciences, Ethypharm, Patheon or Cardinal experiences any significant difficulties in their respective manufacturing processes for our products including the API or finished product, we could experience significant interruptions in the supply of FACTIVE and ANTARA. Our inability to coordinate the efforts of our third party manufacturing partners, or the lack of capacity available at our third party manufacturing partners,

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could impair our ability to supply FACTIVE and ANTARA at required levels. Such an interruption could cause us to incur substantial costs and our ability to generate revenue from FACTIVE and ANTARA may be adversely affected. We may not be able to enter into alternative supply arrangements at commercially acceptable rates, if at all. Also, if we change the source or location of supply or modify the manufacturing process, regulatory authorities will require us to demonstrate that the product manufactured by the new source or from the modified process is equivalent to the product used in any clinical trials that we had conducted. Due to these regulatory requirements, we could experience significant interruptions in the supply of FACTIVE and ANTARA if we decided to transfer the manufacture of our products to one or more suppliers in an effort to deal with such difficulties.

As the FACTIVE API and ANTARA bulk capsules are manufactured in South Korea and France, respectfully, we must ship our products to the United States for finishing, packaging and labeling, and manufacturing in the case for FACTIVE. While in transit, our API and finished product, each shipment of which is of significant value, could be lost or damaged. Moreover, at any time after shipment to the United States, our API or finished product could be lost or damaged as our FACTIVE API is stored at Patheon and our FACTIVE and ANTARA finished product is stored at our third party logistics provider, Integrated Commercialization Solutions, Inc. (ICS). Appropriate risk mitigation steps have been taken and insurance is in place. However, depending on when in the process the API or finished product is lost or damaged, we may have limited recourse for recovery against our manufacturers or insurers. As a result, our financial performance could be impacted by any such loss or damage to our API or finished product.

We may also experience interruption or significant delay in the supply of FACTIVE and ANTARA due to natural disasters, acts of war or terrorism, shipping embargoes, labor unrest or political instability in South Korea or France. In any such event, the supply of our products stored at LG Life Sciences or Ethypharm could also be impacted.

Pursuant to our acquisition of worldwide rights to Ramoplanin, we are responsible for the manufacture of both the active pharmaceutical ingredient and finished dosage form of Ramoplanin. Although we plan to seek a partner for Ramoplanin, a contract manufacturer would be required to produce both the active pharmaceutical ingredient and the final dosage form to support related manufacturing activities. If there is a significant delay in securing a qualified supplier on commercially favorable terms, we could experience a supply shortage of Ramoplanin bulk drug, possibly affecting our ability to consummate partnering arrangements for the commercialization of Ramoplanin.

Moreover, while we may choose to manufacture products in the future, we have no experience in the manufacture of pharmaceutical products for clinical trials or commercial purposes. If we decide to manufacture products, it would be subject to the regulatory requirements described above. In addition, we would require substantial additional capital and would be subject to delays or difficulties encountered in manufacturing pharmaceutical products.

We depend on third parties to manage our product supply chain for FACTIVE tablets and ANTARA capsules.

We do not have the internal capability to perform product supply chain services including warehousing, inventory management and distribution of commercial and sample quantities of FACTIVE tablets and ANTARA capsules. We have an exclusive arrangement with Integrated Commercialization Solutions, Inc. (ICS) to perform such supply chain services through the second quarter of 2007.

We cannot be certain that our arrangement with ICS will be extended, or extended upon commercially favorable terms, or that ICS will be able to perform uninterrupted supply chain services. If ICS were unable to perform their services for any period, we may incur substantial loss of sales to wholesalers and other purchasers of our products. If we are forced to find an alternative supply chain service provider for FACTIVE and ANTARA, in addition to loss of sales, we may also incur costs in establishing a new arrangement.

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Wholesalers, pharmacies and hospitals may not maintain adequate distribution for our products.

We sell FACTIVE and ANTARA to wholesale drug distributors who generally sell products to retail pharmacies and other institutional customers. We do not promote FACTIVE and ANTARA to these wholesalers, and they do not determine such products prescription demand. However, approximately 84% of our product shipments during the twelve months ended December 31, 2006 were to only three wholesalers. Our ability to commercialize FACTIVE and/or ANTARA will depend, in part, on the extent to which we maintain adequate distribution of FACTIVE tablets and ANTARA capsules via wholesalers, pharmacies and hospitals, as well as other customers. Although a majority of the larger wholesalers and retailers distribute and stock FACTIVE and ANTARA, they may be reluctant to do so in the future if demand is not established. Further, it is possible that wholesalers could decide to change their policies or fees, or both, at some time in the future. This could result in their refusal to distribute smaller volume products, or cause higher product distribution costs, lower margins or the need to find alternative methods of distributing products. Such alternative methods may not exist or may not be economically viable. If we do not maintain adequate distribution of FACTIVE tablets or ANTARA capsules, the commercialization of FACTIVE and/or ANTARA and our anticipated revenues and results of operations could be adversely affected.

The development and commercialization of our products may be terminated or delayed, and the costs of development and commercialization may increase, if third parties upon whom we rely to support the development and commercialization of our products do not fulfill their obligations.

In addition to using third parties to fulfill our manufacturing, distribution and supply chain services, our development and commercialization strategy entails entering into arrangements with corporate collaborators, contract research organizations, licensors, licensees and others to conduct development work, manage our clinical trials and market and sell our products outside of the United States. We do not have the expertise or the resources to conduct such activities on our own and, as a result, we will be particularly dependent on third parties in these areas. For instance, we have entered into exclusive arrangements granting rights Pfizer, S.A. de C.V, Abbott Laboratories, Ltd. and Menarini International Operation Luxembourg SA to develop and sell FACTIVE in Mexico, Canada and the European Union, respectively.

We may not be able to maintain our existing arrangements with respect to the commercialization of our existing products, FACTIVE and ANTARA, or establish and maintain arrangements or partnerships to develop and commercialize Ramoplanin or any additional product candidates or products we may acquire on terms that are acceptable to us. Any current or future arrangements for development and commercialization may not be successful. If we are not able to establish or maintain agreements relating to our current products, Ramoplanin, our other product candidates or any additional products we may acquire on terms which we deem favorable, our results of operations would be materially adversely affected.

Third parties may not perform their obligations as expected. The amount and timing of resources that third parties devote to developing and commercializing our products are not within our control. Furthermore, our interests may differ from those of third parties that commercialize our products. Disagreements that may arise with these third parties could delay or lead to the termination of the development or commercialization of our product candidates, or result in litigation or arbitration, which would be time consuming and expensive.

If any third party that supports the development or commercialization of our products breaches or terminates its agreement with us, or fails to conduct its activities in a timely and regulatory compliant manner, such breach, termination or failure could:

• delay or otherwise adversely impact the development or commercialization of FACTIVE tablets, ANTARA capsules, Ramoplanin, our other product candidates or any additional product candidates that we may acquire or develop;

• require us to undertake unforeseen additional responsibilities or devote unforeseen additional resources to the development or commercialization of our products; or

• result in the termination of the development or commercialization of our products.

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Clinical trials are costly, time consuming and unpredictable, and we have limited experience conducting and managing necessary preclinical and clinical trials for product candidates.

To obtain FDA approval to market a new drug product or to expand the approved uses of an existing product, we or our partners must demonstrate proof of safety and efficacy in humans. To meet these requirements, we or our partners will have to conduct extensive testing, including potentially preclinical testing and “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming and expensive process. The length of time required to conduct required studies may vary substantially according to the type, complexity, novelty and intended use of the product candidate, and often can be several years or more per trial. Delays associated with products for which clinical trials are required may cause us to incur additional operating expenses.

The Phase II trial for our product candidate, Ramoplanin, to assess the safety and efficacy of treating Clostridium difficile-associated disease, or CDAD, was completed in 2004 but did not meet its primary endpoint. Prior clinical and preclinical trials for Ramoplanin were conducted by Vicuron and its licensees, from whom we acquired rights to Ramoplanin. Although we have agreed with the FDA to a Special Protocol Assessment regarding specific components of a Phase III program that, if completed successfully, would support regulatory approval for the indication, we can give no assurance that as clinical trials proceed or as part of an NDA review process, if any, the FDA will not determine that a previously approved Special Protocol Assessment for a particular protocol is no longer valid. Further, any third party with whom we may partner or grant our rights to Ramoplanin may not be able to complete future trials, make the filings within the timeframes we currently expect or demonstrate the safety and efficacy of Ramoplanin to the satisfaction of the FDA or other regulatory authorities. If the trials or the filings are delayed or resisted by the FDA, our business may be adversely affected.

If we choose to pursue additional indications for FACTIVE or ANTARA, we may not be able to demonstrate the safety and efficacy of FACTIVE or ANTARA for those indications to the satisfaction of the FDA, or other regulatory authorities. We may also be required to demonstrate that our proposed products represent an improved form of treatment over existing therapies and we may be unable to do so without conducting further clinical studies. Negative, inconclusive or inconsistent clinical trial results could prevent regulatory approval, increase the cost and timing of regulatory approval or require additional studies or a filing for a narrower indication.

In addition, the cost of human clinical trials varies dramatically based on a number of factors, including the order and timing of clinical indications pursued, the extent of development and financial support from alliance partners, the number of patients required for enrollment, the difficulty of obtaining clinical supplies of the product candidate, and the difficulty in obtaining sufficient patient populations and clinicians.

We have limited experience in conducting and managing the preclinical and clinical trials necessary to obtain regulatory marketing approvals. We may not be able to obtain the approvals necessary to conduct clinical studies. Also, the results of our clinical trials may not be consistent with the results obtained in preclinical studies or the results obtained in later phases of clinical trials may not be consistent with those obtained in earlier phases. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after experiencing promising results in early animal and human testing.

Even if a product gains regulatory approval, the product and the manufacturer of the product will be subject to continuing regulatory review, including the requirement to conduct post-approval clinical studies. We may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if previously unknown problems with the product or its manufacture are subsequently discovered.

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We could experience delays in clinical development which could delay anticipated product launches.

The speed with which we are able to complete clinical trials for future product candidates, when and if we, or any third party with whom we partner, elects to commence Phase III development, and our applications for marketing approval will depend on several factors, including the following:

• the rate of patient enrollment, which is a function of many factors, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the study and the nature of the protocol;

• fluctuations in the disease incidence for patients available to enroll in our trials;

• compliance of patients and investigators with the protocol and applicable regulations;

• prior regulatory agency review and approval of our applications and procedures;

• analysis of data obtained from preclinical and clinical activities which are susceptible to varying interpretations, which interpretations could delay, limit or prevent regulatory approval;

• changes in the policies of regulatory authorities for drug approval during the period of product development; and

• the availability of skilled and experienced staff to conduct and monitor clinical studies, to accurately collect data and to prepare the appropriate regulatory applications.

Our intellectual property protection and other protections may be inadequate to protect our products.

Our success will depend, in part, on our ability to obtain commercially valuable patent claims and protect our intellectual property. We currently own or license approximately 75 issued U.S. patents, approximately 87 pending U.S. patent applications, 148 issued foreign patents and approximately 201 pending foreign patent applications. We are not currently involved in any litigation, settlement negotiations, or other legal action regarding patent issues and we are not aware of any patent litigation threatened against us. Our patent position involves complex legal and factual questions, and legal standards relating to the validity and scope of claims in the applicable technology fields are still evolving. Therefore, the degree of future protection for our proprietary rights is uncertain.

Under our license agreement with LG Life Sciences, we obtained an exclusive license to develop and market gemifloxacin in certain territories. This license covers 16 issued U.S. patents and a broad portfolio of corresponding foreign patents and pending patent applications. These patents include claims that relate to the chemical composition of FACTIVE, methods of manufacturing and its use for the prophylaxis and treatment of bacterial infections. We have received a Notice of Final Determination from the U.S. Patent and Trademark Office on our patent term extension application for U.S. Patent 5,776,944 extending its patent term 659 days to April 4, 2017. The principal U.S. patents are currently set to expire at various dates, ranging from 2015 to 2019.

Under our development, license and supply agreement with Ethypharm, S.A., we assumed all of the rights and obligations related to the development, manufacturing, marketing and sale of ANTARA in the United States. This license includes two issued U.S. patents and several pending patent applications. These patents and applications include claims that relate to pharmaceutical compositions containing fenofibrate using the drug delivery technologies incorporated in ANTARA, methods of their use and treatment, and methods of preparing the same. The latest patent in the U.S. is currently set to expire in 2020.

The patents relating to Ramoplanin include claims relating to methods of manufacturing Ramoplanin as well as methods of increasing the yield of the active compound. We also have applications pending related to various novel uses of Ramoplanin as well as a formulation containing Ramoplanin. The patent covering the chemical composition of Ramoplanin has expired. To provide additional protection for Ramoplanin, we rely on proprietary know-how relating to maximizing yields in the manufacture of Ramoplanin, and intend to rely on the five years

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of data exclusivity under the Hatch-Waxman Act in the U.S. and the ten years of market exclusively in Europe available through the European Medicines Agency (EMEA), because Ramoplanin would be a new chemical entity not previously marketed commercially.

The risks and uncertainties that we will face with respect to our patents and other proprietary rights include the following:

• the pending patent applications that we have filed or to which we have exclusive rights may not result in issued patents, may result in issued patents with narrower claims than anticipated or may take longer than expected to result in issued patents;

• the claims of any patents which are issued may be limited from those in the patent applications and may not provide meaningful protection;

• we may not be able to develop additional proprietary technologies that are patentable;

• the patents licensed or issued to us or our partners may not provide a competitive advantage;

• other companies may challenge patents licensed or issued to us or our partners;

• patents issued to other companies may harm our ability to do business;

• other companies may independently develop similar or alternative technologies or duplicate our technologies; and

• the patents may be narrow in scope and accordingly other companies may design around technologies we have licensed or developed.

International patent protection is uncertain.

Patent law outside the United States is uncertain and is currently undergoing review and revision in many countries. Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as U.S. laws. We may participate in opposition proceedings to determine the validity of our or our competitors’ foreign patents, which could result in substantial costs and diversion of our efforts.

Our proprietary position may depend on our ability to protect our proprietary confidential information and trade secrets.

We rely upon certain proprietary confidential information, trademarks, unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements that provide that all confidential information developed or made known to others during the course of the employment, consulting or business relationship shall be kept confidential except in specified circumstances. Agreements with employees provide that all inventions conceived by an individual while employed by us are our exclusive property. We cannot guarantee, however, that these agreements will be honored, that we will have adequate remedies for breach if they are not honored or that our proprietary confidential information and trade secrets will not otherwise become known or be independently discovered by competitors.

We bear substantial responsibilities under our license agreements for FACTIVE and ANTARA and our sublicense agreements to Pfizer, S.A. de C.V., Abbott Laboratories, Ltd. and Menarini International Operation Luxembourg SA, and there can be no assurance that we will successfully fulfill our responsibilities.

FACTIVE

We have an exclusive license from LG Life Sciences to develop and market FACTIVE in North America, France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino,

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Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia. Under this agreement, we are responsible, at our expense and through consultation with LG Life Sciences, for the clinical and commercial development of FACTIVE in the countries covered by the license, including the conduct of clinical trials, the filing of drug approval applications with the FDA and other applicable regulatory authorities and the marketing, distribution and sale of FACTIVE in our territory. The agreement also requires a minimum sales commitment over a period of time, which if not met, would result in the technology being returned to LG Life Sciences. In addition, LG Life Sciences has the right to co-promote FACTIVE in the U.S. on terms to be negotiated, commencing in 2008; such co-promotion option terminates once certain level of sales are reached by us. If LG Life Sciences co-promotes FACTIVE in the U.S., our royalty obligations to LG Life Sciences would cease. We believe that we are currently in compliance with our obligations under the agreement with LG Life Sciences, but there can be no assurance that we will be able to remain in compliance due to the limitations on our resources and the many risks of conducting clinical trials, as described above in “Clinical trials are costly, time consuming and unpredictable, and we have limited experience conducting and managing necessary preclinical and clinical trials for our product candidates” and the challenges inherent in the commercialization of new products as described above in “Our product candidates will face significant competition in the marketplace.” In addition, if LG Life Sciences exercises its right to co-promote FACTIVE, our operating results will suffer.

LG Life Sciences has the obligation under the agreement to diligently maintain its patents and the patents of third parties to which it has rights that, in each case relating to gemifloxacin, the active ingredient in FACTIVE tablets. We have the right, at our expense, to control any litigation relating to suits brought by a third party alleging that the manufacture, use or sale of gemifloxacin in its licensed field in the territories covered by the license infringes upon our rights. We also have the primary right to pursue actions for infringement of any patent licensed from LG Life Sciences under the license agreement within the territories covered by the license. If we elect not to pursue any infringement action, LG Life Sciences has the right to pursue it. The costs of any infringement actions are first paid out of any damages recovered. If we are the plaintiff, the remainder of the damages are retained by us, subject to our royalty obligations to LG Life Sciences. If LG Life Sciences is the plaintiff, the remainder of the damages are divided evenly between us and LG Life Sciences, subject to our royalty obligations to LG Life Sciences. The costs of pursuing any such action could substantially diminish our resources.

In February 2006, we entered into a Sublicensing and Distribution Agreement with Pfizer, S.A. de C.V. (Pfizer Mexico) whereby we sublicensed our rights to commercialize FACTIVE tablets in Mexico to Pfizer Mexico. Under this agreement, we are obligated to exclusively supply all active pharmaceutical ingredient for FACTIVE required by Pfizer Mexico in Mexico. In August 2006, we entered into a Supply, Development and Marketing Agreement with Abbott Laboratories’ Canadian affiliate (Abbott Canada). Under this agreement, we are obligated to exclusively supply all finished packaged FACTIVE product required by Abbott Canada. In December 2006, we entered into a License, Supply and Marketing Agreement with Menarini International Operation Luxembourg SA (Menarini), whereby we sublicensed our rights to sell FACTIVE tablets in the European Union to Menarini. Under the terms of our agreement with Menarini, Menarini is also obligated to exclusively purchase from us, and we must exclusively supply, all API for FACTIVE to be sold in Europe for the earlier to occur of the expiration of the life of certain patents covering the product or expiration of data exclusivity. We believe that, together with our manufacturing partners, we will be able to meet such supply and other obligations under these sublicense and supply agreements but can make no assurances that we will be able to remain in compliance with such responsibilities, which would result in our breach of such agreement.

ANTARA

Our exclusive rights to ANTARA are licensed to us by Ethypharm, S.A. (Ethypharm). If we breach the development, license and supply agreement with Ethypharm, it may be entitled to terminate the agreement. Further, in order to maintain our exclusive rights, we must achieve certain minimum annual sales of ANTARA

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until February 2012 or make payments to Ethypharm to compensate for the difference. Ethypharm also has a right of first refusal on any divestiture of our rights to ANTARA. We believe that we are currently in compliance with our obligations under the Ethypharm agreement, but there can be no assurance that we will be able to remain in compliance or that we will be able to meet the milestones required for extension of the agreement. Moreover, Ethypharm’s right of first refusal on a divestiture of our rights to ANTARA may adversely affect our ability to effect a change of control or sale of our assets.

We depend on key personnel, including members of our direct sales force, in a highly competitive market for such skilled personnel.

We are highly dependent on the principal members of our senior management and key scientific, sales and technical personnel. The loss of any of our personnel could have a material adverse effect on our ability to achieve our goals. We currently maintain employment agreements with the following executive officers: Steven M. Rauscher, President and Chief Executive Officer; Philippe M. Maitre, Senior Vice President and Chief Financial Officer; and Dominick Colangelo, Esq., Executive Vice President, Corporate Development and Operations. The term of each employment agreement continues until it is terminated by the officer or Oscient.

Our future success is dependent upon our ability to attract and retain additional qualified sales and marketing, clinical development, scientific and managerial personnel. Like others in our industry, we may face, and in the past we have faced from time to time, difficulties in attracting and retaining certain employees with the requisite expertise and qualifications. We believe that our historical recruiting periods and employee turnover rates are similar to those of others in our industry; however, we cannot be certain that we will not encounter greater difficulties in the future.

Changes in the expensing of stock-based compensation have resulted and will continue to result in unfavorable accounting charges and may require us to change our compensation practices. Any change in our compensation practices may adversely affect our ability to attract and retain qualified scientific, technical and business personnel.

We rely on stock options to compensate existing employees and attract new employees. As a result of new accounting rules implemented by the Financial Accounting Standards Board, as of January 1, 2006, we were required to record expense for the fair value of stock options granted to employees and the fair value of purchase rights under our employee stock purchase plan, thereby increasing our operating expenses and reported losses. Although we intend to continue to include various forms of equity in our compensation plans, if the extent to which we use forms of equity in our plans is reduced due to the negative effect on earnings, it may be difficult for us to attract and retain qualified scientific, technical and business personnel.

Failure to obtain or maintain regulatory approvals in foreign jurisdictions will prevent us from marketing FACTIVE abroad.

We have entered into commercialization relationships with Pfizer Mexico, Abbott Canada and Menarini whereby we sublicensed our rights to sell FACTIVE tablets in Mexico to Pfizer Mexico, in Canada to Abbott Canada and in the European Union to Menarini. If our partners are unsuccessful in their efforts, it would significantly limit the revenues that we expect to obtain from the sales of FACTIVE.

Further, in order to market FACTIVE in the European Union, we or our distribution partners may need to obtain multiple regulatory approvals. Obtaining foreign approvals may require additional trials and expense. For instance, our predecessor’s original regulatory filing in the United Kingdom was rejected. We may not be able to obtain approval or may be delayed in obtaining approval from any or all of the jurisdictions in which we seek approval to market FACTIVE.

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Our debt obligations expose us to risks that could adversely affect our business, operating results and financial condition.

We have a substantial level of debt. As of December 31, 2006, we had approximately $241.0 million of indebtedness outstanding (including accrued interest), which includes $40.0 million in revenue interest that entitles Paul Capital to receive a royalty on the sales of both ANTARA and FACTIVE. Approximately $26.0 million of outstanding indebtedness will mature in 2009, approximately $21.0 million of outstanding indebtedness will mature in 2010 and approximately $154.0 million of indebtedness will mature in 2011. The level and nature of our indebtedness, among other things, could:

• make it difficult for us to make payments on our debt outstanding from time to time or to refinance it;

• make it difficult for us to obtain any necessary financing in the future for working capital, capital expenditures, debt service, acquisitions or general corporate purposes;

• limit our flexibility in planning for or reacting to changes in our business;

• reduce funds available for use in our operations;

• impair our ability to incur additional debt because of financial and other restrictive covenants;

• make us more vulnerable in the event of a downturn in our business;

• place us at a possible competitive disadvantage relative to less leveraged competitors and competitors that have better access to capital resources;

• restrict the operations of our business as a result of provisions in the Revenue Interest Agreement with Paul Capital that restrict our ability to (i) amend, waive any rights under, or terminate any material license agreements, including the agreements relating to the ANTARA products and FACTIVE, (ii) enter into any new agreement or amend or fail to exercise any of our material rights under existing agreements that would adversely affect Paul Capital’s royalty interest, and (iii) sell any material assets related to ANTARA or FACTIVE; or

• impair our ability to merge or otherwise effect the sale of the company due to the right of the holders of certain of our indebtedness to accelerate the maturity date of the indebtedness in the event of a change of control of the company.

If we do not grow our revenues as we expect, we could have difficulty making required payments on our indebtedness. If we are unable to generate sufficient cash flow or otherwise obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our indebtedness, we would be in default, which would permit the holders of our indebtedness to accelerate the maturity of the indebtedness and could cause defaults under any indebtedness we may incur in the future. Any default under our indebtedness would have a material adverse effect on our business, operating results and financial condition.

Under our financing arrangement with Paul Capital, upon the occurrence of certain events, Paul Capital may require us to repurchase the right to receive revenues that we assigned to it or may foreclose on certain assets that secure our obligations to Paul Capital. Any exercise by Paul Capital of its right to cause us to repurchase the assigned right or any foreclosure by Paul Capital could adversely affect our results of operations and our financial condition.

On August 18, 2006, we and our subsidiary Guardian II Acquisition Corporation, or Guardian II, entered into a revenue interests assignment agreement with Paul Capital pursuant to which we assigned to Paul Capital the right to receive a portion of our net revenues from FACTIVE tablets and Guardian II assigned to Paul Capital the right to receive a portion of its net revenue from ANTARA capsules. To secure its obligations to Paul Capital, Guardian II also granted Paul Capital a security interest in substantially all of its assets, including the U.S. rights to ANTARA.

Under our arrangement with Paul Capital, upon the occurrence of certain events, including if we experience a change of control, undergo certain bankruptcy events of us or our subsidiary, transfer any of substantially all of

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our rights in ANTARA or FACTIVE, transfer of all or substantially all of our assets, breach certain of the covenants, representations or warranties under the revenue interests assignment agreement, or sales of ANTARA are suspended due to an injunction or if we elect to suspend sales of ANTARA as a result of a lawsuit filed by certain third parties, Paul Capital may (i) require us to repurchase the rights we assigned to it at the “put/call price” in effect on the date such right is exercised or (ii) foreclose on the ANTARA assets that secure our obligations to Paul Capital. Except in the case of certain bankruptcy events, if Paul Capital exercises its right to cause us to repurchase the rights we assigned to it, Paul Capital may not foreclose unless we fail to pay the put/call price as required.

If Paul Capital were to exercise its right to cause us to repurchase the right we assigned to it, we cannot assure you that we would have sufficient funds available to pay the put/call price in effect at that time. Even if we have sufficient funds available, we may have to use funds that we planned to use for other purposes and our results of operations and financial condition could be adversely affected. If Paul Capital were to foreclose on the ANTARA assets that secure our obligations to Paul Capital, our results of operations and financial condition could also be adversely affected. Due to Paul Capital’s right to cause us to repurchase the rights we assigned to it is triggered by, among other things, a change in control, transfer of any of our interests in ANTARA or transfer of all or substantially all of our assets, the existence of that right could discourage us or a potential acquirer from entering into a business transaction that would result in the occurrence of any of those events.

RISKS RELATED TO OUR INDUSTRY

Health care insurers, the government and other payers may not pay for our products or may impose limits on reimbursement.

Our ability to commercialize FACTIVE tablets, ANTARA capsules, Ramoplanin and our future products will depend, in part, on the extent to which reimbursement for such products will be available from third-party payers, such as Medicare, Medicaid, health maintenance organizations, health insurers and other public and private payers. We cannot assure you that third-party payers will pay for such products or will establish and maintain price levels sufficient for realization of an appropriate return on our investment in product development. If adequate coverage and reimbursement levels are not provided by government and private payers for use of our products, our products may fail to achieve market acceptance and our results of operations may be materially adversely affected. Under the Medicare Part D outpatient prescription drug benefit, Medicare beneficiaries (primarily the elderly over 65 and the disabled) may enroll in private drug plans. There are multiple types of Part D plans and numerous plan sponsors, each with its own formulary and product access requirements. The plans have considerable discretion in establishing formularies and tiered co-pay structures and in placing prior authorization and other restrictions on the utilization of specific products. In addition, Part D plan sponsors are permitted and encouraged to negotiate rebates with manufacturers. The profitability of our products may depend on the extent to which they enjoy preferred status on the formularies of a significant portion of the largest Part D prescription drug plans. Our ability to obtain such preferred status on favorable economic terms cannot be assured. Additionally, the Part D program has been the subject of much controversy since its inception in 2003, and significant amendments, including an amendment to authorize the Federal Government to directly negotiate drug prices with manufacturers, are possible. Such amendments could adversely affect our anticipated revenues and results of operations, possibly materially.

Most state Medicaid programs have established preferred drug lists, or PDLs, and the process, criteria and timeframe for obtaining placement on the PDL varies from state to state. Under the Medicaid drug rebate program, a manufacturer must pay a rebate for Medicaid utilization of a product. The rebate is based on the greater of (1) a specified percentage of the product’s average manufacturer price (AMP) or (2) the difference between the product’s AMP and the best price offered by the manufacturer. In addition, many states have established supplemental rebate programs as a condition for including a drug product on a PDL. The profitability of our products may depend on the extent to which they appear on the PDLs of a significant number of state Medicaid programs and the amount of the rebates that must be paid to such states. In addition, there is significant

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fiscal pressure on the Medicaid program, and amendments to lower the pharmaceutical costs of the program are possible. Such amendments could adversely affect our anticipated revenues and results of operations, possibly materially.

Many health maintenance organizations and other third-party payers use formularies, or lists of drugs for which coverage is provided under a health care benefit plan, to control the costs of prescription drugs. Each payer that maintains a drug formulary makes its own determination as to whether a new drug will be added to the formulary and whether particular drugs in a therapeutic class will have preferred status over other drugs in the same class. This determination often involves an assessment of the clinical appropriateness of the drug and sometimes the cost of the drug in comparison to alternative products. We cannot assure you that FACTIVE tablets, ANTARA capsules, Ramoplanin or any of our future products will be added to payers’ formularies, whether our products will have preferred status to alternative therapies, nor whether the formulary decisions will be conducted in a timely manner. We may also decide to enter into discount or formulary fee arrangements with payers, which could result in our receiving lower or discounted prices for our products.

Wholesalers, pharmacies and hospitals may not provide adequate distribution for our products.

Our ability to commercialize our products will depend, in part, on the extent to which we obtain adequate distribution of our products via wholesalers, pharmacies and hospitals, as well as other customers. Wholesalers and larger retailers may be reluctant to stock and distribute Oscient products since we are not a large, well-established company. If we do not obtain adequate distribution of our products, the commercialization of FACTIVE and ANTARA and our anticipated revenues and results of operations could be adversely affected.

If a successful product liability claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, we could be forced to pay substantial damage awards.

The use of any of our product candidates in clinical trials, and the sale of any approved products, might expose us to product liability claims. We currently maintain, and we expect that we will continue to maintain, product liability insurance coverage in the amount of $10.0 million per occurrence and $10.0 million in the aggregate. Such insurance coverage might not protect us against all of the claims to which we might become subject. We might not be able to maintain adequate insurance coverage at a reasonable cost or in sufficient amounts or scope to protect us against potential losses. In the event a claim is brought against us, we might be required to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against us. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct financial and managerial resources to such defense and adverse publicity could result, all of which could harm our business.

In addition, a product recall or excessive warranty claims (in any such case, whether arising from manufacturing deficiencies, labeling errors or other safety or regulatory reasons) could have an adverse effect on our product sales or require a change in the indications for which our products may be used.

RISKS RELATED TO THE SECURITIES MARKET

Our stock price is highly volatile.

The market price of our stock has been and is likely to continue to be highly volatile due to the risks and uncertainties described herein, as well as other factors, including:

• our ability to successfully commercialize FACTIVE tablets and ANTARA capsules;

• the revenues that we may derive from the sale of FACTIVE tablets and ANTARA, as compared to analyst estimates;

• our ability to enter into transactions to acquire, license or co-promote additional products;

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• the results of any clinical trials that we may conduct and the pace of our progress in those clinical trials;

• the results of clinical trials conducted by partners for Ramoplanin or products developed from any of our legacy alliances and the pace of our progress in those clinical trials;

• whether we will be able to successfully integrate ANTARA into our sales and marketing efforts;

• whether we will be able to successfully integrate any additional products that we acquire, license or co-promote into our sales and marketing efforts;

• the timing of the achievement of development milestones and other payments under our strategic alliance agreements;

• termination of, or an adverse development in, our strategic alliances;

• conditions and publicity regarding the biopharmaceutical industry generally;

• price and volume fluctuations in the stock market at large which do not relate to our operating performance;

• variations in our rates of product returns, allowances and rebates and discounts;

• sales of shares of our common stock in the public market; and

• comments by securities analysts, or our failure to meet market expectations, including our projected financial performance.

Over the two-year period ending December 31, 2006 the closing price of our common stock as reported on the NASDAQ Global Market ranged from a high of $30.40 to a low of $4.20. The stock market has from time to time experienced extreme price and volume fluctuations that are unrelated to the operating performance of particular companies. In the past, companies that have experienced volatility have sometimes been the subject of securities class action litigation. If litigation were instituted on this basis, it could result in substantial costs and a diversion of management’s attention and resources. These broad market fluctuations may adversely affect the price of our securities, regardless of our operating performance.

Multiple factors beyond our control may cause fluctuations in our operating results and may cause our business to suffer.

Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following:

• the pace of our commercialization of ANTARA capsules and FACTIVE tablets, and in the case of FACTIVE, seasonal fluctuations in the duration and severity of the annual respiratory tract infection season;

• the level of acceptance by physicians and third party payors of FACTIVE and ANTARA;

• the progress of any of our clinical trials for our products;

• the progress of any clinical trials conducted by partners for Ramoplanin or products developed through our legacy alliances;

• our success in concluding transactions to acquire additional approved products and product candidates, and the pace of our commercialization of such additional products;

• the introduction of new products and services by our competitors;

• regulatory actions; and

• expenses related to, and the results of, litigation and other proceedings relating to intellectual property rights.

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We will not be able to control many of these factors. In addition, if our revenues in a particular period do not meet expectations, we may not be able to adjust our expenditures in that period, which could cause our business to suffer. We believe that period-to-period comparisons of our financial results will not necessarily be meaningful. You should not rely on these comparisons as an indication of our future performance. If our operating results in any future period fall below the expectations of securities analysts and investors, our stock price may fall, possibly by a significant amount.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our executive offices are located at 1000 Winter Street, Suite 2200, Waltham, Massachusetts. We lease approximately 36,000 square feet of space at our Winter Street facility and our lease expires on March 31, 2012. During 2006, we incurred aggregate rental costs, excluding maintenance and utilities, for our Waltham facilities of approximately $1.8 million which included obligations under a lease for approximately 81,000 square feet of space at our former executive offices located at 100 Beaver Street, Waltham, Massachusetts, which expired on November 15, 2006. We subleased approximately 47,000 square feet at our former Beaver Street facility, and we received approximately $1.6 million in sublease income in 2006.

We also maintain a west coast lease at 7300 Shoreline Court, South San Francisco, California, for approximately 68,000 square feet of laboratory and administrative space. The remaining average yearly base rent for the west coast facility is approximately $4.6 million. The lease for this facility expires on February 28, 2011 and we have sub-leased to third parties approximately 61,300 square feet of the facility through various dates ranging from October 31, 2008 to January 31, 2009. In 2006, we received approximately $2.3 million in sublease income from the west coast subleases.

Item 3. Legal Proceedings

From time to time we are involved in legal actions in the normal course of business, some of which seek monetary damages, including claims for punitive damages. These actions, when finally concluded and determined, will not, in our opinion, have a material adverse effect on our financial position, results of operations or cash flows.

We believe that we have obtained adequate insurance or, where appropriate, have established adequate reserves in connection with these legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

A special meeting of shareholders was held on November 14, 2006. At the meeting, our shareholders took the following action: approve an amendment to our Amended and Restated Articles of Organization, as amended to date, to effect a 1-for-8 reverse stock split of the issued and outstanding shares of our common stock, whereby each outstanding eight (8) shares of common stock was combined into and became one (1) share of common stock (such number consisting of only whole shares).

For	Against	Abstain	Non-Voting
88,448,555	9,581,455	158,618	10,211,378

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PART II

Item 5. Market for the Registrant’s Common Stock and Related Security Holder Matters

Our common stock is traded on the NASDAQ Global Market under the symbol “OSCI.” The table below sets forth the range of high and low sale prices for each fiscal quarter during 2006 and 2005 as reported by the NASDAQ Global Market, adjusted to account for the effect of the 1-for-8 reverse stock split effective on November 15, 2006.

	2006				2005
	High		Low		High		Low
First Quarter	$	22.48	$	14.16	$	30.56	$	16.40
Second Quarter		16.32		6.16		23.20		12.88
Third Quarter		11.60		4.40		24.32		15.68
Fourth Quarter		9.44		4.15		19.60		12.24

As of March 6, 2007, there were approximately 1,233 shareholders of record of our common stock.

We have not paid any dividends since our inception and presently anticipate that all earnings, if any, will be retained for development of our business and that no dividends on our common stock will be declared in the foreseeable future. Any future dividends will be subject to the discretion of our Board of Directors and will depend upon, among other things, future earnings, the operating and financial condition of our company, our capital requirements and general business conditions.

Equity Compensation Plan Information

Plan category	(a) Number of securities to be issued upon exercise of outstanding options	(b) Weighted-average exercise price of outstanding options		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
Equity compensation plans approved by security holders	986,502	$	31.18	754,392

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Company Purchases of Equity Securities

We did not make any purchases of our common stock during the year ended December 31, 2006.

* $100 invested on 12/31/01 in stock or index-including reinvestment of dividends. Fiscal year ending December 31.

Copyright ^© 2007, Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

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Item 6. Selected Financial Data

You should read carefully the financial statements included in this report, including the notes to the financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The selected financial data in this section are not intended to replace the financial statements.

We derived the statement of operations data for the years ended December 31, 2006, 2005 and 2004 and the balance sheet data as of December 31, 2006 and 2005 from our audited financial statements, which are included elsewhere in this report. We derived the statement of operations data for the years ended December 31, 2003 and 2002 and the balance sheet data as of December 31, 2004, 2003 and 2002 from our audited financial statements which are not included herein. Historical results are not necessarily indicative of future results. See the notes to the financial statements for an explanation of the method used to determine the number of shares used in computing basic and diluted net loss per common share (in thousands, except per share data).

	For the Year Ended December 31,
	2006(3)			2005			2004(4)			2003			2002
Revenues (net):
Product sales	$	38,244		$	20,458		$	4,067		$	—		$	—
Co-promotion		6,890			2,954			—			—			—
Biopharmaceutical/other		1,018			197			2,546			7,009			7,716
Total net revenues (1)		46,152			23,609			6,613			7,009			7,716
Costs of product sales and operating expenses		118,071			112,281			97,229			39,943			41,460
Loss from operations		(71,919	)		(88,672	)		(90,616	)		(32,934	)		(33,744	)
Net other (expense) income		(6,379	)		44			(2,863	)		3,546			(116	)
Loss from continuing operations before income tax		(78,298	)		(88,628	)		(93,479	)		(29,388	)		(33,860	)
Provision for income tax		(179	)		—			—			—			—
Net loss from continuing operations		(78,477	)		(88,628	)		(93,479	)		(29,388	)		(33,860	)
Income (loss) from discontinued operations		—			35			208			(401	)		(157	)
Net loss	$	(78,477	)	$	(88,593	)	$	(93,271	)	$	(29,789	)	$	(34,017	)
Net loss per common share basic and diluted (2)	$	(6.58	)	$	(9.26	)	$	(10.61	)	$	(9.06	)	$	(11.87	)
Weighted average basic and diluted common shares outstanding (2)		11,925			9,569			8,794			3,286			2,865

(1) Does not include revenue from discontinued operations related to our genomics business.

(2) Adjusted to account for the effect of the 1-for-8 reverse stock split effective on November 15, 2006.

(3) We acquired the ANTARA assets on August 18, 2006.

(4) We completed a merger with Genesoft on February 6, 2004.

	As of December 31,
	2006			2005		2004		2003		2002
Cash and cash equivalents, restricted cash, and long and short-term marketable securities	$	44,808		$	80,044	$	176,628	$	28,665	$	50,866
Working capital		39,808			77,750		156,021		18,897		36,511
Total assets		279,407			241,095		340,560		40,516		65,845
Long-term liabilities		250,977			191,289		193,397		292		15,654
Shareholders’ (deficit) equity		(1,996	)		28,101		114,400		29,940		35,417

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements contained herein related to future operating losses and our potential for profitability, the sufficiency of our cash resources, future revenues and sales of FACTIVE and ANTARA, our discount and rebate programs for FACTIVE and ANTARA, our ability to obtain approval from the U.S. Food and Drug Administration (FDA) for a five-day course of therapy with FACTIVE for CAP, possible partnering or other strategic opportunities for the continued development of Ramoplanin, potential marketing approval of FACTIVE in the European Union, as well as other statements related to the progress and timing of product development, present or future licensing, collaborative or financing arrangements or that otherwise relate to future periods, are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements represent, among other things, the expectations, beliefs, plans and objectives of management and/or assumptions underlying or judgments concerning the future financial performance and other matters discussed in this document. The words “may,” “will,” “should,” “plan,” “believe,” “estimate,” “intend,” “anticipate,” “project,” and “expect” and similar expressions are intended to identify forward-looking statements. All forward-looking statements involve certain risks, estimates, assumptions, and uncertainties with respect to future revenues, cash flows, expenses and the cost of capital, among other things.

Some of the important risk factors that could cause our actual results to differ materially from those expressed in our forward-looking statements are included under the heading “Risk Factors” in this Form 10-K. We encourage you to read these risks carefully. We caution investors not to place significant reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated) and we undertake no obligation to update or revise forward-looking statements.

Overview

We are a commercial-stage biopharmaceutical company marketing two FDA-approved products with our national primary care sales force—a cardiovascular product, ANTARA^® (fenofibrate) capsules and a fluoroquinolone antibiotic, FACTIVE^® (gemifloxacin mesylate) tablets. ANTARA is approved by the FDA to treat hypercholesterolemia (high blood cholesterol) and hypertriglyceridemia (high triglycerides) in combination with a healthy diet. Our national sales force began marketing ANTARA in late August 2006. The market for fenofibrate products was approximately $1.5 billion in 2006 and the U.S. market for treating dyslipidemias was approximately $25 billion in 2006. In connection with our acquisition of ANTARA, we were assigned the U.S. rights to ANTARA under an exclusive license from Ethypharm S.A. FACTIVE is approved for the treatment of community-acquired pneumonia, or CAP, of mild to moderate severity and acute bacterial exacerbations of chronic bronchitis, or AECB. We license the rights to gemifloxacin, the active ingredient in FACTIVE tablets, from LG Life Sciences. We launched FACTIVE in the U.S. market in September 2004. Additionally, we have a novel, late-stage antibiotic candidate, Ramoplanin, under investigation for the treatment of Clostridium difficile-associated disease and have begun exploring partnering and other strategic opportunities for the continued development of Ramoplanin. Our strategy is to identify new products to acquire, in-license or co-promote for the U.S. market place in order to leverage our existing commercial infrastructure.

We have incurred significant operating losses in the past. As of December 31, 2006, we had an accumulated deficit of approximately $416 million. We expect to incur additional operating losses due to the implementation of manufacturing, distribution, marketing and sales capabilities.

ANTARA

ANTARA is a once daily formulation of fenofibrate approved for use in combination with a diet restricted in saturated fat and cholesterol to reduce elevated low-density lipoprotein cholesterol (LDL or “bad” cholesterol), triglyceride and apolipoprotein B (free floating fats in the blood) levels, and to increase high-density lipoprotein

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cholesterol (HDL or “good” cholesterol) in adult patients with high cholesterol or an abnormal concentration of lipids in the blood. Fenofibrate products work primarily to lower triglycerides and increase HDL cholesterol, which makes the drug an attractive alternative for those patients whose LDL cholesterol is well controlled. ANTARA received FDA approval in November 2004. We began marketing ANTARA in 43 mg and 130 mg doses in August 2006.

On August 18, 2006, we acquired rights to ANTARA in the U.S. from Reliant Pharmaceuticals Inc. for $78 million plus a $4.3 million payment for ANTARA inventory, exclusive of estimated transaction costs. Under the terms of our acquisition of ANTARA, we assumed certain of Reliant’s liabilities related to ANTARA, including obligations to make certain royalty and milestone payments on sales of ANTARA, and we were assigned rights to an exclusive license to the rights to ANTARA from Ethypharm S.A. In order to maintain the exclusivity of our rights, we must achieve minimum annual sales in the U.S. until February 2012 or pay amounts to Ethypharm to compensate for any shortfall. In addition, a sales-based milestone was met which resulted in the Company paying $400,000 to Ethypharm in the fourth quarter of 2006. We recorded this milestone payment as a liability in accordance with purchase accounting. The license term expires in February 2020 and, absent notice of termination by either party, automatically renews for additional two year periods. Under the terms of the agreement, at our option, Ethypharm is obligated to either manufacture and deliver to us finished fenofibrate product or deliver API to us for encapsulation and packaging. Ethypharm also has a right of first refusal on any divestiture of the ANTARA rights by us. Additional Oscient obligations under the Ethypharm agreement include using commercially reasonable efforts to maintain a sales force of at least 150 representatives through February 2008 and funding a portion of the active pharmaceutical ingredient safety stock that Ethypharm is required to maintain.

Pursuant to the terms of our acquisition of ANTARA from Reliant, we also acquired the NDA and the IND covering the ANTARA products in the United States, clinical data, inventory, the ANTARA^® trademark in the United States and certain related contracts and licenses covering intellectual property rights related to the ANTARA products.

We are not required to pay Reliant a royalty on the sale of the ANTARA products; however, we are required to pay a low single-digit royalty to Reliant for a specified time period on net sales of any line extensions and improvements to the ANTARA products which we develop, which include all products containing fenofibrate as its API. We also agreed that we would not, at any time prior to August 2016, develop or sell any product in the United States that is a combination of fenofibrate and an omega-3 compound without the prior written consent of Reliant.

ANTARA capsules are covered by patents relating to formulations containing fenofibrate and methods of preparing the same that extend through August 2020. In addition, Ethypharm has filed additional patent applications which relate to the formulation and we were assigned a patent application which was filed by Reliant relating to methods of treatment. If issued, we believe these patents may provide ANTARA additional patent protection.

FACTIVE

Overview

FACTIVE was approved by the FDA in 2003 for the treatment of community-acquired pneumonia of mild to moderate severity, or CAP, and acute bacterial exacerbations of chronic bronchitis, or AECB.

We license from LG Life Sciences the right to develop and commercialize gemifloxacin, a novel fluoroquinolone antibiotic, in North America, France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland,

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Switzerland, Andorra, Monaco, San Marino, Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia. The term of the agreement with respect to each country extends at least through the life of the patents covering gemifloxacin in such country. In the United States, the last of the issued patents for composition of matter expires in 2018. The patent term could extend further in countries outside of the U.S. depending upon several factors, including whether we obtain patent extensions and the timing of our commercial sale of the product in a particular country.

Under the terms of the agreement, LG Life Sciences has agreed to supply and we are obligated to purchase from LG Life Sciences all of our anticipated commercial requirements for the FACTIVE API. LG Life Sciences currently supplies the FACTIVE API from its manufacturing facility in South Korea.

The agreement with LG Life Sciences also requires a minimum sales commitment over a period of time, which if not met, would result in the technology being returned to LG Life Sciences. Under this agreement, we are responsible, at our expense and through consultation with LG Life Sciences, for the clinical and commercial development of gemifloxacin in the countries covered by the license, including conducting clinical trials, filing drug approval applications with the FDA and other applicable regulatory authorities and marketing, distributing and selling of gemifloxacin in our territory; provided, that LG Life Sciences has the right to co-promote the product in the U.S., on terms to be negotiated, commencing in 2008 and for periods thereafter, in which case our royalty obligations to LG Life Sciences would cease. Pursuant to an amendment dated March 31, 2005 as further described below, LG Life Sciences’ right to co-promote in the U.S. will terminate upon our reaching a certain level of sales.

We are obligated to pay a royalty on sales of FACTIVE in North America and the territories covered by the license in Europe. These royalty obligations expire with respect to each country covered by the agreement on the later of (i) the expiration of the patents covering FACTIVE in such country or (ii) the expiration of data exclusivity in Mexico, Canada or the European Union respectively, or 2014 in the U.S. We are also obligated to make aggregate milestone payments of up to an additional $40 million to LG Life Sciences (including future milestone payments described in the amendments to the agreement described below) upon achievement of additional regulatory approvals and sales thresholds.

On March 31, 2005, we amended our license and option agreement with LG Life Sciences. As part of the amendment of the agreement, we made a one-time, up-front payment of $2 million to LG Life Sciences which was recorded to general and administrative expense in the three month period ended March 31, 2005 and agreed to make certain additional milestone payments upon obtaining regulatory approvals and sales thresholds. The amended agreement also includes a reduction of future royalties payable to LG Life Sciences at certain FACTIVE revenue levels in territories covered by the agreement.

We further amended our agreement with LG Life Sciences on February 3, 2006, pursuant to which LG Life Sciences agreed to a reduction of future royalties payable for sales of FACTIVE tablets in Mexico and Canada and the termination of LG Life Sciences’ co-promotion rights in these countries. The modified agreement also calls for additional milestone payments to be made to LG Life Sciences upon consummation of sublicense agreements in Mexico and Canada (which payments were made to LG Life Science in February 2006 and August 2006, respectively) as well as upon receipt of regulatory approval of FACTIVE in each of such countries. Additionally, on December 27, 2006, we amended our agreement with LG Life Sciences to reduce future royalties payable to LG Life Sciences for sales of FACTIVE tablets in Europe and to provide for a reduction in the supply price for the API for FACTIVE for product to be sold in Europe. In lieu of milestone payments previously agreed to by the parties, this amendment also requires us to pay LG Life Sciences a portion of any milestone or license fee payments we receive from our European partner.

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Commercialization and Development

With respect to additional development initiatives, we have completed a clinical trial designed to demonstrate that a five-day course of FACTIVE for the treatment of mild to moderate CAP is as effective as the currently approved seven-day course of treatment. On September 21, 2006, we received an approvable letter from the FDA for the supplemental New Drug Application (sNDA) seeking approval for the five-day treatment of CAP with FACTIVE tablets. In accordance with the letter, we provided clarification and additional interpretation regarding certain data included in the application to assist the FDA in its evaluation. The FDA accepted the response as complete and we expect to receive an action letter from the FDA by May 1, 2007. The receipt of the approvable letter from the FDA does not assure ultimate approval of the sNDA.

As part of the FACTIVE development program, several studies relating to acute bacterial sinusitis, or ABS, were completed, and, in November 2005, we filed an sNDA for ABS. In September 2006, the FDA’s Anti-Infective Drugs Advisory Committee voted not to recommend approval of this sNDA. In November 2006, we voluntarily withdrew our sNDA seeking approval of the ABS indication.

On February 6, 2006, we entered into a Sublicensing and Distribution Agreement with Pfizer, S.A. de C.V. (Pfizer Mexico), pursuant to which we sublicensed our rights to sell FACTIVE tablets in Mexico to Pfizer Mexico. Pfizer Mexico is responsible for obtaining regulatory approvals for FACTIVE in Mexico. In exchange for those rights, Pfizer Mexico has agreed to pay us an up-front payment, milestone payments upon obtaining certain regulatory approvals and sales goals as well as royalties on future sales. These royalty rates are subject to reduction upon expiration of certain patents in Mexico for FACTIVE or if a generic form of gemifloxacin has a material impact on Pfizer Mexico’s sales volumes in Mexico. Pfizer Mexico is obligated to exclusively purchase from us, and we must exclusively supply, all API for FACTIVE. The agreement with Pfizer Mexico may be terminated by either party upon the occurrence of certain termination events, including Pfizer Mexico’s right to terminate at any time after the first anniversary of launch of FACTIVE tablets in Mexico upon six months prior written notice. Upon termination, Pfizer Mexico is obligated to assign any and all rights to regulatory approvals in Mexico to us or our designee. Pfizer Mexico is currently marketing FACTIVE-5 in Mexico for the treatment of CAP, AECB and ABS.

On August 9, 2006, we granted the commercialization rights to FACTIVE tablets in Canada to Abbott Canada, the Canadian affiliate of Abbott Laboratories. In exchange for those rights, Abbott Canada agreed to a transfer price on product purchases and to make certain payments to us upon achievement of certain regulatory and sales milestones. FACTIVE is currently approved in Canada for the five-day treatment of AECB, and Abbott Canada has launched FACTIVE for the treatment of AECB.

We entered into a License, Supply and Marketing Agreement with Menarini International Operation Luxembourg SA, a wholly-owned subsidiary of Menarini Industrie Farmaceutiche Riunite S.r.l. dated December 28, 2006, whereby we sublicensed our rights to sell FACTIVE tablets in Europe to Menarini. Under the terms of our agreement with Menarini, Menarini is responsible for obtaining regulatory approval for FACTIVE in the European Union, and we have agreed to reimburse Menarini for expenses associated with such regulatory development up to an agreed limit. Menarini has also paid us an up-front payment and has agreed to pay us milestone payments upon obtaining certain regulatory and reimbursement approvals and upon achieving certain annual net sales goals, which could total up to $23 million if all the milestones are achieved. Menarini will pay us a transfer price on purchases of the API for FACTIVE, which is determined based on a percentage of quarterly sales of FACTIVE in the European Union. Menarini is also obligated to exclusively purchase from us, and we must exclusively supply, all API for FACTIVE to be sold in Europe for the earlier to occur of the expiration of the life of certain patents covering the product or expiration of data exclusivity. Our agreement with Menarini may be terminated by either party upon the occurrence of certain termination events, including Menarini’s right to terminate if the European Union regulatory authorities do not recommend approval of FACTIVE at various stages of the approval process with a package insert, or label, that meets certain requirements as to the indications for which FACTIVE may be prescribed, safety and dosing.

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Menarini may also terminate the agreement if it does not receive approval for reimbursement from European member countries that is above a certain minimum price per tablet. Upon termination, Menarini is obligated to assign any and all rights to regulatory approvals in the European Union to the Company or its designee.

Research and Development Programs

FACTIVE

As a condition to the approval to sell FACTIVE tablets, the FDA has required, as a post-marketing study commitment, that we conduct a prospective, randomized study examining the activity of FACTIVE tablets (5,000 patients) versus an active comparator (2,500 patients) in patients with acute bacterial exacerbations of chronic bronchitis and community-acquired pneumonia of mild to moderate severity. This study includes patients of different ethnicities to gain safety information in populations not substantially represented in the existing clinical trial program. This Phase IV trial was initiated in the fall of 2004 and enrollment was completed in January 2007. We currently estimate it will cost approximately an additional $1.0 million for completion of the final analysis of trial data and submission of such trial data to the FDA.

Additionally, in April 2005, we completed a Phase III trial examining the potential use of FACTIVE tablets for the five-day treatment of mild to moderate CAP. Based on the results of this study, in November 2005 we submitted an sNDA to the FDA for approval to promote the five-day treatment of FACTIVE tablets for this indication. On September 21, 2006, we received an approvable letter from the FDA for the sNDA seeking approval for the five-day treatment of CAP with FACTIVE tablets. In accordance with the letter, we provided clarification and additional interpretation regarding certain data included in the application to assist the FDA in its evaluation. The FDA accepted the response as complete and we expect to receive an action letter from the FDA by May 1, 2007. Receipt of the approvable letter from the FDA does not assure approval of the sNDA.

Ramoplanin

We have a novel, late-stage investigational antibiotic candidate, Ramoplanin, under investigation for the treatment of Clostridium difficile-associated disease, or CDAD. In October 2001, we in-licensed Ramoplanin from Vicuron Pharmaceuticals Inc. (Vicuron), now a wholly-owned subsidiary of Pfizer Inc., and on February 3, 2006, acquired worldwide rights from Vicuron, assuming full rights to the manufacturing, development and commercialization of Ramoplanin.

We agreed with the FDA to a Special Protocol Assessment (SPA) regarding the specific components of a Phase III program that, if completed successfully, would support regulatory approval for the indication. With the acquisition of ANTARA, we have made the strategic decision to concentrate our financial resources on building our primary care business in the United States and are currently seeking to out-license, co-develop or sell our rights to Ramoplanin.

Critical Accounting Policies & Estimates

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K. Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our critical accounting policies include the following:

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Revenue Recognition

Our principal source of revenue is the sale of FACTIVE tablets and ANTARA capsules. In the second quarter of 2005, we began recognizing co-promotion revenue in connection with our co-promotion agreement with Auxilium Pharmaceuticals, Inc. (Auxilium), which terminated on August 31, 2006. Other historical sources of revenue include biopharmaceutical alliances and royalties from our divested genomic services business. In future periods, we expect our revenues derived from biopharmaceutical alliances will continue to decrease, however product revenues will continue to increase based on anticipated increased volume of prescriptions of FACTIVE tablets and ANTARA capsules.

Although ANTARA revenue results are anticipated to be relatively steady throughout our fiscal year, we expect demand for FACTIVE to be highest from December to March as the incidence of respiratory tract infections, including CAP and AECB, tends to increase during the winter months. In addition, fluctuations in the severity of the annual respiratory tract infection season may cause our product sales to vary from year to year. Due to these seasonal fluctuations in demand for FACTIVE, our results in any particular quarter may not be indicative of the results for any other quarter or for the entire year.

Product Sales

We follow the provisions of Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition (a replacement of SAB 101)” (SAB No. 104) and recognize revenue from product sales upon delivery of product to wholesalers, when persuasive evidence of an arrangement exists, the fee is fixed or determinable, title to product and associated risk of loss has passed to the wholesaler and collectability of the related receivable is reasonably assured. All revenues from product sales are recorded net of applicable allowances for sales returns, rebates, special promotional programs, and discounts. For arrangements where the risk of loss has not passed to wholesalers or pharmacies, we defer the recognition of revenue by recording deferred revenue until such time that risk of loss has passed. The cost of FACTIVE and ANTARA associated with amounts recorded as deferred revenue is recorded in inventory until such time as risk of loss has passed.

Co-Promotion Revenue

Amounts earned under our previous co-promotion agreement with Auxilium from the sale of TESTIM gel, a product developed by Auxilium, are classified as co-promotion revenue in our consolidated statements of operations. Auxilium was obligated to pay us a co-promotion fee based on a specified percentage of the gross profit from TESTIM sales attributable to primary care physicians in the U.S. that exceeded specified cumulative sales threshold, determined on an annual basis. The specific percentage was based upon TESTIM sales levels attributable to primary care physicians and the marketing expenses incurred by us in connection with the promotion of TESTIM under the co-promotion agreement. Such co-promotion revenue was earned when TESTIM units were dispensed through patient prescriptions. There is no cost of goods sold associated with co-promotion revenue, and the selling and marketing expenses incurred with respect to the co-promotion arrangement are classified as selling and marketing expenses in our consolidated statements of operations. On August 31, 2006, we mutually agreed with Auxilium to conclude this co-promotion arrangement and agreed with Auxilium to share profits from primary care sales, as provided for under the co-promotion agreement, through August 31, 2006. As part of the termination of the co-promotion agreement, we received $1,800,000 from Auxilium as additional compensation for commercialization efforts by our sales force through August 31, 2006, which has been recognized as revenue during the year ended December 31, 2006.

Biopharmaceutical/Other Revenue

Prior to our merger with GeneSoft Pharmaceuticals, Inc. in 2004, we pursued biopharmaceutical revenues through alliance partnerships with pharmaceutical companies and through government grants. Biopharmaceutical revenues have consisted of government research grants and license fees, contract research, and milestone

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payments from alliances with pharmaceutical companies. We also maintained a genomic services business. We have now shifted our focus to the development and commercialization of pharmaceutical products. The declining revenues and associated expenses for the genomics services business have been classified as discontinued operations in the consolidated financial statements.

Other revenues consist of sublicensing revenues related to FACTIVE. We recognize revenue in accordance with SAB No. 104 and Emerging Issues Task Force Issue No. (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF No. 00-21). In accordance with EITF No. 00-21, the up-front license payments related to various license agreements will be recognized as revenue over the term of our continuing obligations under the arrangements which range from eighteen months to twenty-four months. In addition, on August 1, 2006, we announced that we received notice from Pfizer Mexico that FACTIVE was approved by the Ministry of Health in Mexico to be marketed as FACTIVE-5 for the treatment of community-acquired pneumonia, acute bacterial exacerbations of chronic bronchitis and acute bacterial sinusitis which generated a milestone payment recognized as revenue during the year ended December 31, 2006. We expense incremental direct costs associated with sublicense agreements in the period in which the expense is incurred.

Sales Rebates, Discounts and Incentives

In the U.S., we sell FACTIVE and ANTARA to pharmaceutical wholesalers for further distribution through pharmacies to the ultimate consumers of the product. When we deliver our product, we reduce the amount of gross revenue recognized from such product sales based primarily on estimates of four categories of discounts and allowances that suggest that all or part of the revenue should not be recognized at the time of the delivery—product returns, cash discounts, rebates, and special promotional programs.

Product Returns

Factors that are considered in our estimate of future FACTIVE and ANTARA product returns include an analysis of the amount of product in the wholesaler and pharmacy channel, review of consumer consumption data as reported by external information management companies, return rates for similar competitive antibiotic products that have a similar shelf life and are sold in the same distribution channel, the remaining time to expiration of our product, and our forecast of future sales of our product. Consistent with industry practice, we offer contractual return rights that allow our customers to return product within six months prior to and twelve months subsequent to the expiration date of our product. FACTIVE tablets and ANTARA capsules each have a 36-month expiration period from the date of manufacturing. At December 31, 2006 and December 31, 2005, our product return reserve was approximately $774,000 and $720,000, respectively. This reserve is evaluated on a quarterly basis, assessing each of the factors described above, and adjusted accordingly. Based on the factors noted above, we believe our estimate of product returns is reasonable, and changes, if any, from this estimate would not have a material impact to our financial statements.

Cash Discounts

Our standard invoice includes a contractual cash 2% discount, net 30 days terms. Based on historical experience, we estimate that most of our customers deduct a 2% discount from their balance. The cash discount reserve is presented as an allowance against trade receivables in the consolidated balance sheet. As of December 31, 2006 and 2005, the balance of the cash discounts reserve was approximately $202,000 and $50,000, respectively.

Rebates

The liability for managed care and Medicaid rebates is calculated based on historical and current rebate redemption and utilization rates contractually submitted by each state. As of December 31, 2006 and 2005, the

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balance of the accrual for managed care and Medicaid rebates for ANTARA and FACTIVE in total was approximately $2,994,000 and $381,000, respectively. Considering the estimates made by us, as well as estimates prepared by third party utilization reports that are used in evaluating the required liability balance, we believe our estimates are reasonable. As of December 31, 2006, the significant change to our estimates in the periods presented is primarily attributable to the acquisition of the ANTARA product line.

Special Promotional Programs:

We have from time to time, offered certain promotional incentives to our customers for both FACTIVE and ANTARA and may continue this practice in the future. Such programs include: sample cards to end consumers, certain product incentives to pharmacy customers, and other sales stocking allowances. Examples of programs utilized to date follow:

Sample Card Program for FACTIVE

During the first and second quarters of 2006, we initiated three sample card programs whereby we offered an incentive to patients in the form of a free full-course sample card for FACTIVE. We have accounted for these programs in accordance with EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer” (EITF No. 01-09). For the first sample card program, we were able to develop a reasonable and reliable estimate of the amount of expected reimbursement claims based on actual claims submitted by and processed by a third party claims processing organization. For the second and third sample card programs, the estimate of expected reimbursement claims was based on the historical actual reimbursement claims for the similar completed programs that we conducted in the first and second quarters of 2006. The first program expired on March 31, 2006, the second program expired on June 15, 2006 and the third program expired on September 30, 2006. There is no liability as of December 31, 2006 for these sample card programs.

Voucher Rebate Program for FACTIVE

In 2006, we initiated six voucher rebate programs whereby we offered mail-in rebates and point-of-sale rebates to retail consumers. We have accounted for these programs in accordance with EITF No. 01-09. The liabilities we recorded for these voucher rebate programs were estimated based upon the historical rebate redemption rates for the similar completed programs that commenced in the first quarter of 2005 and the fourth quarter of 2005. The first program expired on June 30, 2006, the second and third programs expired on August 31, 2006, the fourth program expired on September 30, 2006, the fifth program expired on December 31, 2006 and the sixth program expires on April 30, 2007. As of December 31, 2006 and 2005, the balance of the liabilities for these voucher programs totaled approximately $452,000 and $105,000, respectively.

Voucher Rebate Program for ANTARA

During the third and fourth quarter of 2006, we initiated two voucher rebate programs whereby we offered a point-of-sale rebate to retail consumers. We have accounted for this program in accordance with EITF No. 01-09. The liabilities we recorded for these voucher rebate programs were estimated based upon the historical rebate redemption rates for the similar completed programs by other pharmaceutical companies. This first program expired on December 31, 2006 and the second program expires on July 31, 2007. As of December 31, 2006, the balance of the liabilities for these voucher programs totaled approximately $619,000.

Clinical Trial Expense Accrual

Our clinical development trials related to FACTIVE and Ramoplanin are primarily performed by outside parties. At the end of each accounting period, we estimate both the total cost and time period of the trials and the percent completed as of that accounting date. We also adjust these estimates when final invoices are received.

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For the fiscal years ended December 31, 2006 and 2005, we adjusted our accrual for clinical trial expenditures to reflect its most current estimate of liabilities outstanding to third parties. However, the possibility exists that the timing or cost of the clinical trials might be longer or shorter and cost more or less than estimated and that the associated financial adjustments would be reflected in future periods.

Accounts Receivable

Trade accounts receivable consists of amounts due from wholesalers for the purchase of FACTIVE and ANTARA. Ongoing credit evaluations of customers are performed and collateral is generally not required. As of December 31, 2006 and 2005, we reserved approximately $39,000 and $0, respectively, for bad debts related to the sale of FACTIVE or ANTARA. We continuously review all customer accounts to determine if an allowance for uncollectible accounts is necessary. We currently provide substantially all of our distributors with payment terms of up to 30 days on purchases of FACTIVE and ANTARA. Amounts past due from customers are determined based on contractual payment terms. Through December 31, 2006, payments have generally been made in a timely manner. We also reserved $310,000 and $0, respectively, as of December 31, 2006 and 2005 related to other non trade receivables.

Inventories

Inventories are stated at the lower of cost or market with cost determined under the average cost method. Products are removed from inventory and recognized as cost of goods sold on an average cost basis. For FACTIVE, inventories consist of raw material in powder form and work-in-process of approximately $6,223,000 and $9,770,000, and FACTIVE finished tablets of approximately $3,095,000 and $4,417,000, as of December 31, 2006 and 2005, respectively. For ANTARA, inventories consist of raw material and work-in-process of approximately $3,894,000 and ANTARA finished capsules of approximately $1,027,000 as of December 31, 2006.

On a quarterly basis, we analyze our inventory levels, and provide a reserve for inventory and marketing samples that have become obsolete, have a cost basis in excess of its expected net realizable value or are in excess of forecast requirements to cost of product revenues and marketing expense, respectively. Expired inventory is disposed of and the related costs are written off against the previously established reserves. At December 31, 2006 and December 31, 2005, there was approximately $1,091,000 and $2,072,000, respectively, in FACTIVE sample product to be used for FACTIVE marketing programs. At December 31, 2006, there was approximately $454,000 in ANTARA samples product to be used for ANTARA marketing programs. These are classified within other current assets in the consolidated balance sheet.

Long-Lived Assets

We follow the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). Under SFAS No. 144, long-lived assets and identifiable intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment exist, recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating the undiscounted cash flows are each done at the lowest possible level for which there are identifiable assets. If the aggregate undiscounted cash flows are less than the carrying value of the asset, then the resulting impairment charge to be recorded is calculated based on the amount by which the carrying amount of the asset exceeds its fair value. Any write-downs are recorded as permanent reductions in the carrying amount of the asset.

We also follow the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” (SFAS No. 142). Under SFAS No. 142, goodwill and purchased intangible assets with indefinite lives are not amortized but are reviewed periodically for impairment. We perform an annual evaluation of goodwill at the end of each fiscal year

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to test for impairment or more frequently if events or circumstances indicate that goodwill may be impaired. Because we have a single operating segment, which is our sole reporting unit, we perform this test by comparing the fair value of the entity with our book value, including goodwill. If the fair value exceeds the book value, goodwill is not impaired. If the book value exceeds the fair value, then we would calculate the potential impairment loss by comparing the implied fair value of goodwill with the book value. If the implied fair value of goodwill is less than the book value, then an impairment charge would be recorded.

As of December 31, 2006, we do not believe that any of our long-lived assets, goodwill, and other intangible assets are impaired.

Stock-Based Compensation

Effective January 1, 2006, we adopted SFAS No. 123(Revised 2004), “Share-Based Payment” (SFAS No. 123R) using the modified prospective transition method. SFAS No. 123R requires all share-based payments, including grants of stock options, to be recognized in the income statement as an operating expense, based on their fair values. Under the modified prospective transition method, compensation cost recognized during the twelve months ended December 31, 2006 includes (1) compensation cost for all share-based payments granted prior to, but not vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123) and (2) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. Such amounts have been reduced by our estimate of forfeitures on all unvested awards. Stock-based compensation expense primarily relates to stock options, restricted stock, and stock issued under our employee stock purchase plan. Prior to the adoption of SFAS No. 123R, we followed the provisions of SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure” (SFAS No. 148) adopting the disclosure-only provisions of SFAS No. 123. In addition, we accounted for our employee share-based arrangements under Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), applying related interpretations in accounting for all stock awards granted to employees. Under the modified prospective adoption method, the results for prior periods are not restated.

The fair value of each stock option award is estimated on the grant date using the Black-Scholes-Merton option-pricing model based on the assumptions of volatility, risk-free interest rates, expected life of the option, and dividends (if any). The expected life of the stock options granted was estimated based on the historical exercise patterns over the option lives while considering employee exercise strategy and cancellation behavior. The expected life of options used for the twelve month period ended December 31, 2006 ranged from 5.55 to 6.25 years. The expected volatility is determined based on historical volatility data of our common stock from the period of time beginning with our merger with Genesoft in February 2004 and other factors through the month of grant. Our expected volatility for the year ended December 31, 2006 was between 52.14% and 62.18%. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. Our risk-free interest rate for the year ended December 31, 2006 was between 4.35% and 5.07%. We have not paid and do not expect to pay any dividends; as a result, our dividend yield is assumed to be 0%.

The adoption of SFAS No. 123R increased the year ended December 31, 2006 operating loss, net loss, and cash flows from operating activities by $3,829,000 and basic and diluted net loss per share by $0.32. The compensation expense under SFAS No. 123R is recorded in cost of product sales, research and development expense, selling and marketing expense, and general and administrative expense based on the specific allocation of employees receiving the equity awards. Additionally, we eliminated the January 1, 2006 deferred compensation balance against additional paid-in capital upon adoption of SFAS No. 123R.

Our policy is to recognize compensation cost for awards with service conditions and graded vesting using the straight-line method. Additionally, our policy is to issue authorized but previously unissued shares to satisfy share option exercises, the issuance of restricted stock and stock issued under the ESPP. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are

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ultimately expected to vest. In addition, the requisite service period is generally equal to the vesting term. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. We have applied an annual forfeiture rate of 19.03% to all unvested options as of December 31, 2006. This analysis will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.

As of December 31, 2006, we estimate there is approximately $5,207,000 of total unrecognized compensation cost related to unvested share based awards. These costs are expected to be recognized over a weighted average remaining requisite service period of 1 year. We expect approximately 317,000 in unvested options to vest at some point in the future. The value of options expected to vest is calculated by applying an estimated forfeiture rate to the unvested options.

Recent Accounting Pronouncements

Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006. The Company has not yet completed its evaluation of the Interpretation, but does not currently believe that adoption will have a material impact on its results of operations, financial position or cash flows.

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157 “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 establishes a common definition for fair value, creates a framework for measuring fair value, and expands disclosure requirements about such fair value measurements. SFAS No. 157 is effective for our first quarter of 2008. Management is in the process of studying the impact of this interpretation on our financial accounting and reporting.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. FASB has indicated it believes that SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. For example, SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the

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company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statement No. 157, “Fair Value Measurements” (SFAS No. 157), and FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” (SFAS No. 107). SFAS No. 159 is effective as of the beginning of a company’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the company makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157.

RESULTS OF OPERATIONS

Years Ended December 31, 2006 and 2005

Revenues

Total net revenues increased 95% to $46,152,000 for the year ended December 31, 2006 from $23,609,000 for the year ended December 31, 2005.

Net product sales increased 87% to $38,244,000 for the year ended December 31, 2006 from $20,458,000 for the year ended December 31, 2005. This increase was primarily related to the acquisition of ANTARA 130 mg (fenofibrate) capsules in August 2006 which resulted in approximately $16,778,000 in net product sales and increased shipments of FACTIVE tablets of approximately $1,008,000.

Co-promotion revenue increased 133% to $6,890,000 for the year ended December 31, 2006 from $2,954,000 for the year ended December 31, 2005, primarily due to the initiation of our co-promotion of TESTIM in May 2005, higher gross profits related to increased TESTIM prescriptions in 2006 and also due to a $1,800,000 payment from Auxilium Pharmaceuticals in August 2006 in connection with the termination of the co-promotion arrangement.

Biopharmaceutical and other revenues increased significantly to $1,018,000 for the year ended December 31, 2006 from $197,000 for the year ended December 31, 2005, primarily due to the recognition of revenues in connection with various milestone achievements related to Pfizer Mexico upon the regulatory approval to distribute and sell FACTIVE tablets in Mexico and an up-front payment from Pfizer Mexico which is recognized over the term of our obligation under the agreement. We expect our revenues related to both the biopharmaceutical alliances and genomics services to be minimal in the future.

Costs and Expenses

Total costs and expenses increased 5% to $118,071,000 for the year ended December 31, 2006 from $112,281,000 in 2005, primarily due to cost of product sales associated with the acquisition of ANTARA during 2006.

Cost of product sales increased 100% to $19,613,000 in 2006 from $9,830,000 in 2005. Our overall gross product margin at December 31, 2006 and 2005, including amortization of intangible assets was 49% and 52%, respectively. The primary reason for the decrease in margin was due to approximately $1,700,000 associated with obsolete inventory in 2006 and costs associated with the write-up of inventory to fair value of ANTARA product obtained during the acquisition of the product line. Our cost of revenues on FACTIVE for the years ended December 31, 2006 and 2005, after standard product cost and royalties, but excluding amortization of intangible assets, was 55% and 75% of product sales, respectively. Our cost of revenues on ANTARA for the

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year ended December 31, 2006, after standard product cost and royalties, but excluding amortization of intangible assets, was 80% of product sales. In addition, included in the cost of product sales is approximately $4,767,000 of amortization of intangible assets associated with FACTIVE for each of the years ended December 31, 2006 and 2005 and approximately $1,610,000 of amortization of intangible assets associated with ANTARA for the year ended December 31, 2006.

Research and development expenses decreased 14% to $12,406,000 in 2006 from $14,432,000 in 2005. Research and development activities include clinical trials, other clinical development, technology transfer and process optimization for manufacturing. These research and development expenses primarily consist of salaries and related expenses for personnel and the cost of materials used in research and development. Other research and development expenses include fees paid to consultants and outside service providers. The decrease is due to the completion of the FACTIVE five-day clinical trial and also a decrease in the costs primarily related to external costs and materials associated with the FACTIVE post-marketing study as the trial approaches near completion in the first half of 2007. We expect research and development expense to continue to decrease in 2007 as the FACTIVE post-marketing study is expected to be completed in the first half of 2007.

Selling and marketing expenses decreased 8% to $69,211,000 in 2006 from $74,931,000 in 2005. This decrease was primarily due to expenses in 2005 being unusually high related to hiring additional sales and marketing personnel costs of $5,751,000, increased other marketing, advertising and promotional costs of approximately $3,081,000 to support the marketing efforts for FACTIVE, offset by increased marketing costs associated with the promotion of ANTARA in August 2006 of approximately $943,000 and increased costs in 2006 of $2,169,000 associated with the promotion of TESTIM which began in the second quarter of 2005 and was terminated in August 2006.

General and administrative expenses increased 29% to $16,841,000 in 2006 from $13,088,000 in 2005 primarily due to an increase in general and administrative payroll and related costs of approximately $1,472,000, an increase in stock based compensation due to the adoption of SFAS No. 123R of approximately $2,267,000, an increase in legal fees of approximately $400,000 and an increase in general and administrative expenses of approximately $58,000 offset by a decrease in technology license fees of approximately $444,000.

Other Income and Expense

Interest income decreased 12% to approximately $2,995,000 in 2006 from approximately $3,400,000 in 2005 reflecting higher yields on cash balances in 2006, offset by lower overall cash balances in 2006.

Interest expense significantly increased 36% to approximately $11,056,000 in 2006 from approximately $8,126,000 in 2005. In 2006, interest expense primarily consisted of approximately $5,346,000 related to the issuance of $153 million of senior convertible notes in the second quarter of 2004, $2,987,000 related to financing with Paul Capital, approximately $1,241,000 related to the issuance of $22.0 million of convertible notes in connection with the Genesoft merger, $827,000 related to amortization of deferred financing costs along with approximately $640,000 related to non-cash interest expense related to the facility lease liability.

For the year ended December 31, 2005, we recorded a gain from the sale of intellectual property of $2,500,000, from the sale of intellectual property related to the genomic sequence of an undisclosed pathogen to Wyeth.

For the year ended December 31, 2006, we recorded a gain on the disposition of an investment of approximately $1,617,000 in exchange for our shares in Agencourt Personal Genomics Bioscience related to the merger with Applera Corporation. For the year ended December 31, 2005 we recorded a gain on the disposition of marketable securities of approximately $2,162,000 in exchange for our ownership of common stock of Agencourt Bioscience Corporation, which was acquired by Beckman Coulter in a cash transaction.

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Years Ended December 31, 2005 and 2004

Revenues

Total net revenues increased significantly by 257% to $23,609,000 for the year ended December 31, 2005 from $6,613,000 for the year ended December 31, 2004.

Net product sales increased to $20,458,000 for the year ended December 31, 2005 from $4,067,000 for the year ended December 31, 2006. The commercial sale of FACTIVE tablets was launched in September 2004, and thus, the 2004 year represents four months of FACTIVE revenue as opposed to a full year of revenue for 2005.

Co-promotion revenue increased 100% to $2,954,000 for the year ended December 31, 2005 from $0 for the year ended December 31, 2004 due to the introduction of co-promoting TESTIM during the second quarter of 2005.

Biopharmaceutical revenues decreased 92% to $197,000 for the year ended December 31, 2005 from $2,546,000 for the year ended December 31, 2004, reflecting our strategic shift to commercialization of pharmaceutical products.

Our revenue mix shifted during 2005. We expect that our revenues derived from both our biopharmaceutical alliance and genomics services will be minimal in comparison to prior years. We expect an increase in product revenues based on the sale of FACTIVE tablets and ANTARA capsules.

Costs and Expenses

Total costs and expenses increased 15% to $112,281,000 for the year ended December 31, 2005 from $97,229,000 in 2004, primarily reflecting a full year of selling and marketing expense in 2005 due to the launch of FACTIVE in September 2004.

Cost of product sales increased significantly by 191% to $9,830,000 in 2005 from $3,381,000 in 2004. The commercial sale of FACTIVE tablets was launched in September 2004, and, thus, the current period represents a full year of sales compared to the initial product launch in the prior period. Included in the cost of product sales is $4,767,000 and $1,981,000 for 2005 and 2004, respectively, of amortization of intangible assets associated with FACTIVE. Our gross product margin at December 31, 2005 and 2004 including amortization of intangible assets was 52% and 17%, respectively. The primary reason for the improved margin was due to higher sales in 2005 and also due to approximately $800,000 of other manufacturing costs mainly related to the technology transfer to our new manufacturing site of FACTIVE tablets that was incurred in 2004. Our cost of revenues on FACTIVE for the year ended December 31, 2005 and 2004, after standard product cost and royalties, but excluding amortization of intangible assets, was 75% and 66% of product sales, respectively.

Research and development expenses decreased 51% to $14,432,000 in 2005 from $29,557,000 in 2004. Research and development activities include clinical trials, other clinical development, technology transfer and process optimization for manufacturing, and early-stage research and development funded internally as well as by government grants and strategic alliances. These research and development expenses primarily consist of salaries and related expenses for personnel, amortization of intangible assets and the cost of materials used in research and development. Other research and development expenses include fees paid to consultants and outside service providers. The decrease in research and development is primarily due to a decrease of approximately $7,849,000 relating to the termination of the Ramoplanin VRE trial in July 2004, a decrease of approximately $3,833,000 related to internal research effort and alliances as well as a decrease of approximately $2,879,000 in connection with the feasibility testing of FACTIVE manufacturing in a new contracted manufacturing site and a decrease in stock based compensation in the amount of $2,902,000 due to lower amortization of deferred compensation resulting from stock options that were issued as part of the merger with GeneSoft Pharmaceuticals in 2004 and decreased expenses related to terminations of personnel following the merger. These decreases are

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offset by an increase of approximately $2,338,000 in connection with the clinical trials for FACTIVE related to the five-day CAP study and the FACTIVE post-marketing study.

Selling and marketing expenses significantly increased by 115% to $74,931,000 in 2005 from $34,826,000 in 2004. This increase was primarily due to additional sales and marketing personnel and associated hiring costs of $24,625,000 and consulting costs of $9,188,000, increased other marketing, advertising and promotional costs of approximately $4,465,000 to support the launch of FACTIVE, increased costs of $3,539,000 associated with the promotion of TESTIM which began in the second quarter of 2005, offset by decreases of approximately $1,712,000 associated with marketing studies and other costs.

General and administrative expenses increased 1% to $13,088,000 in 2005 from $12,981,000 in 2004 primarily due to an increase in general and administrative payroll and related costs of approximately $810,000 and an increase of approximately $460,000 in other general and administrative expenses offset by a decrease in stock based compensation in the amount of $1,163,000 due to lower amortization of deferred compensation resulting from stock options that were issued as part of the merger with GeneSoft Pharmaceuticals in 2004 and decreased expenses related to terminations of personnel following the merger.

As part of our merger with Genesoft, we recorded a one-time charge of approximately $11,704,000 in 2004 related to in-process research and development expenses associated with internally funded early-stage target discovery programs. The valuation of the in-process research and development of $11,704,000 includes a peptide deformylase inhibitor research program (PDF) licensed from Vernalis (R & D) Limited for the treatment of infections.

Restructuring charges were $4,780,000 in 2005 consisting of $4,681,000 for the Beaver Street, Waltham, Massachusetts facility and $99,000 for severance costs.

Other Income and Expense

Interest income increased 40% to approximately $3,400,000 in 2005 from approximately $2,424,000 in 2004 reflecting higher yields on cash balances offset by lower overall cash balances in 2005.

Interest expense increased 44% to approximately $8,126,000 in 2005 from approximately $5,625,000 in 2004. In 2005, interest expense primarily consisted of approximately $5,346,000 related to the issuance of $153 million of senior convertible notes in the second quarter of 2004, approximately $1,180,000 related to the issuance of $22 million of convertible notes in connection with the Genesoft merger, $815,000 related to amortization of deferred financing costs along with approximately $742,000 related to non-cash interest expense related to the facility lease liability.

We recorded a gain on the sale of fixed assets of approximately $65,000 and $338,000 in 2005 and 2004, respectively, primarily related to the sale of laboratory and computer equipment, which were no longer used in operations as a result of restructuring.

For the year ended December 31, 2005, we recorded income from the sale of intellectual property of $2,500,000, due to the sale of intellectual property related to the genomic sequence of an undisclosed pathogen to Wyeth. We also recorded a gain on the disposition of marketable securities of approximately $2,162,000 in exchange for our ownership of common stock of Agencourt Bioscience Corporation, which was recently acquired by Beckman Coulter in a cash transaction.

For the year ended December 31, 2005, we recorded other income of approximately $43,000, primarily due to miscellaneous license fees related to genomic-based software sold in previous periods.

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Discontinued Operations

For the years ended December 31, 2005 and 2004, we recorded income from discontinued operations of approximately $35,000 and $208,000, respectively for royalty payments from Agencourt who purchased our genomics services business in March 2004.

Liquidity and Capital Resources

Our primary sources of cash have been from the sale of debt and equity securities, product discovery alliances, the sale of FACTIVE tablets and ANTARA capsules and co-promotion revenues based on the sale of TESTIM. The TESTIM co-promotion agreement was terminated on August 31, 2006.

As of December 31, 2006, we had total cash, cash equivalents, restricted cash and short-term marketable securities of approximately $44,808,000, which includes approximately $6,612,000 in restricted cash. We will need to raise additional capital in the future to fund our operations. We believe that, under our current rate of investment in development and commercialization programs, our existing capital resources are adequate to support operations through at least the end of 2007. There is no assurance, however, that changes in our plans or events affecting our operations will not result in accelerated or unexpected expenditures.

In recent years, we have experienced a significant increase in hiring and employment costs in an effort to build an effective sales and marketing organization to commercialize our products, expand the medical/development organization to support additional development and commercialization of our products and to build the infrastructure necessary to support these efforts. We expect expenses in the sales and marketing areas to reflect continued commercialization of FACTIVE and ANTARA as we seek to grow our sales.

Cash Flows

Our operating activities used cash of approximately $63,637,000, $96,980,000 and $70,589,000 in 2006, 2005 and 2004, respectively.

Cash used in our operating activities for 2006 was primarily a result of our loss from continuing operations of approximately $78,477,000, adjusted for the gains of approximately $1,619,000 on the sales of investment and fixed assets, an increase in inventories of approximately $1,796,000 due to increased demand of ANTARA capsules and FACTIVE tablets, and an increase in accounts receivable of approximately $6,080,000 as a result of the acquisition of ANTARA, as well as decreases in clinical trial expense accrual of approximately $1,489,000 resulting from the completion of patient enrollment related to the Phase IV trial of FACTIVE, accrued facilities impairment charge of approximately $2,826,000 related to our west coast facility and accrued restructuring charges of approximately $1,076,000 related to our previous facility in Waltham, Massachusetts.

These uses of cash were partially offset by decreases in prepaid expenses and other current assets of approximately $1,901,000 resulting from decreases in net samples inventory and decreased costs associated with the utilization of a contracted third party sales organization, as well as decreases in interest receivable of approximately $233,000 related to the payment of interest upon maturity of investments, increases in accounts payable of approximately $3,955,000 primarily resulting from the acquisition of ANTARA, including royalties payable on the net sales of FACTIVE and ANTARA sold in the U.S. and accounts payable and other accrued expenses acquired as part of the ANTARA acquisition. Additional offsets include increases in accrued expenses and other current liabilities of approximately $5,900,000 resulting from increases in sales reserves and allowances and royalty interest payable as a result of the acquisition of ANTARA, increases in deferred revenue of approximately $1,386,000 pertaining to up-front license fees in relation to sublicense agreements with Pfizer Mexico, Abbott Canada, and Menarini, increases in other long-term liabilities of approximately $1,869,000 resulting from accrued interest on the $22.0 million convertible note and the $20.0 million note payable to Paul Capital, as well as non-cash depreciation and amortization expenses of approximately $12,502,000 including amortization of intangible assets, stock based compensation, non-cash interest expense, and provision for excess and obsolete inventories and provision for accounts receivables of approximately $1,980,000.

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Cash used in our operating activities for 2005 was primarily a result of our loss from continuing operations of approximately $88,628,000, adjusted for the gains of approximately $2,227,000 on the sales of investment and fixed assets, an increase in inventories of approximately $7,129,000 due to increased demand of FACTIVE tablets, and an increase in accounts receivable of approximately $1,983,000 resulting from the co-promotion agreement with Auxillium, as well as decreases in accounts payable of approximately $2,633,000 resulting from timing of payables processing, accrued expenses and other liabilities of approximately $4,678,000 resulting from decreases in costs associated with the Genesoft merger and decreases in costs associated with the utilization of a contracted third party sales organization, clinical trial expense accrual of approximately $941,000 resulting from the completion of the FACTIVE five-day CAP trial, deferred revenue of approximately $1,302,000 related to our initial stocking incentive program, accrued facilities impairment charge of approximately $2,947,000 related to our west coast facility and accrued restructuring charge of approximately $1,143,000 related to our previous facility in Waltham, Massachusetts. These uses of cash were partially offset by decreases in prepaid expenses and other current assets of approximately $5,350,000 resulting from the expiration of our contract with a contracted third party sales representative provider and $1,247,000 in interest receivable as a result of timing of payments on maturing investments and overall decrease in our investment securities balance and an increase in accrued other long-term liabilities of approximately $993,000 resulting from accrued interest on the $22.0 million convertible note, as well as non-cash depreciation and amortization expenses of approximately $7,974,000 including amortization of intangible assets, stock based compensation, non-cash interest expense and provision for excess and obsolete inventories of approximately $1,067,000.

Cash used in our operating activities for 2004 was due primarily to our loss from continuing operations of approximately $93,479,000, an increase in inventories of approximately $6,959,000 to support the launch of FACTIVE, and other increases in an interest receivable, accounts receivable, prepaid expenses and other current assets as well as decreases in accrued facility impairment charge, and clinical trial expense accrual. These uses of cash were partially offset by increases in accounts payable, accrued expenses and other liabilities, deferred revenue, accrued restructuring charge, accrued other long-term liabilities, and non-cash expenses, such as amortization of deferred compensation, depreciation and amortization expense, restructuring charge, interest expense, and write-off of in-process technology.

Our investing activities used cash of approximately $68,117,000 in 2006, provided cash of approximately $96,823,000 in 2005, and used cash of approximately $120,236,000 in 2004.

Cash used in our investing activities in 2006 were primarily related to the acquisition of ANTARA of approximately $77,563,000, and increases in other assets of approximately $329,000 and net purchases of property and equipment of approximately $263,000. These uses of cash were partially offset by proceeds from maturities of marketable securities of approximately $2,696,000, decreases in restricted cash associated with interest payments on debt of approximately $5,118,000, proceeds from the disposition of an investment of approximately $1,617,000 and net proceeds from notes receivable of approximately $604,000.

Cash provided by our investing activities in 2005 were primarily related to proceeds from maturities of marketable securities of approximately $94,694,000, proceeds related to the disposition of Agencourt stock upon its acquisition by Beckman Coulter of approximately $2,387,000, a decrease of restricted cash of approximately $5,246,000 related to the payment of convertible note interest, a decrease in other assets of approximately $471,000, proceeds from sales of fixed assets of approximately $359,000 and proceeds from notes receivable of approximately $440,000. Cash provided from investing activities was partially offset by the issuance of notes receivable of approximately $2,740,000 related to a deposit required in order to lease vehicles for the sales representatives, purchases of marketable securities of approximately $2,706,000 and purchases of property and equipment of approximately $1,328,000.

Cash used by our investing activities in 2004 were primarily related to cash used in connection with the merger with Genesoft of approximately $14,875,000, purchases of marketable securities of approximately $143,037,000, increases in restricted cash of approximately $13,279,000 and other assets of approximately

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$4,238,000 as well as purchases of property and equipment of approximately $1,532,000. These uses of cash were partially offset by proceeds from maturities of marketable securities of approximately $55,824,000 and sale of property and equipment of approximately $901,000.

Our financing activities provided cash of approximately $104,332,000 in 2006. This was primarily due to the issuance of 2,254,402 shares of common stock in connection with the completion of a private placement which generated net proceeds of approximately $33,477,000; proceeds of $20,000,000 from the issuance of a note in connection with the financing of the ANTARA acquisition; proceeds of $40,000,000 from an assignment of revenue interest in connection with the financing of the ANTARA acquisition and net proceeds of approximately $9,958,000 from the issuance of 1,388,889 shares of common stock in connection with financing the acquisition of ANTARA. In addition, we received approximately $166,000 from the exercise of 89,456 stock options and proceeds of approximately $740,000 from the issuance of 78,987 shares of stock under the employee stock purchase plan, offset by payments made on capital lease obligations of approximately $9,000.

Our financing activities in 2005 provided cash of approximately $997,000, primarily due to proceeds from exercise of stock options of approximately $871,000 and proceeds from the issuance of shares under the employee stock purchase plan of approximately $417,000, offset by payments of long-term obligations of approximately $291,000.

Our financing activities in 2004 provided cash of approximately $234,391,000, primarily due to gross proceeds from the issuance of convertible notes of $152,750,000 and net proceeds from issuance of stock through private placement in conjunction with the merger of approximately $80,864,000. We also received proceeds from exercise of 266,233 stock options of approximately $1,865,000, proceeds from exercise of warrants of approximately $195,000 and proceeds from the issuance of 15,693 shares of stock under the employee stock purchase plan of approximately $303,000. These proceeds were partially offset by payments of long-term obligations of approximately $1,586,000.

At December 31, 2006, we had net operating loss carryforwards of approximately $440,400,000 and $329,386,000 available to reduce federal and state taxable income, if any, respectively. In addition, we also had tax research credit carryforwards of approximately $16,726,000 to reduce federal and state income tax, if any. Net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain cumulative changes in ownership interests of significant shareholders over a three-year period in excess of 50%. Additionally, certain of our losses have begun to expire due to time, not limitations.

Our Outstanding Debt Obligations and Equity Financings

In the quarter ended June 26, 2004, we issued $152,750,000 in principal amount of our 3 ¹/2% senior convertible promissory notes due April 2011. These notes are convertible into shares of our common stock at the option of the holders at a conversion price of $53.14 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006. We may not redeem the notes at our election before May 10, 2010. After this date, we can redeem all or a part of the notes for cash at a price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest. Upon the occurrence of a termination of trading of our common stock or a change of control transaction in which substantially all of our common stock is exchanged for consideration other than common stock that is listed on a U.S. national securities exchange or market (such as NASDAQ), holders of these notes have the right to require us to repurchase all or any portion of their notes at a price equal to 100% of the principal amount plus accrued and unpaid interest. In addition, in the case of a change of control transaction in which all of the consideration paid for our common stock consists of cash, we may have an obligation to pay an additional make-whole premium to the note holders based on a formula set forth in the indenture.

On February 6, 2004, in connection with our merger with Genesoft, we issued $22,309,647 in principal amount of our 5% convertible five year promissory notes which were recorded in investing activities as cash

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flows related to acquisition. These notes are convertible into our common stock at the option of the holders, at a conversion price of $53.13 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006. In addition, we have the right to force conversion if the price of our common stock closes above 150% of the then effective conversion price for 15 consecutive trading days. At the closing of the merger, the holders of these notes also received an aggregate of 601,693 shares of our common stock representing the payment of accrued interest and related amounts on certain outstanding notes previously issued to such holder by Genesoft.

Other Financial Arrangements

To finance the acquisition of ANTARA in August 2006, we, together with our wholly-owned subsidiary Guardian II Acquisition Corporation, or Guardian II (the entity which holds all of the ANTARA assets), entered into several financing agreements with Paul Royalty Fund Holdings II, LP, an affiliate of Paul Capital Partners, or Paul Capital, including the Revenue Interests Assignment Agreement, the Note Purchase Agreement and the Common Stock and Warrant Purchase Agreement, in consideration for an aggregate amount of $70 million.

Under the Revenue Interests Assignment Agreement (the “Revenue Agreement”), we sold to Paul Capital the right to receive specified royalties on our net sales in the United States (and the net sales of its affiliates and licensees) of FACTIVE tablets and Guardian II sold to Paul Capital the right to receive specified royalties on Guardian II’s net sales in the United States (and the net sales of its respective affiliates and licensees) of the ANTARA products, in each case until December 31, 2016. The royalty payable to Paul Capital on net sales of ANTARA and FACTIVE starts each fiscal year as a high single-digit royalty rate and could decline to a low single-digit royalty rate based on achievement of annual specified sales thresholds in each fiscal year. Once the cumulative royalty payments to Paul Capital exceed $100 million, the royalties become nominal. In connection with the Revenue Agreement, we recorded a liability, referred to as the revenue interest liability, of approximately $40 million in accordance with EITF 88-18, Sales of Future Revenues. We will impute interest expense associated with this liability using the effective interest rate method and will record a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the life of the arrangement. The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of ANTARA and FACTIVE sales. Payments made to Paul Capital as a result of ANTARA and FACTIVE sales levels will reduce the accrued interest liability and the principal amount of the revenue interest liability. Through December 31, 2006, there have been no principal payments made to Paul Capital as a result of ANTARA or FACTIVE sales.

In the event of (i) a change of control of Oscient or Guardian II, (ii) a bankruptcy of Oscient or Guardian II, (iii) a transfer by Oscient or any of its subsidiaries of substantially all of either ANTARA or FACTIVE, (iv) subject to a cure period, breach of certain material covenants and representations in the Revenue Agreement and (v) in the event the sale of ANTARA is suspended due to a court issued injunction or we elect to suspend sales of ANTARA, in each case as a result of a lawsuit by certain third parties (each a “Put Event”), Paul Capital has the right to require Oscient and Guardian II to repurchase from Paul Capital its royalty interest at a price in cash which equals the greater of (a) a specified multiple of cumulative payments made by Paul Capital under the Revenue Agreement less the cumulative royalties previously paid to Paul Capital; or (b) the amount which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return (the “Put/Call Price”). Upon a bankruptcy event, Oscient and Guardian II are automatically required to repurchase the Paul Capital royalty interest at the Put/Call Price. In the event of a change of control of Oscient, we have the right to repurchase the Paul Capital royalty interest for an amount equal to the Put/Call Price. We have determined that Paul Capital’s put option and our call option meet the criteria to be considered an embedded derivative and should be accounted for as such. We recorded a net liability of $1,005,000 related to the put/call option to reflect its estimated fair value as of the date of the agreement, in accordance with SFAS No. 133, Accounting for Derivatives Instruments and Hedging Activities. This liability will be revalued on a quarterly basis to reflect any changes in the fair value and any gain or loss resulting from the revaluation will be recorded in earnings. As of December 31, 2006, no gain or loss has been recorded.

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During the first two fiscal years immediately following the fiscal year in which combined annual net sales of ANTARA and FACTIVE are equal to or greater than $125 million, Oscient and Guardian II have the right, but not the obligation, to reduce the royalty percentages due under the Revenue Agreement to Paul Capital by 50% by paying Paul Capital a price in cash which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return. During the first two fiscal years immediately following the fiscal year in which combined annual net sales of ANTARA and FACTIVE are equal to or greater than $250 million, Oscient and Guardian II have the right, but not the obligation, to repurchase the Paul Capital royalty interest at a price in cash which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return.

Guardian II entered into a Note Purchase Agreement, or the Note Purchase Agreement, with Paul Capital pursuant to which Guardian II issued and sold a $20,000,000 aggregate principal amount of 12% senior secured note, or the Note, due on the fourth anniversary of the closing date, subject to Guardian II’s option to extend the maturity to the sixth anniversary of the closing date, provided (i) there are no defaults under the Note at the time, and (ii) we issue to Paul Capital, at the time of the exercise of such option, a warrant for a number of shares of common stock equal to 10% of the principal balance plus accrued interest divided by $6.94, with an exercise price of $6.94 per share. If we exercise such option, the number of shares subject to the warrant issuable to Paul Capital would be between 288,018 shares and 367,529 shares, depending upon the amount, if any, of the interest payable on the Note we elect to have added to the principal of the Note rather than paid in cash as described below.

Interest is payable semi-annually in arrears on the last day of each of March and September. Guardian II has the option to pay interest in cash or to have 50% of the interest paid in cash and 50% of the interest added to principal. In the event of a change of control of Oscient or on or after the second anniversary of the closing, Oscient and Guardian II may at our option prepay all or any part of the Note at a premium which declines over time. In the event of an event of default, with “event of default” defined as a continuing Put Event under the Revenue Agreement as described in more detail above, the outstanding principal and interest in the Note will become immediately due and payable.

Subject to the Revenue Agreement and the Note Purchase Agreement, without the prior written consent of Paul Capital, Oscient and Guardian II have agreed not to (i) amend, waive any rights under, or terminate any material license agreements, including the agreements relating to the ANTARA products and FACTIVE, (ii) enter into any new agreement or amend or fail to exercise any of its material rights under existing agreements that would adversely affect Paul Capital’s royalty interest, and (iii) sell any material assets related to ANTARA or FACTIVE.

Pursuant to the terms of the Revenue Agreement and the Note Purchase Agreement, Guardian II and Paul Capital entered into a Security Agreement, or the Security Agreement, under which Guardian II granted to Paul Capital a security interest in and to substantially all assets owned by Guardian II (including rights to the ANTARA products) in order to secure its performance under each of the Revenue Agreement, the Note Purchase Agreement and the Note. To the extent the indebtedness under certain of our pre-existing debt obligations is refinanced or replaced and such replacement or refinancing indebtedness is secured, we have agreed to equally and ratably secure its obligations under the Revenue Agreement.

As part of the financing, we and Paul Capital also entered into a Common Stock and Warrant Purchase Agreement, or the Stock and Warrant Purchase Agreement, pursuant to which, in exchange for $10 million, Oscient sold to Paul Capital 1,388,889 shares (the “Shares”) of the Common Stock, at a price of $7.20 per share (the “Private Placement”) and issued Paul Capital a warrant (the “Warrant”) to purchase 288,018 shares of Common Stock (the “Warrant Shares”) at an exercise price of $6.94 per share. The Warrant is exercisable for seven years from the date of closing. The Warrant contains a net share settlement feature and penalties if Oscient does not deliver the applicable amount of Warrant Shares within three trading days of exercise of a Warrant by Paul Capital. The Warrant also contains provisions providing that, at Paul Capital’s election, Oscient must re-purchase the Warrant from Paul Capital upon a sale of the Company in which the consideration for such sale is solely cash. We agreed pursuant to the Stock and Warrant Purchase Agreement to elect one person designated by Paul Capital to our Board of Directors following the closing and to continue to nominate one person designated

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by Paul Capital for election to our Board of Directors by our shareholders. The director designated by Paul Capital shall resign and we shall no longer be required to nominate a director designated by Paul Capital upon the later of the following events: (1) if Paul Capital ceases to own at least five percent of the our Common Stock or securities convertible into our Common Stock; (2) if we owe Paul Capital less than $5,000,000 under the Note pursuant to the Note Purchase Agreement; (3) the cumulative payments to Paul Capital made by us under the terms of the Revenue Agreement first exceed 250% of the consideration paid to us by Paul Capital; or (4) if the amounts due by us pursuant to the Revenue Agreement cease to be due. If at any time Paul Capital’s designee is not elected to our Board of Directors, Paul Capital’s designee will have a right to participate in all meetings of our Board of Directors in a nonvoting observer capacity.

Contractual Obligations

Our major outstanding contractual obligations relate to our convertible promissory notes, our facility leases and our financing agreements with Paul Royalty Fund Holdings II, LP, through which we funded our acquisition of ANTARA. The following table summarizes our significant contractual obligations and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands).

	2007			2008			2009			2010			2011			Thereafter		Total
Operating leases	$	5,098		$	5,424		$	5,613		$	5,799		$	1,786		$	245	$	23,965
Sublease contracted income		(1,037	)		(526	)		(45	)		—			—			—		(1,608	)
Current sublease forecasts (a)		(1,519	)		(1,926	)		(1,099	)		(1,183	)		(199	)		—		(5,926	)
		2,542			2,972			4,469			4,616			1,587			245		16,431
Convertible promissory notes, including interest (b,c)		5,346			5,346			33,904			5,346			155,423			—		205,365
Term Loan (d)		1,245			1,321			1,402			26,625			—			—		30,593
Total forecasted contractual obligations	$	9,133		$	9,639		$	39,775		$	36,587		$	157,010		$	245	$	252,389

(a) The current market reflects lower demand and cost for space, as well as shorter term leases.

(b) Upon the closing of the Genesoft merger, we exchanged approximately $22.0 million of our convertible promissory notes for a like principal amount of Genesoft promissory notes. The convertible promissory notes bear an interest rate of 5% compounded semi-annually and mature on February 6, 2009. The convertible promissory notes are convertible into shares of our common stock at the holder’s election at any time at a price per share equal to $53.13 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006. The convertible promissory notes payable of approximately $28.6 million at maturity date includes approximately $6.2 million of accrued interest payable.

(c) In the quarter ended June 26, 2004, we issued $152.8 million in principal amount of 3 ¹/2% senior convertible promissory notes due in April 2011. These notes are convertible into shares of our common stock at the option of the holders at a conversion price of $53.14 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006. In connection with the issuance, we recorded deferred financing costs of $5.7 million which is being amortized to interest expense on a straight-line basis over the period the notes are outstanding. A portion of the net proceeds from the offering was used to purchase U.S. government securities as pledged collateral to secure the first six scheduled interest payments on the notes, of which three are classified as restricted cash on the December 31, 2005 consolidated balance sheet and the last interest payment which is classified as restricted cash on the December 31, 2006 consolidated balance sheet.

(d) Pursuant to the financing of our acquisition of ANTARA, our wholly owned subsidiary, Guardian II Acquisition Corporation, entered into a Note Purchase Agreement with Paul Capital pursuant to which Guardian II issued and sold a $20.0 million aggregate principal amount of 12% senior secured note due on the fourth anniversary of the closing date, subject to Guardian II’s option to extend the maturity to the sixth anniversary of the closing date. Interest is payable semi-annually in arrears on the last day of each of March and September. Guardian II has the option to pay interest in cash or to have 50% of the interest paid in cash and 50% of the interest added to principal.

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In addition to the amounts reflected in the table above, in the future, we may owe royalties and other contingent payments to our collaborators and licensors, based on the achievement of product sales and specified other objectives and milestones, including a minimum annual product purchase commitment to Ethypharm pursuant to the ANTARA license agreement.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As specified in our investment policy guidelines, investments are made primarily in high-grade corporate bonds with effective maturities of two years or less, and U.S. government agency securities. These investments are subject to risk of default, changes in credit rating and changes in market value. Our investment policy limits the amount of our credit exposure to any one issue, issuer, and type of instrument. Due to the nature of our investments and the investment policies and procedures, we have determined that the risks associated with the interest rate fluctuations related to these financial instruments are not material to our business.

As of December 31, 2006 we did not have any financing arrangements that were not reflected in our balance sheet.

In connection with the closing of the merger of Genesoft, we assumed approximately $22.3 million in Genesoft debt, restructured at a 5% annual interest rate, by issuing promissory notes of the Company that are convertible, at the option of the holder, into shares of our common stock at a price of $53.13 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006.

In the quarter ended June 26, 2004, we issued $152.8 million in principal amount of our 3 ¹/2% senior convertible promissory notes due April 2011. These notes are convertible into shares of our common stock at the option of the holders at a conversion price of $53.14 per share, as adjusted pursuant to the reverse stock split which we effectuated in November 2006. We may not redeem the notes at our election before May 10, 2010. After this date, we can redeem all or a part of the notes for cash at a price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest. Upon the occurrence of a change of control or a termination of trading of our common stock (each as defined in the indenture for the notes), holders of our notes have the right to require us to repurchase all or any portion of their notes at a price equal to 100% of the principal amount plus accrued and unpaid interest. In addition, in the case of a cash purchase of our common stock, we may have an obligation to pay an additional make-whole premium to our note holders based on a formula set forth in the indenture.

Guardian II, our wholly-owned subsidiary, entered into a Note Purchase Agreement with Paul Capital pursuant to which Guardian II issued and sold a $20,000,000 aggregate principal amount of 12% senior secured note due on the fourth anniversary of the closing date. Interest is payable semi-annually in arrears on the last day of each of March and September. Guardian II has the option to pay interest in cash or to have 50% of the interest paid in cash and 50% of the interest added to principal. In the event of a change of control of Oscient or on or after the second anniversary of the closing, we may at our option prepay all or any part of the note at a premium which declines over time. In the event of an event of default, the outstanding principal and interest in the note will become immediately due and payable.

The interest rates on the note to Paul Capital and our convertible notes payable are fixed and therefore not subject to interest rate risk.

Item 8. Financial Statements and Supplementary Data

Financial statements and supplementary data required by Item 8 are set forth at the pages indicated in Item 15(a) below.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding The Effectiveness Of Disclosure Controls And Procedures

We currently have in place systems relating to disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Our principal executive officer and principal financial officer evaluated the effectiveness of these disclosure controls and procedures as of the end of our fiscal year ended December 31, 2006 in connection with the preparation of this annual report. They concluded that the disclosure controls and procedures were effective as of the end of the period covered by this annual report.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). All internal controls over financial reporting, no matter how well designed, have inherent limitations. As a result of these inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those internal controls determined to be effective can provide only reasonable assurance with respect to reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2006 based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2006.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young LLP, our independent registered public accounting firm, as stated in their report which is included herein.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Oscient Pharmaceuticals Corporation

We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting, that Oscient Pharmaceuticals Corporation maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Oscient Pharmaceuticals Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Oscient Pharmaceuticals Corporation maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Oscient Pharmaceuticals Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Oscient Pharmaceuticals Corporation as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ (deficit) equity and comprehensive loss, and cash flows for each of the three years in the period ended December 31, 2006 of Oscient Pharmaceuticals Corporation and our report dated March 12, 2007, expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts

March 12, 2007

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Item 9B. OTHER INFORMATION

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers and Directors

The table below lists our Executive Officers and Directors and their ages and positions as of March 1, 2007:

Name	Age	Position(s)
Steven M. Rauscher	53	President, Chief Executive Officer, and Director
Philippe M. Maitre	50	Senior Vice President, Chief Financial Officer
Dominick C. Colangelo	43	Executive Vice President, Corporate Development & Operations
David K. Stone (2)(3)	50	Chairman of the Board and Director
Gregory B. Brown, M.D.	53	Director
Walter Flamenbaum, M.D.	63	Director
Robert J. Hennessey (2)	65	Director
William R. Mattson (1)(4)	60	Director
Gary Patou, M.D. (4)	48	Director
Williams S. Reardon (2)	60	Director
Norbert G. Riedel, Ph.D. (1)(3)	49	Director
John E. Voris (1)(3)(4)	59	Director

(1) Member of Compensation Committee

(2) Member of Audit Committee

(3) Member of Nominating and Corporate Governance Committee

(4) Member of Compliance Committee

Mr. Rauscher became the Chief Executive Officer and President of Oscient in October 2000 and served as Chairman from May 2003 to February 2004. Previously, he had been the Chief Executive Officer and a director of Americas Doctor, Inc., a company that provides clinical research and marketing services to the pharmaceutical industry, since 1995. Mr. Rauscher was employed by Abbott Laboratories from 1975 to 1993 holding various positions including Vice President of Sales for the U.S. Pharmaceutical Products Division, Vice President of Business Development for the International Products Division, and Vice President of Corporate Licensing. Mr. Rauscher is a member of the Board of Directors of Acorda Pharmaceuticals and Target Discovery, Inc.

Mr. Maitre was appointed Senior Vice President and Chief Financial Officer of the Company in May 2006. Mr. Maitre worked for 18 years at sanofi-aventis and predecessor companies, serving most recently as Deputy CFO and Corporate Controller. Mr. Maitre then served as Chief Financial Officer of PPD, Inc. from 2000 to 2002, as President and Chief Executive Officer of ANOSYS Inc. from 2003 to 2005 and subsequently as a consultant to various biopharmaceutical companies until his employment by the Company.

Mr. Colangelo was appointed Senior Vice President for Corporate Development and Operations in January 2005 and promoted to Executive Vice President in February 2006. Prior to joining the Company, Mr. Colangelo was Director of Lilly Ventures, for Eli Lilly. Previously Mr. Colangelo held several executive positions with Eli Lilly, including Director, Strategy and Business Development for the Growth Disorders Products group. Mr. Colangelo joined Eli Lilly in 1995.

Mr. Stone is the Founder and Managing Director of Liberty Tree Advisors, LLC, a consulting firm focusing on emerging life sciences companies. He is also a Venture Advisor to Flagship Ventures, an early-stage venture

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capital firm, and served as Managing Director and Partner at Flagship Ventures from 2000 to 2006. From 1989 to 1999, Mr. Stone was at Cowen & Company, where he followed the biopharmaceutical industry, holding the position of Managing Director from 1994 to 1999. Mr. Stone began his career in biotechnology in 1983 as a Project Manager and later Communications Director at Genetics Institute (now part of Wyeth Pharmaceuticals). He earned a B.S. in Microbiology from Colorado State University and an MBA from Harvard Business School.

Dr. Brown joined the Oscient Board in August 2006. He currently serves as an independent consultant at Compo Capital Advisors, LLC. In October, 2007, Dr. Brown will join Cowen Healthcare Royalty Partners, a newly formed alternative asset management practice created by Cowen Group, Inc. Dr. Brown was previously a Partner at Paul Capital Partners, an established member of the global private equity community from 2003 to 2006. Dr. Brown also worked at Adams, Harkness & Hill from 1997 to 2002, where he served as the co-head of investment banking, and at Vector Securities International from 1992 to 1997. Before receiving his business degree, Dr. Brown was a practicing thoracic and vascular surgeon. He earned his MBA from Harvard Business School, his M.D. from SUNY Upstate Medical Center, and his AB from Yale College.

Dr. Flamenbaum joined Oscient’s Board of Directors in December 2006 and is a partner at Paul Capital Partners. A founding partner of the Paul Royalty Funds, Dr. Flamenbaum joined Paul Capital in 1999. Prior to joining Paul Capital, Dr. Flamenbaum held leadership positions at several business organizations, including a contract research organization, SigA Pharmaceuticals and Therics, Inc., a medical device company. Dr. Flamenbaum is board certified in internal medicine, nephrology and clinical pharmacology and was a professor of medicine at the Mt. Sinai School of Medicine and Tufts University School of Medicine. He earned his M.D. from Columbia University and his B.A. from Washington & Jefferson College.

Mr. Hennessey served as Chief Executive Officer and President of Oscient from March 1993 until October 2000 and Chairman of the Board from May 1994 through May 2003. Mr. Hennessey served as interim Chief Executive Officer of Penwest Pharmaceuticals from February 15, 2005 to December 15, 2005. Mr. Hennessey currently serves on the board of directors of Penwest Pharmaceuticals and Repligen Corporation. Prior to joining our company in 1993, Mr. Hennessey had significant pharmaceutical industry experience, holding positions in Strategic Planning and Business Development for Sterling Drug, Abbott Laboratories, SmithKline and Merck Sharp & Dohme.

Mr. Mattson has served on Oscient’s Board since June 2006. Mr. Mattson is currently the Chairman of The Mattson Jack Group, a healthcare consulting firm he established in 1986. Previously, Mr. Mattson worked for Monsanto and its subsidiary Searle Pharmaceuticals from 1983-1986 as Director of Marketing Development and Area Vice President. From 1970 to 1983, Mr. Mattson worked in various general management and business development roles at Abbott Laboratories. Mr. Mattson is a member of the St. Louis College of Pharmacy Board of Trustees.

Dr. Patou joined Oscient Pharmaceuticals following the merger with GeneSoft Pharmaceuticals and served as Executive Vice President and Chief Medical Officer through April 2005. He is currently an executive partner at MPM Capital. Prior to the merger, Dr. Patou served as President of Genesoft beginning in December 2000. Prior to joining Genesoft, Dr. Patou worked at GlaxoSmithKline (1995-2000), initially as Vice President of Anti-Infective Development. He subsequently became Senior Vice President & Director, Project and Portfolio Management with responsibility for all therapy areas. Dr. Patou began his career with British Biotech Pharmaceuticals (now Vernalis). He qualified as a physician in the UK in 1982 and is a fellow of the Royal College of Pathologists. Dr. Patou also currently serves on the board of Xenon Pharmaceuticals.

Mr. Reardon is retired from PricewaterhouseCoopers LLP where he was employed from June 1973 to July 2002. Until his retirement, Mr. Reardon was a business assurance (audit) partner at PWC’s Boston office and leader of its Life Sciences Industry Practice for New England and the Eastern United States. From 1998 to 2000, Mr. Reardon served on the Board of the Emerging Companies Section of the Biotechnology Industry

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Organization. He also served on the Board of Directors of the Massachusetts Biotechnology Council from 2000 until his retirement from PWC. Mr. Reardon is a director of Idera Pharmaceuticals, Inc., and Synta Pharmaceuticals, Inc., serving as Audit Committee Chairman of each.

Dr. Riedel is currently Chief Scientific Officer and Corporate Vice President for Baxter International Inc., a manufacturer of health care products, specialty therapeutics and medical instruments. From 1998 until March 2001, Dr. Riedel served as President of the Recombinant Strategic Business Unit for Baxter Bioscience, a division of Baxter International. Prior to joining Baxter in 1998, Dr. Riedel served as Head of Global Biotechnology for Hoechst Marion Roussel, Inc.

Mr. Voris currently serves as CEO of HAPC, Inc., a special purpose acquisition company. He started this role in September 2005. Prior to this role he was chairman and CEO of Epocrates, a clinical software company. Prior to Epocrates, Mr. Voris spent nearly three decades at Eli Lily and Company, serving in a variety of roles. He also serves on the Boards of Directors of HAPC, Inc., Epocrates, Gentiae, a clinical research company; and Regenesis Biomedical, a wound therapy medical device company.

Our Board of Directors

Our directors are elected at the annual meeting of shareholders and hold office (subject to the By-laws) until the next annual meeting of shareholders and until their successors are elected and qualified.

Committees of the Board of Directors

The Board of Directors has four standing committees. Each committee operates pursuant to a written charter. The Board may also establish other committees to assist in the discharge of its responsibilities.

Audit Committee

We have an Audit Committee established in accordance with applicable rules. The Audit Committee of the Board of Directors currently consists of Messrs. Reardon, Hennessey and Stone. In the opinion of the Board of Directors, each of the members of the Audit Committee is independent within the meaning of Rules 4200 and 4350 of the Nasdaq listing standards (as currently in effect and on the date of our annual meeting of shareholders). The Board of Directors has determined that Mr. Reardon, the Chairman of the Audit Committee, possesses the attributes of an audit committee financial expert under the rules of the SEC and Nasdaq, and has, therefore, designated him as the Audit Committee financial expert.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Pursuant to General Instruction G(3) to Form 10-K, the information regarding Section 16(a) Beneficial Ownership Reporting Compliance may be found under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement for our 2007 Annual Meeting of Stockholders. Such information is incorporated herein by reference.

CODE OF ETHICS

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and controller. That code is part of our code of ethics and conduct which is available free of charge on our website (www.oscient.com), by sending a written request to Investor Relations, Oscient Pharmaceuticals Corporation, 1000 Winter Street, Suite 2200, Waltham, MA 02451, or by emailing investors@oscient.com. We intend to include on our website any amendment to, or waiver from, a provision of our code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and controller that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.

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Item 11. Executive Compensation

REPORT OF COMPENSATION COMMITTEE

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis (the “CD&A”) for the year ended December 31, 2006 with management. Based on these reviews and discussions, the compensation committee recommended to the full board that the CD&A be included in the Form 10-K.

By the Compensation Committee of the Board of Directors:

Norbert G. Riedel (Chair)

William R. Mattson, Jr.

John E. Voris

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Role of Compensation Committee

The Compensation Committee of the board of directors for the majority of the last fiscal year consisted of Norbert G. Riedel, Ph.D. Committee Chairperson, Pamela J. Kirby, Ph.D. and John E. Voris. Due to Ms. Kirby’s departure from our board in December 2006, William R. Mattson Jr. was appointed to the Compensation Committee, effective as of December 6, 2006.

The Compensation Committee’s primary purpose and responsibilities include the following:

• Review and approve corporate goals and objectives relating to CEO and other executive officer compensation, evaluate the CEO’s and other executive officers’ performance in light of those goals and objectives and, either as a committee or together with the other independent directors, determine and approve the CEO’s and other executive officers’ compensation level (encompassing base pay, management incentive plans, stock, benefits and perquisites);

• Make recommendations to the board regarding director compensation;

• Make recommendations to the board regarding the adoption of employee incentive compensation plans and equity-based plans;

• Oversee administration of our equity-based plans;

• Review and approve management proposals for annual employee salary planning; and

• Perform periodic review of major employee benefit plans.

Objectives of Compensation Program

Our goal is to attract, retain, motivate, and reward our employees through the use of competitive compensation plans that serve to closely align employee interests with that of the company and the long-term interests of our shareholders. Competitive and labor market dynamics as well as financial position influence our compensation philosophy. We strive to retain and reward the highest caliber management team by offering competitive compensation plans, which are comparable to those offered by our competitors, and promote performance-based compensation. To more closely align the interests of employees with those of the shareholders, we employ equity-based employee awards.

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Overview of Compensation and Process

We strive to attract and retain the necessary executive talent, reward annual performance and provide incentives to reward performance that is intended to create long-term shareholder value. The amount of each element of compensation is determined by or under the direction of our compensation committee, which considers the following factors in determining the amount of salary and other benefits to pay each executive:

• performance against corporate and individual goals for the previous year;

• difficulty of achieving desired results in the coming year;

• value of his or her unique skills and capabilities to support long-term performance of the company;

• performance of their general management responsibilities; and

• contribution as a member of the executive management team.

The compensation of the executive officer team consists of a combination of salary, annual bonus, equity grants, contributions to or accruals under benefit plans and participation in various other plans generally available to all employees, such as our 401(k) plan. Each year we review the compensation paid to all employees, including executive officers, to ensure that the key elements and overall compensation remain competitive with prevailing industry benchmark data of similarly situated companies and remain aligned with shareholder interests.

Our compensation policy strives to provide a balance between long-term and current compensation which serve to attract and retain talent and provide equity awards as incentives to maximize long-term value for our company and our shareholders. We provide cash compensation in the form of base salary to meet competitive salary norms and reward good performance on an annual basis and in the form of bonus compensation to reward superior performance against specific annual corporate goals. We provide non-cash compensation to reward superior performance against specific objectives and long-term strategic goals. Compensation for our executive officers for fiscal 2006 included a mix of cash and non-cash compensation, including benefits and equity-related awards. Equity awards are determined by performance and competitive market practice with respect to equity awards granted to executives as a percentage of common shares outstanding.

Section 162(m) of the U.S. tax code generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to each of the corporation’s chief executive officer and four other most highly paid executive officers. Qualifying performance-based compensation will not be subject to the deduction limitation if certain requirements are met. We periodically review the potential consequences of Section 162(m) and may structure the performance-based portion of our executive compensation to comply with certain exemptions in Section 162(m). However, we reserve the right to use our judgment to authorize compensation payments that do not comply with the exemptions in Section 162(m) when we believe that such payments are appropriate and in the best interests of the stockholders, after taking into consideration changing business conditions or the officer’s performance.

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Compensation Components

The components of our compensation program as described in more detail below:

Base Salary

Base salaries for our named executive officers are established based on their responsibilities, experience and expected contribution to the Company. Salary levels also take into account the salary and compensation paid by similar companies with which we compete for executive talent. Each year, we established a budget for merit based salary increases for all employees of the company, including the executive officers. In 2006, based on 2005 performance and the other factors, the budget for merit salary increases was fixed at 3%. The merit budget remained unchanged for 2007 based on 2006 performance.

Base salaries are reviewed annually taking into account the executive officer’s effectiveness in achieving the corporate and personal goals set out for the previous year, his or her expected contribution for the coming year and the competitive data. Base salaries are also evaluated relative to other components of our compensation program to ensure the executives total compensation and mix of components is consistent with our compensation objectives and philosophies.

In 2006, each of Steven Rauscher, Dominick Colangelo and Stephen Cohen received a merit increase in base salary equal to 3%. Mr. Colangelo received an additional increase of 8.26% to recognize his promotion to Executive Vice President.

In 2007, it was determined that the executive officers would not receive a salary increase.

Annual Performance Bonuses

Our named executive officers are eligible to receive as a bonus an amount equal to a percentage of their annual base salary based on attainment of performance goals as determined by the compensation committee. Each year, the Chief Executive Officer recommends overall corporate goals, as well as individual goals for each named executive officer. The compensation committee reviews the proposed goals and then sets and prioritizes the goals for the year. The committee also determines the percentage of base salary which the executive officers are eligible to receive based on achievement of stated goals and overall stewardship of the company. The performance goals are linked to financial, strategic, operational and organizational objectives, although considerable weight was prescribed to performance goals relating to the acquisition, integration and sales of ANTARA allowing for executives to achieve beyond their established bonus potential. Within each of these categories there are goals for overall corporate performance and individual performance goals. The bonus for our Chief Executive Officer, Mr. Rauscher, is based on the attainment of the overall corporate goals. Following each year, the Chief Executive Officer provides the compensation committee his assessment of the performance of the executive officers generally and against the performance goals. The compensation committee reviews the performance of the executive officers, determines the extent to which the performance goals are achieved and, either as a committee or together with the other independent directors, determines in its discretion the bonuses payable to the executive officers. Performance bonuses are paid in cash.

In August of 2006, following the completion of the ANTARA acquisition, the performance goals were modified to include goals related to ANTARA. Given the importance of ANTARA to the future of the Company, the compensation committee felt that it was important to provide appropriate incentives to ensure a successful integration and launch of ANTARA. The revised goals included ANTARA specific goals to be measured through February 2007 in order to better gauge the success of the ANTARA launch. In determining 2006 bonus payments, performance was evaluated through August 2006 against the original performance goals highlighted by key achievements in business development transactions and prudent cash management, and for the balance of the year against the revised goals established in August with notable performance attained on ANTARA specific goals.

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Based on an assessment of the achievement of performance, goals in particular taking into account the successful integration and launch of ANTARA, Messrs. Rauscher, Colangelo and Maitre were awarded cash bonuses of $325,282, $206,136 and $71,907 respectively. Based on his performance through his retirement at the end of June 2006, Mr. Cohen received a bonus of $35,439.

Long-Term Equity Incentives

We grant equity awards to our named executive officers, in the form of restricted stock grants and stock options, to provide employees, including executive officers, with longer term incentives and as a key tool to encourage employee retention. Because of the direct relationship between the value of an equity award and the market price of our common stock, we believe that granting stock options and other equity awards is an effective method of motivating executive officers to manage our company in a manner that is consistent with the interests of our shareholders. Equity awards are typically granted to employees when they are hired, upon significant promotions and each year in connection with annual performance review. For annual performance grants, the executive team makes a recommendation to the compensation committee in March and the committee determines the grant for each executive officer. Equity awards typically include a mix of options to purchase our common stock and restricted shares of each common stock that vest over a prescribed period. Exercise prices for option grants are wholly determined by the compensation committee and are fixed at the fair market value on the date of compensation committee approval or at a specified date of grant, such as the date of hire in the case of a new employee.

We grant stock awards to our executive officers and eligible employees based upon prior performance, the importance of retaining their services and the potential for their performance to help us attain our long-term goals. In determining annual equity awards the compensation committee also takes into account the extent to which previous equity awards continue to provide appropriate incentives to employees. Company and individual performance and competitive market practices are key considerations in determining size and mix of grants for employees, including executive officers. Equity grants awarded to officers generally are confined to a certain percentage of all shares granted to employees During fiscal year 2006, a total of 220 employees and non-employee directors received stock option and restricted grants equal to an aggregate of 3.6% of the outstanding shares of our common stock based on the shares outstanding in March 2006 when the 2006 annual equity grants were made. The three named executive officers received stock option and restricted grants of approximately 96,250 shares (adjusted to take into account the one-for-eight reverse stock split effectuated in November 2006) or approximately 30% of all shares granted in fiscal 2006. Mr. Maitre received a restricted stock and a stock option grant upon his hiring in May 2006. On March 7, 2007, as part of the annual process for determining annual compensation and annual equity awards Messrs. Rauscher, Colangelo and Maitre received restricted stock awards of 24,196 shares, 19,562 shares and 7, 722 shares, respectively, all of which vest over two years and stock options to purchase 60,404 shares, 48,838 shares and 19,278 shares of common stock, respectively, which vest over two years. All options were granted at an exercise price of $4.94, the closing sale price of a share of the company’s common stock on March 7, 2007. These equity awards granted to our executive officers in the aggregate represents 1.3% of common shares outstanding and follow the company’s practice of considering officer grants within the confines of performance, market practices, annual approved usage rate and past practice with respect to percentage of outstanding shares awarded to our executive officers.

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Other Benefits

Our executives are entitled to few benefits that are not otherwise available to all of our employees. Other benefits for officers are limited to executive life insurance and in the case of the Chief Executive Officer, a predetermined annual allowance of $10,000 as prescribed in Mr. Rauscher’s employment agreement with the company.

All of our named executive officers participated in our 401(k) plan and received matching employer contributions at the same rate as other employee-participants. Our health and insurance plans are the same for all employees and our healthcare premiums follow a shared cost schedule, under which employees contribute approximately 23% of the healthcare premiums. As a commercial organization, we employ a variety of annual sales contests to reward top sales representatives and sales managers which may include sales trips that are hosted by certain members of the executive team; however, during 2006, none of the executive officers participated in any of these trips.

Termination-based compensation

Under the terms of their employment agreements, our executive officers are, under specified circumstances, entitled to receive severance payments and, in some cases, accelerated vesting of equity awards upon termination of employment. The severance payments, and in particular the change of control severance, are intended to aid in employee retention and maintain productivity in the event of a change of control of the company. In addition, these payments are designed to align executive and shareholder interests by enabling executives to consider corporate transactions that are in the best interests of the shareholders and other constituents of the company without undue concern over whether the transactions may jeopardize the executives’ own employment. The specific triggering provisions and severance due each of the executive officers is described below under “Employment Agreements” and “Potential Payments upon Change of Control.” We believe that our severance arrangements are in line with severance packages offered to executive officers of companies of similar size to us represented in the compensation data we reviewed.

Post-Employment Compensation

Pension Benefits

We do not provide pension arrangements or post-retirement health coverage for our executives or employees. Our executive officers are eligible to participate in our 401(k) defined contribution plan. In any plan year, we will contribute to each participant a matching contribution equal to 50% of the first 6% of the participant’s compensation that has been contributed to the plan, as prescribed in the plan document and within federal tax limits. All of our executive officers participated in our 401(k) plan during fiscal 2006 and received matching contributions.

Nonqualified Deferred Compensation

We do not provide any nonqualified defined contribution or other deferred compensation plans.

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Summary Compensation Table for 2006

The following table sets forth the compensation paid by us in respect of our fiscal year ended December 31, 2006 to (i) our Chief Executive Officer, (ii) the two individuals who served as our principal financial officer in 2006 and (iii) our only other executive officer.

Name and Principal Position	Year	Salary ($)		Bonus ($)			Stock Awards ($)(1)		Option Awards ($)(1)		All Other Compensation ($)			Total ($)
Steven M. Rauscher Chief Executive Officer and President	2006	$	432,115	$	325,282		$	89,307	$	106,020	$	174,240	(6)	$	1,126,964
Dominick Colangelo Executive Vice President—Corporate Development and Operations	2006		338,654		206,136			71,446		85,012		7,050	(7)		708,298
Philippe Maitre Sr. Vice President and Chief Financial Officer (2)	2006		155,769		96,904	(4)		11,549		14,575		22,022	(8)		300,819
Stephen Cohen Former Sr. Vice President and Chief Financial Officer (3)	2006		142,516		135,439	(5)		21,716		27,457		29,800	(9)		356,928

(1) Refer to Note 2(s), “Stock-Based Compensation,” in the Notes to Consolidated Financial Statements for the assumptions used to determine the valuation of our equity awards.

(2) Mr. Maitre’s employment with the Company began May 22, 2006 pursuant to an employment agreement dated May 5, 2006 described in more detail in the section entitled “Employment Agreements” below.

(3) Mr. Cohen retired as Senior Vice President and Chief Financial Officer on May 22, 2006; Mr. Cohen continued with the Company on a full-time basis through June 30, 2006 and provided transitional services on a part time basis through December 31, 2006.

(4) Mr. Maitre received a one-time signing bonus of $25,000 upon commencement of his employment in May 2006 and a performance bonus of $71,904 for fiscal year 2006 performance, to be paid in March 2007. The bonus earned by Mr. Maitre for fiscal 2006 is prorated per the seven-month period of fiscal 2006 during which Mr. Maitre served as an executive officer.

(5) As a condition of providing part-time transitional services to the company through December 31, 2006, Mr. Cohen received $100,000 paid in two equal installments on July 7, 2006 and September 23, 2006; Mr. Cohen also received a performance bonus of $35,439 for fiscal year 2006, paid in 2007 which was prorated per the five-month period of 2006 during which Mr. Cohen was an executive officer and provided services to the Company.

(6) The 2006 amount represents $3,758 in contributions to Mr. Rauscher’s life insurance premiums, $6,600 to the Company’s 401(k) Retirement Savings Plan, $14,652 in compensation allowances and $149,230 related to income realized for payment in full of all principal outstanding under the March 28, 2001 note described more fully in section entitled “Employment Agreements”. In accordance with the terms of the loan, Mr. Rauscher transferred 3,000 shares to the company as payment in full under such loan and paid the company an amount equal to $41,334 for interest due to the company pursuant to such loan.

(7) The 2006 amount represents $450 in contributions to Mr. Colangelo’s life insurance premiums, and $6,600 to the Company’s 401(k) Retirement Savings Plan.

(8) This amount represents $22,022 in relocation costs.

(9) This amount represents $6,600 to the Company’s 401(k) Retirement Savings Plan and $23,200 in relocation costs.

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Grants of Plan-Based Awards for 2006

The following table sets forth certain information with respect to the options granted during or for the fiscal year ended December 31, 2006 to each of our named executive officers.

Name and Principal Position	Grant Date	All Other Stock Awards: Number of Shares of Stock or Units (1) (#)		All Other Option Awards: Number of Securities Underlying Options (2) (#)		Exercise or Base Price of Option Awards (3) ($)		Grant Date Fair Value of Stock and Option Awards (4) ($)
Steven M. Rauscher Chief Executive Officer and President	02/27/06	12,500		31,251		$	15.40	$	450,632
Dominick Colangelo Executive Vice President—Corporate Development and Operations	02/27/06	10,000		25,000			15.40		360,500
Philippe Maitre Sr. Vice President and Chief Financial Officer	05/22/06	8,750	(5)	21,875	(6)		13.64		211,383
Stephen Cohen Former Sr. Vice President and Chief Financial Officer	02/27/06	5,000		12,501			15.40		180,257

(1) Awards consist of restricted stock awards that, unless otherwise noted below, vest 50% per year for two years from date of grant. Number of shares for stock awards and options have been adjusted to take into account the effect of the one-for-eight reverse stock split consummated in November of 2006.

(2) Unless otherwise noted below, all options vest in eight equal quarterly installments beginning 90 days form the grant date.

(3) The exercise price of the stock option awards is equal to the average of the high and low sales price of the common stock on the day of grant as reported by The NASDAQ Global Market, as adjusted to take into account the effect of the one-for-eight reverse stock split consummated in November of 2006.

(4) Refer to Note 2(s), “Stock-Based Compensation”, in the Notes to Consolidated Financial Statements for the assumptions used to determine the valuation of our equity awards.

(5) Award consists of restricted stock that vest in four equal annual installments on the anniversary of his commencement of employment.

(6) Options vest in four equal annual installments on the anniversary of his commencement of employment.

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Outstanding Equity Awards Value at Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options previously awarded to the named executive officers at the fiscal year end December 31, 2006. The share numbers in the table below have been adjusted to take into account the effect of the one-for-eight reverse stock split consummated in November of 2006.

	Option Awards							Stock Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price		Option Expiration Date (1)	Number of Shares or Units of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Steven M. Rauscher Chief Executive Officer and President	34,037	—		—	$	115.50	10/25/2010	—			—	—	—
	30,000	—		—	$	115.50	10/25/2010	—			—	—	—
	3,463	—		—	$	115.50	10/25/2010	—			—	—	—
	1,953	—		—	$	13.36	3/6/2012	—			—	—	—
	3,751	—		—	$	13.36	3/6/2012	—			—	—	—
	3,750	—		—	$	13.36	3/6/2012	—			—	—	—
	2,500	—		—	$	8.80	10/9/2012	—			—	—	—
	1,667	—		—	$	8.80	10/9/2012	—			—	—	—
	834	—		—	$	8.80	10/9/2012	—			—	—	—
	8,251	—		—	$	3.072	3/11/2013	—			—	—	—
	1,172	1,172	(2)	—	$	10.24	3/11/2013	—			—	—	—
	2,344	—		—	$	10.24	3/11/2013	—			—	—	—
	1,069	—		—	$	15.42	2/3/2014	—			—	—	—
	271	2,107	(3)	—	$	41.76	4/12/2014	—			—	—	—
	51,812	—		—	$	41.76	4/12/2014	—			—	—	—
	5,209	3,102	(3)	—	$	41.76	4/12/2014	—			—	—	—
	1	—		—	$	21.80	3/6/2015	—			—	—	—
	9,285	—		—	$	21.80	3/6/2015	—			—	—	—
	1	4,166	(3)	—	$	21.80	3/6/2015	—			—	—	—
	29,167	16,667	(3)	—	$	21.80	3/6/2015	—			—	—	—
	1,068	—		—	$	18.20	12/20/2015	—			—	—	—
	1	595	(4)	—	$	15.40	2/26/2016	—			—	—	—
	11,719	18,936	(4)	—	$	15.40	2/26/2016	—			—	—	—
	—	—		—		—	—	6,250	(5)	$	32,875	—	—
Dominick Colangelo Executive Vice President	3,477 4,336	10,431 13,006	(2) (2)	—   —	$ $	28.76 28.76	1/2/2015 1/2/2015	—   —			—   —	—   —	—   —
	9,375	15,625	(4)	—	$	15.40	2/26/2016	—			—	—	—
	—	—		—		—	—	5,000	(5)	$	26,300	—	—
Philippe Maitre Sr. Vice President and Chief Financial Officer	—   —	21,875 —	(2)	—   —	$	13.64 —	05/21/2016 —	—   8,750		$	—   46,025	—   —	—   —

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	Option Awards						Stock Awards
Name and Principal Position	Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price		Option Expiration Date (1)	Number of Shares or Units of Stock That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Stephen Cohen Former Sr. Vice President and Chief Financial Officer	4,688	—	—	$	65.62	3/31/2007	—	—	—	—
	1,408	—	—	$	65.62	3/31/2007	—	—	—	—
	3,280	—	—	$	65.62	3/31/2007	—	—	—	—
	2,396	—	—	$	19.68	3/31/2007	—	—	—	—
	4,375	—	—	$	81.75	3/31/2007	—	—	—	—
	817	—	—	$	13.84	3/31/2007	—	—	—	—
	1,000	—	—	$	45.16	3/31/2007	—	—	—	—
	3,000	—	—	$	45.16	3/31/2007	—	—	—	—
	1,938	—	—	$	8.80	3/31/2007	—	—	—	—
	1,563	—	—	$	8.80	3/31/2007	—	—	—	—
	2,769	—	—	$	3.07	3/31/2007	—	—	—	—
	1,454	—	—	$	10.24	3/31/2007	—	—	—	—
	766	—	—	$	15.42	3/31/2007	—	—	—	—
	1,314	—	—	$	41.76	12/31/2008	—	—	—	—
	11,187	—	—	$	41.76	12/31/2008	—	—	—	—
	4,430	—	—	$	21.80	12/31/2008	—	—	—	—
	6,444	—	—	$	21.80	12/31/2008	—	—	—	—
	18,557	—	—	$	21.80	12/31/2008	—	—	—	—
	766	—	—	$	18.20	3/31/2007	—	—	—	—
	4,688	—	—	$	15.40	3/31/2007	—	—	—	—

(1) The expiration date of each option occurs ten years after the date of grant of each option.

(2) Options become exercisable in four equal annual installments from the date of grant.

(3) Options become exercisable in twelve equal quarterly installments beginning 90 days from the date of grant.

(4) Options become exercisable in eight equal quarterly installments beginning 90 days from the date of grant.

(5) Restricted stock vests in two equal installments on November 30, 2006 and November 30, 2007, respectively.

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Options Exercised and Stock Vested

	Stock Awards
Name	Number of Shares Acquired on Vesting (#)(1)	Value Realized on Vesting ($)
Steven Rauscher	6,250	$	36,320
Dominick Colangelo	5,000	$	29,056
Philippe Maitre	—		—
Stephen Cohen	2,500	$	38,500

(1) Number of shares have been adjusted to take into account the effect of the one-for-eight reverse stock split consummated in November of 2006.

Employment Agreements

Steven M. Rauscher, President and Chief Executive Officer

Steven M. Rauscher, President and Chief Executive Officer, has an employment agreement with us, that commenced on October 26, 2000. Mr. Rauscher’s current base salary is $432,600 per year. The agreement entitles Mr. Rauscher to receive an annual incentive bonus of up to 60% of his base salary based on our achievement of enhanced share value and certain operating and financial goals to be determined by the Board of Directors. Upon hiring, Mr. Rauscher was awarded stock options to purchase 67,500 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) at an exercise price of $115.50 per share (as adjusted pursuant to the one-for-eight reverse stock split), the fair market value of the common stock on the date of grant. These options are fully vested. In connection with his commencement of employment with us in 2001, Mr. Rauscher was also awarded 3,000 shares of restricted common stock share (as adjusted pursuant to the one-for-eight reverse stock split). On March 28, 2001, we loaned Mr. Rauscher $163,000 to allow him to pay income tax liabilities associated with the grant of the 3,000 restricted shares. The loan became due and payable on December 31, 2006. The principal amount of the loan was non-recourse as it was secured only by the 3,000 shares of restricted stock, while the interest component of the loan was full recourse. On December 31, 2006, in accordance with the terms of the loan, Mr. Rauscher transferred the 3,000 shares to the company as payment in full of all principal outstanding under such loan and paid us an amount equal to $41,334 for interest due to us pursuant to such loan.

In the event that Mr. Rauscher’s employment is terminated by us for reasons other than for cause, or he terminates it with good reason (as defined), the agreement provides for the continuation of all compensation and benefits for a period of up to 12 months, or until such time as he finds comparable employment, whichever occurs first. Also, if, within two years following a change of control (as defined) by us, Mr. Rauscher’s employment is terminated other than for cause, or he experiences a material reduction in responsibilities or compensation, or is required to relocate out of the greater Boston area, he will receive a lump sum severance payment in an amount equal to two times the sum of his base salary and annual target incentive bonus, as well as the pro-rated portion of his target bonus for the year in which his employment is terminated, and any remaining unvested options and restricted shares will immediately and fully vest and all his options will remain exercisable for the shorter of two years from his date of termination or the expiration date of the option. Mr. Rauscher is also entitled to continue to participate in company’s group health and dental plans for a period of 24 months following termination and the company is obligated to continue to contribute to the premium cost of that coverage for such period. Mr. Rauscher’s employment agreement also provides that he will be entitled to receive a payment to cover any excise tax payable with respect to such severance payments as a result of Section 280G of the U.S. tax code.

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Dominick Colangelo, Executive Vice President, Corporate Development and Operations

Dominick (Nick) Colangelo, Esq., Executive Vice President, Corporate Development and Operations, has an employment agreement with us, which commenced on January 1, 2005. Mr. Colangelo’s current base salary is $340,000 per year. The agreement, as amended, entitles Mr. Colangelo to receive an annual incentive bonus of up to 50% of his salary based on his performance and that of the Company against goals to be determined by the Board of Directors annually after consultation with Mr. Colangelo. Upon hiring, Mr. Colangelo received a cash signing bonus of $100,000 and was awarded stock options to purchase 31,250 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) at $28.76 per share (as adjusted pursuant to the one-for-eight reverse stock split), the fair market value of the common stock on the date of grant, which options vest in four equal annual installments on the anniversary of his commencement of employment.

In the event that Mr. Colangelo’s employment is terminated by us for reasons other than for cause, or he terminates it with good reason (as defined), the agreement provides for the continuation of all compensation and benefits for a period of up to nine months, or until such time as he finds comparable employment, whichever occurs first. Also, if, within two years following a change of control (as defined) of us, Mr. Colangelo’s employment is terminated other than for cause, or he experiences a material reduction in responsibilities or compensation at the surviving company, or he is required to relocate out of the greater Boston area, he will receive a lump sum severance payment equal to one and a half times the sum of his base salary and annual target incentive bonus, as well as the pro-rated portion of his target bonus for the year in which his employment is terminated and any remaining unvested restricted shares and options will immediately and fully vest and all his options will remain exercisable for the shorter of two years from his date of termination or the expiration date of the option. Mr. Colangelo is also entitled to continue to participate in company’s group health and dental plans for a period of 18 months following termination and the company is obligated to continue to contribute to the premium cost of that coverage for such period. Mr. Colangelo’s employment agreement also provides that he will be entitled to receive a payment to cover any excise tax payable on such severance payments as a result of Section 280G of the U.S. tax code.

Philippe Maitre, Senior Vice President and Chief Financial Officer

Philippe Maitre, Senior Vice President and Chief Financial Officer, has an employment agreement with us, which commenced on May 22, 2006. Mr. Maitre’s current base salary is $270,000 per year. The agreement entitles Mr. Maitre to receive an annual incentive bonus of up to 40% of his base salary based on his performance and that of the company against goals to be determined by the Board of Directors annually after consultation with Mr. Maitre. Upon hiring, Mr. Maitre received a cash signing bonus of $25,000 and was awarded (i) stock options to purchase 21,875 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) at an exercise price of $13.64 per share (as adjusted pursuant to the one-for-eight reverse stock split), the fair market value of the common stock on the date of grant, which options vests in four equal annual installments on the anniversary of his commencement of employment, and (ii) 8,750 shares of restricted common stock (as adjusted pursuant to the one-for-eight reverse stock split), which stock vest in four equal annual installments on the anniversary of his commencement of employment. We also agreed to reimburse Mr. Maitre for reasonable relocation expenses up to $125,000.

In the event that Mr. Maitre’s employment is terminated by us for reasons other than for cause, or he terminates it with good reason (as defined), the agreement provides for the continuation of all compensation and benefits for a period of up to nine months, or until such time as he finds comparable employment, whichever occurs first. Also, if, within two years following a change of control (as defined) of us, Mr. Maitre’s employment is terminated other than for cause, or he experiences a material reduction in responsibilities at the surviving company, he will receive a lump sum severance payment equal to one and a half times the sum of his base salary and annual target incentive bonus, as well as the pro-rated portion of his target bonus for the year in which his employment is terminated and any remaining unvested restricted shares and options will immediately and fully

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vest and all his options will remain exercisable for the shorter of two years from his date of termination or the expiration date of the option. Mr. Maitre is also entitled to continue to participate in our group health and dental plans for a period of 18 months following termination and the company is obligated to continue to contribute to the premium cost of that coverage for such period.

Stephen Cohen, Former Senior Vice President and Chief Financial Officer

Stephen Cohen was the Senior Vice President and Chief Financial Officer. He retired from this position in May 2006; however, he continued to work for us on a full-time basis through June 2006 and on a part-time basis through December of 2006. Mr. Cohen had an employment agreement with us, which terminated on June 30, 2006, which entitled Mr. Cohen to receive an annual incentive bonus of up to 40% of his base salary, which was $265,000 at such time, based on his performance and that of the Company against goals to be determined by the Board of Directors annually after consultation with Mr. Cohen. Mr. Cohen received a performance bonus of $35,439 for fiscal year 2006, which was prorated for the five month period of 2006 during which Mr. Cohen was an executive officer and provided services to us. Mr. Cohen received $100,000 for his provision of part-time transitional services to the company from July 2006 through December 2006. Upon hiring, Mr. Cohen was awarded stock options to purchase 9,376 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) at an exercise price of $65.62 per share (as adjusted pursuant to the one-for-eight reverse stock split), the fair market value of the common stock on the date of grant, which options vested in four equal annual installments on the anniversary of his commencement of employment. In lieu of a cash signing bonus, Mr. Cohen was awarded additional options to purchase 2,396 shares of stock (as adjusted pursuant to the one-for-eight reverse stock split) at an exercise price of $19.68 per share (as adjusted pursuant to the one-for-eight reverse stock split), representing thirty percent of the fair market value of the common stock on the date of grant, which options vested in two equal installments on the anniversary of his employment.

Potential Payments Upon Change of Control Under Employment Agreements

The following table summarizes the potential payments to each named executive officer assuming that one of the following events occurs. The table assumes that the event occurred on December 29, 2006, the last business day of our fiscal year. We have assumed a price per share of our common stock of $5.06, which was the closing price of our common stock on December 29, 2006.

Name	Termination Other Than “For Cause” or Resignation With Good Reason		Termination Other Than “For Cause” Following a Change in Control
Steven Rauscher President and Chief Executive Officer	$707,026	(1)	$2,272,572	(2)
Dominick Colangelo Executive Vice President, Corporate Development & Operations	392,601	(3)	999,264	(4)
Philippe Maitre Senior Vice President and Chief Financial Officer	294,650	(5)	652,300	(6)

(1) Includes payment of the following: $432,600 for the continuation of salary, $259,560 for his target bonus and $14,866 for continuation of benefits for a period of 12 months following such termination, or until Mr. Rauscher finds comparable employment. We have assumed payment for the full 12 months.

(2) Includes payment of the following: $1,384,320 in a lump sum payment for salary and bonus, equivalent to two times his base salary for fiscal year 2006 plus two times his annualized target incentive bonus; $259,560 for the pro-rated portion of his target bonus for the year in which he was terminated; $54,180 for benefits, the value of which is based upon the premiums in effect on December 29, 2006; $52,995 for accelerated

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vesting of equity awards, based on the fair value of unvested stock options as of December 29, 2006 in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-based Payments”; and, $521,517 for any excise tax payable with respect to such severance payments in accordance with Section 280G of the U.S. tax code. The gross-up figures assume a December 31, 2006 change in control and termination date. For purposes of these figures, the following are included as parachute payments: cash severance payable upon the termination in connection with the change of control, additional pro-rated bonus amounts payable upon the termination, and the value of the acceleration of outstanding equity awards, all determined in accordance with applicable tax regulations. Any earned but unpaid salary or bonus amounts due following the termination are not treated as parachute payments. We have assumed that all outstanding options are cashed out in the assumed transaction for an amount equal to the excess, if any, of $5.06 (the closing price of our common stock on December 29, 2006, the last business day of the year) over the exercise per share under the option, multiplied by the number of shares subject to the option. Finally, these figures assume that none of the parachute payments will be discounted as attributable to reasonable compensation and no value is attributed to the executive executing a non-competition agreement in connection with the assumed termination of employment.

(3) Includes payment of $255,000 for the continuation of salary, $127,500 for his target bonus and $10,101 for continuation of benefits for a period of nine months following such termination, or until Mr. Colangelo finds comparable employment. We have assumed payment for the full nine months.

(4) Includes payment of the following: $765,000 in a lump sum payment for salary and bonus, equivalent to one and a half times the sum of his base salary for fiscal year 2006 plus his annualized target incentive bonus; $170,000 for the pro-rated portion of his target bonus for the year in which he was terminated; $20,202 for benefits, the value of which is based upon the premiums in effect on December 29, 2006; and $44,062 for accelerated vesting of equity awards, based on the fair value of unvested stock options as of December 29, 2006 in accordance with the provisions of SFAS No. 123R, “Share-based Payments”.

(5) Includes payment of $202,500 for the continuation of salary, $81,000 for his target bonus and $11,150 for continuation of benefits for a period of nine months following such termination, or until Mr. Maitre finds comparable employment. We have assumed payment for the full nine months.

(6) Includes payment of the following: $567,000 in a lump sum payment for salary and bonus, equivalent to one and a half times the sum of his base salary for fiscal year 2006 plus his annualized target incentive bonus; $63,000 for the pro-rated portion of his target bonus for the year in which he was terminated; $22,300 for benefits, the value of which is based upon the premiums in effect on December 29, 2006; and, $30,625 for accelerated vesting of equity awards, based on the fair value of unvested stock options as of December 29, 2006 in accordance with the provisions of SFAS No. 123R, “Share-based Payments”.

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DIRECTOR COMPENSATION

Name(1)	Fees Earned or Paid in Cash ($)(2)	Stock Awards ($)		Option Awards ($) (3)(4)(5)		All Other Compensation ($)		Total ($)
G. Brown	500	890		887	(6)	—		2,277
L. Evnin	26,000	—		—		—		26,000
W. Flamenbaum	0	100		103	(7)	—		203
R. Hennessey	41,500	654		620		—		42,774
P. Kirby	78,375	654	(8)	620	(8)	—		79,649
W. Mattson	21,000	1,309		1,240		—		23,549
G. Patou	55,125	654		620		117,413	(9)	173,812
W. Reardon	70,000	654		620		—		71,274
N. Riedel	68,500	654		620		—		69,744
D. Singer	6,750	—		—		—		6,750
D. Stone	82,709	654		620		—		83,983
J. Voris	62,813	654		620		—		64,082

(1) Mr. Steven Rauscher, a director of our company, has been omitted from this table since he receives no compensation for serving on our board.

(2) Amounts consist of the fees paid to directors described below under the heading “Overview of Non-Employee Director Compensation.”

(3) Refer to Note 2(s), “Stock-Based Compensation”, in the Notes to Consolidated Financial Statements for assumptions used to determine the valuation of our equity awards.

(4) Unless otherwise noted below, the grant date fair value of each stock option awarded to Non-Employee Directors is $5.43 (as adjusted to take into account the 1-for-8 reverse stock split effectuated on November 15, 2006).

(5) The following are the aggregate number of option and restricted stock awards outstanding that have been granted to each of our non-employee directors as of December 31, 2006, the last day of the 2006 fiscal year was as follows: G. Brown 2,100; W. Flamenbaum 2,100; R. Hennessey 10,383; P. Kirby 3,715; W. Mattson 2,100; G. Patou 5,675; W. Reardon 8,989; N. Reidel 19,800; D. Stone 18,520; and J. Voris 5,675.

(6) The grant date fair value of each stock option is $5.93 (as adjusted to take into account the 1-for-8 reverse stock split effectuated November 15, 2006).

(7) The grant date fair value of each stock option is $3.72 (as adjusted to take into account the 1-for-8 reverse stock split effectuated November 15, 2006).

(8) Such awards were issued to P. Kirby under the company’s 2001 Incentive Plan in 2006, but did not vest prior to her December 6, 2006 resignation from the board.

(9) Consulting fees paid to G. Patou, for consulting services performed, including expanded services related to the Advisory Committee meeting convened by the FDA in connection with Oscient’s sNDA filing for the ABS indication.

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Overview of Non-Employee Director Compensation

We review the level of compensation of our non-employee directors periodically to ensure that remuneration elements remain competitive. We have historically obtained data from a number of different sources including:

• publicly available data describing director compensation in peer companies;

• survey data collected by our human resources department; and

• information obtained directly from other companies.

Pursuant to the 2001 Incentive Plan, each non-employee director receives an annual retainer of $40,000 and the chairman of the Board of Directors receives an additional $20,000. Additional retainers are paid for membership on the board’s committees. Members of the Audit Committee receive an annual retainer of $15,000, while the chairman receives $30,000. Members of the Compensation Committee receive an annual retainer of $10,000, while the chairman receives $20,000. Members of the Nominating and Corporate Governance Committee, including the chairman, receive an annual retainer of $5,000. Members of the Compliance Committee receive $10,000, while the chairman receives $15,000.

In addition to the annual retainers, non-employee directors were also granted (i) upon their initial election to the board, options to receive an aggregate of 1,500 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) that vest equally over three years with an exercise price equal to the fair market value at date of grant, and a restricted stock award of 600 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) that vests equally over three years; and (ii) upon their re-election to the Board, options to receive an aggregate of 750 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) that vest equally over two years with an exercise price equal to the fair market value at date of grant, and a restricted stock award of 300 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split), that vests equally over two years with an exercise price equal to the fair market value at date of grant. Upon a change of control, if within two years following such event, a director is either not nominated to serve as a director or is not elected by the shareholders to serve as a director, all of such director’s unvested options become exercisable upon such director ceasing to be a director of the Company and all of the director’s options remain exercisable until the earlier of two years from the date such director ceases to be a director and the final exercise date of such option.

Directors who are also our employees do not receive cash or equity compensation for service on the board in addition to compensation payable for their service as employees of Oscient.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information regarding the beneficial ownership of our common stock as of March 1, 2007 by:

• each person known by us to beneficially own more than 5% of our common stock;

• each of our directors and named executive officers; and

• all of our directors and executive officers as a group.

The percentages shown are based on shares of Company common stock outstanding as of March 1, 2007. Unless otherwise indicated, the address for each stockholder is c/o Oscient Pharmaceuticals Corporation, 1000 Winter Street, Suite 2200, Waltham, Massachusetts 02451. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of capital stock listed as owned by such person or entity.

Beneficial ownership and percentage ownership are determined in accordance with the rules and regulations of the SEC and include voting or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options and/or warrants held by that person that are currently exercisable or exercisable within 60 days of the date hereof are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following table or pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name. The percentage of beneficial ownership is based on 13,642,361 shares of common stock outstanding on an as-converted basis on March 1, 2007.

	Amount and Nature of Beneficial Ownership		Percent of Class
5% Stockholders:
Paul Royalty Fund Holdings II	1,676,908	(1)	12.0	%
Ashford Capital Management, Inc.	1,509,763	(2)	11.0	%
Abingworth Management Limited	751,853	(3)	5.4	%
Directors and Named Executive Officers:
Walter Flamenbaum	1,677,508	(4)	12.0	%
Steven M. Rauscher	238,896	(5)	1.7	%
Dominick Colangelo	38,361	(6)	*
Norbert G. Riedel	18,490	(7)	*
David K. Stone	18,020	(8)	*
Gary Patou	16,125	(9)	*
Robert J. Hennessey	14,691	(10)	*
Philippe M. Maitre	10,566	(11)	*
William S. Reardon	8,892	(12)	*
John E. Voris	2,884	(13)	*
Gregory B. Brown	600	(14)	*
William R. Mattson	600	(15)	*
All directors and officers as a group (12 persons)	2,039,383	(16)	14.4	%

* Represents less than 1% of the class.

(1) Includes 1,388,889 restricted shares directly held by Paul Royalty Fund Holdings II (“PRFH”) and indirectly held by Paul Royalty Fund II, LP (“PRF”), Paul Royalty Associates II, LP (“PRA”), Paul Royalty

84

Management, LLC (“PRM”) and Paul Capital Advisors, LLC (“PCA”). PRFH directly owns 1,388,889 shares of common stock. PRF and PRA may be deemed to indirectly own 1,388,889 shares of common stock held by PRFH because PRF and PRA are the general partners of PRFH. PRM may be deemed to indirectly own the shares because PRM is the general partner of PRF and PRA. As manager of PRA, PCA exercises voting and dispositive power over investments held by PRA. Includes warrants exercisable for 288,019 shares of common stock held by PRFH. PRF and PRA may be deemed to own the warrants held by PRFH because PRF and PRA are the general partners of PRFH. PRM may be deemed to own the warrants because PRM is the general partner of PRF and PRA. As manager of PRA, PCA exercises voting and dispositive power over investments held by PRA. The address of this shareholder is 50 California Street, Suite 3000, San Francisco, CA 94111. This information is based on information contained in a joint Schedule 13G filed on August 28, 2006 by PRFH.

(2) The shares reported by Ashford Capital Management, Inc. (“Ashford Capital”), a registered investment advisor, are held in separate individual client accounts, two separate limited partnerships and eleven commingled funds. Includes 93,750 shares issuable upon exercise of warrants. The address of this shareholder is P.O. Box 4172, Wilmington, DE 19807. This information is based on the Schedule 13G filed on February 13, 2007 by Ashford Capital.

(3) Includes 207,292 shares held by Abingworth Bioequities Master Fund LTD, 186,742 shares held by Abingworth Bioventures IV LP, 1,297 shares held by Abingworth Bioventures III Executives LP, 29,677 shares held by Abingworth Bioventures III C LP, 49,661 shares held by Abingworth Bioventures III B LP, 81,283 shares held by Abingworth Bioventures III A LP and 1,602 shares held by Abingworth Bioventures IV Executives LP. Includes 56,671 shares issuable upon exercise of warrants held by Abingworth Bioequities Master Fund LTD, 56,189 shares issuable upon exercise of warrants held by Abingworth Bioventures IV LP, 648 shares issuable upon exercise of warrants held by Abingworth Bioventures III Executives LP, 14,838 shares issuable upon exercise of warrants held by Abingworth Bioventures III C LP, 24,830 shares issuable upon exercise of warrants held by Abingworth Bioventures III B LP, 40,641 shares issuable upon exercise of warrants held by Abingworth Bioventures III A LP and 482 shares issuable upon exercise of warrants held by Abingworth Bioventures IV Executives LP. The investment manager of these securities is Abingworth Management Limited, 38 Jermyn Street, London, SW1Y 6DN U.K. This information is based on information contained in a joint Schedule 13G filed on February 13, 2007 by Abingworth Management Limited.

(4) Includes 1,388,889 restricted shares directly held by Paul Royalty Fund Holdings II (“PRFH”) and indirectly held by Paul Royalty Fund II, LP (“PRF”), Paul Royalty Associates II, LP (“PRA”), Paul Royalty Management, LLC (“PRM”) and Paul Capital Advisors, LLC (“PCA”). PRFH directly owns 1,388,889 shares of common stock. PRF and PRA may be deemed to indirectly own 1,388,889 shares of common stock held by PRFH because PRF and PRA are the general partners of PRFH. PRM may be deemed to indirectly own the shares because PRM is the general partner of PRF and PRA. As manager of PRA, PCA exercises voting and dispositive power over investments held by PRA. Includes warrants exercisable for 288,019 shares of common stock held by PRFH. PRF and PRA may be deemed to own the warrants held by PRFH because PRF and PRA are the general partners of PRFH. PRM may be deemed to own the warrants because PRM is the general partner of PRF and PRA. As manager of PRA, PCA exercises voting and dispositive power over investments held by PRA. Dr. Flamenbaum is a member of PCA and he serves on the Board of Managers of PCA. Includes 600 restricted shares.

(5) Includes (i) 224,029 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 6,250 restricted shares.

(6) Includes (i) 28,126 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 5,000 restricted shares.

(7) Includes (i) 17,750 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

(8) Includes (i) 16,470 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

(9) Includes (i) 2,584 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

85

(10) Includes (i) 8,333 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

(11) Includes 8,750 restricted shares.

(12) Includes (i) 6,939 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

(13) Includes (i) 2,584 shares of common stock, which shares are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007 and (ii) 300 restricted shares.

(14) All such shares are restricted shares.

(15) All shares are restricted shares.

(16) Includes (i) 588,584 shares of common stock that are issuable upon the exercise of vested options or options that are to become vested within 60 days following March 1, 2007, (ii) 23,600 restricted shares held by officers and directors, (iii) warrants exercisable for 288,019 shares of common stock held by PRFH and (iv) 1,388,889 restricted shares held by PRFH.

86

Item 13. Certain Relationships and Related Transactions and Director Independence

In accordance with our Audit Committee charter, our Audit Committee is responsible for reviewing and approving the terms and conditions of all related party transactions. Although we have not entered into any financial transactions with any immediate family member of a director or executive officer of our Company, if we were to do so, any such material financial transaction would need to be approved by our Audit Committee prior to our Company entering into such transaction. A report is made to our audit committee annually disclosing all related parties that are employed by us and related parties that are employed by other companies with whom we had a material relationship during that year, if any. Our Audit Committee also reviews and approves our proxy statement and the information contained therein. We have determined that, in 2006, we had the following reportable related transactions described below.

On February 6, 2004, we completed our merger with GeneSoft Pharmaceuticals, Inc. David Singer and Luke Evnin, who served on our Board of Directors through June of 2006 and Gary Patou, currently serving on the Board of Directors, served as directors and/or officers of Genesoft prior to the merger. Pursuant to the terms of the merger agreement, we provided, with respect to Mr. Singer and Mr. Evnin and continue to provide, with respect to Mr. Patou, a directors’ and officers’ liability insurance policy that covers the acts and omissions of Messrs. Singer, Patou and Evnin in their capacities as directors and officers of Genesoft for a period of six years from the closing date of the merger.

Pursuant to a consulting agreement with the Company, Dr. Patou provided periodic consulting services to the Company, including expanded services related to the Advisory Committee meeting convened by the FDA in connection with Oscient’s sNDA filing for the ABS indication. Dr. Patou received a total of approximately $117,000 for such services in 2006.

To finance the acquisition of ANTARA capsules in August 2006, we entered into several financing arrangements with Paul Royalty Fund Holdings II, LP, an affiliate of Paul Capital Partners (Paul Capital), in consideration for an aggregate amount of $70 million. In connection with such financing arrangements, we agreed to elect one person designated by Paul Capital to our Board following the closing in August of 2006 and to continue to nominate one person designated by Paul Capital for election to our Board by our shareholders. Initially, Greg Brown was Paul Capital’s representative and currently Walter Flamenbaum acts as the Paul Capital designee to our Board. In connection with such financing transaction, we entered into the Revenue Interests Assignment Agreement pursuant to which we sold to Paul Capital the right to receive specified royalties on the net sales in the United States (and the net sales of their respective affiliates and licensees) of ANTARA capsules and FACTIVE tablets until December 31, 2016. Further, our wholly owned subsidiary, Guardian II, entered into a Note Purchase Agreement with Paul Capital pursuant to which Guardian II issued and sold a $20,000,000 aggregate principal amount of 12% senior secured note due on the fourth anniversary of the closing date, subject to Guardian II’s option to extend the maturity to the sixth anniversary of the closing date, provided (i) there are no defaults under the note at the time, and (ii) we issue to Paul Capital, at the time of the exercise of such option, a warrant for a number of shares of common stock equal to 10% of the principal balance plus accrued interest divided by $6.94, with an exercise price of $6.94 per share. In connection with such financial agreements, Guardian II and Paul Capital entered into a Security Agreement under which Guardian II granted to Paul Capital a security interest in and to substantially all assets owned by Guardian II (including rights to the ANTARA products) in order to secure its performance under each of the agreements with Paul Capital. As part of the financing, we and Paul Capital also entered into a Common Stock and Warrant Purchase Agreement, pursuant to which, in exchange for $10 million, Oscient sold to Paul Capital 1,388,889 shares of the common stock (as adjusted pursuant to the one-for-eight reverse stock split) at a price of $7.20 per share (as adjusted pursuant to the one-for-eight reverse stock split) and issued Paul Capital a warrant to purchase 288,019 shares of common stock (as adjusted pursuant to the one-for-eight reverse stock split) at an exercise price of $6.94 per share (as adjusted pursuant to the one-for-eight reverse stock split). The Warrant is exercisable for seven years from the date of closing.

The Board of Directors has determined that each of Messrs. Reardon, Riedel, Voris, Stone, Mattson and Hennessey is independent within the meaning of Rule 4200 of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards as currently in effect and on the date of our annual meeting of shareholders.

87

Item 14. Principal Accountant Fees and Services

Pursuant to General Instruction G(3) to Form 10-K, the information with respect to this item may be found under the caption “Principal Accountant Fees and Services” in the Proxy Statement for our 2007 Annual Meeting of shareholders. Such information is incorporated herein by reference.

88

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) (1) Financial Statements—See “Index to Consolidated Financial Statements” appearing on page F-1.

(2) Schedule 2

Valuation and Qualifying Accounts

December 31, 2006

(in thousands)

	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Product Sales		Deductions			Balance at End of Period
Year Ended December 31, 2006
Deducted from assets accounts:
Allowance for doubtful accounts	$	—	$	349	$	—	$	—	(1)	$	349
Reserve for cash discounts	$	50	$	—	$	953	$	801	(2)	$	202
Total	$	50	$	349	$	953	$	801		$	551
Year Ended December 31, 2005
Deducted from assets accounts:
Allowance for doubtful accounts	$	—	$	—	$	—	$	—	(1)	$	—
Reserve for cash discounts	$	79	$	—	$	466	$	495	(2)	$	50
Total	$	79	$	—	$	466	$	495		$	50
Year Ended December 31, 2004
Deducted from assets accounts:
Allowance for doubtful accounts	$	—	$	—	$	—	$	—	(1)	$	—
Reserve for cash discounts	$	—	$	—	$	118	$	39	(2)	$	79
Total	$	—	$	—	$	118	$	39		$	79

(1) Uncollectible accounts written off, net of recoveries.

(2) Discounts taken by customers during year.

(3) List of Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger and Reorganization dated November 17, 2003(11)
2.2	Asset Purchase Agreement by and among Reliant Pharmaceuticals, Inc., Guardian II Acquisition Corporation and Oscient Pharmaceuticals Corporation dated July 21, 2006 *(24)
3.1	Articles of Organization (as amended through November 15, 2006)‡
3.2	By-Laws (as amended to date)(19)
4.1	Form of Purchase Warrant issued to Smithfield Fiduciary LLC and the Tail Wind Fund Ltd.(9)
4.2	Form of Common Stock Purchase Warrant dated as of September 29, 2003(10)
4.3	Registration Rights Agreement dated September 29, 2003(10)
4.4	Registration Rights Agreement dated November 17, 2003, by and between Genome Therapeutics Corp. and certain creditors of GeneSoft Pharmaceuticals, Inc.(12)
4.5	Form of Indenture dated as of May 10, 2004(17)

89

Exhibit No.	Description
4.6	Pledge Agreement dated as of May 10, 2004(17)
4.7	Registration Rights Agreement dated May 10, 2004(17)
4.8	Form of Indenture dated as of May 10, 2004(17)
4.9	Pledge Agreement dated May 10, 2004(17)
4.10	Registration Rights Agreement dated May 10, 2004(17)
4.11	Form of Common Stock Purchase Warrant dated April 5, 2006(20)
4.12	Form of Common Stock Purchase Warrant dated August 18, 2006‡
4.13	Registration Rights Agreement dated August 18, 2006‡
10.1	Incentive Stock Option Plan and Form of Stock Option Certificate(1)
10.2	Genome Therapeutics Corp. (f/k/a Collaborative Research) Incentive Savings Plan(2)
10.3	Amendment dated November 4, 1986 to the Genome Therapeutics Corp. (f/k/a Collaborative Research) Incentive Savings Plan dated March 1, 1985(3)
10.4	1991 Stock Option Plan and Form of Stock Option Certificate(4)
10.5	Lease dated June 23, 2004 relating to certain property in Waltham, Massachusetts‡
10.6	1993 Stock Option Plan and Form of Stock Option Certificate(5)
10.7	1997 Directors’ Deferred Stock Plan(6)
10.8	1997 Stock Option Plan(6)
10.9	Amended and Restated 2001 Incentive Plan(23)
10.10	Stock Option Agreements with Steven M. Rauscher(7)
10.11	Employment Letter with Steven M. Rauscher(8)
10.12	Employment Letter with Stephen Cohen(8)
10.13	Amendment, Redemption and Exchange Agreement between the Company and The Tail Wind Fund, dated June 4, 2003(9)
10.14	Note Amendment and Exchange Agreement dated November 17, 2003, by and between Genome Therapeutics Corp. and certain creditors of GeneSoft Pharmaceuticals, Inc.(12)
10.15	Amendment to Employment Agreement dated as February 5, 2004 between Genome Therapeutics Corp. and Steven M. Rauscher(13)
10.16	Amendment to Employment Agreement dated February 5, 2004 between Genome Therapeutics Corp. and Stephen Cohen(13)
10.17	Employment letter with Gary Patou, M.D. dated January 11, 2004(13)
10.18	License and Option Agreement dated October 22, 2002 between Genesoft Pharmaceuticals, Inc. and LG Life Sciences, Ltd.(13)*
10.19	Amendment No. 1 to License and Option Agreement dated November 21, 2002 by and between GeneSoft Pharmaceuticals, Inc. and LG Life Sciences, Ltd.*(13)
10.20	Amendment to No. 2 to License and Option Agreement dated December 6, 2002 by and between GeneSoft Pharmaceuticals, Inc. and LG Life Sciences, Ltd.*(13)
10.21	Amendment No. 3 to License and Option Agreement dated October 16, 2004 by and between GeneSoft Pharmaceuticals, Inc. and LG Life Sciences, Ltd.*(13)
10.22	Genome Therapeutics Corp. Employee Stock Purchase Plan as amended through April 13, 2004(16)
10.23	Genome Therapeutics Corp. 2001 Incentive Plan as amended through April 13, 2004(16)

90

Exhibit No.	Description
10.24	Employment Letter with Dominick C. Colangelo dated January 3, 2005(14)
10.25	Co-Promotion Agreement dated April 11, 2005 between Auxilium Pharmaceuticals, Inc. and Oscient Pharmaceuticals Corp.(15)*
10.26	Amendment No. 4 to License and Option Agreement dated March 31, 2005 by and between GeneSoft Pharmaceuticals, Inc. and LG Life Sciences, Ltd.(15)*
10.27	Form of Incentive Stock Option(18)
10.28	Form of Nonstatutory Stock Option(18)
10.29	Form of Restricted Stock Award(18)
10.30	Amended and Restated Employee Stock Purchase Plan (as amended through June 8, 2006)(23)
10.31	Amendment No. 5 to License and Option Agreement dated February 3, 2006 by and between Oscient Pharmaceuticals Corporation and LG Life Sciences, Ltd.*(21)
10.32	Assignment and Termination Agreement dated February 3, 2006 between Vicuron Pharmaceuticals, Inc. and Oscient Pharmaceuticals Corporation(21)
10.33	Sublicensing and Distribution Agreement dated February 6, 2006 by and between Pfizer S.A. de C.V. and Oscient Pharmaceuticals Corporation*(21)
10.34	Form of Purchase Agreement dated April 5, 2006(20)
10.35	Amendment to Employment Agreement for Dominick C. Colangelo dated May 5, 2006(22)
10.36	Employment Agreement with Philippe M. Maitre dated May 5, 2006(22)
10.37	Amendment to Employment Agreement for Steven M. Rauscher dated May 12, 2006(22)
10.38	Amended and Restated Development, Licensing and Supply Agreement dated July 31, 2006 by and between Ethypharm S.A. and Reliant Pharmaceuticals, Inc.*(24)
10.39	Common Stock and Warrant Purchase Agreement dated July 21, 2006 by and between Oscient Pharmaceuticals Corporation and Paul Royalty Fund Holdings II(25)
10.40	Note Purchase Agreement dated July 21, 2006 by and between Guardian Acquisition Corporation and Paul Royalty Fund Holdings II*(25)
10.41	Revenue Interests Assignment Agreement dated August 18, 2006 by and between Oscient Pharmaceuticals Corporation, Guardian Acquisition Corporation and Paul Royalty Fund Holdings II*(25)
10.42	Supply, Distribution & Marketing Agreement by and between Oscient Pharmaceuticals Corporation, Abbott International LLC and Abbott Laboratories Ltd.*(25)
10.43	Amendment No. 7 to License and Option Agreement dated December 27, 2006 by and between Oscient Pharmaceuticals Corporation and LG Life Sciences, Ltd.*‡
10.44	License, Supply and Marketing Agreement dated December 28, 2006 by and between Oscient Pharmaceuticals Corporation and Menarini International Operation Luxembourg, S.A.*‡
12.1	Statement re: Computation of Ratios‡
21.1	Subsidiaries of the Registrant‡
23.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm‡
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act‡
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act‡
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act‡
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act‡

91

 ‡ Filed herewith.

 * Confidential treatment requested with respect to a portion of this Exhibit

(1) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 2-75230) dated December 8, 1981 and incorporated herein by reference.

(2) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1985 and incorporated herein by reference.

(3) Filed as exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1986 and incorporated herein by reference.

(4) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1992 and incorporated herein by reference.

(5) Filed as exhibits to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1994 and incorporated herein by reference.

(6) Filed as exhibits to the Company’s Registration Statement on Forms S-8 (333-49069) dated April 1, 1998 and incorporated herein by reference.

(7) Filed as an exhibit to the Company’s Registration Statement on Form S-8 (333-58274) on April 4, 2001 and incorporated herein by reference.

(8) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2001 and incorporated herein by reference.

(9) Filed as an exhibit to the Company’s Current Report on Form 8-K on June 5, 2003 and incorporated herein by reference.

(10) Filed as an exhibit to the Company’s Current Report on Form 8-K on October 1, 2003 and incorporated herein by reference.

(11) Filed as an exhibit to the Company’s Current Report on Form 8-K on November 18, 2003 and incorporated herein by reference.

(12) Filed as an exhibit to the Company’s Registration Statement on Form S-4 (No. 333-111171) on December 15, 2003 and incorporated herein by reference.

(13) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 27, 2004 and incorporated herein by reference.

(14) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2005 and incorporated herein by reference.

(15) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by reference.

(16) Filed as an exhibit to the Company’s Registration Statement on Form S-8 (333-116707) on June 21, 2004 and incorporated herein by reference.

(17) Filed as an exhibit to the Company’s Registration Statement on Form S-3 (333-118026) on August 9, 2004 and incorporated herein by reference.

(18) Filed as an exhibit to the Company’s Current Report on Form 8-K on December 27, 2005 and incorporated herein by reference.

(19) Filed as an exhibit to the Company’s Registration Statement on Form S-3 (333-137596) on September 26, 2006 and incorporated herein by reference.

(20) Filed as an exhibit to the Company’s Current Report on Form 8-K on April 12, 2006 and incorporated herein by reference.

(21) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference.

(22) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference.

(23) Filed as an exhibit to the Company’s Registration Statement on Form S-8 (333-138309) on October 30, 2006 and incorporated herein by reference.

(24) Filed as an exhibit to the Company’s Current Report on Form 8-K on November 1, 2006 and incorporated herein by reference.

(25) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 and incorporated herein by reference.

92

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

OSCIENT PHARMACEUTICALS CORPORATION
By:	/s/    STEVEN M. RAUSCHER
	Steven M. Rauscher President and Chief Executive Officer

Dated: March 14, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    STEVEN M. RAUSCHER         Steven M. Rauscher	Director, President and Chief Executive Officer (Principal Executive Officer)	March 14, 2007
/s/    PHILIPPE M. MAITRE         Philippe M. Maitre	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	March 14, 2007
/s/    DAVID K. STONE         David K. Stone	Director and Chairman of the Board	March 14, 2007
/s/    GREGORY B. BROWN         Gregory B. Brown	Director	March 14, 2007
/s/    WALTER FLAMENBAUM         Walter Flamenbaum	Director	March 14, 2007
/s/    ROBERT J. HENNESSEY         Robert J. Hennessey	Director	March 14, 2007
/s/    WILLIAM MATTSON         William Mattson	Director	March 14, 2007
/s/    GARY PATOU         Gary Patou	Director	March 14, 2007
/s/    WILLIAM S. REARDON         William S. Reardon	Director	March 14, 2007
/s/    NORBERT G. RIEDEL         Norbert G. Riedel	Director	March 14, 2007
/s/    JOHN E. VORIS         John E. Voris	Director	March 14, 2007

93

OSCIENT PHARMACEUTICALS CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Shareholders’ (Deficit) Equity and Comprehensive Loss for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-8

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Oscient Pharmaceuticals Corporation

We have audited the accompanying consolidated balance sheets of Oscient Pharmaceuticals Corporation as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ (deficit) equity and comprehensive loss, and cash flows for the each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Oscient Pharmaceuticals Corporation at December 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

As discussed in Note 14 to the consolidated financial statements, on January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” which requires the Company to recognize expense for all share-based payments based on their values.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Oscient Pharmaceuticals Corporation’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and out report dated March 12, 2007 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Boston, Massachusetts

March 12, 2007

F-2

OSCIENT PHARMACEUTICALS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	December 31, 2006			December 31, 2005
ASSETS
Current Assets:
Cash and cash equivalents	$	38,196		$	65,618
Marketable securities		—			2,696
Restricted cash		2,483			5,386
Interest receivable		228			461
Notes receivable		590			561
Accounts receivable (net of allowance for bad debts of $349 and $0 in 2006 and 2005, respectively)		11,937			6,206
Inventories		14,237			14,187
Prepaid expenses and other current assets		2,563			4,340
Total current assets		70,234			99,455
Property and Equipment, at cost:
Manufacturing and computer equipment		4,722			4,622
Equipment and furniture		1,159			1,160
Leasehold improvements		138			135
		6,019			5,917
Less—Accumulated depreciation		4,522			4,069
		1,497			1,848
Restricted cash		4,129			6,344
Long-term notes receivable		1,269			1,739
Other assets		4,074			4,573
Intangible assets, net		120,011			65,607
Goodwill		78,193			61,529
	$	279,407		$	241,095
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term obligations	$	38		$	—
Accounts payable		10,402			6,447
Accrued expenses and other current liabilities		16,063			10,163
Current portion of accrued facilities impairment charge		2,182			2,175
Accrued restructuring charge		—			1,076
Clinical trial expense accrual		355			1,844
Deferred revenue		1,386			—
Total current liabilities		30,426			21,705
Long-term liabilities:
Long-term obligations, net of current maturities		234,186			175,060
Noncurrent portion of accrued facilities impairment charge		11,718			14,029
Other long-term liabilities		5,073			2,200
Commitments and Contingencies (Note 12)
Shareholders’ (Deficit) Equity:
Common stock, $0.10 par value—Authorized—174,375 shares, Issued and Outstanding—13,559 and 9,669 in 2006 and 2005, respectively		1,356			967
Series B restricted common stock, $0.10 par value—Authorized—625 shares, Issued and outstanding—none		—			—
Additional paid-in-capital		412,553			364,736
Accumulated deficit		(415,905	)		(337,428	)
Deferred compensation		—			(11	)
Note receivable from officer		—			(163	)
Total shareholders’ (deficit) equity		(1,996	)		28,101
	$	279,407		$	241,095

The accompanying notes are an integral part of these consolidated financial statements.

F-3

OSCIENT PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Year Ended December 31,
	2006			2005			2004
Revenues (net):
Product sales	$	38,244		$	20,458		$	4,067
Co-promotion		6,890			2,954			—
Biopharmaceutical/Other		1,018			197			2,546
Total net revenues		46,152			23,609			6,613
Costs and expenses:
Cost of product sales (1)		19,613			9,830			3,381
Research and development (1)		12,406			14,432			29,557
Selling and marketing (1)		69,211			74,931			34,826
General and administrative (1)		16,841			13,088			12,981
Write-off of in-process technology		—			—			11,704
Restructuring charge		—			—			4,780
Total costs and expenses		118,071			112,281			97,229
Loss from operations		(71,919	)		(88,672	)		(90,616	)
Other (expense) income:
Interest income		2,995			3,400			2,424
Interest expense		(11,056	)		(8,126	)		(5,625	)
Gain on sale of fixed assets		2			65			338
Income from sale of intellectual property		—			2,500			—
Gain on disposition of investment		1,617			2,162			—
Other income		63			43			—
Net other (expense) income		(6,379	)		44			(2,863	)
Loss from continuing operations before income tax		(78,298	)		(88,628	)		(93,479	)
Provision for income tax		(179	)		—			—
Net loss from continuing operations		(78,477	)		(88,628	)		(93,479	)
Income from discontinued operations		—			35			208
Net loss	$	(78,477	)	$	(88,593	)	$	(93,271	)
Loss from continuing operations per common share:
Basic and diluted	$	(6.58	)	$	(9.26	)	$	(10.61	)
Income from discontinued operations per common share:
Basic and diluted	$	—		$	—		$	—
Net loss per common share:
Basic and diluted	$	(6.58	)	$	(9.26	)	$	(10.61	)
Weighted average common shares outstanding:
Basic and diluted		11,925,485			9,568,598			8,793,731
(1)    Includes non-cash stock-based compensation as follows:
Cost of product sales	$	67		$	—		$	—
Research and development		136			836			3,738
Selling and marketing		1,236			—			—
General and administrative		2,437			170			1,333

The accompanying notes are an integral part of these consolidated financial statements.

F-4

OSCIENT PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY AND COMPREHENSIVE LOSS

(in thousands, except share data)

	Common Stock		Additional Paid- In Capital		Accumulated Deficit		Deferred Compensation		Note Receivable From Officer		Total Shareholders’ Equity (Deficit)		Comprehensive Loss
	Shares	$0.10 Par Value
Balance, December 31, 2003	3,935	393	185,482		(155,564	)	(208	)	(163	)	29,940		(30,074	)
Exercise of stock options	266	27	1,838		—		—		—		1,865		—
Issuance of stock under employee stock purchase plan	16	2	301		—		—		—		303		—
Sale of common stock, net of issuance costs of $7,336	2,100	210	80,654		—		—		—		80,864		—
Issuance of common stock related to merger with Genesoft	3,151	315	74,564		—		—		—		74,879		—
Exercise of stock warrants	7	1	194		—		—		—		195		—
Deferred compensation related to issuance and modification of stock options	—	—	457		—		(5,880	)	—		(5,423	)	—
Issuance of stock options to employees	—	—	444		—		—		—		444		—
Amortization of deferred compensation	—	—	—		—		5,071		—		5,071		—
Fair value of options & warrants issued in exchange of Genesoft options & warrants	—	—	19,533		—		—		—		19,533		—
Net loss	—	—	—		(93,271	)	—		—		(93,271	)	(93,271	)
Balance at December 31, 2004	9,475	948	363,467		(248,835	)	(1,017	)	(163	)	114,400		(93,271	)
Exercise of stock options	174	17	854		—		—		—		871		—
Issuance of stock under employee stock purchase plan	20	2	415		—		—		—		417		—
Amortization of deferred compensation	—	—	—		—		1,006		—		1,006		—
Net loss	—	—	—		(88,593	)	—		—		(88,593	)	(88,593	)
Balance at December 31, 2005	9,669	967	364,736		(337,428	)	(11	)	(163	)	28,101		(88,593	)
Exercise of stock options	90	9	157		—		—		—		166		—
Issuance of stock under employee stock purchase plan	79	8	732		—		—		—		740		—
Issuance of common stock in private placement	2,254	225	33,252		—		—		—		33,477		—
Issuance of common stock to Paul Capital	1,389	139	9,819		—		—		—		9,958		—
Issuance of restricted stock	78	8	(8	)	—		—		—		—		—
Reversal of deferred compensation	—	—	(11	)	—		11		—		—		—
Stock based compensation expense	—	—	3,876		—		—		—		3,876		—
Settlement of note receivable	—	—	—		—		—		163		163		—
Net loss	—	—	—		(78,477	)	—		—		(78,477	)	(78,477	)
Balance at December 31, 2006	13,559	1,356	412,553		(415,905	)	—		—		(1,996	)	(78,477	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

OSCIENT PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash Flows from Operating Activities:
Loss from continuing operations	$	(78,477	)	$	(88,628	)	$	(93,479	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,158			5,411			5,420
Provision for excess and obsolete inventories		1,631			1,067			11
Provision for bad debts		349			—			—
Non-cash restructuring charge		—			—			1,976
Non-cash interest expense		1,468			1,557			1,145
Non-cash write-off of in process technology at merger		—			—			11,704
Gain on disposal of fixed assets		(2	)		(65	)		(338	)
Gain on disposition of investment		(1,617	)		(2,162	)		—
Stock-based compensation		3,876			1,006			5,071
Changes in assets and liabilities, net of acquisition
Interest receivable		233			1,247			(1,570	)
Accounts receivable		(6,080	)		(1,983	)		(3,365	)
Inventories		(1,796	)		(7,129	)		(6,959	)
Prepaid expenses and other current assets		1,901			5,350			(5,319	)
Accounts payable		3,955			(2,633	)		6,726
Accrued expenses and other liabilities		5,900			(4,678	)		7,851
Clinical trial expense accrual		(1,489	)		(941	)		(867	)
Deferred revenue		1,386			(1,302	)		843
Accrued facilities impairment charge		(2,826	)		(2,947	)		(2,865	)
Accrued restructuring charge		(1,076	)		(1,143	)		2,219
Accrued other long-term liabilities		1,869			993			1,207
Net cash used in operating activities		(63,637	)		(96,980	)		(70,589	)
Cash Flows from Investing Activities:
Purchases of marketable securities		—			(2,706	)		(143,037	)
Proceeds from maturities of marketable securities		2,696			94,694			55,824
Proceeds from disposition of investment		1,617			2,387			—
Purchases of property and equipment		(263	)		(1,328	)		(1,532	)
Proceeds from sale of property and equipment		3			359			901
Decrease (increase) in restricted cash		5,118			5,246			(13,279	)
(Increase) decrease in other assets		(329	)		471			(4,238	)
Proceeds from notes receivable		790			440			—
Issuance of notes receivable		(186	)		(2,740	)		—
Cash flow related to merger		—			—			(14,875	)
Cash flows related to acquisition of ANTARA		(77,563	)		—			—
Net cash (used in) provided by investing activities		(68,117	)		96,823			(120,236	)

F-6

OSCIENT PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS—(Continued)

(in thousands)

	Year Ended December 31,
	2006			2005			2004
Cash Flows from Financing Activities:
Proceeds from private placement of common stock, net of issuance costs		33,477			—			—
Proceeds from issuance of stock in connection with acquisition of ANTARA, net of issuance costs		9,958			—			—
Proceeds from exercise of stock options		166			871			1,865
Proceeds from issuance of stock under the employee stock purchase plan		740			417			303
Proceeds from issuance of notes		20,000			—			152,750
Proceeds from assignment of revenue interest		40,000			—			—
Proceeds from sale of common stock, net of issuance costs		—			—			80,864
Proceeds from exercise of warrants		—			—			195
Payments on long-term obligations		(9	)		(291	)		(1,586	)
Net cash provided by financing activities		104,332			997			234,391
Cash Flows from Discontinued Operations:
Operating cash flows		—			35			208
Total		—			35			208
Net (Decrease) Increase in Cash and Cash Equivalents		(27,422	)		875			43,774
Cash and Cash Equivalents, beginning of year		65,618			64,743			20,969
Cash and Cash Equivalents, end of year	$	38,196		$	65,618		$	64,743
Supplemental Disclosure of Cash Flow Information:
Interest paid during period	$	6,053		$	5,346		$	2,348
Income tax paid during period	$	25		$	—		$	18
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Deferred compensation related to unvested stock options at merger	$	—		$	—		$	5,423
Note receivable and accrued interest forgiven at merger	$	—		$	—		$	6,269
Issuance of common stock related to merger	$	—		$	—		$	74,879
Issuance of options and warrants in exchange of Genesoft’s options and warrants	$	—		$	—		$	19,534

The accompanying notes are an integral part of these consolidated financial statements.

F-7

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements

(1) Operations

The Company is a commercial-stage biopharmaceutical company marketing two U.S. Food and Drug Administration (FDA)-approved products with its national primary care sales force—a cardiovascular product, ANTARA^® (fenofibrate) capsules, and a fluoroquinolone antibiotic, FACTIVE^® (gemifloxacin mesylate) tablets. On August 18, 2006, the Company acquired the U.S. rights to ANTARA from Reliant Pharmaceuticals, Inc. ANTARA is approved by the FDA to treat hypercholesterolemia (high blood cholesterol) and hypertriglyceridemia (high triglycerides) in combination with a healthy diet. The Company began promoting ANTARA with its national sales force in late August 2006. The Company licenses the rights to ANTARA from Ethypharm S.A of France. FACTIVE is indicated for the treatment of community-acquired pneumonia of mild to moderate severity (CAP) and acute bacterial exacerbations of chronic bronchitis (AECB). The Company licenses the rights to gemifloxacin, the active ingredient in FACTIVE tablets, from LG Life Sciences of the Republic of Korea. FACTIVE was launched in the U.S. market in September 2004. Additionally, the Company has a novel, late-stage antibiotic candidate, Ramoplanin, under investigation for the treatment of Clostridium difficile-associated disease. With the acquisition of ANTARA, the Company has made the strategic decision to concentrate its financial resources on building its primary care business in the United States and is currently seeking to out-license, co-develop or sell its right to Ramoplanin to a partner.

As shown in the consolidated financial statements, at December 31, 2006, the Company has a total cash and cash equivalents balance of $44,808,000, which includes $6,612,000 in restricted cash, and an accumulated deficit of $415,905,000. Based on the Company’s available capital, current operating plan and management’s ability to manage expenses, the Company believes that the cash on hand as of December 31, 2006, is sufficient to fund continuing operations through at least January 1, 2008. The Company may seek to raise additional capital within the next 12 months through the sale of debt or equity securities. The Company’s ability to raise additional capital, however, will be heavily impacted by, among other factors, the investment market for biopharmaceutical companies and the progress of the FACTIVE and ANTARA commercial programs as well as the Company’s progress in meeting its operational and financial objectives, acquiring, licensing or co-promoting an additional product and developing a partnership to advance the Ramoplanin clinical development program. Additional financing may not be available to the Company when needed, or, if available, may not be available on favorable terms. If the Company cannot obtain adequate financing on acceptable terms when such financing is required, the Company’s business will be adversely affected.

(2) Summary of Significant Accounting Policies

The accompanying consolidated financial statements reflect the application of certain accounting policies, as described in this note and elsewhere in the accompanying notes to the consolidated financial statements.

(a) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Guardian II Acquisition Corporation, Collaborative Genetics, Inc., Collaborative Securities Corp. (a Massachusetts Securities Corporation), Oscient Pharmaceuticals U.K. Ltd., and GeneSoft Pharmaceuticals LLC. All intercompany accounts and transactions have been eliminated in consolidation.

(b) Revenue Recognition

The Company’s principal source of revenue is the sale of ANTARA capsules and FACTIVE tablets. In the second quarter of 2005, the Company began recognizing co-promotion revenue in connection with its co-promotion agreement with Auxilium Pharmaceuticals, Inc. (Auxilium), which terminated on August 31, 2006.

F-8

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Other historical sources of revenue include biopharmaceutical alliances and royalties from the divested genomic services business. In future periods, product revenues will continue to increase based on anticipated increased volume of prescriptions of ANTARA capsules and FACTIVE tablets, however the Company expects revenues derived from biopharmaceutical alliances will continue to decrease.

Although ANTARA revenue results are anticipated to be steady throughout the fiscal year, the Company expects demand for FACTIVE to be highest from December to March as the incidence of respiratory tract infections, including CAP and AECB, tends to increase during the winter months. In addition, fluctuations in the severity of the annual respiratory tract infection season may cause product sales to vary from year to year. Due to these seasonal fluctuations in demand for FACTIVE, the Company’s results in any particular quarter may not be indicative of the results for any other quarter or for the entire year.

Product Sales

The Company follows the provisions of Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition (a replacement of SAB 101)” (SAB No. 104) and recognizes revenue from product sales upon delivery of product to wholesalers, when persuasive evidence of an arrangement exists, the fee is fixed or determinable, title to product and associated risk of loss has passed to the wholesaler and collectability of the related receivable is reasonably assured. All revenues from product sales are recorded net of applicable allowances for sales returns, rebates, special promotional programs, and discounts. For arrangements where the risk of loss has not passed to wholesalers or pharmacies, the Company defers the recognition of revenue by recording deferred revenue until such time that risk of loss has passed. The cost of FACTIVE and ANTARA associated with amounts recorded as deferred revenue is recorded in inventory until such time as risk of loss has passed.

Co-Promotion Revenue

On August 31, 2006, the Company and Auxilium mutually agreed to conclude the co-promotion arrangement and agreed to share profits from primary care sales, as provided for under the co-promotion agreement, through August 31, 2006. Amounts earned under the Company’s co-promotion agreement with Auxilium from the sale of TESTIM gel, a product developed by Auxilium, are classified as co-promotion revenue in the Company’s consolidated statements of operations. Auxilium was obligated to pay the Company a co-promotion fee based on a specified percentage of the gross profit from TESTIM sales attributable to primary care physicians in the U.S. that exceeded a specified cumulative sales threshold, determined on an annual basis. The specific percentage was based upon TESTIM sales levels attributable to primary care physicians and the marketing expenses incurred by the Company in connection with the promotion of TESTIM under the co-promotion agreement. Such co-promotion revenue was earned when TESTIM units were dispensed through patient prescriptions. There was no cost of goods sold associated with co-promotion revenue, and the selling and marketing expenses incurred with respect to the co-promotion arrangement are classified as selling and marketing expenses in the Company’s consolidated statements of operations. As part of the termination of the co-promotion agreement, the Company received $1,800,000 from Auxilium as additional compensation for commercialization efforts by the Company’s sales force through August 31, 2006, which has been recognized as revenue during the year ended December 31, 2006.

Biopharmaceutical/Other Revenue

Prior to its merger with GeneSoft Pharmaceuticals, Inc. in 2004, the Company pursued biopharmaceutical revenues through alliance partnerships with pharmaceutical companies and through government grants. Biopharmaceutical revenues have consisted of government research grants and license fees, contract research, and milestone payments from alliances with pharmaceutical companies. The Company also maintained a

F-9

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

genomic services business. The Company has now shifted its focus to the development and commercialization of pharmaceutical products. The declining revenues and associated expenses for the genomics services business have been classified as discontinued operations in the accompanying consolidated financial statements.

Other revenues consist of sublicensing revenues related to FACTIVE. The Company recognizes revenue in accordance with SAB No. 104 and Emerging Issues Task Force Issue No. (EITF) 00-21, “Revenue Arrangements with Multiple Deliverables” (EITF No. 00-21). In accordance with EITF No. 00-21, the up-front license payments related to the various sublicense agreements will be recognized as revenue over the term of the Company’s continuing obligations under the arrangements which range from eighteen months to twenty-four months. In addition, on August 1, 2006, the Company announced that it received notice from Pfizer Mexico that FACTIVE was approved by the Ministry of Health in Mexico to be marketed as FACTIVE-5 for the treatment of community-acquired pneumonia, acute bacterial exacerbations of chronic bronchitis and acute bacterial sinusitis which generated a milestone payment recognized as revenue during the year ended December 31, 2006. The Company expenses incremental direct costs associated with sublicense agreements in the period in which the expense is incurred.

(c) Sales Rebates, Discounts and Incentives

The Company’s sales of FACTIVE and ANTARA are made to pharmaceutical wholesalers for further distribution through pharmacies to the ultimate consumers of the product. When the Company delivers its product, the Company reduces the amount of gross revenue recognized from such product sales based primarily on estimates of four categories of discounts and allowances that suggest that all or part of the revenue should not be recognized at the time of the delivery—product returns, cash discounts, rebates, and special promotional programs.

Product Returns

Factors that are considered in the Company’s estimate of future FACTIVE and ANTARA product returns include an analysis of the amount of product in the wholesaler and pharmacy channel, review of consumer consumption data as reported by external information management companies, return rates for similar competitive antibiotic and cardiovascular products that have a similar shelf life and are sold in the same distribution channel, the remaining time to expiration of the product, and the forecast of future sales of the Company’s product. Consistent with industry practice, the Company offers contractual return rights that allow its customers to return product within six months prior to and twelve months subsequent to the expiration date of its product. FACTIVE tablets and ANTARA capsules each have a 36-month expiration period from the date of manufacturing. At December 31, 2006 and 2005, the Company’s product return reserve was approximately $774,000 and $720,000, respectively. This reserve is evaluated on a quarterly basis, assessing each of the factors described above, and adjusted accordingly. Based on the factors noted above, the Company believes its estimate of product returns is reasonable, and changes, if any, from this estimate would not have a material impact to the Company’s financial statements.

Cash Discounts

The Company’s standard invoice includes a contractual cash 2% discount, net 30 days terms. Based on historical experience, the Company estimates that most of its customers deduct a 2% discount from their balance. The cash discount reserve is presented as an allowance against trade receivables in the consolidated balance sheets. As of and December 31, 2006 and 2005, the balance of the cash discounts reserve was approximately $202,000 and $50,000, respectively. As of December 31, 2006, the significant change to the Company’s estimates in the periods presented is primarily attributable to the acquisition of the ANTARA product line.

F-10

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

Rebates

The liability for managed care and Medicaid rebates is calculated based on historical and current rebate redemption and utilization rates contractually submitted by each state. As of December 31, 2006 and 2005, the balance of the accrual for managed care and Medicaid rebates for ANTARA and FACTIVE was approximately $2,994,000 and $381,000, respectively. Considering the estimates made by the Company, as well as estimates prepared by third party utilization reports that are used in evaluating the required liability balance, the Company believes its estimates are reasonable. As of December 31, 2006, the significant change to the Company’s estimates in the periods presented is primarily attributable to the acquisition of the ANTARA product line.

Special Promotional Programs:

The Company has from time to time, offered certain promotional incentives to its customers for both FACTIVE and ANTARA and may continue this practice in the future. Such programs include: sample cards to end consumers, certain product incentives to pharmacy customers, and other sales stocking allowances. Examples of programs utilized to date follow:

Sample Card Programs for FACTIVE

During the first and second quarters of 2006, the Company initiated three sample card programs whereby the Company offered an incentive to patients in the form of a free full-course sample card for FACTIVE. The Company has accounted for these programs in accordance with EITF No. 01-09, “Accounting for Consideration Given by a Vendor to a Customer” (EITF No. 01-09). For the first sample card program, the Company was able to develop a reasonable and reliable estimate of the amount of expected reimbursement claims based on actual claims submitted by and processed by a third party claims processing organization. For the second and third sample card programs, the estimate of expected reimbursement claims was based on the historical actual reimbursement claims for the similar completed programs that the Company conducted in the first and second quarters of 2006. The first 2006 program expired on March 31, 2006, the second program expired on June 15, 2006 and the third program expired on September 30, 2006. There is no liability as of December 31, 2006 for these sample card programs.

Voucher Rebate Programs for FACTIVE

In 2006, the Company initiated six voucher rebate programs whereby the Company offered mail-in rebates and point-of-sale rebates to retail consumers. The Company has accounted for these programs in accordance with EITF No. 01-09. The liabilities the Company recorded for these voucher rebate programs were estimated based upon the historical rebate redemption rates for the similar completed programs that commenced in the first quarter of 2005 and the fourth quarter of 2005. The first program expired on June 30, 2006, the second and third programs expired on August 31, 2006, the fourth program expired on September 30, 2006, the fifth program expired on December 31, 2006 and the sixth program expires on April 30, 2007. As of December 31, 2006 and 2005, the balance of the liabilities for these voucher programs totaled approximately $452,000 and $105,000, respectively.

Voucher Rebate Programs for ANTARA

During the third and fourth quarters of 2006, the Company initiated two voucher rebate programs whereby the Company offered a point-of-sale rebate to retail consumers. The Company has accounted for this program in accordance with EITF No. 01-09. The liabilities the Company recorded for these voucher rebate programs were estimated based upon the historical rebate redemption rates for the similar completed programs by other

F-11

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

pharmaceutical companies. The first program expired on December 31, 2006 and the second program expires on July 31, 2007. As of December 31, 2006, the balance of the liabilities for these voucher programs totaled approximately $619,000.

(d) Clinical Trial Expense Accrual

The Company’s clinical development trials related to FACTIVE and Ramoplanin are primarily performed by outside parties. At the end of each accounting period, the Company estimates both the total cost and time period of the trials and the percent completed as of that accounting date. The Company also adjusts these estimates when final invoices are received. For the fiscal years ended December 31, 2006 and 2005, the Company adjusted its accrual for clinical trial expenditures to reflect its most current estimate of liabilities outstanding to outside parties. However, the possibility exists that the timing or cost of the clinical trials might be longer or shorter and cost more or less than estimated and that the associated financial adjustments would be reflected in future periods.

(e) Accounts Receivable

Trade accounts receivable consists of amounts due from wholesalers for the purchase of FACTIVE and ANTARA. Accounts receivable related to sales of FACTIVE are the accounts receivable of the Company and accounts receivable related to sales of ANTARA are the accounts receivable of Guardian II. Guardian II granted Paul Capital a security interest in substantially all of its assets, including its accounts receivables, to secure its obligations to Paul Capital. See Note 13. Ongoing credit evaluations of customers are performed and collateral is generally not required. As of December 31, 2006 and 2005, the Company reserved approximately $39,000 and $0, respectively, for bad debts related to the sale of FACTIVE or ANTARA. The Company continuously reviews all customer accounts to determine if an allowance for uncollectible accounts is necessary. The Company currently provides substantially all of its distributors with payment terms of up to 30 days on purchases of FACTIVE and ANTARA. Amounts past due from customers are determined based on contractual payment terms. Through December 31, 2006, payments have generally been made in a timely manner. The Company also reserved $310,000 and $0, respectively, as of December 31, 2006 and 2005 related to other non trade receivables.

The following table represents accounts receivable (in thousands):

	December 31,
	2006		2005
Trade, net	$	10,348	$	3,170
Co-promotion		—		1,825
Other		1,589		1,211
Total	$	11,937	$	6,206

(f) Restricted Cash

In connection with the 3 ¹/2% convertible debt offering completed in May 2004, the Company was required to set aside cash in an amount equal to the first six semi-annual interest payments related to such debt. As of December 31, 2006, the Company’s restricted cash consists, in part, of the remaining semi-annual interest payment totaling approximately $2,673,000 which is payable on April 15, 2007. At December 31, 2006, the restricted cash balance related to the convertible debt offering is approximately $2,482,000 excluding accrued interest. In addition, approximately $3,697,000 of cash is restricted in connection with a letter of credit issued for the building lease at the Company’s South San Francisco, California facility and approximately $433,000 of cash is restricted in connection with a letter of credit issued for the building lease at the Company’s Waltham, Massachusetts facility. The restrictions related to the South San Francisco facility and the Waltham facility expire on February 28, 2011 and March 31, 2012, respectively.

F-12

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(g) Property and Equipment

The Company records property and equipment at cost. Major replacements and improvements are capitalized, while general repairs and maintenance are expensed as incurred. The Company depreciates its property and equipment over the estimated useful life of the assets using the straight-line method starting when the asset is placed in service. The estimated useful life for leasehold improvements is the term of the lease (which is lower than the useful life of the assets).

	Estimated Useful Life
Manufacturing and computer equipment	3-5 Years
Equipment and furniture	3-5 Years
Leasehold improvements	7 Years

As of December 31, 2006, the Company recorded approximately $188,000 with accumulated depreciation of $9,000 as a capital lease which is being depreciated using the straight-line method over the term of the lease and is being classified as computer equipment in the accompanying consolidated balance sheets.

Depreciation expense was approximately $781,000, $644,000 and $1,119,000 for the fiscal years ended December 31, 2006, 2005 and 2004, respectively.

(h) Inventories

Inventories are stated at the lower of cost or market with cost determined under the average cost method. Products are removed from inventory and recognized as cost of goods sold on an average cost basis. For FACTIVE, inventories consist of raw material in powder form and work-in-process of approximately $6,223,000 and $9,770,000, and finished tablets of approximately $3,095,000 and $4,417,000, as of December 31, 2006 and 2005, respectively. For ANTARA, inventories consist of raw material and work-in-process of approximately $3,894,000, and finished capsules of approximately $1,027,000, as of December 31, 2006.

On a quarterly basis, the Company analyzes inventory levels, and provides a reserve for inventory and marketing samples that have become obsolete, have a cost basis in excess of its expected net realizable value or are in excess of forecast requirements to cost of product revenues and marketing expense, respectively. Expired inventory is disposed of and the related costs are written off against the previously established reserves. At December 31, 2006 and 2005, there was approximately $1,091,000 and $2,072,000, respectively, in FACTIVE sample product to be used for FACTIVE marketing programs and approximately $454,000 in ANTARA sample product to be used for ANTARA marketing programs at December 31, 2006. These are classified as other current assets in the accompanying consolidated balance sheets.

The following table represents net trade inventories (in thousands):

	As of December 31
	2006		2005
Raw material	$	4,488	$	8,418
Work-in-process		5,628		1,352
Finished goods		4,121		4,417
Total	$	14,237	$	14,187

F-13

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(i) Net Loss Per Share

Basic and diluted net loss per share was determined by dividing net loss by the weighted average shares outstanding during the period. Diluted loss per share is the same as basic loss per share for all periods presented, as the effect of the potential common stock is anti-dilutive. Anti-dilutive securities which consist of stock options, securities sold under the Company’s directors’ deferred stock plan, convertible notes, warrants and unvested restricted stock that are not included in net loss per share totaled 6,316,089, 4,826,615 and 4,665,067 shares of the Company’s common stock (prior to the application of the treasury stock method) during the years ended December 31, 2006, 2005 and 2004, respectively.

(j) Single Source Suppliers

FACTIVE

The Company currently obtains the active pharmaceutical ingredient for its commercial requirements for FACTIVE from a single source. The Company purchases the active pharmaceutical ingredient pursuant to a long-term supply agreement. The disruption or termination of the supply of the commercial requirement for FACTIVE or a significant increase in the cost of the active pharmaceutical ingredient from this source could have a material adverse effect on the Company’s business, financial position and results of operations.

ANTARA

Pursuant to the Company’s license arrangement with Ethypharm, Ethypharm is responsible for the manufacture and supply of ANTARA finished product or ANTARA bulk product at the Company’s option. The disruption or termination of the supply of ANTARA by Ethypharm or its third party contractors could have a material adverse effect on the Company’s business, financial position and results of operations.

(k) Concentration of Credit Risk

Statement of Financial Accounting Standards (SFAS) No. 105, “Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk,” (SFAS No. 105) requires disclosure of any significant off-balance-sheet and credit risk concentrations. The Company has no off-balance-sheet or credit risk concentrations such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains its cash and cash equivalents and investment balances with several unaffiliated institutions.

The following table summarizes the number of customers that individually comprise greater than 10% of total revenues and their aggregate percentage of the Company’s total product revenues:

Year-Ended December 31,	Number of Significant Customers	Percentage of Total Product Revenues by Customer
		A		B		C		D		E
2006	3	41	%	31	%	12	%	*		*
2005	2	52	%	29	%	*		*		*
2004	4	17	%	25	%	*		21	%	15	%

F-14

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The following table summarizes the number of customers that individually comprise greater that 10% of total accounts receivable and their aggregate percentage of the Company’s total trade accounts receivable.

As of December 31,	Number of Significant Customers	Percentage of Total Trade Accounts Receivable by Customer
		A		B		C		D	E
2006	3	39	%	34	%	11	%	*	*
2005	2	54	%	27	%	*		*	*

* balance is less than 10%

To date, the Company has not written off any significant customer accounts receivable balances.

(l) Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(m) Financial Instruments

The estimated fair value of the Company’s financial instruments, including cash and cash equivalents, short-term marketable securities and accounts receivable, approximates the carrying values of these instruments.

In connection with financing the acquisition of ANTARA, the Company recognizes embedded derivative instruments related to a put/call liability in the consolidated financial statements at fair value. Changes in the fair value are recorded in the consolidated statements of operations.

(n) Reclassifications

The Company has reclassified certain prior-year information to conform with the current year’s presentation. The Company has separately disclosed the operating portion of the cash flows attributable to its discontinued operations, which in prior periods was reported on a combined basis as a single amount.

(o) Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs were approximately $3,260,000, $7,666,000 and $5,921,000 for the fiscal years ended December 31, 2006, 2005 and 2004, respectively.

(p) Comprehensive Loss

The Company follows the provisions of SFAS No. 130, “Reporting Comprehensive Income” (SFAS No. 130). SFAS No. 130 requires disclosure of all components of comprehensive income (loss) on an annual and interim basis. Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. In 2006, 2005 and 2004, the net loss of approximately $78,477,000, $88,593,000 and $93,271,000 is equal to the comprehensive net loss.

F-15

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(q) Segment Reporting

The Company follows the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS No. 131). SFAS No. 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions as to how to allocate resources and assess performance. The Company’s chief decision makers, as defined under SFAS No. 131, are the chief executive officer and the chief financial officer. All of the Company’s assets are located in the United States. Approximately 92% of the Company’s product revenues are generated from customers based in the United States.

Prior to the sale of the genomics services segment in 2003, the Company had viewed its operations and managed its business as principally two operating segments: genomics services and biopharmaceutical. In 2004, the Company exited the genomics services segment, merged with Genesoft and launched FACTIVE on September 9, 2004. On August 18, 2006, the Company acquired the U.S. product rights of ANTARA. As a result, the Company believes it operates in one segment called biopharmaceutical. Product sales and the financial information disclosed herein represent all of the material financial information related to the Company’s one operating segment. In addition, in the fourth quarter of 2004, the Company reclassified all periods to present the revenues and expenses associated with the genomics business as discontinued operations as the Company no longer had significant involvement in the cash flows of this business.

Revenues from product sales are recorded net of applicable allowances for sales returns, rebates, and discounts. For arrangements where the risk of loss has not passed to wholesalers or pharmacies, the Company defers the recognition of revenue by recording deferred revenue until such time that risk of loss has passed. In periods prior to 2004, the measure of gross profit for the biopharmaceutical segment is equal to total segment revenues less externally funded research and development costs related to the Company’s alliance arrangements and government research grants.

(r) Long-Lived Assets

The Company follows the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). Under SFAS No. 144, long-lived assets and identifiable intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment exist, recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating the undiscounted cash flows is done at the lowest possible level for which there are identifiable assets. If the aggregate undiscounted cash flows are less than the carrying value of the asset, then the resulting impairment charge to be recorded is calculated based on the amount by which the carrying amount of the asset exceeds its fair value. Any write-downs are recorded as permanent reductions in the carrying amount of the asset.

The Company also follows the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” (SFAS No. 142). Under SFAS No. 142, goodwill and purchased intangible assets with indefinite lives are not amortized but are reviewed periodically for impairment. The Company performs an annual evaluation of goodwill at the end of each fiscal year to test for impairment or more frequently if events or circumstances indicate that goodwill may be impaired. Because the Company has a single operating segment, which is its sole reporting unit, the Company performs this test by comparing the fair value of the entity with its book value,

F-16

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

including goodwill. If the fair value exceeds the book value, goodwill is not impaired. If the book value exceeds the fair value, then the Company would calculate the potential impairment loss by comparing the implied fair value of goodwill with the book value. If the implied fair value of goodwill is less than the book value, then an impairment charge would be recorded.

As December 31, 2006, the Company does not believe that any of its long-lived assets, goodwill, or intangible assets are impaired.

(s) Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123(Revised 2004), “Share-Based Payment” (SFAS No. 123R) using the modified prospective transition method. SFAS No. 123R requires all share-based payments, including grants of stock options, to be recognized in the income statement as an operating expense, based on their fair values. Under the modified prospective transition method, compensation cost recognized during the year ended December 31, 2006 includes (1) compensation cost for all share-based payments granted prior to, but not vested as of December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123), and (2) compensation cost for all share-based payments granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R. Such amounts have been reduced by its estimate of forfeitures on all unvested awards. Stock-based compensation expense primarily relates to stock options, restricted stock, and stock issued under the Company’s employee stock purchase plan. Results for prior periods are not restated.

Prior to January 1, 2006, the Company followed the provisions of SFAS No. 148, “Accounting for Stock-Based Compensation, Transition and Disclosure” (SFAS No. 148) and adopted the disclosure-only provisions of SFAS No. 123. In addition, the Company applied the intrinsic value method under Accounting Principles Board Opinion (APB) No. 25 and related interpretations, in accounting for its stock-based compensation plans for awards to employees, rather than the alternative fair value accounting method provided for under SFAS No. 123. Under APB No. 25, when the exercise price of options granted under the plans equals the market price of the underlying stock on the date of grant, no compensation expense is required. In accordance with EITF No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (EITF No. 96-18), the Company records compensation expense equal to the fair value of options granted to non-employees over the period of service, which is generally the vesting period. The Company generally used the straight-line method of amortization for stock-based compensation. Had compensation cost for these plans been determined consistent with SFAS No. 123R, the Company’s consolidated net loss and net loss per share would have been increased to the following pro forma amounts (in thousands, except per share amounts):

	Year Ended December 31, 2005			Year Ended December 31, 2004
Net loss as reported	$	(88,593	)	$	(93,271	)
Add: Share-based employee compensation cost, included in the determination of net loss as reported		1,006			5,071
Less: Total share-based compensation expense determined under the fair value method for all employee awards		(7,231	)		(10,768	)
Pro forma net loss	$	(94,818	)	$	(98,968	)
Basic and diluted net loss per share
As reported	$	(9.26	)	$	(10.61	)
Pro forma	$	(9.91	)	$	(11.25	)

F-17

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The adoption of SFAS No. 123R increased the Company’s year ended December 31, 2006 operating loss, net loss, and cash flows used in operating activities by $3,829,000 and basic and diluted net loss per share by $0.32. The compensation expense under SFAS No. 123R is recorded in cost of product sales, research and development expense, selling and marketing expense, and general and administrative expense based on the specific allocation of employees receiving the equity awards. Additionally, the Company eliminated the January 1, 2006 deferred compensation balance against additional paid-in capital upon adoption of SFAS No. 123R.

The fair value of each option award is estimated on the grant date using the Black-Scholes-Merton option-pricing model based on the assumptions noted in the following table:

	Year Ended December 31,
	2006	2005	2004
Expected volatility	52.14 – 62.18%	48.35 – 53.13%	81%
Risk-free interest rate	4.35 – 5.07%	3.71 – 4.45%	2.85 – 4.88%
Expected life (years)	5.55 – 6.25	5.00	5.00
Expected dividend	—	—	—

The expected life of the stock options granted was estimated based on the historical exercise patterns over the option lives while considering employee exercise strategy and cancellation behavior. The expected life is applied to one group as a whole as the Company does not expect substantially different exercise or post-vesting termination behavior amongst its employee population. The Company will continue to review the expected life among the employee population to determine whether multiple groups is necessary.

Expected volatility is determined exclusively based on historical volatility data of the Company’s common stock from the period of time beginning with the Company’s merger with Genesoft in February 2004 and other factors through the month of grant. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected life assumption. The Company has not paid and does not anticipate paying cash dividends, therefore the expected dividend yield is assumed to be 0%.

The total compensation cost that has been charged to income for the year ended December 31, 2006 was approximately $3,876,000. The Company’s policy is to recognize compensation cost for awards with service conditions and graded vesting using the straight-line method. Additionally, the Company’s policy is to issue authorized but previously unissued shares to satisfy share option exercises, the issuance of restricted stock and stock issued under the ESPP. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. In addition, the requisite service period is generally equal to the vesting term. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. The Company estimates forfeitures based on historical data, adjusted for known trends, calculated with the assistance of the independent third party. The Company has applied an annual forfeiture rate of 19.03% to options in calculating total recognized compensation cost as of December 31, 2006. This analysis will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.

Using the Black-Scholes-Merton option-pricing model, the weighted average grant date fair values of options granted during the years ended December 31, 2006, 2005 and 2004 were $7.36, $9.60 and $27.84, respectively. For the year ended December 31, 2006, the Company granted 243,644 in stock options with a weighted average exercise price of $13.49. For the year ended December 31, 2005, the Company granted 536,250 in stock options with a weighted average exercise price of $19.92.

F-18

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

During the years ended December 31, 2006, 2005 and 2004 the total intrinsic value of options exercised was $754,000, $2,842,000 and $8,025,000, respectively. The total amount of cash received from exercise of these options during the years ended December 31, 2006 and 2005 was $166,000 and $871,000, respectively.

The total fair value of shares vested during 2006, 2005 and 2004 was $1,256,000, $2,092,000 and $14,580,000, respectively.

The 2001 Incentive Plan also provides for awards of nontransferable shares of restricted common stock which are subject to forfeiture. All shares of restricted stock vest based on service conditions in two equal installments over a two-year period. Generally, the fair value of each restricted stock award is equal to the market price of the Company’s stock at the date of grant. Certain restricted share awards provide for accelerated vesting if there is a change in control.

A summary of activity related to restricted stock under the Option Plans as of December 31, 2006, is indicated in the following table (in thousands, except weighted average data):

	Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2005	—		$	—
Granted	81		$	13.39
Vested	(24	)		5.81
Forfeited	(7	)	$	14.45
Nonvested at December 31, 2006	50		$	16.82

As of December 31, 2006, there was approximately $5,207,000 of total unrecognized compensation cost related to unvested share based awards. This cost is expected to be recognized over a weighted average remaining requisite service period of 1 year. The Company expects approximately 317,000 in unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.

(t) Recent Accounting Pronouncements

Accounting for Uncertainty in Income Taxes

In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. The Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Interpretation is effective for fiscal years beginning after December 15, 2006. The Company has not yet completed its evaluation of the Interpretation, but does not currently believe that adoption will have a material impact on its results of operations, financial position or cash flows.

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 establishes a common definition for fair value, creates a framework for measuring fair

F-19

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

value, and expands disclosure requirements about such fair value measurements. SFAS No. 157 will be effective for the Company beginning January 1, 2008. Management is in the process of studying the impact of this interpretation on the Company’s financial accounting and reporting.

Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS No. 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. FASB has indicated it believes that SFAS No. 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. For example, SFAS No. 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. SFAS No. 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statement No. 157, “Fair Value Measurements” (SFAS No. 157), and FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” (SFAS No. 107). SFAS No. 159 is effective as of the beginning of a company’s first fiscal year beginning after November 15, 2007. Early adoption is permitted as of the beginning of the previous fiscal year provided that the company makes that choice in the first 120 days of that fiscal year and also elects to apply the provisions of SFAS No. 157.

(3) Acquisition of ANTARA

On August 18, 2006, the Company acquired the rights to ANTARA in the United States from Reliant Pharmaceuticals in a transaction being accounted for as an acquisition of a business in accordance with SFAS No. 141, “Business Combinations” (SFAS No. 141) and accordingly, allocated the purchase price of ANTARA based upon the estimated fair value of net assets acquired and liabilities assumed. The Company has performed a preliminary valuation study to determine the allocation of the estimated purchase price of the ANTARA acquisition among the tangible and intangible assets acquired as well as their estimated amortization period. The study was performed by a third party and is unaudited. The estimated useful life of the intangible assets is assumed to be fourteen years which was based upon the remaining life of the patents covering ANTARA, the regulatory barriers to competition, and management’s knowledge of existing competitors research activities. The Company has completed an analysis of the fair values of the liabilities assumed in connection with the acquisition, including certain liabilities that qualify for recognition under EITF No. 95-3 “Recognition of Liabilities in Connection with a Purchase Business Combination” (EITF No. 95-3).

F-20

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The following is a summary of the Company’s estimate of the fair values of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

Estimate of the allocation of purchase price:
Inventories	$	4,344
Prepaid expenses		2,656
Intangible assets		60,780
Goodwill		16,783
Total assets acquired		84,563
Liabilities assumed		(1,427	)
Net assets acquired	$	83,136
Consideration and direct transaction costs:
Cash	$	82,376
Estimated direct transaction costs		760
Total purchase price	$	83,136

The following table presents the estimate of the fair value of the intangible assets acquired, their estimated useful lives and amortization expense (in thousands, except estimated useful lives data):

Intangible assets	Fair value of intangibles		Estimated life (in years)	Amortization for the year ended December 31, 2006
License Agreement	$	58,900	14	$	1,560
Manufacturing Relationship		1,880	14		50
Total	$	60,780		$	1,610

The following table presents the estimated amortization of the intangible assets acquired (in thousands):

2006	$	1,610
2007		4,341
2008		4,341
2009		4,341
2010-2020		46,147
Total	$	60,780

The valuation of the purchased intangible assets of $60,780,000 was based on the result of a valuation using the income approach and applying a weighted average cost of capital of 17%. On an ongoing basis, the Company will evaluate the useful life of these intangible assets and determine if any competitive, governmental or regulatory event has impaired the value of the assets or modified their estimated useful lives.

Supplemental Pro Forma Information

ANTARA’s operations, assumed as of the date of acquisition, are included in the Company’s results of operations beginning on August 18, 2006. In the following table, the unaudited pro forma combined condensed statements of operations for 2006 and 2005 gives effect to the acquisition of ANTARA as if the acquisition of ANTARA had occurred on January 1, 2006 and 2005, respectively.

F-21

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The unaudited pro forma combined condensed statements of operations are not necessarily indicative of the financial results that would have occurred if the ANTARA acquisition had been consummated on January 1, 2005 nor are they necessarily indicative of the financial results which may be attained in the future.

The pro forma statements of operations are based upon available information and upon certain assumptions that the Company’s management believes are reasonable. The ANTARA acquisition is being accounted for using the purchase method of accounting (in thousands, except per share data).

	Year ended December 31,
	2006 (Actual)			2006 (Pro forma)			2005 (Actual)			2005 (Pro forma)
Revenue	$	46,152		$	70,242		$	23,609		$	47,302
Total costs and expenses		118,071			153,136			112,281			195,310
Net loss	$	(78,477	)	$	(89,452	)	$	(88,593	)	$	(147,929	)
Weighted average number of shares—basic and diluted		11,925			12,797			9,569			10,957
Net loss per share	$	(6.58	)	$	(6.99	)	$	(9.26	)	$	(13.50	)

(4) Reverse Stock Split

Pursuant to an Amendment to the amended and restated articles of organization, the Company effectuated on November 15, 2006, a one-for-eight reverse stock split of its issued and outstanding common stock, par value $0.10 per share and maintained the number of authorized shares of its common stock at 175,000,000. As a result of the reverse stock split, each eight shares of common stock issued and outstanding as of November 15, at the close of business, were automatically combined into and became one share of common stock. In cases in which the reverse stock split results in any shareholder holding a fraction of a share, such fractional share was rounded up to the nearest whole number.

Immediately after giving effect to the reverse stock split, the Company had approximately 13,552,125 shares of common stock outstanding (without giving effect to rounding due to fractional shares). The reverse stock split did not change the number of authorized shares of common stock, alter the par value of the common stock or modify any voting rights or other terms of the common stock. As a result of the reverse stock split, the per share exercise price of, and the number of shares of common stock underlying, Company stock options and warrants outstanding immediately prior were automatically proportionally adjusted, based on the one-for-eight reverse stock split ratio, in accordance with the terms of such options or warrants, as the case may be. All share and per share information in these consolidated financial statements have been retroactively restated to reflect the reverse stock split.

(5) Merger with GeneSoft Pharmaceuticals, Inc. and Sale of Common Stock

On February 6, 2004, the Company completed its acquisition of 100% of Genesoft, a privately-held company located in South San Francisco, California pursuant to which, among other things, the Company acquired the rights to commercialize FACTIVE as the Company focused on expanding the business in the primary care physician market in the United States. The acquisition was accounted for as a purchase in accordance with SFAS No. 141 and accordingly, allocated the purchase price of Genesoft based upon the estimated fair value of net assets acquired and liabilities assumed. The purchase price of approximately $110 million was paid by the issuance of approximately 3,150,000 shares of the Company’s common stock to existing Genesoft common stockholders and promissory note holders and the issuance of options to purchase approximately 425,000 shares for Genesoft stock options and warrants assumed in the merger. In connection with the merger, the Company assumed approximately $22 million in Genesoft debt, through the issuance of 5%

F-22

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

convertible promissory notes. Such notes are convertible, at the option of the holder, into shares of the Company’s common stock at a price of $53.13 per share, as adjusted pursuant to the reverse stock split which the Company effectuated in November 2006.

Concurrent with the merger, the Company sold 2.1 million shares of its common stock at $42 per share resulting in net proceeds received of approximately $81 million.

The following is a summary of the Company’s estimate of the fair values of the assets acquired and liabilities assumed at the date of acquisition. The Company engaged a third party to appraise the fair value of the acquired tangible and intangible assets, which has completed its report. The Company has completed its analysis of the fair values of the liabilities assumed in connection with the acquisition, including certain liabilities that qualify for recognition under EITF No. 95-3. The Company has finalized the purchase price allocation by completing analysis of its assumed liabilities and other relevant information relating to the acquisition. The final purchase price allocation is presented below (in thousands):

Assets:
Current Assets	$	6,684
Property & Equipment		263
Intangible Assets Subject to Amortization		74,675
Restricted Cash		3,697
In-Process Research & Development		11,704
Goodwill		62,495
Total Assets Acquired	$	159,518
Liabilities:
Current Liabilities	$	5,199
Long-Term Liabilities		22,310
Accrued Facility Costs		21,617
Total Liabilities Assumed	$	49,126
Net Assets Acquired	$	110,392

The valuation of the purchased intangible assets of $74.7 million was based on the result of a valuation using the income approach and applying risk-adjusted discount rates between 15% and 22%. The valuation of purchased intangible assets includes the license to Genesoft’s lead product and developed technology, FACTIVE, valued at $69.5 million. FACTIVE is an orally administered, broad-spectrum fluoroquinolone antibiotic which was approved by the FDA for the treatment of acute bacterial exacerbation of chronic bronchitis and community- acquired pneumonia of mild to moderate severity. The valuation of purchased intangible assets also includes the value of a manufacturing and supply agreement for FACTIVE with a third party of $5.2 million.

At the time of acquisition, management approved a plan to integrate certain Genesoft facilities into existing operations. In connection with the integration activities, the Company included in the purchase price allocation a restructuring liability of approximately $18,306,000, which includes $1,419,000 in severance-related costs and $16,887,000 in facility lease impairment costs pertaining to 68,000 square feet of leased space which expires on February 28, 2011. In the quarter ended December 31, 2004, in accordance with EITF No. 95-3, the Company made an adjustment to the facilities impairment estimate based on the additional cost of utilities and other related expenses of approximately $4,730,000. The adjustment was recorded as an additional cost of the acquired company. In 2006 and 2005, in accordance with EITF No. 95-3, the Company made adjustments to the facilities lease liability based on revisions made to estimates of future rental income related to additional subleased space

F-23

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

of approximately $119,000 and $734,000, respectively. The adjustment was recorded as a reduction to goodwill. In 2004, the Company paid approximately $1,419,000 against the 2004 accrual for termination benefits.

The following tables display the restructuring liability activity recorded related to the Genesoft acquisition (in thousands):

	Year Ended December 31, 2006
	Balance at December 31, 2005		Liability Adjustment			Cash Payments			Interest Accretion		Balance at December 31, 2006
Assumed facility lease liability	$	16,204	$	(119	)	$	(2,825	)	$	640	$	13,900

	Year Ended December 31, 2005
	Balance at December 31, 2004		Liability Adjustment			Cash Payments			Interest Accretion		Balance at December 31, 2005
Assumed facility lease liability	$	19,375	$	(734	)	$	(3,179	)	$	742	$	16,204

In addition, the Company recorded interest expense of approximately $640,000, $742,000 and $623,000 in 2006, 2005 and 2004, respectively, in connection with the amortization of the discount related to the facility lease liability. The Company recorded the lease liability at its net present value and, accordingly, the Company recorded interest expense associated with the amortization of this discount.

Additionally, the Company recorded approximately $5,423,000 of deferred compensation related to the intrinsic value of unvested options issued in exchange for options assumed in the merger in 2004. The Company recorded approximately $836,000 and $4,587,000 in amortization of deferred compensation in 2005 and 2004, respectively, in connection with the merger. The deferred compensation related to the options assumed in the merger was fully amortized as of December 31, 2005.

Supplemental Pro Forma Information:

Genesoft’s operations, assumed as of the date of acquisition, are included in the Company’s results of operations beginning on February 6, 2004. The unaudited pro forma combined condensed statement of operations for 2004 gives effect to the acquisition of Genesoft as if the acquisition of Genesoft had occurred on January 1, 2004.

The pro forma statements of operations are based upon available information and upon certain assumptions that the Company’s management believes are reasonable. The Genesoft acquisition is being accounted for using the purchase method of accounting (in thousands, except per share data).

	Year Ended December 31,
	2004     (Actual)			2004 (Pro forma)     (unaudited)
Revenue	$	6,613		$	7,046
Total costs and expenses		97,229			99,994
Net loss	$	(93,271	)	$	(95,732	)
Weighted average number of shares—basic and diluted		8,794			8,794
Net loss per share	$	(10.61	)	$	(10.89	)

F-24

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(6) Restructuring Plans

In the fourth quarter of 2004, the Company relocated its corporate headquarters from a facility in Waltham, Massachusetts to a different facility in Waltham, Massachusetts. The Company completed the relocation to obtain administrative space that was needed to support the launch of FACTIVE. The abandonment of the former corporate headquarters was accounted for under SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146). Accordingly, the Company recorded a restructuring charge of approximately $4,780,000 which was comprised of $2,780,000 related to the remaining facility costs that continued to be incurred through the lease expiration date on November 15, 2006, net of expected sublease payments and $2,000,000 for the write-off of the net book value of the leasehold improvements at the abandoned facility. Upon expiration of the lease, the Company recognized additional expense of $124,000 and has no remaining liability as of December 31, 2006.

The following tables summarize the restructuring activity during 2006 and 2005 (in thousands):

	Year Ended December 31, 2006
	Balance at December 31, 2005		Cash Payments			Balance at December 31, 2006
Restructuring facility lease liability	$	1,076	$	(1,076	)	$	—

	Year Ended December 31, 2005
	Balance at December 31, 2004		Cash Payments			Balance at December 31, 2005
Restructuring facility lease liability	$	2,219	$	(1,143	)	$	1,076

(7) Sale of Genomics Services and Intellectual Property

(a) Sale of Genomics Services—Discontinued Operation

On March 14, 2003, the Company completed the sale of its genomics services business to Agencourt Bioscience Corporation (Agencourt). As part of the Asset Purchase Agreement (the Agreement), the Company transferred its gene sequencing operations, including both commercial and government customer contracts and certain personnel and equipment, to Agencourt in exchange for an up-front cash payment of $200,000 and shares of Agencourt common stock. The Company was to receive royalties on gene sequencing revenue earned by Agencourt that is related to the transferred business for a period of two years after the date of sale. The Company retained the right to its PathoGenome^™ Database, including all associated intellectual property, subscriptions and royalty rights on products developed by subscribers.

During the year ended December 31, 2005, the Company received approximately $2,388,000 in exchange for 500,000 shares of Agencourt Bioscience Corporation (Agencourt) common stock when Agencourt was acquired by Beckman Coulter. The Company received the original 500,000 shares as part of the sale of the genomics services business in 2002 to Agencourt. In connection with the receipt of these funds, the Company recorded a gain on the sale of the stock of approximately $2,162,000 during the year ended December 31, 2005. During the year ended December 31, 2006, the Company received approximately $1,617,000 in exchange for 121,150 shares of Agencourt Personal Genomics Bioscience related to the merger with Applera Corporation. The Company received the original 121,150 shares as part of the sale of the genomics services business in 2002 to Agencourt. The Company recorded a gain on disposition of the investment of $1,617,000 for the year ended December 31, 2006. In addition, the Company may receive additional funds through 2008 based on milestones achieved by Agencourt.

F-25

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The cash flows from the genomics services group were no longer significant during the quarter ended December 31, 2004 and therefore were eliminated from the ongoing operations of the Company as a result of the disposal transaction. As a result, the genomics services business is considered to be a “discontinued operation” as defined by SFAS No. 144. Accordingly, during the fourth quarter of 2004, the Company presented the revenues and associated expenses as a discontinued operation as the Company no longer has significant involvement in the cash flows of this business.

(b) Sale of Intellectual Property

During the year ended December 31, 2005, the Company recorded income from sale of intellectual property of $2,500,000, due to the sale of intellectual property related to the genomic sequence of an undisclosed pathogen to Wyeth Pharmaceuticals, which was recorded as income from sale of intellectual property in the accompanying consolidated statement of operations for the year ended December 31, 2005.

(8) Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following (in thousands):

	December 31,
	2006		2005
Goodwill	$	78,193	$	61,529
License Agreement, net		113,925		61,019
Manufacturing Relationship, net		6,086		4,588
Total	$	198,204	$	127,136

(a) Goodwill

The Company’s goodwill relates to the acquisition of Genesoft, which occurred in February 2004 and totaled approximately $62,495,000, and the product acquisition of ANTARA, which occurred in August 2006 and totaled approximately $16,783,000. During 2006 and 2005, the Company recorded a reduction to goodwill associated with Genesoft of approximately $119,000 and $734,000, respectively primarily related to additional sublease income related to the South San Francisco facility. As of December 31, 2006, the Company does not believe that its goodwill is impaired. No amount of the goodwill balance at December 31, 2006 will be deductible for income tax purposes.

(b) Intangible Assets

As of December 31, 2006, intangible assets consist of the following (in thousands):

Asset Classification	Cost		Accumulated Amortization			Net
License Agreement	$	128,352	$	(14,427	)	$	113,925
Manufacturing Relationship		7,103		(1,017	)		6,086
Total	$	135,455	$	(15,444	)	$	120,011

The FACTIVE and ANTARA intangible assets are amortized on a straight-line basis over the remaining legal life of the underlying patents of approximately 15.7 and 14.0 years respectively, which also corresponds to the estimated useful life of such assets. The weighted average amortization period for the license agreement is

F-26

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

approximately 14.9 years and the weighted average amortization period for the manufacturing relationship is approximately 15.2 years, respectively. During 2006, 2005 and 2004, the Company recorded approximately $6,376,000, $4,767,000 and $4,302,000 of amortization expense, respectively.

The remaining amortization in future periods is as follows (in thousands):

Year-Ending December 31,
2007	$	9,108
2008		9,108
2009		9,108
2010		9,108
2011		9,108
Thereafter		74,471
Total	$	120,011

(9) Cash, Cash Equivalents and Marketable Securities

The Company applies the provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (SFAS No. 115). At December 31, 2006 and 2005, the Company held cash and cash equivalents. At December 31, 2005, the Company’s investments included short-term marketable securities, most of which were classified as held-to-maturity, as the Company had the positive intent and ability to hold these securities to maturity. Cash equivalents are short-term, highly liquid investments with original maturities of 90 days or less. Marketable securities are investment securities with original maturities of greater than 90 days. Cash equivalents are carried at cost, which approximates fair value. Marketable securities that are classified as held-to-maturity are recorded at amortized cost, which approximates fair value. At December 31, 2006, cash and cash equivalents consisted of money market funds. At December 31, 2005, cash and cash equivalents consisted of money market funds and commercial paper and marketable securities consisted of corporate obligations. At December 31, 2006, the Company did not hold investments, and as a result, had no net unrealized loss. At December 31, 2005, the average maturity of the Company’s investments was approximately 0.9 months, respectively, and as a result of holding investments, it had a net unrealized loss of approximately $1,000, respectively, which is the difference between the amortized cost and the fair value of the held-to-maturity investments related to well capitalized corporations. The fair value of the Company’s cash equivalents and marketable securities is determined based on market value.

F-27

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

At December 31, 2006 and 2005, the Company’s cash and cash equivalents and investments consisted of the following (in thousands):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2006
Cash and Cash Equivalents:
Cash	$	35,222	$	—	$	—		$	35,222
Money market funds		2,974		—		—			2,974
Total cash and cash equivalents	$	38,196	$	—	$	—		$	38,196
December 31, 2005
Cash and Cash Equivalents:
Cash	$	43,069	$	—	$	—		$	43,069
Money market funds		11,326		—		—			11,326
Commercial paper		11,223		4		—			11,227
Total cash and cash equivalents	$	65,618	$	4	$	—		$	65,622
Marketable Securities (held-to-maturity):
Short-term corporate obligations	$	2,696	$	—	$	(1	)	$	2,695
Total short-term marketable securities	$	2,696	$	—	$	(1	)	$	2,695

(10) Notes Receivable

In connection with a lease agreement associated with vehicles for the Company’s sales representatives, the Company was issued notes by the lessor totaling approximately $2,926,000 related to the repayment of security deposits made by the Company. The notes bear interest at rates ranging from 5.5% to 7.75% and have expiration dates ranging from February 2008 to November 2008. Principal and interest are repaid by the lessor to the Company over the 36 month lease term as lease payments are made on the vehicles.

(11) Income Taxes

The Company applies SFAS No. 109, “Accounting for Income Taxes” (SFAS No. 109), which requires the Company to recognize deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. SFAS No. 109 requires deferred tax assets and liabilities to be adjusted when the tax rates or other provisions of the income tax laws change.

At December 31, 2006, the Company had net operating loss carryforwards of approximately $440,440,000 and $329,386,000 available to reduce federal and state taxable income, respectively, if any. The Company also had tax research credit carryforwards of approximately $16,726,000 to reduce federal and state income tax, if any. Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%. Additionally, certain losses have begun to

F-28

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

expire due to the limitations of the carryforward. The net operating loss and tax credit carryforwards expire approximately as follows (in thousands):

Expiration Date	Federal Net Operating Loss Carryforwards		State Net Operating Loss Carryforwards		Research Tax Credit Carryforwards
2007	$	2,206	$	31,825	$	84
2008		2,616		28,551		24
2009		1,038		73,384		8
2010		—		92,402		21
2011		—		69,402		691
2012-2026		434,540		33,822		15,898
	$	440,400	$	329,386	$	16,726

The components of the Company’s net deferred tax asset at the respective dates are as follows (in thousands):

	December 31,
	2006			2005
Net operating loss carryforwards	$	163,368		$	138,955
Research and development credits		14,966			17,148
Investment tax credits		—			75
Capitalized research and development costs		7,180			8,262
Depreciation		996			1,625
Facility impairment liability related to merger		5,343			6,879
Sale reserves and allowances		2,582			467
Intangible assets acquired at merger		(23,390	)		(25,278	)
Other Intangibles		(209	)		—
Restructuring liabilities		—			(414	)
Deferred compensation		2,067			1,136
Accrued expenses		2,053			1,035
Other temporary differences		2,330			756
Net deferred tax asset		177,286			150,646
Valuation allowance		(177,465	)		(150,646	)
Net deferred tax liability	$	(179	)	$	—

The valuation allowance has been provided due to the uncertainty surrounding the realization of the deferred tax assets. The valuation allowance increased by approximately $26,819,000 from December 31, 2005 to December 31, 2006, primarily due to the increase in net operating loss carryforwards.

The acquisition of the ANTARA assets from Reliant was deemed to be a taxable acquisition. As such, the goodwill is tax deductible. The Company accounts for goodwill pursuant to SFAS No. 142 and as of December 31, 2006, the Company has not taken an impairment charge. Therefore, the tax amortization expense generated a deferred tax liability without the ability to recognize an equal amount of deferred tax asset due to the determination that a valuation allowance is required on its gross deferred tax assets.

F-29

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(12) Commitments and Contingencies

(a) Lease Commitments

During 2004, the Company moved from its former headquarters in Waltham, Massachusetts, which had approximately 81,000 square feet to a new facility in Waltham, Massachusetts. The Company’s new headquarters of approximately 36,000 square feet is under an operating lease which expires on March 31, 2012 and includes an option to renew for an additional five years. The rent payments under the Company’s headquarters lease include lease escalation clauses. In addition, for the months of November and December in 2006 and 2007, total rental payments are abated by approximately $121,000 and $131,000, respectively. The rent differential related to the rent holidays and escalation provisions have been accounted for as deferred rent. The Company assumed a lease obligation in South San Francisco, California when it merged with Genesoft. The leased space is approximately 68,000 square feet and the lease expires on February 28, 2011. A portion of the old headquarters in Waltham, Massachusetts and the facility in South San Francisco, California have been subleased to third parties in 2006 and 2005. The Company’s lease obligation on the former headquarters in Waltham, Massachusetts expired on November 15, 2006.

The future minimum lease payments under the operating leases at December 31, 2006 are as follows (in thousands):

Year-Ending December 31,	Restructuring/Impaired Facilities		Headquarter Facility
2007	$	4,366	$	732
2008		4,519		906
2009		4,677		936
2010		4,821		978
2011		807		978
Thereafter		—		245
Total	$	19,190	$	4,775

Rent expense relating to the Company’s headquarters in each of the years ended 2006 and 2005 amounted to approximately $833,000 and rent expense in 2004 amounted to approximately $347,000. Rent payments for facilities accounted for in the restructuring and facility impairment accruals amounted to $5,255,000 and $5,204,000 in 2006 and 2005, respectively. Rental payments from subleasing arrangements were approximately $3,922,000 and $3,571,000 in 2006 and 2005, respectively and were accounted for as part of the Company’s restructuring and impairment accruals. The aggregate minimum amount of rental payments to be received in future periods from existing contracted subleasing arrangements is approximately $2,070,000 as of December 31, 2006.

(b) Employment Agreements

The Company has employment agreements with its executive officers and several key employees, which provide for bonuses, as defined, and severance benefits upon termination of employment, as defined.

(c) Litigation

The Company is involved in various legal matters, which arise in the ordinary course of business. The Company does not believe that the ultimate resolution of any matter will have a material adverse effect on its financial condition, results of operations or cash flows.

F-30

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(13) Long-term Obligations

Long-term obligations consist of the following (in thousands):

	As of December 31,
	2006		2005
3 1/2% Senior convertible promissory notes	$	152,750	$	152,750
5% Convertible promissory notes		22,310		22,310
Revenue interest assignment		38,995		—
12% Senior secured note		20,000		—
Capital lease		169		—
		234,224		175,060
Less—current portion of capital lease		38		—
	$	234,186	$	175,060

(a) Debt Obligations

In the quarter ended June 26, 2004, the Company issued $152,750,000 in principal amount of its 3 ¹/2% senior convertible promissory notes due in April 2011. These notes are convertible into the Company’s common stock at the option of the holders at a conversion price of $53.14 per share, as adjusted pursuant to the reverse stock split which the Company effectuated in November 2006. The Company may not redeem the notes at its election before May 10, 2010. After this date, the Company can redeem all or a part of the notes for cash at a price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest. Upon the occurrence of a termination of trading of the Company’s common stock or a change of control transaction in which substantially all of the Company’s common stock is exchanged for consideration other than common stock that is listed on a U.S. national securities exchange or market (such as NASDAQ), holders of these notes have the right to require the Company to repurchase all or any portion of their notes at a price equal to 100% of the principal amount plus accrued and unpaid interest. In addition, in the case of a change of control transaction in which all of the consideration paid for the Company’s common stock consists of cash, the Company may have an obligation to pay an additional make-whole premium to the note holders based on a formula set forth in the indenture. In connection with the issuance, the Company recorded deferred financing costs of $5,708,000 which are being amortized to interest expense on a straight-line basis over the period the notes are outstanding. A portion of the net proceeds from the offering was used to purchase U.S. government securities as pledged collateral to secure the first six scheduled interest payments on the notes, which are classified as restricted cash on the December 31, 2006 and 2005 accompanying consolidated balance sheets. As part of the issuance, the Company filed a shelf registration statement relating to the resale of the notes and the common stock issuable upon conversion.

On February 6, 2004, in connection with the merger with Genesoft, the Company issued $22,309,647 in principal amount of 5% convertible promissory notes due in February 2009. These notes are convertible into the Company’s common stock at the option of the holders, at a conversion price of $53.13 per share, as adjusted pursuant to the reverse stock split which the Company effectuated in November 2006. In addition, the Company has the right to force conversion if the price of its common stock closes above 150% of the then effective conversion price for 15 consecutive trading days. At the closing of the merger, the holders of these notes also received an aggregate 601,693 shares of the Company’s common stock representing the payment of accrued interest and related amounts on certain outstanding notes previously issued to such holders by Genesoft.

F-31

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(b) Other Financial Arrangements

To finance the acquisition of ANTARA in August 2006, the Company, together with its wholly-owned subsidiary Guardian II Acquisition Corporation (“Guardian II”) (the entity which holds all of the ANTARA assets), entered into several financing agreements with Paul Royalty Fund Holdings II, LP, an affiliate of Paul Capital Partners (Paul Capital), including the Revenue Interest Assignment Agreement, and the Note Purchase Agreement, presented under long term debt, and the Common Stock and Warrant Purchase Agreement, presented in equity, in consideration for an aggregate amount of $70 million.

Revenue Interests Assignment Agreement

The Company and Guardian II entered into the Revenue Interests Assignment Agreement (the “Revenue Agreement”), pursuant to which the Company sold to Paul Capital the right to receive specified royalties on Oscient’s net sales in the United States (and the net sales of its affiliates and licensees) of FACTIVE tablets and Guardian II sold to Paul Capital the right to receive specified royalties on Guardian II’s net sales in the United States (and the net sales of its affiliates and licensees) of ANTARA capsules, in each case until December 31, 2016. The royalty payable to Paul Capital on net sales of ANTARA and FACTIVE starts each fiscal year as a high single digit royalty rate and declines to a low single digit royalty rate based on achievement of annual specified sales thresholds in each fiscal year. Once the cumulative royalty payments to Paul Capital exceed $100 million, the royalties become nominal.

In connection with the Revenue Agreement, the Company recorded a liability, referred to as the revenue interest liability, of approximately $40 million in accordance with EITF No. 88-18, “Sales of Future Revenues” (EITF No. 88-18). The Company will impute interest expense associated with this liability using the effective interest rate method and will record a corresponding accrued interest liability. The effective interest rate is calculated based on the rate that would enable the debt to be repaid in full over the life of the arrangement. The interest rate on this liability may vary during the term of the agreement depending on a number of factors, including the level of ANTARA and FACTIVE sales. Payments made to Paul Capital as a result of ANTARA and FACTIVE sales levels will reduce the accrued interest liability and the principal amount of the revenue interest liability. Through December 31, 2006, the Company has paid approximately $1,377,000 to Paul Capital as a result of ANTARA and FACTIVE sales.

In the event of (i) a change of control of Oscient or Guardian II, (ii) a bankruptcy of Oscient or Guardian II, (iii) a transfer by Oscient or any of its subsidiaries of substantially all of either ANTARA or FACTIVE, (iv) subject to a cure period, breach of certain material covenants and representations in the Revenue Agreement and (v) in the event the sale of ANTARA is suspended due to a court issued injunction or the Company elects to suspend sales of ANTARA, in each case as a result of a lawsuit by certain third parties (each a “Put Event”), Paul Capital has the right to require the Company and Guardian II to repurchase from Paul Capital its royalty interest at a price in cash which equals the greater of (a) a specified multiple of cumulative payments made by Paul Capital under the Revenue Agreement less the cumulative royalties previously made to Paul Capital; or (b) the amount which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return (the “Put/Call Price”). Upon a bankruptcy event, the Company and Guardian II are automatically required to repurchase the Paul Capital royalty interest at the Put/Call Price. In the event of a change of control of Oscient, the Company has the right to repurchase the Paul Capital royalty interest for an amount equal to the Put/Call Price. The Company has determined that Paul Capital’s put option and the Company’s call option meet the criteria to be considered an embedded derivative and should be accounted for as such. The Company recorded a net liability of $1,005,000 related to the put/call option to reflect its estimated fair value as of the date of the agreement, in accordance with SFAS No. 133, “Accounting for Derivatives Instruments and Hedging Activities” (SFAS No. 133). This liability will be revalued on a quarterly basis to reflect any changes in the fair value and any gain or loss resulting from the revaluation will be recorded in earnings. As of December 31, 2006, no gain or loss has been recorded.

F-32

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

During the first two fiscal years immediately following the fiscal year in which combined annual net sales of ANTARA and FACTIVE are equal to or greater than $125 million, the Company and Guardian II have the right, but not the obligation, to reduce the royalty percentages due under the Revenue Agreement to Paul Capital by fifty percent (50%) by paying Paul Capital a price in cash which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return. During the first two fiscal years immediately following the fiscal year in which combined annual net sales of ANTARA and FACTIVE are equal to or greater than $250 million, the Company and Guardian II have the right, but not the obligation, to repurchase the Paul Capital royalty interest at a price in cash which will provide Paul Capital, when taken together with the royalties previously paid, a specified rate of return.

Note Purchase Agreement

Guardian II entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Paul Capital pursuant to which Guardian II issued and sold a $20,000,000 aggregate principal amount of 12% senior secured note (the “Note”), due on the fourth anniversary of the closing date, subject to Guardian II’s option to extend the maturity to the sixth anniversary of the closing date, provided (i) there are no defaults under the Note at the time, and (ii) the Company issues to Paul Capital, at the time of the exercise of such option, a warrant for such number of shares of common stock equal to 10% of the principal balance plus accrued interest divided by $6.94, with an exercise price of $6.94 per share. If the Company exercises such option, the number of shares subject to the warrant issuable to Paul Capital would be between 288,018 shares and 367,529 shares, depending upon the amount, if any, of the interest payable on the Note the Company elects to have added to the principal of the Note rather than paid in cash as described below.

Interest is payable semi-annually in arrears on the last day of each of March and September. Guardian II has the option to pay interest in cash or to have 50% of the interest paid in cash and 50% of the interest added to principal. In the event of a change of control of Oscient or on or after the second anniversary of the closing, the Company may at its option prepay all or any part of the Note at a premium which declines over time. In the event of default, with “event of default” defined as a continuing Put Event under the Revenue Agreement as described in more detail above, the outstanding principal and interest in the Note shall become immediately due and payable.

Subject to the Revenue Agreement and the Note Purchase Agreement, without the prior written consent of Paul Capital, the Company has agreed not to (i) amend, waive any rights under, or terminate any material license agreements, including the agreements relating to the ANTARA products and FACTIVE, (ii) enter into any new agreement or amend or fail to exercise any of its material rights under existing agreements that would adversely affect Paul Capital’s royalty interest, and (iii) sell any material assets related to ANTARA or FACTIVE.

Pursuant to the terms of the Revenue Agreement and the Note Purchase Agreement, Guardian II and Paul Capital entered into a Security Agreement (the “Security Agreement”) under which Guardian II granted to Paul Capital a security interest in and to substantially all assets owned by Guardian II (including rights to the ANTARA products) in order to secure its performance under each of the Revenue Agreement, the Note Purchase Agreement and the Note. To the extent the indebtedness under certain of its pre-existing debt obligations is refinanced or replaced and such replacement or refinancing indebtedness is secured, the Company has agreed to equally and ratably secure its obligations under the Revenue Agreement.

Common Stock and Warrant Purchase Agreement

As part of the financing, the Company and Paul Capital also entered into a Common Stock and Warrant Purchase Agreement (the “Stock and Warrant Purchase Agreement”), pursuant to which, in exchange for $10 million, the Company sold to Paul Capital 1,388,889 shares (the “Shares”) of the Common Stock, at a price of

F-33

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

$7.20 per share (the “Private Placement”) and issued Paul Capital a warrant (the “Warrant”) to purchase 288,018 shares of Common Stock (the “Warrant Shares”) at an exercise price of $6.94 per share. The Warrant is exercisable for seven years from the date of closing. The Warrant contains a net share settlement feature and penalties if the Company does not deliver the applicable amount of Warrant Shares within three trading days of exercise of a Warrant by Paul Capital. The Warrant also contains provisions providing that, at Paul Capital’s election, the Company must re-purchase the Warrant from Paul Capital upon a sale of the Company in which the consideration for such sale is solely cash.

The following table presents future maturities of debt (in thousands):

Year-Ending December 31,
2007	$	38
2008		38
2009		22,348
2010		20,038
2011		152,767
Thereafter		38,995
Total	$	234,224

(14) Stockholders Equity

(a) Equity Plans

The Company granted stock options to key employees and consultants under its 1991, 1993, 1995 and 1997 Stock Option Plans, and continues to grant stock-based awards under the 2001 Incentive Plan (collectively, the Option Plans). The Stock Option and Compensation Committee of the Board of Directors determines the purchase price and vesting schedule applicable to each option grant. As of December 31, 2006, there are no shares reserved for future grants under the 1991, 1993, 1995 and 1997 Plans. The 2001 Incentive Plan provides for the grant of non-qualified stock options, incentive stock options, restricted stock, stock appreciation rights, unrestricted stock, deferred stock, convertible securities, and cash and equity-based performance awards. Generally, options granted to employees vest based on service conditions over a two to four year time period and options granted to non-employees vest based on service conditions over a one to three year time period, all of which have graded vesting. In addition, the requisite service period is generally equal to the vesting terms. All options granted to both employees and non-employees have a contractual term of ten years from date of grant and generally, the exercise price of the stock options equals the fair market value of the Company’s common stock on the date of grant. Certain option awards provide for accelerated vesting if there is a change in control. As of December 31, 2006, 1,790,842 shares were authorized and 754,392 shares were available under the 2001 Incentive Plan for future issuance. In addition, under separate agreements not covered by any plan, the Company has granted certain key employees and directors of the Company an aggregate of 65,506 options to purchase common stock.

The Company also has an Employee Stock Purchase Plan (ESPP), which was adopted in February 2000. Under the ESPP, eligible employees may contribute up to 15% of their earnings toward the semi-annual purchase of the Company’s common stock. The employees’ purchase price is 85% of the fair market value of the common stock at the time of grant of option or the time at which the option is deemed exercised, whichever is less. The most recently completed offering period began July 1, 2006 and ended on December 31, 2006; therefore, July 1, 2006 is considered the grant date for the purposes of recognizing the stock-based compensation expense for this offering period. The Company projects the estimated contributions at the beginning of the period and uses the Black-Scholes-Merton option-pricing model in order to determine the estimated fair value of the stock to be

F-34

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

issued. At the end of the offering period, the Company adjusts the estimated contributions to actual. Under Accounting Principles Board Opinion (APB) No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), the Company was not required to recognize stock-based compensation expense for the cost of stock options or shares issued under the Company’s ESPP, as the ESPP was determined to be noncompensatory. Upon adoption of SFAS No. 123R, the Company began recording stock-based compensation expense related to the ESPP. As of December 31, 2006, 281,250 shares were authorized and 12,039 shares were available for future issuance under this plan.

In December 2005, in accordance with transition guidance issued by the Internal Revenue Code in connection with Section 409A, the Company approved a plan to cancel the outstanding discounted stock options and issue replacement options with an exercise price equal to the current fair market value of the Company’s common stock. The replacement options were not discounted and therefore not subject to the additional taxes imposed by Section 409A. Because the replacement options have a higher exercise price than the canceled discounted options, a cash payment in an amount equal to the aggregate spread between the two exercise prices, as well as an amount to cover the tax payable in respect of such payment, has been made to each affected optionee. The cash payments under this plan totaled approximately $65,000 and has been accounted compensation expense. The Company does not anticipate issuing discounted stock options as part of employee compensation in the future.

Deferred compensation is recorded in an amount equal to the excess of the fair market value per share over the exercise price times the number of options or shares granted. Deferred compensation is amortized on a straight-line basis over the vesting period of the underlying awards. The Company recorded amortization of deferred compensation related to employee stock-based awards of $1,006,000 and $5,071,000 for the years ended December 31, 2005 and 2004, respectively.

A summary of activity related to stock options under the Option Plans as of December 31, 2006, 2005 and 2004 and changes during the respective years ended is presented below (in thousands, except weighted average data):

	Number of Shares (in thousands)		Exercise Price Range		Weighted Average Price		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding, December 31, 2003	506		$	0.80-399.28	$	47.52
Granted	368			11.68-53.84		38.64
Exchanged upon merger	414			0.56-23.52		2.88
Exercised	(266	)		0.56-47.28		7.04
Canceled	(67	)		4.08-399.28		52.24
Outstanding, December 31, 2004	955		$	0.56-221.28	$	35.76
Granted	536			13.76-28.80		19.92
Exercised	(173	)		0.56-18.40		3.60
Canceled	(211	)		1.92-172.72		39.28
Outstanding, December 31, 2005	1,107		$	0.56-221.28	$	32.49
Granted	244		$	5.00-18.12		13.49
Exercised	(89	)		4.06-17.92		1.89
Canceled	(275	)		1.18-172.75		30.31
Outstanding, December 31, 2006	987		$	3.07-265.72	$	31.18	7.55	$	36.00
Exercisable, December 31, 2006	596		$	3.07-265.72	$	38.64	6.84	$	36.00
Exercisable, December 31, 2005	575		$	0.56-221.28	$	38.32
Exercisable, December 31, 2004	590		$	0.56-221.28	$	34.72

F-35

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

The range of exercise prices for options outstanding and options exercisable under the Option Plans at December 31, 2006 are as follows:

Range of Exercise Prices	Weighted Average Remaining Contractual Life of Options Outstanding (in years)	Options Outstanding			Options Exercisable
		Number of Shares (in thousands)	Weighted Average Exercise Price		Number of Shares (in thousands)	Weighted Average Exercise Price
$    3.07 –     4.61	6.22	21	$	3.51	21	$	3.51
$    4.61 –     6.91	9.16	19		6.01	4		5.49
$    6.91 –   10.37	8.18	77		9.37	28		9.14
$  10.37 –   15.55	8.62	270		14.50	117		14.34
$  15.55 –   23.33	8.26	149		20.23	92		20.84
$  23.33 –   34.99	7.71	153		26.45	79		26.14
$  34.99 –   52.49	6.98	190		42.35	152		42.43
$  52.49 –   78.73	5.22	27		59.26	22		60.50
$  78.73 – 118.10	3.86	79		112.42	79		112.42
$118.10 – 177.15	3.61	2		160.18	2		160.18
Total	7.55	987	$	31.18	596	$	38.64

(b) Sale of Common Stock

On April 11, 2006, the Company completed a private placement of its common stock with institutional investors and other accredited investors. The Company sold an aggregate of 2,254,402 shares of its common stock at a price of $15.44 per share and warrants to purchase up to 1,149,745 shares of common stock at a price of $1.00 per warrant. The warrants have an exercise price of $17.76 per share and a term of five years.

(c) Warrants

As of December 31, 2006 and 2005, the Company had warrants outstanding for the purchase of 1,836,684 shares of common stock at exercise prices ranging from $6.94 – $90.64 in 2006, and 392,864 shares of common stock at exercise prices ranging from $26.96 – $90.64 in 2005, as adjusted for the reverse stock split effectuated by the Company on November 15, 2006. These warrants are fully vested at December 31, 2006 and are as follows (in thousands, except exercise price data):

Warrants Outstanding	Exercise Price		Expiration
319	$	27.84	October 15, 2008
74	$	26.96	December 31, 2008
1,150	$	17.76	April 11, 2011
6	$	90.64	June 13, 2011
288	$	6.94	August 18, 2013

(d) Note Receivable from Officer

In March 2001, the Company loaned $163,000 to an officer of the Company to allow him to pay income tax liabilities associated with a restricted stock grant of 3,000 shares. The loan carried an interest of 4%. The principal amount of the note was non-recourse as it was secured only by the 3,000 shares of restricted stock. The interest portion of the loan was full-recourse as it was secured by the officer’s personal assets. The officer paid the Company approximately $41,000 for interest due to the Company pursuant to the loan. Pursuant to the terms of the note, the note came due on December 31, 2006, at which point the officer transferred the 3,000 shares of restricted stock to the Company as payment in full of all principal outstanding under such loan.

F-36

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(e) Common Stock Reserved

Common stock reserved for future issuance at December 31, 2006 consists of the following (in thousands):

Stock option and incentive plans	1,791
Employee stock purchase plan	12
Warrants	1,837
Conversion of convertible notes	3,359
Total	6,999

(15) Incentive Savings 401(k) Plan

The Company maintains an incentive savings 401(k) plan (the 401(k) Plan) for the benefit of all employees. The Company matches 50% of the first 6% of salary, which for 2006 was limited to the first $220,000 of annual salary. The Company contributed approximately $356,000, $183,000 and $167,000 to the 401(k) Plan for the years ended December 31, 2006, 2005 and 2004, respectively.

(16) Supply Agreement for FACTIVE

The Company licenses from LG Life Sciences the right to develop and commercialize gemifloxacin, a novel fluoroquinolone antibiotic, in North America, France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino, Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia. The term of the agreement with respect to each country extends at least through the life of the patents covering gemifloxacin in such country. In the United States, the last of the issued patents for composition of matter expires in 2018. The patent term could extend further in countries outside of the U.S. depending upon several factors, including whether the Company obtains patent extensions and the timing of its commercial sale of the product in a particular country.

Under the terms of the agreement, LG Life Sciences has agreed to supply and the Company is obligated to purchase from LG Life Sciences all of its anticipated commercial requirements for the FACTIVE API. LG Life Sciences currently supplies the FACTIVE API from its manufacturing facility in South Korea.

The agreement with LG Life Sciences also requires a minimum sales commitment over a period of time, which if not met, would result in the technology being returned to LG Life Sciences. Under this agreement, the Company is responsible, at its expense and through consultation with LG Life Sciences, for the clinical and commercial development of gemifloxacin in the countries covered by the license, including the conduct of clinical trials, the filing of drug approval applications with the FDA and other applicable regulatory authorities and the marketing, distribution and sale of gemifloxacin in its territory; provided, that LG Life Sciences has the right to co-promote the product in the U.S., on terms to be negotiated, commencing in 2008 and for periods thereafter, in which case the Company’s royalty obligations to LG Life Sciences would cease. Pursuant to an amendment dated March 31, 2006 as further described below, LG Life Sciences’ right to co-promote in the U.S. will terminate upon the Company reaching a certain level of sales.

The Company is obligated to pay a royalty on sales of FACTIVE in North America and the territories covered by the license in Europe. These royalty obligations expire with respect to each country covered by the

F-37

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

agreement on the later of (i) the expiration of the patents covering FACTIVE in such country or (ii) the expiration of data exclusivity in Mexico, Canada or the European Union respectively, or 2014 in the U.S. The Company is also obligated to make aggregate milestone payments of up to $40 million to LG Life Sciences (including milestone payments required by the amendments described below) upon achievement of additional regulatory approvals and sales thresholds.

On March 31, 2005, the Company amended its license and option agreement with LG Life Sciences. As part of the amendment of the agreement, the Company made a one-time, up-front payment of $2 million to LG Life Sciences which was recorded to general and administrative expense in the three month period ended March 31, 2005 and agreed to make certain additional milestone payments upon obtaining regulatory approvals and sales thresholds. The amended agreement also includes a reduction of future royalties payable to LG Life Sciences at certain FACTIVE revenue levels in territories covered by the agreement.

The Company further amended its agreement with LG Life Sciences on February 3, 2006, pursuant to which LG Life Sciences agreed to a reduction of future royalties payable for sales of FACTIVE tablets in Mexico and Canada and the termination of LG Life Sciences’ co-promotion rights in these countries. The modified agreement also calls for additional milestone payments to be made to LG Life Sciences upon consummation of sublicense agreements in Mexico and Canada (which payments were made to LG in February 2006 and August 2006, respectively) as well as upon receipt of regulatory approval of FACTIVE in each of such countries. Additionally, on December 27, 2006, the Company amended its agreement with LG Life Sciences to reduce future royalties payable to LG Life Sciences for sales of FACTIVE tablets in Europe and provides for a reduction in the supply price for the active pharmaceutical ingredient for FACTIVE for product to be sold in Europe. In lieu of milestone payments previously agreed to by the parties, this amendment also requires the Company to pay LG Life Sciences a portion of any milestone or license fee payments the Company receives from its European partner.

(17) Supply Agreement for ANTARA

In accordance with the acquisition of ANTARA in August of 2006, the Company was assigned rights to and assumed obligations under an exclusive license to the rights to ANTARA licensed from Ethypharm S.A. In order to maintain the exclusivity of these rights, the Company must achieve minimum annual sales in the United States and Canada until February 2012 or pay amounts to Ethypharm to compensate for any shortfall. During the term of the agreement, the Company is obligated to pay a royalty on sales of ANTARA in the U.S. including a royalty on other fenofibrate monotherapy products in formulation and dosage forms that may be substantially similar or identical to ANTARA developed by the Company. The license term expires in February 2020 and, absent notice of termination by either party, automatically renews for additional two year periods. Under the terms of the agreement, at the Company’s option, Ethypharm is obligated to either manufacture and deliver to the Company finished fenofibrate product or deliver bulk product to the Company for encapsulation and packaging. Ethypharm also has a right of first refusal on any divestiture of the ANTARA rights by the Company. Additional Company obligations under the Ethypharm agreement include using commercially reasonable efforts to maintain a sales force of at least 150 representatives through February 2008 and funding a portion of the active pharmaceutical ingredient safety stock that Ethypharm is required to maintain.

(18) Co-Promotion of TESTIM

On April 11, 2005, the Company entered into a co-promotion agreement with Auxilium Pharmaceuticals, Inc. (Auxilium), under which the Company and Auxilium co-promoted in the United States Auxilium’s product,

F-38

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

TESTIM gel, a topical 1% testosterone gel indicated for the treatment of male hypogonadism. On August 31, 2006, the Company and Auxilium mutually agreed to conclude this co-promotion arrangement and agreed to share profits from primary care sales, as provided for under the co-promotion agreement, through August 31, 2006. As part of the termination of the co-promotion agreement, the Company received $1,800,000 from Auxilium as additional compensation for commercialization efforts by its sales force through August 31, 2006, which has been recognized as revenue at December 31, 2006.

(19) Partnering Arrangements for FACTIVE

Sublicense Agreement with Pfizer, S.A. de C.V.

On February 6, 2006, the Company entered into a Sublicensing and Distribution Agreement with Pfizer, S.A. de C.V. (Pfizer Mexico), pursuant to which the Company sublicensed its rights to sell FACTIVE tablets in Mexico to Pfizer Mexico. Pfizer Mexico is responsible for obtaining and maintaining regulatory approvals for FACTIVE. In exchange for those rights, Pfizer Mexico has agreed to pay the Company an up-front payment, milestone payments upon obtaining certain regulatory approvals and sales goals as well as royalties on future sales. The up-front payment is being recognized as revenue over the term of the Company’s continuing obligations under the agreement. These royalty rates are subject to reduction upon expiration of certain patents in Mexico for FACTIVE or if a generic form of gemifloxacin has a material impact on Pfizer Mexico’s sales volumes in Mexico. Pfizer Mexico is obligated to exclusively purchase from the Company, and the Company must exclusively supply, all active pharmaceutical ingredients for FACTIVE to be sold in Mexico. The agreement with Pfizer Mexico may be terminated by either party upon the occurrence of certain termination events, including Pfizer Mexico’s right to terminate at any time after the first anniversary of launch of FACTIVE tablets in Mexico upon six months prior written notice. Upon termination of the Pfizer Agreement, Pfizer Mexico is obligated to assign any and all rights to regulatory approvals in Mexico to the Company or its designee.

Supply and Marketing Agreement with Abbott Laboratories

On August 9, 2006, the Company granted the commercialization rights to FACTIVE tablets in Canada to Abbott Laboratories, Ltd. (Abbott Canada), the Canadian affiliate of Abbott. In exchange for those rights, Abbott Canada agreed to a transfer price on product purchases and to make certain payments to the Company upon achievement of certain regulatory and sales milestones. FACTIVE tablets are currently approved in Canada for the treatment of AECB, and Abbott Canada is responsible for obtaining regulatory approval, on behalf of the Company, for additional indications of FACTIVE.

Menarini International Operation Luxembourg SA

The Company entered into a License, Supply and Marketing Agreement with Menarini International Operation Luxembourg SA (Menarini), a wholly-owned subsidiary of Menarini Industrie Farmaceutiche Riunite S.r.l. dated December 28, 2006, whereby the Company sublicensed its rights to sell FACTIVE tablets in the European Union to Menarini. Under the terms of the Company’s agreement with Menarini., Menarini is responsible for obtaining regulatory approval for FACTIVE in the European Union, and the Company has agreed to reimburse Menarini for expenses associated with such regulatory development up to an agreed limit. Menarini has agreed to pay the Company an up-front payment which is being recognized as revenue over the term of the Company’s continuing obligations under the agreement. Menarini has also agreed to pay the Company milestone payments upon obtaining certain regulatory and reimbursement approvals and upon achieving certain annual net sales goals, which could total up to $23.0 million, if all the milestones are achieved. Menarini will pay the Company a transfer price on purchases of the active pharmaceutical ingredient, or API, for FACTIVE, which is

F-39

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

determined based on a percentage of quarterly sales of FACTIVE, by Menarini, in the European Union. Menarini is also obligated to exclusively purchase from the Company, and the Company must exclusively supply, all API for FACTIVE to be sold in Europe for the earlier to occur of the expiration of the life of certain patents covering the product or expiration of data exclusivity. The Company’s agreement with Menarini may be terminated by either party upon the occurrence of certain termination events, including Menarini’s right to terminate if the European regulatory authorities do not recommend approval of FACTIVE at various stages of the approval process with a package insert, or label, that meets certain requirements as to the indications for which FACTIVE may be prescribed, safety and dosing. Menarini may also terminate the agreement if it does not receive approval for reimbursement from European member countries that is above a certain minimum price per tablet. Upon termination, Menarini is obligated to assign any and all rights to regulatory approvals in the European Union to the Company or its designee.

(20) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	December 31,
	2006		2005
Payroll and related expenses	$	5,640	$	4,658
Deferred rent		401		280
Professional fees		916		597
Interest related to convertible notes payable		1,446		1,144
Sales reserves and allowances		6,003		1,536
Royalty interest payable		712		—
Outsourced sales training and field expenses		204		486
Other		741		1,462
	$	16,063	$	10,163

F-40

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

(21) Quarterly Consolidated Statements of Operations (unaudited)

The following table sets forth unaudited quarterly statement of operations data for each of the eight quarters in the two year period ended December 31, 2006. In the opinion of management, this information has been prepared on the same basis as the audited financial statements appearing elsewhere in this Form 10-K, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the unaudited quarterly results of operations (in thousands, except per share data).

	Year			Quarter Ended December 31,			Quarter Ended September 30,			Quarter Ended June 30,			Quarter Ended March 31,
2006
Revenues:
Product sales	$	38,244		$	18,068		$	8,308		$	2,622		$	9,246
Co-promotion		6,890			0			3,474			1,871			1,545
Biopharmaceutical/other revenues		1,018			196			580			60			182
Total revenues		46,152			18,264			12,362			4,553			10,973
Costs and expenses:
Cost of product sales		19,613			7,805			6,573			2,485			2,750
Research and development		12,405			1,991			4,281			3,205			2,928
Selling and marketing		69,211			14,314			17,215			17,237			20,445
General and administrative		16,841			5,061			4,379			3,763			3,640
Total costs and expenses		118,071			29,171			32,448			26,690			29,763
Loss from operations		(71,919	)		(10,907	)		(20,086	)		(22,137	)		(18,790	)
Other income (expense):
Interest income		2,995			555			842			901			696
Interest expense		(11,056	)		(4,167	)		(2,807	)		(2,072	)		(2,010	)
Gain on sale of fixed assets		2			2			(1	)		1			—
Gain on disposition of investment		1,617			—			1,380			237			—
Other income		63			5			15			44			—
Net other (expense) income		(6,379	)		(3,605	)		(571	)		(889	)		(1,314	)
Loss from continuing operations before income tax		(78,298	)		(14,512	)		(20,657	)		(23,026	)		(20,104	)
Provision for income tax		179			179			—			—			—
Net loss	$	(78,477	)	$	(14,691	)	$	(20,657	)	$	(23,026	)	$	(20,104	)
Net loss per common share:
Basic and diluted	$	(6.58	)	$	(1.09	)	$	(1.62	)	$	(1.96	)	$	(2.07	)
Weighted average common shares outstanding:
Basic and diluted		11,925			13,484			12,742			11,723			9,702

F-41

OSCIENT PHARMACEUTICALS CORPORATION

Notes to Consolidated Financial Statements—(Continued)

	Year			Quarter Ended December 31,			Quarter Ended September 30,			Quarter Ended June 30,			Quarter Ended March 31,
2005
Revenues:
Product sales	$	20,458		$	7,963		$	4,778		$	3,805		$	3,912
Co-promotion		2,954			1,423			1,161			370			—
Biopharmaceutical		197			100			2			61			34
Total revenues		23,609			9,486			5,941			4,236			3,946
Costs and expenses:
Cost of product sales		9,830			3,439			2,018			2,307			2,066
Research and development		14,432			1,423			2,814			4,191			6,004
Selling and marketing		74,931			17,654			19,460			17,709			20,108
General and administrative		13,088			2,937			2,524			2,598			5,029
Total costs and expenses		112,281			25,453			26,816			26,805			33,207
Loss from operations		(88,672	)		(15,967	)		(20,875	)		(22,569	)		(29,261	)
Other income (expense):
Interest income		3,400			773			877			880			870
Interest expense		(8,126	)		(1,930	)		(2,055	)		(2,097	)		(2,044	)
Gain on sale of fixed assets		65			13			8			6			38
Income from sale of intellectual property		2,500			—			—			—			2,500
Gain on disposition of investment		2,162			—			143			2,019			—
Other income		43			—			—			3			40
Net other income (expense)		44			(1,144	)		(1,027	)		811			1,404
Loss from continuing operations		(88,628	)		(17,111	)		(21,902	)		(21,758	)		(27,857	)
Income from discontinued operations		35			—			—			14			21
Net loss	$	(88,593	)	$	(17,111	)	$	(21,902	)	$	(21,744	)	$	(27,836	)
Net loss per common share:
Basic and diluted	$	(9.26	)	$	(1.77	)	$	(2.28	)	$	(2.28	)	$	(2.93	)
Weighted average common shares outstanding:
Basic and diluted		9,569			9,645			9,595			9,543			9,488

F-42

EX-3.1

Exhibit 3.1

The Commonwealth of Massachusetts

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

Articles of Amendment

(General Laws Chapter 156D, Section 10.06; 950 CMR 113.34)

(1)    Exact name of corporation: Oscient Pharmaceuticals Corporation

(2)    Registered office address:	1000 Winter Street, Suite 2200, Waltham, MA 02451
	(number, street, city or town, state, zip code)

(3)    These articles of amendment affect article(s):	IV
	(specify the number(s) of article(s) being amended (I-VI))

(4)    Date adopted:	November 14, 2006
	(month, day, year)

(5) Approved by:

(check appropriate box)

¨ the incorporators.

¨ the board of directors without shareholder approval and shareholder approval was not required.

þ the board of directors and the shareholders in the manner required by law and the articles of organization.

(6) State the article number and the text of the amendment. Unless contained in the text of the amendment, state the provisions for implementing the exchange, reclassification or cancellation of issued shares.

That, effective at 11:59 p.m., eastern time, on November 15, 2006 of this Certificate of Amendment with the Secretary of State of The Commonwealth of Massachusetts (the “Effective Time”), a one-for-eight Reverse Stock Split of the Corporation’s Common Stock shall become effective, pursuant to which each eight (8) issued and outstanding shares of Common Stock and held by each shareholder of record of the Corporation immediately prior to the Effective Time shall be reclassified and combined into one (1) share of Common Stock from and after the Effective Time. No fractional shares of Common Stock shall be issued as a result of such reclassification and combination. In lieu of any fractional shares to which the shareholder would otherwise be entitled, the Corporation shall round each such fractional share up to the next whole share.

The par value of the Common Stock immediately after the Effective Time shall be $0.10 per share. The total number of authorized shares of Common Stock immediately after the Effective Time shall be 175,000,000.

To change the number of shares and the par value, * if any, of any type, or to designate a class or series, of stock, or change a designation of class or series of stock, which the corporation is authorized to issue, complete the following:

Total authorized prior to amendment:

WITHOUT PAR VALUE		WITH PAR VALUE
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE

Total authorized after amendment:

WITHOUT PAR VALUE		WITH PAR VALUE
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE

(7) The amendment shall be effective at the time and on the date approved by the Division, unless a later effective date not more than 90 days from the date and time of filing is specified: November 15, 2006 at 11:59 p.m. (EST)

* G.L. Chapter 156D eliminates the concept of par value, however a corporation may specify par value in Article III. See G.L. Chapter 156D, Section 6.21, and the comments relative thereto.

Signed by:	/s/ Steven M. Rauscher	,
	(signature of authorized individual)

¨ Chairman of the board of directors,

þ President,

¨ Other officer,

¨ Court-appointed fiduciary,

on this         14^th day of         November             ,         2006         .

COMMONWEALTH OF MASSACHUSETTS

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

Articles of Amendment

(General Laws Chapter 156D, Section 10.06; 950 CMR 113.34)

I hereby certify that upon examination of these articles of amendment, it appears that the provisions of the General Laws relative thereto have been complied with, and the filing fee in the amount of $              having been paid, said articles are deemed to have been filed with me this      day of             , 20    , at              a.m./p.m.

    time

Effective date:
	(must be within 90 days of date submitted)

WILLIAM FRANCIS GALVIN

Secretary of the Commonwealth

Filing fee: Minimum filing fee $100 per article amended, stock increases $100 per 100,000 shares, plus $100 for each additional 100,000 shares or any fraction thereof.

TO BE FILLED IN BY CORPORATION

Contact Information:

Examiner	Franklin P. Collazo, Paralegal
Name approval	Ropes & Gray LLP
C	One International Place, Boston, MA 02110
M	Telephone:	(617) 951-7591
	Email:

Upon filing, a copy of this filing will be available at www.sec.state.ma.us/cor. If the document is rejected, a copy of the rejection sheet and rejected document will be available in the rejected queue.

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

We,	Steven M. Rauscher	, President
and	Patrick O’Brien	, Clerk
of	Genome Therapeutics Corp.	,
	(Exact name of corporation)

located at	100 Beaver Street, Waltham, MA 02453	,
	(Street address of corporation in Massachusetts)

certify that these Articles of Amendment affecting articles numbered:

1

(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)

of the Articles of Organization were duly adopted at a meeting held on April 13, 2004, by vote of:

56,231,749	shares of	Common Stock	of	73,925,570	shares outstanding,
		(type, class & series, if any)
	shares of		of		shares outstanding, and
		(type, class & series, if any)
	shares of		of		shares outstanding,
		(type, class & series, if any)

being at least a majority of each type, class or series outstanding and entitled to vote thereon:

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following:

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

ARTICLE I has been amended in its entirety to read as follows:

“ARTICLE I

The exact name of the corporation is: Oscient Pharmaceuticals Corporation”

The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date:                        .

SIGNED UNDER THE PENALTIES OF PERJURY, this 13th day of April, 2004.

/s/    Stephen M. Rauscher	, President
/s/    Patrick O’Brien	, Clerk.

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $100 having been paid, said articles are deemed to have been filed with me this 13 day of April 2004.

Effective date:

/s/ William Francis Galvin

WILLIAM FRANCIS GALVIN

Secretary of the Commonwealth

TO BE FILLED IN BY CORPORATION

Contact information:

Nicholas T. Antoun, c/o Ropes & Gray

One International Place

Boston, MA 02110

Telephone: (617) 951-7000

Email: nantoun@ropesgray.com

A copy of this filing will be available on-line at www.state.ma.us/sec/cor once the document is filed.

FEDERAL IDENTIFICATION
NO. 04-2297484

The Commonwealth of Massachusetts

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

We,             Steven M. Rauscher , President

and             Stephen Cohen , Assistant Clerk,

of	Genome Therapeutics Corp.	,
(Exact name of corporation)

located at	100 Beaver Street, Waltham, MA 02453	,
(Street address of corporation in Massachusetts)

certify that these Articles of Amendment affecting articles numbered:

3

(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)

of the Articles of Organization were duly adopted at a meeting held on February 2, 2004, by vote of:

28,157,783	shares of	Common Stock	of	31,477,889	shares outstanding,
		(type, class & series, if any)
	shares of		of		shares outstanding, and
		(type, class & series, if any)
	shares of		of		shares outstanding,
		(type, class & series, if any)

being at least a majority of each type, class or series outstanding and entitled to vote thereon:

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following:

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	50,000,000*	$                0.10
Preferred:		Preferred:

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	175,000,000*	$                0.10
Preferred:		Preferred:

* Includes 625,000 shares of Series B restricted stock, par value $0.10 per share

The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date: .

SIGNED UNDER THE PENALTIES OF PERJURY, this 2nd day of February, 2004.

/s/     Stephen M. Rauscher	, President
/s/    Stephen Cohen	, Assistant Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $125,000 having been paid, said articles are deemed to have been filed with me this 3rd day of February 2004 .

Effective date:

/s/ William Francis Galvin

WILLIAM FRANCIS GALVIN

Secretary of the Commonwealth

TO BE FILLED IN BY CORPORATION

Contact information:

Stephen Cohen, Genome Therapeutics Corp.

100 Beaver Street

Waltham, MA 02453

Telephone: 781-398-2311

Email: scohen@genomecorp.com

A copy of this filing will be available on-line at www.state.ma.us/sec/cor once the document is filed.

FEDERAL IDENTIFICATION

NO. 04-2297484

The Commonwealth of Massachusetts

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

CERTIFICATE OF CHANGE OF FISCAL YEAR END

(General Laws, Chapter 156B, Section 38A)

I,	Stephen Cohen	, *Assistant Clerk
of	Genome Therapeutics Corp.	,

having a principal office at	100 Beaver St., Waltham, MA 02154	,
	(Street address of corporation in Massachusetts)

certify that the fiscal year end (i.e. the tax year end) of the corporation was changed to the last day of the month of December.

SIGNED UNDER THE PENALTIES OF PERJURY, this 2nd day of January, 2003.

/s/ , Assistant Clerk.

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

William Francis Galvin

Secretary of the Commonwealth

One Ashburton Place, Boston, Massachusetts 02108-1512

Articles of Amendment

(General Laws, Chapter 156B, Section 72)

We,             Stephen Cohen , Vice President

and             David C. Chapin , Clerk,

of	Genome Therapeutics Corp.	.
(Exact name of corporation)

located at	100 Beaver Street, Waltham, MA 02154	.
(Street address of corporation in Massachusetts)

certify that these Articles of Amendment affecting articles numbered:

3

(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)

of the Articles of Organization were duly adopted at a meeting held on February 27, 2001, by vote of:

18,171,161	shares of	Common Stock	of	22,288,658	shares outstanding,
		(type, class & series, if any)
	shares of		of		shares outstanding, and
		(type, class & series, if any)
	shares of		of		shares outstanding,
		(type, class & series, if any)

being at least a majority of each type, class or series outstanding and entitled to vote thereon:

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following:

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	35,000,000	$                                    .10
Preferred:		Preferred:

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	50,000,000	$                                    .10
Preferred:		Preferred:

The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date: .

SIGNED UNDER THE PENALTIES OF PERJURY, this 14th day of March, 2001.

/s/     Stephen Cohen	, Vice President
/s/    David C. Chapin	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $15,000.00 having been paid, said articles are deemed to have been filed with me this 15th day of March 2001 .

Effective date:

/s/ William Francis Galvin

WILLIAM FRANCIS GALVIN

Secretary of the Commonwealth

TO BE FILLED IN BY CORPORATION

Photocopy of document to be sent to:

Nicholas T. Antoun, c/o Ropes & Gray

One International Place

Boston, MA 02110

Telephone: (617) 951-7000

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE

MICHAEL J. CONNOLLY, Secretary

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

(General Laws Chapter 156B, Section 72)

We,	Robert J. Hennessey	, President
and	David C. Chapin	, Clerk,
of	Collaborative Research, Inc.	,
	(Exact name of corporation)

located at	100 Beaver Street, Waltham, MA 02453	,
	(Street address of corporation in Massachusetts)

certify that these Articles of Amendment affecting articles numbered:

1

(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)

of the Articles of Organization were duly adopted at a meeting held on August 31, 1994, by vote of:

7,342,933	shares of	Common Stock	of	11,771,446	shares outstanding,
		(type, class & series, if any)
	shares of		of		shares outstanding, and
		(type, class & series, if any)
	shares of		of		shares outstanding,
		(type, class & series, if any)

being at least a majority of each type, class or series outstanding and entitled to vote thereon:

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following:

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:
Preferred:		Preferred:

That Article I of the Articles of Organization be amended by deletion thereof in its entirety and by insertion in place thereof of the following:

“GENOME THERAPEUTICS CORP.”

The foregoing amendment will become effective when these articles of amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date: September 6, 1994.

SIGNED UNDER THE PENALTIES OF PERJURY, this 31st day of August, 1994.

/s/ Robert J. Hennessey	, President
/s/ David C. Chapin	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $100 having been paid, said articles are deemed to have been filed with me this 1st day of September 1994.

      /s/Michael J. Connolly      

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT

TO:	David C. Chapin
	Ropes & Gray
	One International Place, Boston, MA 02110-2624
	Telephone: (617) 951-7371

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE

MICHAEL J. CONNOLLY, Secretary

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

(General Laws Chapter 156B, Section 72)

We,	Robert J. Hennessey	, President
and	David C. Chapin	, Clerk
of	Collaborative Research, Inc.	,
	(Exact name of corporation)

located at	100 Beaver Street, Waltham, MA 02453	,
	(Massachusetts Address of Corporation)

certify that these Articles of Amendment affecting articles numbered:

3

(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)

of the Articles of Organization were duly adopted at a meeting held on January 24, 1994, by vote of:

8,424,455	shares of	Common Stock	of	10,693,166	shares outstanding,
		(type, class & series, if any)
	shares of		of		shares outstanding, and
		(type, class & series, if any)
	shares of		of		shares outstanding,
		(type, class & series, if any)

being at least a majority of each type, class or series outstanding and entitled to vote thereon:

To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following:

The total presently authorized is:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	*17,500,000	$.10
Preferred:		Preferred:

* 625,000 shs. Series B Restricted Common

16,875,000 shs. Common Stock

Change the total authorized to:

WITHOUT PAR VALUE STOCKS		WITH PAR VALUE STOCKS
TYPE	NUMBER OF SHARES	TYPE	NUMBER OF SHARES	PAR VALUE
Common:		Common:	*35,000,000	$.10
Preferred:		Preferred:

* 625,000 shs. Series B Restricted Common Stock

34,375,000 shs. Common Stock

The foregoing amendment will become effective when these articles of amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

Later effective date:                    .

SIGNED UNDER THE PENALTIES OF PERJURY, this 24th day of January , 1994.

/s/ Robert J. Hennessey	, President
/s/ David C. Chapin	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $17,500 having been paid, said articles are deemed to have been filed with me this 1st day of February 1994 .

      /s/Michael J. Connolly      

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT

TO:	David C. Chapin
	Ropes & Gray
	One International Place, Boston, MA 02110-2624
	Telephone: (617) 951-7371

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE

MICHAEL J. CONNOLLY, Secretary

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts.

We,	Thomas O. Oesterling	, President
and	Truman S. Casner	, Clerk
of	Collaborative Research, Inc.	,
	(Name of corporation)

located at Two Oak Park, Bedford, Massachusetts 01730 ,

do hereby certify that the following amendment to the articles of organization of the corporation was duly adopted at a meeting held on December 9, 1987, by vote of:

9,337,250	shares of	Common	out of	10,652,328	shares outstanding,
		(Class of Stock)
	shares of		out of		shares outstanding, and
		(Class of Stock)
	shares of		out of		shares outstanding,
		(Class of Stock)

being at least two-thirds of each class outstanding and entitled to vote thereon:

To add a new Article 6(k) as follows:

(SEE CONTINUATION SHEET 2A)

To change the number of shares and the par value, if any, of each class of stock within the corporation fill in the following:

The total presently authorized is:

KIND OF STOCK	NO PAR VALUE NUMBER OF SHARES	WITH PAR VALUE NUMBER OF SHARES	PAR VALUE
COMMON
PREFERRED

Change the total to:

KIND OF STOCK	NO PAR VALUE NUMBER OF SHARES	WITH PAR VALUE NUMBER OF SHARES	PAR VALUE
COMMON
PREFERRED

“(k). A director of the corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that this Article 6(k) shall not eliminate the liability of a director to the extent that such liability is provided by applicable law (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 or Section 62 (or successor provisions) of the Business Corporation Law of The Commonwealth of Massachusetts, or (iv) for any transaction from which the director derived an improper personal benefit. The foregoing provisions of this Article 6(k) shall not eliminate the liability of a director for any act or omission occurring prior to the date on which this Article 6(k) becomes effective. No amendment to or repeal of this Article 6(k) shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.”

CONTINUATION SHEET 2A

The foregoing amendment will become effective when these articles of amendment are filed in accordance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this

9th day of December, 1987.

/s/    Thomas O. Oesterling	, President
/s/    Truman S. Casner	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $75.00 having been paid, said articles are deemed to have been filed with me this 11th day of December 1987.

/s/ Michael J. Connolly

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT

TO:	David C. Chapin
	Ropes & Gray
	225 Franklin Street Boston,
	MA 02110
	Telephone: (617) 423-6100

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE

MICHAEL JOSEPH CONNOLLY, Secretary

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

General Laws, Chapter 156B, Section 72

This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts.

We,	James A. Wimbush	, President,
and	Truman S. Casner	, Clerk,
of	Collaborative Research, Inc.	,
	(Name of Corporation)

located at 128 Spring Street, Lexington, MA 02173 ,

do hereby certify that the following amendment to the articles of organization of the corporation was duly adopted at a meeting held on January 17, 1984, by vote of:

7,980,801	shares of	Common	out of	8,071,064	shares outstanding,
		(Class of Stock)
	shares of		out of		shares outstanding, and
		(Class of Stock)
	shares of		out of		shares outstanding,
		(Class of Stock)

being at least a majority of each class outstanding and entitled to vote thereon, two-thirds of each class outstanding and entitled to vote thereon and of each class or series of stock whose rights are adversely affected thereby:

To change the number of shares and the par value, if any, of each class of stock within the corporation fill in the following:

The total presently authorized is:

KIND OF STOCK	NO PAR VALUE NUMBER OF SHARES	WITH PAR VALUE NUMBER OF SHARES	PAR VALUE
COMMON		12,500,000	.10
PREFERRED

Change the total to:

KIND OF STOCK	NO PAR VALUE NUMBER OF SHARES	WITH PAR VALUE NUMBER OF SHARES	PAR VALUE
COMMON		*17,500,000	.10
PREFERRED

* 625,000 shs. Series B Restricted Common Stock

16,875,000 shs. Common Stock.

The foregoing amendment will become effective when these articles of amendment are filed in accordance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 17th day of January, 1984.

/s/    James A. Wimbush	, President
/s/    Truman S. Casner	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $2,500.00 having been paid, said articles are deemed to have been filed with me this 19th day of January 1984.

/s/ Michael J. Connolly

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF AMENDMENT TO BE SENT

TO:	Truman S. Casner
	c/o Ropes & Gray
	225 Franklin Street
	Boston, MA 02110
	Telephone: (617) 423-6100

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

MICHAEL JOSEPH CONNOLLY

Secretary of State

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

General Laws, Chapter 156B, Section 72

This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts.

We,	James A. Wimbush	, President,
and	Truman S. Casner	, Clerk,
of	Collaborative Research, Inc.	,
	(Name of corporation)

located at 128 Spring Street, Lexington, MA 02173 ,

do hereby certify that the following amendment to the articles of organization of the corporation was duly adopted at a meeting held on January 21, 1983, by vote of:

7,284,935	shares of	Common	out of	8,217,048	shares outstanding,
		(Class of Stock)
	shares of		out of		shares outstanding, and
		(Class of Stock)
	shares of		out of		shares outstanding,
		(Class of Stock)

being at least two-thirds of each class outstanding and entitled to vote thereon:

SEE CONTINUATION SHEETS 2A – 2B

FOR INCREASE IN CAPITAL FILL IN THE FOLLOWING:

	{	shares preferred	}	with par value
		shares common
The total amount of capital stock already authorized is
		shares preferred	}	without par value
		shares common

	{	shares preferred	}	with par value
		shares common
The amount of additional capital stock authorized is
		shares preferred	}	without par value
		shares common

PROVISIONS RELATING TO CAPITAL STOCK

A. Subject to subsequent reconstitution and conversion as provided below, 625,000 shares of the authorized common stock, $.10 par value (the “Common Stock”) of the Company are designated “Series B Restricted Stock.” The rights, privileges, preferences and restrictions of the Common Stock and the Series B Restricted Stock shall be identical in all respects except as follows:

(1) Voting Rights. On all matters submitted to a vote of the Company’s stockholders, each share of Common Stock shall entitle the holder thereof to one (1) vote, and, except as otherwise required by law, each share of Series B Restricted Stock shall entitle the holder thereof to no vote.

(2) Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Common Stock shall be entitled to receive, prior to and in preference to any distribution of the Company’s assets to the holders of the Series B Restricted Stock by reason of their ownership thereof, the greater of (a) five dollars ($5.00) for each share of Common Stock then held by them, or (b) an amount for each share of Common Stock then held by them equal to ten (10) times the amount which, after such distribution, would remain available for distribution to holders of the Series B Restricted Stock for each share of Series B Restricted Stock then held by them. If, upon the occurrence of such event, the assets available for distribution among the holders of Common Stock are insufficient to permit the payment to the holders of the Common Stock of the foregoing preferential amount, then the entire amount of assets available for distribution to the holders of Common Stock shall be distributed among the holders of Common Stock in proportion to the number of shares of Common Stock then held by each of them.

(3) Dividends. No dividends may be declared or paid with respect to any share of Series B Restricted Stock.

B. Upon the occurrence of any of the following events, each share of Series B Restricted Stock (whether issued or unissued) shall automatically be converted into or reconstituted as one (1) share of Common Stock:

CONTINUATION SHEET 2A

(1) the effectiveness prior to September 1, 1986 of (a) any merger or consolidation of the Company with another corporation in which the Company is not the surviving corporation, (b) the acquisition (by merger or otherwise) by another corporation in exchange in whole or in part for its equity securities (or the equity securities of an entity which is in control of the acquiring corporation) of shares of capital stock of the Company if, immediately after such acquisition, the acquiring corporation owns, directly or indirectly, stock possessing 50 percent or more of the total combined voting power of all classes of stock of the Company, or (c) any sale of all or substantially all of the assets of the Company; or

(2) the last day of any fiscal year ending prior to September 1, 1986 in which the Company realizes revenues, excluding interest income, of at least thirteen million dollars ($13,000,000).

C. Each conversion of shares hereunder shall be effected by the surrender at the office of the Company or any transfer agent for such shares of the certificate therefor, in such form and accompanied by such documents, if any, as the Company may require. The Company shall, as soon as practicable thereafter, issue and deliver at such office a certificate or certificates representing the number and class or series of shares into which such shares are convertible hereunder. Such conversion shall be deemed to have occurred as of the time set forth in paragraph B hereinabove.

D. In the event of any (i) stock split, reverse stock split or other subdivision or combination of the Common Stock, or (ii) stock dividend or other distribution on the Common Stock payable in Common Stock, an appropriate pro rata adjustment or adjustments shall be made in the liquidation preference set forth in paragraph A hereinabove and the conversion rates set forth in paragraph B hereinabove. No fractional shares shall be issued upon conversion of Series B Restricted Stock. In lieu of any fractional share to which a shareholder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the then fair market value per share of Series B Restricted Stock as determined in good faith by the Company’s Board of Directors.

CONTINUATION SHEET 2B

The foregoing amendment will become effective when these articles of amendment are filed in accordance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 24th day of January, 1983.

/s/ James A. Wimbush	, President
/s/ Truman S. Casner	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within articles of amendment and, the filing fee in the amount of $75.00 having been paid, said articles are deemed to have been filed with me this 27th day of January 1983.

/s/ Michael J. Connolly

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF AMENDMENT TO BE SENT

TO:	David C. Chapin
	c/o Ropes & Gray
	225 Franklin Street
	Boston, MA 02110
	Telephone: (617) 423-6100

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

MICHAEL JOSEPH CONNOLLY

Secretary of State

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

ARTICLES OF AMENDMENT

General Laws, Chapter 156B, Section 72

This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts.

We,	Orrie M. Friedman	, President,
and	Gerard E. Hickman	, Clerk
of	Collaborative Research, Inc.	,
	(Name of corporation)

located at 128 Spring Street, Lexington, MA 02173 ,

do hereby certify that the following amendment to the restated articles of organization of the corporation was duly adopted at a meeting held on January 4, 1982, by vote of:

1,063,578	shares of	Common	out of	1,342,444	shares outstanding,
		(Class of Stock)
	shares of		out of		shares outstanding, and
		(Class of Stock)
	shares of		out of		shares outstanding,
		(Class of Stock)

being at least a majority of each class outstanding and entitled to vote thereon:

FOR INCREASE IN CAPITAL FILL IN THE FOLLOWING:

	{	0	shares preferred	}	with par value, $.10 per share
		1,750,000	shares common
The total amount of capital stock already authorized is
		0	shares preferred	}	without par value
		0	shares common

	{	0	shares preferred	}	with par value, $.10 per share
		10,750,000	shares common
The amount of additional capital stock authorized is
		0	shares preferred	}	without par value
		0	shares common

The foregoing amendment will become effective when these articles of amendment are filed in accordance with Chapter 156B, Section 6 of The General Laws unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date.

IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this 4th day of January, 1982.

/s/ Orrie M. Friedman	, President
/s/ Gerard E. Hickman	, Clerk

THE COMMONWEALTH OF MASSACHUSETTS

ARTICLES OF AMENDMENT

(General Laws, Chapter 156B, Section 72)

I hereby approve the within Articles of Amendment and, the filing fee in the amount of $5,375.00 having been paid, said articles are deemed to have been filed with me this 5th day of January 1982.

/s/ Michael J. Connolly

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF AMENDMENT TO BE SENT

TO:	David C. Chapin
	c/o Ropes & Gray
	225 Franklin Street
	Boston, MA 02110
	Telephone: (617) 423-6100

FEDERAL IDENTIFICATION

No. 04-2297484

The Commonwealth of Massachusetts

MICHAEL JOSEPH CONNOLLY

Secretary of State

ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108

RESTATED ARTICLES OF ORGANIZATION

General Laws, Chapter 156B, Section 74

This certificate must be submitted to the Secretary of the Commonwealth within sixty days after the date of the vote of stockholders adopting the amendment. The fee for filing this certificate is prescribed by General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth of Massachusetts.

We,	Orrie M. Friedman	, President,
and	Myer L. Orlov	, Clerk,
of	Collaborative Research, Inc.	,
	(Name of corporation)

located at 1365 Main Street, Waltham, Massachusetts ,

do hereby certify that the following restatement of the articles of organization of the corporation was duly adopted at a meeting held on August 17, 1981, by vote of:

816,000	shares of	Common	out of	1,113,250	shares outstanding,
		(Class of Stock)
	shares of		out of		shares outstanding, and
		(Class of Stock)
	shares of		out of		shares outstanding,
		(Class of Stock)

being at least two-thirds of each class of stock outstanding and entitled to vote and of each class or series of stock adversely affected thereby:

1. The name by which the corporation shall be known is: Collaborative Research, Inc.

2. The purposes for which the corporation is formed are as follows:

(a) To engage in chemical and biochemical research and development principally in the fields of bio-organic and chemotherapy and genetic recombination, to synthesize specialty chemicals and to undertake clinical assays, and to manufacture and sell chemical and bio-chemical products.

(b) To carry on any manufacturing, mercantile, selling, management, service or other business, operation or activity which may be lawfully carried on by a corporation organized under the Business Corporation Law of The Commonwealth of Massachusetts, whether or not related to those referred to in the foregoing paragraph.

3. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue is as follows:

	WITHOUT PAR VALUE	WITH PAR VALUE
CLASS OF STOCK	NUMBER OF SHARES	NUMBER OF SHARES	PAR VALUE
Preferred	NONE	NONE		NONE
Common	NONE	1,750,000	$	0.10

4. If more than one class is authorized, a description of each of the different classes of stock with, if any, the preferences, voting powers, qualifications, special or relative rights or privileges as to each class thereof and any series now established:

NONE

5. The restrictions, if any, imposed by the articles of organization upon the transfer of shares of stock of any class are as follows:

NONE

6. Other lawful provisions, if any, for the conduct and regulation of the business and affairs of the corporation, for its voluntary dissolution, or for limiting, defining, or regulating the powers of the corporation, or of its directors or stockholders, or of any class of stockholders:

See Continuation Sheets 6-A through 6-D attached hereto.

Article 6

Other Lawful Provisions

(a) The corporation may carry on any business, operation or activity referred to in Article 2 to the same extent as might an individual, whether as principal, agent, contractor or otherwise, and either alone or in conjunction or a joint venture or other arrangement with any corporation, association, trust, firm or individual.

(b) The corporation may carry on any business, operation or activity through a wholly or partly owned subsidiary.

(c) The corporation may be a partner in any business enterprise which it would have power to conduct by itself.

(d) The directors may make, amend or repeal the bylaws in whole or in part, except with respect to any provision thereof which by law or the bylaws requires action by the stockholders.

(e) Meetings of the stockholders may be held anywhere in the United States.

(f) No stockholder shall have any right to examine any property or any books, accounts or other writings of the corporation if there is reasonable ground for belief that such examination will for any reason be adverse to the interests of the corporation, and a vote of the directors refusing permission to make such examination and setting forth that in the opinion of the directors such examination would be adverse to the interests of the corporation shall be prima facie evidence that such examination would be adverse to the interests of the corporation. Every such examination shall be subject to such reasonable regulations as the directors may establish in regard thereto.

(g) The directors may specify the manner in which the accounts of the corporation shall be kept and may determine what constitutes net earnings, profits and surplus, what amounts, if any, shall be reserved for any corporate purpose, and what amounts, if any, shall be declared as dividends. Unless the board of directors otherwise specifies, the excess of the consideration for any share of its capital stock with par value issued by it over such par value shall be paid-in surplus. The board of directors may allocate to capital stock less than all of the consideration for any share of its capital stock without par value issued by it, in which case the balance of such consideration shall be paid-in surplus. All surplus shall be available for any corporate purpose, including the payment of dividends.

6-A

(h) The purchase or other acquisition or retention by the corporation of shares of its own capital stock shall not be deemed a reduction of its capital stock. Upon any reduction of capital or capital stock, no stockholder shall have any right to demand any distribution from the corporation, except as and to the extent that the stockholders shall have provided at the time of authorizing such reduction.

(i) The directors shall have the power to fix from time to time their compensation. No person shall be disqualified from holding any office by reason of any interest. In the absence of fraud, any director, officer or stockholder of this corporation individually, or any individual having any interest in any concern which is a stockholder of this corporation, or any concern in which any of such directors, officers, stockholders or individuals has any interest, may be a party to, or may be pecuniarily or otherwise interested in, any contract, transaction or other act of this corporation, and

(1) such contract, transaction or act shall not be in any way invalidated or otherwise affected by that fact;

(2) no such director, officer, stockholder or individual shall be liable to account to this corporation for any profit or benefit realized through any such contract, transaction or act; and

(3) any such director of this corporation may be counted in determining the existence of a quorum at any meeting of the directors or of any committee thereof which shall authorize any such contract, transaction or act, and may vote to authorize the same;

provided, however, that any contract, transaction or act in which any director or officer of this corporation is so interested individually or as a director, officer, trustee or member of any concern which is not a subsidiary or affiliate of this corporation, or in which any directors or officers are so interested as holders, collectively, of a majority of shares of capital stock or other beneficial interest at the time outstanding in any concern which is not a subsidiary or affiliate of this corporation, shall be duly authorized or ratified by a majority of the directors who are not so interested, to whom the nature of such interest has been disclosed and who have made any findings required by law;

6-B

the term “interest” including personal interest and interest as a director, officer, stockholder, shareholder, trustee, member or beneficiary of any concern;

the term “concern” meaning any corporation, association, trust, partnership, firm, person or other entity other than this corporation; and

the phrase “subsidiary or affiliate” meaning a concern in which a majority of the directors, trustees, partners or controlling persons is elected or appointed by the directors of this corporation, or is constituted of the directors or officers of this corporation.

To the extent permitted by law, the authorizing or ratifying vote of the holders of a majority of the shares of each class of the capital stock of this corporation outstanding and entitled to vote for directors at any annual meeting or a special meeting duly called for the purpose (whether such vote is passed before or after judgment rendered in a suit with respect to such contract, transaction or act) shall validate any contract, transaction or act of this corporation, or of the board of directors or any committee thereof, with regard to all stockholders of this corporation, whether or not of record at the time of such vote, and with regard to all creditors and other claimants under this corporation; provided, however, that

A. with respect to the authorization or ratification of contracts, transactions or acts in which any of the directors, officers or stockholders of this corporation have an interest, the nature of such contracts, transactions or acts and the interest of any director, officer or stockholder therein shall be summarized in the notice of any such annual or special meeting, or in a statement or letter accompanying such notice, and shall be fully disclosed at any such meeting;

B. the stockholders so voting shall have made any findings required by law;

C. stockholders so interested may vote at any such meeting except to the extent otherwise provided by law; and

D. any failure of the stockholders to authorize or ratify such contract, transaction or act shall not be deemed in any way to invalidate the same or to deprive this corporation, its directors, officers or employees of its or their right to proceed with such contract, transaction or act.

6-C

No contract, transaction or act shall be avoided by reason of any provision of this paragraph (i) which would be valid but for such provision or provisions.

(j) The corporation shall have all powers granted to corporations by the laws of The Commonwealth of Massachusetts, provided that no such power shall include any activity inconsistent with the Business Corporation Law or the general laws of said Commonwealth.

6-D

We further certify that the foregoing restated articles of organization effect no amendments to the articles of organization of the corporation as heretofore amended, except amendments to the following articles: 2, 3, 4 and 6.s

Briefly describe amendments in space below:

(a) Article 2 of the Restated Articles or Organization amends the purposes for which the corporation was formed.

(b) Article 3 of the Restated Articles of Organization amends the statement of the authorized capital stock of the Corporation by the elimination of 1,000 shares of the Class A Preferred Stock, no par value previously authorized. Article 3 further amends the statement of the authorized capital stock of the corporation by the increase of the number of authorized shares of Common Stock, $.10 par value, from 1,500,000 to 1,750,000.

(c) Article 4 of the Restated Articles of Organization amends the description of the preferences, voting powers, qualifications, special or relative rights or privileges of each class of stock by the elimination of all reference thereto.

(d) Article 6 of the Restated Articles of Organization amends the additional provisions for the conduct and regulation of the business of the corporation, for its voluntary dissolution, and for limiting, defining and regulating the powers of the corporation and of its directors and stockholders.

IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our names this Seventeenth day of August in the year 1981.

/s/ Orrie M. Friedman	, President,
/s/ Myer L. Orlov	, Clerk.

THE COMMONWEALTH OF MASSACHUSETTS

RESTATED ARTICLES OF ORGANIZATION

(General Laws, Chapter 156B, Section 74)

I hereby approve the within restated articles of organization and, the filing fee in the amount of $525.00 having been paid, said articles are deemed to have been filed with me this 17th day of August 1981.

      /s/Michael J. Connolly      

MICHAEL J. CONNOLLY

Secretary of State

TO BE FILLED IN BY CORPORATION

PHOTOCOPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT

TO:	David C. Chapin
	c/o Ropes & Gray
	225 Franklin Street Boston, MA 02110
	Telephone: (617) 423-6100

Copy Mailed

EX-4.12

Exhibit 4.12

THIS SECURITY AND THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

COMMON STOCK PURCHASE WARRANT

To Purchase 2,304,147 Shares of Common Stock of

Oscient Pharmaceuticals Corporation

THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, Paul Royalty Fund Holdings II (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after [Date] (the “Initial Exercise Date”) and on or prior to the close of business on [the seventh anniversary following the Closing Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Oscient Pharmaceuticals Corporation, a corporation incorporated in The Commonwealth of Massachusetts (the “Company”), up to 2,304,147 shares (the “Warrant Shares”) of Common Stock, par value $0.10 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $0.8680, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”), dated July 21, 2006, between the Company and the Holder.

1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue

1

thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). The Company shall at all times reserve and keep available for issue upon the exercise of this Warrant such number of its authorized but unissued Common Stock as will be sufficient to permit the exercise in full of this Warrant.

3. Exercise of Warrant.

(a) Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) to the attention of the Chief Financial Officer and upon payment of the Exercise Price of the shares thereby purchased the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Payment of the Exercise Price may be made at the option of the Holder by (i) by wire transfer or cashier’s check drawn on a United States bank of United States dollars or (ii) the surrender and cancellation of Warrant Shares issuable upon such exercise of this Warrant, which shall be valued and credited toward the total Exercise Price due the Company at the average of the daily closing bid prices of Common Stock for the five consecutive Trading Days prior to such exercise (the “Trading Price”). Certificates for shares purchased hereunder shall be delivered to the Holder (at an address in the United States specified by the Holder) within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price, delivery of the required documentation and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. For purposes of this Warrant, a “Trading Day” shall mean any day on which the national securities exchange or the national market system of the NASD are open for trading.

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

(c) The Holder understands that, until such time as the Registration Statement has been declared effective or the Warrant Shares may be sold pursuant to Rule 144 under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the certificates representing any Warrants Shares issued upon exercise of this Warrant will bear a restrictive legend in substantially the following form:

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE

2

TRANSFERRED EXCEPT (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.”

(d) If the Company shall fail for any reason or for no reason to issue to the Holder (at an address in the United States specified by the Holder) within three (3) Trading Days after the date the Warrant is validly exercised by payment to the Company of the Exercise Price, delivery of the required documentation and payment of all taxes required to be paid by the Holder, if any, pursuant to Section 5 (a “Valid Exercise”), a certificate for the number of Warrant Shares to which the Holder is entitled and register such Warrant Shares on the Company’s share register or to credit the Holder’s balance account with the Depository Trust Company (“DTC”) for such number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise of this Warrant, then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such third Trading Day that the issuance of such shares of Common Stock is not timely effected an amount equal to 2.0% of the product of (A) the number of Warrant Shares not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the closing sale price of the Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such Warrant Shares to the Holder without violating this Section 3(e) (the “Delivery Date Price”); provided, however, that in no event shall the Company be obligated to pay damages pursuant to this sentence in an aggregate amount that exceeds 100% of the Delivery Date Price per Warrant Share. In addition to the foregoing, if within three (3) Trading Days after the date of a Valid Exercise the Company shall fail to issue and deliver a certificate to the Holder (at an address in the United States specified by the Holder) and register such Warrant Shares on the Company’s share register or credit the Holder’s balance account with DTC for the number of Warrant Shares to which the Holder is entitled upon the Holder’s exercise hereunder, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Warrant Shares issuable upon such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Trading Days after the Holder’s request promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased over the product of (A) such number of shares of Common Stock, times (B) the Delivery Date Price.

4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Trading Price.

3

5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names (provided the Holder has complied with the restrictions on transfer set forth herein) as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

6. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

7. Transfer, Division and Combination.

(a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

(b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7.

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e) Prior to, and as a condition of, any transfer of this Warrant, the Holder or transferee of this Warrant, as the case may be must (i) furnish to the Company a written opinion

4

of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) execute and deliver to the Company an investment letter in form and substance reasonably acceptable to the Company and (iii) qualify as an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act.

8. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

11. Adjustments of Exercise Price and Number of Warrant Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

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12. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case of (i) any capital reorganization or reclassification, (ii) any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, (iii) any sale or conveyance to another entity of the property of the Company as an entirety or substantially as an entirety, or (iv) any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company) (each, a “Fundamental Transaction”), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such Fundamental Transaction had this Warrant been exercised immediately prior to the effective date of such Fundamental Transaction and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in Section 11 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in Section 11 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Section 12 shall similarly apply to successive Fundamental Transactions. The Company shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant to be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such Fundamental Transaction and of said provisions so proposed to be made, shall be mailed to the Holder of this Warrant not less than thirty (30) days prior to such event. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. Notwithstanding the foregoing, following a Fundamental Transaction in which all or substanitally all of the outstanding Common Stock of the Company is exchanged for, converted into, acquired for or constitutes the right to receive solely cash (a “Triggering Event”), at the written request of the Holder delivered before the 30^th day after such Triggering Event, the Company (or the successor entity) shall purchase this Warrant from the Holder by paying to the Holder, within five days after such request, cash in an amount equal to the Black-Scholes Value (as defined below) of the remaining unexercised portion of this Warrant. “Black-Scholes Value” means the value of the unexercised portion of this Warrant calculated using the Black-Scholes Option Pricing Model determined as of the day immediately following the public announcement of the applicable Triggering Event and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of such request and (ii) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg.

13. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

14. Notice of Distribution. If the Board of Directors of the Company shall declare any dividend or other distribution with respect to its Common Stock other than a cash

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distribution out of earned surplus, the Company shall mail notice thereof to the Holder of this Warrants not less than ten (10) days prior to the record date fixed for determining stockholders entitled to participate in such dividend or other distribution. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d).

15. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed.

16. Registration Rights Agreement. The Common Stock issuable upon exercise of this Warrant shall constitute Registrable Securities (as such term is defined in the Registration Rights Agreement of even date herewith between the Holder and the Company (the “Registration Rights Agreement”)). The original Holder of this Warrant, and any valid transferees thereof pursuant to the Registration Rights Agreement, shall be entitled to all of the benefits afforded to a holder of any Registrable Securities under the Registration Rights Agreement and such holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of the Registration Rights Agreement applicable to the holder as a holder of Registrable Securities.

17. Miscellaneous.

(a) Jurisdiction. This Warrant shall constitute a contract under the laws of the Commonwealth of Massachusetts.

(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

(c) Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date.

(d) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided, that upon any permitted assignment of this Warrant, the assignee shall promptly provide the Company with its contact information.

(e) Limitation of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no

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enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

(f) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company 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 Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(g) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.

(h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

(i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

*            *            *

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: August 18, 2006

OSCIENT PHARMACEUTICALS CORPORATION
By:	/s/ Dominick C. Colangelo
Name:	Dominick C. Colangelo
Title:	Executive Vice President

NOTICE OF EXERCISE

To: Oscient Pharmaceuticals Corporation

1. The undersigned hereby elects to purchase                      Warrant Shares of Oscient Pharmaceuticals Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price for such Warrant Shares in full, together with all applicable transfer taxes, if any. Payment shall take the form of lawful money of the United States.

2. The undersigned hereby elects to convert the attached Warrant into Warrant Shares of Oscient Pharmaceuticals Corporation through “cashless exercise” in the manner specified in the Warrant. This conversion is exercised with respect to                      of the Warrant Shares covered by the Warrant.

3. Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

________________________________________

The Warrant Shares shall be delivered to the following:

________________________________________

________________________________________

________________________________________

4. Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

[PURCHASER]
By:
Name:
Title:
Dated:	_________________

ASSIGNMENT FORM

(To assign the foregoing Warrant, execute

this form and supply required information.

Do not use this form to exercise the Warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to                                  whose address is ____________________________________.

    ________________________________________________

Dated: _________, ________

Holder’s Signature:

Holder’s Address:

Signature Guaranteed:

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

EX-4.13

Exhibit 4.13

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of August 18, 2006, between Oscient Pharmaceuticals Corporation, a Massachusetts corporation (the “Company”), and Paul Royalty Fund Holdings II, a California general partnership (the “PRF”).

RECITALS

WHEREAS, pursuant to the terms of that certain Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) dated as of the date hereof, PRF is acquiring 11,111,111 shares of Common Stock (the “Shares”) and a warrant to purchase 2,304,147 shares of Common Stock (the “Warrant”); and

WHEREAS, the Purchase Agreement contemplates this Agreement being executed by the parties hereto as of the date hereof.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Definitions and Usage.

1.1 Definitions. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the following meanings:

“Agreement” has the meaning set forth in the first paragraph of this Agreement.

“Business Day” or “Business Days” means any day other than a Saturday, a Sunday, any day which is a legal holiday under the laws of the State of New York, or any day on which banking institutions located in the State of New York are required by law or other governmental action to close.

“Common Stock” means the Company’s common stock, $0.10 par value per share.

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

“Continuously Effective” with respect to a specified registration statement, means that such registration statement shall not cease to be effective and available for Transfers of Registrable Securities thereunder for longer than either (i) any ten (10) consecutive Business Days, or (ii) an aggregate of fifteen (15) Business Days during the period specified in the relevant provision of this Agreement.

“Demand Registration” has the meaning set forth in Section 2.1(a).

“Demand Registration Request” has the meaning set forth in Section 2.1(a).

“Equity Securities” has the meaning set forth in Section 2.2(b).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at that time.

“Failed Registration” has the meaning set forth in Section 2.2(f).

“general disclosure package” means as of the Applicable Time, any preliminary prospectus and any issuer free writing prospectus.

“Holders” means PRF, unless and until such PRF assigns all of its rights and obligations hereunder to any Persons in accordance with Section 7.3, at such times as such Persons shall own Registrable Securities.

“Losses” has the meaning set forth in Section 7(a).

“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, but not including a government or political subdivision or any agency or instrumentality of such government or political subdivision.

“Piggyback Registration” has the meaning set forth in Section 3.1.

“PRF” has the meaning set forth in the first paragraph of this Agreement.

“Purchase Agreement” has the meaning set forth in the Recitals.

“Qualified Holders” means the holders of a majority of the Registrable Securities then outstanding.

“register, registered and registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering by the SEC of effectiveness or automatic effectiveness of such registration statement or document.

“Registrable Securities” means (a) the Shares, (b) the Common Stock underlying the Warrant and (c) any Common Stock issued or issuable with respect to any of the securities referred to in clauses (a) or (b) by way of a stock dividend, stock split, combination, subdivision or other similar event. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when they (x) have been registered and sold pursuant to the Securities Act or which have been sold to the public pursuant to Rule 144 or any similar rule promulgated by the SEC pursuant to the Securities Act permitting the resale of restricted securities without the necessity of a registration statement under the Securities Act or (y) upon any Transfer in any manner to a Person which, by virtue of Section 8.3, is not entitled to the rights provided by this Agreement.

“Registration Expenses” has the meaning set forth in Section 6.1.

“Requesting Holders” means the Holders requesting a registration hereunder.

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“SEC” means the Securities and Exchange Commission and includes any governmental authority or agency succeeding to the functions thereof.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at that time.

“Shares” has the meaning set forth in the Recitals.

“Shelf Registration” has the meaning set forth in Section 2.2.

“Transfer” means and includes the act of any sale, conveyance, assignment, disposition, pledge, hypothecation, gift creation of a trust (voting or otherwise) or transfer or otherwise disposing of (other than pledging, hypothecating or otherwise transferring as security) (and correlative words shall have correlative meanings); provided, however, that any transfer or other disposition upon foreclosure or other exercise of remedies of a secured creditor after an event of default under or with respect to a pledge, hypothecation or other transfer as security shall constitute a “Transfer”.

“Violation” has the meaning set forth in Section 7(a).

“Underwriters Representative” means the managing underwriter, or in the case of a co-managed underwriting, the managed underwriter designated as the Underwriters’ Representative for the co-managers.

2. Demand Registrations.

2.1 Requests for Registration.

(a) At any time the Qualified Holders may make a written request (a “Demand Registration Request”) to the Company that the Company effect the registration of all or any portion of the Registrable Securities as the Qualified Holders shall set forth in the Demand Registration Request pursuant to the terms of this Agreement (a “Demand Registration”).

(b) Each Demand Registration Request shall specify the approximate number of Registrable Securities requested to be registered. Within ten days after receipt of any such request, the Company shall give written notice of such requested registration to all other Holders, and shall include as part of such Demand Registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company’s notice by such Holders.

(c) Upon receipt of a Demand Registration Request, the Company shall, subject to the terms and conditions of this Agreement, cause to be filed with the SEC a registration statement in accordance with the Securities Act and the Company shall include therein the Registrable Securities requested in the Demand Registration Request. The registration statement shall be on Form S-3 (or such successor form), unless at the time of filing such registration statement or at any time prior to the SEC entering an order declaring such registration statement to be effective under the Securities Act, either (i) the Company does not

3

meet the “Registrant Requirements” of, or (ii) the proposed offering by the Participating Holders does not meet the “Transaction Requirements” of, “I. Eligibility Requirements For Use of Form S-3” to the General Instructions to Form S-3 under the Securities Act. In the event that Form S-3 is not available for use in connection with the registration statement, the registration statement shall be on an appropriate form of the SEC as shall be selected by the Company and shall permit the disposition of the Registrable Securities in accordance with the intended method of disposition specified in the Demand Registration Request.

2.2 Shelf Registration. In connection with any Demand Registration, the Qualified Holders may require the Company to file such registration with the Securities and Exchange Commission in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect) (a “Shelf Registration”) at any time.

2.3 Restrictions on Registration.

(a) The Company shall be entitled to (i) postpone the filing, effectiveness, supplementing or amending of the registration statement or prospectus otherwise required to be prepared and filed pursuant to this Agreement, and (ii) suspend the use of any prospectus included in the registration statement, if in either case the Company reasonably determines that such registration and/or the offer or Transfer of Registrable Securities contemplated by the registration statement or any prospectus would interfere with, or require premature disclosure of, any plan or proposal by the Company or any of its subsidiaries to engage in any material financing, acquisition, disposition, reorganization, merger or tender offer or other significant transaction, and the Company promptly gives the Participating Holders written notice of such determination. The Company shall not be obligated to file a registration statement pursuant to this Section 2 if a Demand Registration Request would result in an anticipated net aggregate offering price of less than two million dollars ($2,000,000). Notwithstanding anything herein to the contrary, the Company shall not exercise its rights under this Section 2.3(a) more than twice in any 12 month period, nor, in each case, for a period of more than 60 days. The Holders hereby acknowledge that any notice given by the Company pursuant to this Section 2.3(a) shall constitute material non-public information and that the United States securities laws prohibit any Person who has material non-public information about a company from purchasing or selling securities of such company or from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities.

(b) The Company shall not be obligated to file the registration statement otherwise required to be prepared and filed pursuant to this Section 2 if, within 30 days after its receipt of a Demand Registration Request, the Company notifies the Requesting Holders that (i) prior to the Company’s receipt of such Demand Registration Request, the Company had a plan or intention promptly to register equity securities, including any security convertible into or exchangeable for equity securities (“Equity Securities”), under the Securities Act (other than Equity Securities to be registered on a registration statement on Form S-4 or Form S-8 (or any successor form to such forms)) and (ii) the Company reasonably believes that the proposed methods of distribution of the Registrable Securities subject to such Demand Registration Request would impair or adversely affect the proposed distribution of the Equity Securities to be registered by the Company.

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(c) If the Company postpones the filing or effectiveness of a registration statement pursuant to Section 2.3(a)(i) or is not obligated to file a registration statement pursuant to Section 2.3(b), the Requesting Holders may withdraw in writing their Demand Registration Request and such Holders’ rights under Section 2.1 to make a Demand Registration Request shall be reinstated and continue as if such unfulfilled Demand Registration Request had not been made.

(d) Notwithstanding anything in this Agreement to the contrary, in no event will the Company be obligated to effect more than two Demand Registrations hereunder. For purposes of the preceding sentence, a Demand Registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, or (ii) if after such registration statement has become effective, the related offer, sale or distribution of Registrable Securities thereunder is prohibited by any stop order, injunction or other order or requirement of SEC or other governmental agency or court for any reason not attributable to any Holder and such prohibition is not thereafter eliminated. If the Company shall have complied with its obligations under this Agreement, a right to request a registration pursuant to this Section 2 shall be deemed to have been satisfied upon the effective date of such registration; provided, that, no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated.

(e) Notwithstanding anything in this Agreement to the contrary, the Company shall have no obligation hereunder to register any Registrable Securities if, at the time of a Demand Registration Request, the proposed sale or disposition of all of the Registrable Securities for which registration was requested by the Requesting Holders does not require registration under the Securities Act for a sale or disposition in a single public sale (including sales in accordance with Rule 144(k) or any similar rule promulgated by the SEC under the Securities Act), and the Company offers to remove any and all legends restricting Transfer from the certificates evidencing such Registrable Securities.

(f) If at least 75% of the Registrable Securities requested to be registered by the Requesting Holders pursuant to a Demand Registration are not sold in such registration (a “Failed Registration”), the Requesting Holders shall have the right to require the Company to effect an additional registration of all or part of the Requesting Holders’ Registrable Securities in accordance with this Section 2; provided, the foregoing right to an additional registration shall only be available to the Holders with respect to one Failed Registration and thereafter any additional registrations (including Failed Registrations) shall count against the two Demand Registrations to which the Holders are entitled pursuant to Section 2.3(d) herein.

2.4 Underwritten Offerings.

(a) If a Demand Registration pursuant to this Section 2 involves an underwritten offering (whether on a “firm commitment”, “best efforts” or “all reasonable efforts” basis or otherwise), the Holders of a majority of the Registrable Securities initially requesting registration shall select the underwriter or underwriters and manager or managers to administer such underwritten offering; provided, however, that each Person so selected shall be reasonably acceptable to the Company.

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(b) If the Company effects the registration pursuant to this Section 2 in connection with an underwritten offering of Registrable Securities and the Underwriters’ Representative advises the Participating Holders that, in its opinion, the amount of securities requested to be included in such offering (whether by the Holders or other holders of securities of the Company) exceeds the amount that can be sold in such offering within a price range acceptable to the Holders of a majority of the Registrable Securities initially requesting registration, securities shall be included in such offering and the related registration, to the extent of the amount that can be sold within such price range in the following order of priority: first, the Registrable Securities requested by the Participating Holders to be included in such registration pursuant to this Section 2 pro rata among the respective Holders thereof on the basis of the amount of Registrable Securities owned by each such Holder; and second, all other securities requested to be included in such registration. Subject to Section 8.13, the Holders shall continue to have their rights hereunder with regard to any such excluded Registrable Securities.

3. Piggyback Registrations.

3.1 Right to Piggyback. Whenever following the fourth anniversary of the date of this Agreement, the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration which shall be governed by Section 2, and registrations related solely to employee benefit plans or a Rule 145 transaction) and the registration form to be used may be used for the registration of Registrable Securities (a “Piggyback Registration”), the Company shall give prompt written notice to all Holders, of its intention to effect such a registration and, subject to the terms hereof, shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after such Holders receive the Company’s notice.

3.2 Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold therein without adversely affecting the marketability of the offering, the Company shall include in such registration (a) first, the securities the Company proposes to sell, (b) second, the Registrable Securities requested to be included in such registration, pro rata among the respective Holders thereof on the basis of the amount of Registrable Securities owned by each such Holder and (c) third, other securities requested to be included in such registration.

3.3 Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company’s securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (a) first, the securities requested to be included therein by the holders requesting such registration, (b) second, the Registrable Securities requested to be included in such registration, pro rata among the Holders of such securities on the basis of the number of Registrable Securities owned by each such Holder and (c) third, other securities requested to be included in such registration.

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3.4 Selection of Underwriters. The Company shall have the right to select the investment banker(s) and manager(s) to administer the offering in connection with any Piggyback Registration.

4. Registration Procedures. Whenever the Holders have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use best efforts to effect the registration of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as expeditiously as practicable:

(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause the registration statement to become effective promptly after filing; provided, however, that before filing the registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to one firm of counsel for the Participating Holders copies of all such documents in the form substantially as proposed to be filed with the SEC.

(b) Prepare and file with the SEC such amendments and supplements to the registration statement and the prospectus used in connection with the registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by the registration statement. Subject to Section 2.2(a), (i) the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for the period specified in Section 3(j), and (ii) if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, then the Company shall promptly notify the Holders, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to the Holders such amended or supplemented prospectus, which such Holders shall thereafter use in the Transfer of Registrable Securities covered by such registration statement. Pending any such amendment or supplement described in this Section 3(a), the Holders shall cease making offers or Transfers of Registrable Securities pursuant to the prior prospectus. If any Registrable Securities included in the registration statement subject to, or required by, this Agreement remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of the registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status.

(c) Furnish to the Holders, without charge, such numbers of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each issuer free writing prospectus and preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act, and such other related documents as such Holders may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders.

(d) Use its best efforts (i) to register and qualify the securities covered by the registration statement under such other securities or Blue Sky laws of such states where an

7

exemption from registration is not available and as shall be reasonably requested by an Underwriters’ Representative (or, if the registration is not for a public offering, in up to ten states designated by the Holders of the majority of the Registrable Securities being registered) and (ii) to obtain the withdrawal of any order suspending the effectiveness of the registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and Transfer of any of the Registrable Securities in any state, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business as a foreign corporation, to consent to general service of process or subject itself to taxation in any state.

(e) In the event of any underwritten offering, enter into and perform its obligations under an underwriting agreement (including indemnification and contribution obligations of underwriters), in the usual and customary form for other securities offerings of the Company, with the managing underwriter or underwriters of such offering. The Company shall also cooperate with the Holders and the Underwriters’ Representative for such offering in the marketing of the Registrable Securities, including making reasonably available the officers, accountants, counsel, premises, books and records of the Company for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence.

(f) Promptly notify the Holders of any stop order issued or threatened to be issued by the SEC in connection therewith and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(g) Make available for inspection by the Holders, any underwriter participating in such offering and the representatives of such Holders and the Underwriters’ Representative (but not more than one firm of counsel to such Holders), all financial and other information as shall be reasonably requested by them, and provide such Holders, any underwriter participating in such offering and the representatives of such Holders and the Underwriters’ Representative the reasonable opportunity to discuss the business affairs of the Company with its principal executives and with the independent registered public accounting firm who have certified the audited financial statements included in the registration statement, in each case all as reasonably necessary to enable them to exercise their due diligence responsibility under the Securities Act.

(h) Use its reasonable efforts to obtain a so-called “comfort letter” from the independent public accountants of the Company, and legal opinions of counsel to the Company addressed to the Holders, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Holders of a majority of the Registrable Securities being registered. Delivery of any such comfort letter or opinion shall be subject to the recipient furnishing such written representations or acknowledgements as are customarily provided by selling stockholders who receive such comfort letters or opinions.

(i) Use its reasonable best efforts to cause the Registrable Securities covered by the registration statement, if then listed on a securities exchange or included for quotation in a

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recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, but in no event for less than the period such registration is effective.

(j) Keep the registration statement Continuously Effective (i) if a Demand Registration, for up to 60 calendar days or until such earlier date of which all the Registrable Securities under the demand Registration Statement shall have been disposed of in the manner described in the registration statement and (ii) if a Shelf Registration, for up thirty six (36) months or until such earlier date as of which all the Registrable Securities under the Shelf Registration statement have been disposed of in a manner described in the registration statement. Notwithstanding the foregoing, if for any reason the effectiveness of a registration is suspended or postponed as permitted by any provision of this Agreement, the relevant foregoing period shall be extended by the aggregate number of days of such suspension or postponement.

(k) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in the registration.

5. Holders’ Obligations. It shall be a condition precedent to the obligation of the Company to take any action pursuant to this Agreement with respect to the Registrable Securities of the Holders, that each Holder shall:

(a) Promptly furnish to the Company such information regarding the Holder, the number of the Registrable Securities owned by it, the number of Registrable Securities to be registered and the intended method of disposition of such securities and other reasonable information as shall be required to effect the registration of the Holder’s Registrable Securities, and cooperate fully with the Company in preparing the registration statement.

(b) If the Company has delivered a prospectus to the Holder and after having done so the prospectus is amended or supplemented to comply with the requirements of the Securities Act, at the written request of the Company, the Holder shall immediately cease making offers or Transfers of Registrable Securities and shall return the prospectuses to the Company and, upon receipt of the amended or supplemented prospectus from the Company, the Holder shall use only such amended or supplemented prospectus in making offers or Transfers of the Registrable Securities.

(c) If the Company has delivered to the Holder written notice in accordance with Section 2.3(a), then the Holder shall immediately cease making offers or Transfers of Registrable Securities until the Company shall have given the Holder written notice that the Holder may once again commence making offers or Transfers of Registrable Securities under the current prospectus or has delivered to the Holder an amended or supplemented prospectus, in which event the Holder shall use only such amended or supplemented prospectus to make offers or Transfers of Registrable Securities.

(d) During such time as the Holder may be engaged in a distribution of Registrable Securities, the Holder shall comply with Regulation M promulgated under the Exchange Act and pursuant thereto it shall, among other things, (i) not engage in any stabilization activity in connection with the securities of the Company in contravention of such

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regulation or (ii) distribute Registrable Securities under the registration statement solely in the manner described in the registration statement.

6. Registration Expenses.

6.1 Company Expenses. Subject to Section 6.2, all expenses incident to the Company’s performance of or compliance with this Agreement, including all registration and filing fees, fees of any transfer agent and registrar, fees and expenses of compliance with securities or blue sky laws, printing expenses, fees and disbursements of counsel for the Company and its independent registered public accounting firm, fees and expenses of underwriters (excluding discounts and commissions attributable to the Registrable Securities included in such registration), the Company’s internal expenses and the expenses and fees for listing the securities to be registered on each securities exchange or quotation system on which similar securities issued by the Company are then listed or quoted (all such expenses being herein called “Registration Expenses”) shall be borne by the Company.

6.2 Holder Expenses. In connection with a registration hereunder, the Company shall reimburse the Holders included in a registration for the reasonable fees and disbursements of one counsel (not to exceed $50,000).

7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Agreement:

(a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Holder, each Person, if any, who controls such Holder within the meaning of the Securities Act, and each officer, director, partner and employee of such Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including reasonable attorney’s fees and disbursements and reasonable expenses of investigation (collectively, “Losses”), incurred by such Person pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, but only insofar as such Losses arise out of or are based upon any of the following statements or omissions (collectively, a “Violation”):

(i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement, including any preliminary prospectus, any issuer free writing prospectus, the general disclosure package or the final prospectus contained therein, or any amendments or supplements thereto; or

(ii) the omission or alleged omission to state therein a material fact required to be stated in either such preliminary prospectus, issuer free writing prospectus, general disclosure package or final prospectus, or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

provided, however, that the indemnification required by this Section 7(a) shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of

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the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such Loss to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of a Holder or any underwriter expressly for use in connection with such registration; and provided, further, that this indemnity shall not be available to any Person who offers or Transfers any Registrable Securities (whether pursuant to a prospectus or not) during any period which the Company has notified the Holder that such offers and Transfers must cease under the Agreement, including Sections 2.3(a), 4(b), 5(b) and 5(c). Subject to Section 7(c), in connection with the foregoing indemnification obligations, the Company shall not be liable for reasonable fees and expenses of more than one separate firm for all the Holders.

(b) To the extent permitted by applicable law, the Holders (jointly and severally) shall indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the registration statement, each Person, if any, who controls the Company within the meaning of the Securities Act, and each officer, director, partner, and employee of such controlling Person, against any and all Losses incurred by such Person pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, but only insofar as such Losses arise out of or are based upon any Violation, in each case to the extent that such Violation arises out of or is based upon information furnished in writing by or on behalf of a Holder expressly for use in connection with such registration; provided, however, that (x) any indemnification required by this Section 7(b) shall not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of the Holders (which consent shall not be unreasonably withheld) and (y) in no event shall the amount of any indemnity obligation under this Section 7(b) exceed the gross proceeds from the applicable offering received by the Holders.

(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 7, such indemnified party shall deliver to the indemnifying party a written notice thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses (in each case, to the extent reasonable) to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 7 to the extent of such prejudice but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 7. Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the

11

indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it that are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels).

(d) If the indemnification required by this Section 7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any Losses referred to in this Section 7:

(i) the 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 Losses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions that resulted in such Losses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the Losses referred to above shall be deemed to include, subject to the limitations set forth in Sections 7(a), 7(b) and 7(c), any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding;

(ii) the parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 7(d)(i). No Person guilty of fraudulent misrepresentation (within the meaning of

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Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(e) The obligations of the Company and the Holders under this Section 7 shall survive the completion of any offering of Registrable Securities pursuant to the registration statement under this Agreement, and otherwise.

8. Miscellaneous.

8.1 Specific Performance. Each of the parties hereto acknowledges that the other party will have no adequate remedy at law if it fails to perform any of its obligations under the Agreement. In such event, each of the parties agrees that the other party shall have the right, in addition to any other rights it may have (whether at law or in equity), to specific performance of this Agreement.

8.2 Notices. All notices, consents, waivers and communications hereunder given by any party to the other shall be in writing (including facsimile transmission) and delivered personally, by telegraph, telecopy, telex or facsimile, by a recognized overnight courier, or by dispatching the same by certified or registered mail, return receipt requested, with postage prepaid, in each case addressed:

If to PRF to:

Paul Royalty Fund Holdings II

c/o Paul Capital Partners

140 East 45th Street, 44th Floor

New York, NY 10017

Attention: Gregory B. Brown, MD, Partner

Facsimile No.: (646) 264-1101

with a copy to:

McDermott Will & Emery LLP

227 West Monroe Street

Chicago, IL 60606-5096

Attention: Timothy R.M. Bryant

Facsimile No.: (312) 984-7700

If to the Company or any of its Subsidiaries to:

Oscient Pharmaceuticals Corporation

1000 Winter Street, Suite 2200

Waltham, MA 02451

Attention: Legal Department

Facsimile No.: (781) 398-2530

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with a copy to:

Ropes & Gray LLP

One International Place

Boston, MA 02110

Attention: Patrick O’Brien, Esq.

Facsimile No.: 617-951-7050

or to such other address or addresses as PRF or the Company or its Subsidiaries may from time to time designate by notice as provided herein, except that notices of changes of address shall be effective only upon receipt. All such notices, consents, waivers and communications shall: (a) when posted by certified or registered mail, postage prepaid, return receipt requested, be effective three (3) Business Days after dispatch, unless such communication is sent trans-Atlantic, in which case they shall be deemed effective three (3) Business Days after dispatch, (b) when telegraphed, telecopied, telexed or facsimiled, be effective upon receipt by the transmitting party of confirmation of complete transmission, or (c) when delivered by a recognized overnight courier or in person, be effective upon receipt when hand delivered.

8.3 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. The Company shall not be entitled to assign any of its obligations and rights under this Agreement without the prior written consent of PRF. PRF may assign without consent of the Company any of its obligations and rights under the Agreement without restriction.

8.4 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements (including the Term Sheet for Purchase of Revenue Interest, Debt and Equity from Oscient Pharmaceuticals Corporation dated June 29, 2006 between Paul Capital Advisors, LLC and the Company), understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, the terms of that certain Confidential Disclosure Agreement by and between the Company and PRF dated as of June 8, 2006 shall continue in effect. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by either party hereto. None of this Agreement, nor any provision hereof, is intended to confer upon any Person other than the parties hereto any rights or remedies hereunder.

8.5 Amendments; No Waivers.

(a) This Agreement or any term or provision hereof may not be amended, changed or modified except with the written consent of the parties hereto. No waiver of any right hereunder shall be effective unless such waiver is signed in writing by the party against whom such waiver is sought to be enforced.

(b) No failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or

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privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

8.6 Interpretation. When a reference is made in this Agreement to Articles, Sections, Schedules or Exhibits, such reference shall be to an Article, Section, Schedule or Exhibit to this Agreement unless otherwise indicated. The words “include”, “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”. Neither party hereto shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one party or the other.

8.7 Headings and Captions. The headings and captions in this Agreement are for convenience and reference purposes only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement.

8.8 Counterparts; Effectiveness. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other parties hereto. Any counterpart may be executed by facsimile or pdf signature and such facsimile or pdf signature shall be deemed an original.

8.9 Severability. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall nevertheless be given full force and effect.

8.10 Governing Law; Jurisdiction.

(a) This Agreement shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the State of New York, without giving effect to the principles of conflicts of law thereof.

(b) Any legal action or proceeding with respect to this Agreement or any other Transaction Document may be brought in any state or federal court of competent jurisdiction in the state, county and city of New York. By execution and delivery of this Agreement, each party hereto hereby irrevocably consents to and accepts, for itself and in respect of its property, generally and unconditionally the non-exclusive jurisdiction of such courts. Each party hereto hereby further irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of any Transaction Document.

(c) Each party hereto hereby irrevocably consents to the service of process out of any of the courts referred to in subsection (b) above of this Section 8.10 in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at its address set forth in this Agreement. Each party hereto hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any suit, action or proceeding commenced hereunder or under any other Transaction Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of a party to serve process on the other party in any other manner permitted by law.

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8.11 Waiver of Jury Trial. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any action, proceeding, claim or counterclaim arising out of or relating to any Transaction Document or the transactions contemplated under any Transaction Document. This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to any Transaction Document.

8.12 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or Persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.

8.13 Termination. This Agreement may be terminated at any time by a written instrument signed by the Company and PRF. Unless sooner terminated in accordance with the preceding sentence, this Agreement (other than Section 7) shall terminate in its entirety automatically upon the earlier of (i) such date as there are no shares of Registrable Securities outstanding and (ii) the date that the Company is a party to a merger or consolidation and the Holders receive pursuant to such merger or consolidation securities registered under the Securities Act in exchange for the Registrable Securities.

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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be executed the day and year first above written.

OSCIENT PHARMACEUTICALS CORPORATION
By:	/s/ Dominick C. Colangelo
Name: Dominick C. Colangelo
Title: Executive Vice President
PAUL ROYALTY FUND HOLDINGS II
By:	Paul Royalty Fund II, LP, its Managing Partner
By:	Paul Capital Royalty Management, LLC, its General Partner
By:	Paul Capital Advisors, LLC, its Manager
By:	/s/ Gregory B. Brown, M.D.
Name: Gregory B. Brown, MD
Title: Member

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EX-10.5

Exhibit 10.5

BAY COLONY CORPORATE CENTER

WALTHAM, MASSACHUSETTS

OFFICE LEASE

BAY COLONY CORPORATE CENTER LLC,

a Delaware limited liability company,

Landlord

and

OSCIENT PHARMACEUTICALS CORPORATION,

a Massachusetts corporation,

Tenant

DATED AS OF: June 23, 2004

TABLE OF CONTENTS

Paragraph		Page
1.	Premises	1
2.	Certain Basic Lease Terms	1
3.	Term; Delivery of Possession of Premises	3
4.	Condition of Premises	4
5.	Monthly Rent	8
6.	Letter of Credit	9
7.	Additional Rent; Operating Expenses and Tax Expenses	10
8.	Use of Premises; Compliance with Law	16
9.	Alterations and Restoration	19
10.	Repair	21
11.	Abandonment	22
12.	Liens	22
13.	Assignment and Subletting	23
14.	Indemnification of Landlord	28
15.	Insurance	30
16.	Mutual Waiver of Subrogation Rights	32
17.	Utilities	32
18.	Personal Property and Other Taxes	35
19.	Rules and Regulations	36
20.	Surrender; Holding Over	36
21.	Subordination and Attornment	37
22.	Financing Condition	38
23.	Entry by Landlord	38
24.	Insolvency or Bankruptcy	39
25.	Default and Remedies	40
26.	Damage or Destruction	43
27.	Eminent Domain	45
28.	Landlord’s Liability; Sale of Building	46
29.	Estoppel Certificates	47
30.	Right of Landlord to Perform	47
31.	Late Charge	48
32.	Attorneys’ Fees; Waiver of Jury Trial	48
33.	Waiver	49
34.	Notices	49
35.	Deleted	49
36.	Defined Terms and Marginal Headings	49
37.	Time and Applicable Law	50
38.	Successors	50
39.	Entire Agreement; Modifications	50
40.	Light and Air	50
41.	Name of Building	50
42.	Severability	50

-i-

43.	Authority	50
44.	No Offer	51
45.	Real Estate Brokers	51
46.	Consents and Approvals	51
47.	Reserved Rights	52
48.	Financial Statements	52
49.	Deleted	52
50.	Nondisclosure of Lease Terms	52
51.	Furniture	53
52.	Right of First Offer	53
53.	Renewal Option	54
54.	Notice of Lease; Termination Agreement	56

EXHIBITS

A – Outline of Premises

B – Rules and Regulations

C – Form of Commencement Date Letter

D – Description of Final Plans

E – Letter of Credit

F – List of Existing Furniture

G – Outline of First Offer Space

H – Fleet SNDA

I – Form of Notice of Lease

J – Form of Termination Agreement

-ii-

LEASE

THIS LEASE is made as of the 23 day of June, 2004, between BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company (“Landlord”), and OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation (“Tenant”).

1. Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, on the terms and conditions set forth herein, the space outlined on the attached Exhibit A (the “Premises”) which Premises consist of “Increment 1” and “Increment 2,” as shown on Exhibit A. The Premises are located on the floor specified in Paragraph 2 below of the building located at 1000 Winter Street, Waltham, Massachusetts (the “Building”). The parcel(s) of land (the “Land”) on which the Building is located and the other improvements on the Land (including the Building, driveways, and landscaping) are referred to herein as the “Real Property.” The Real Property is situated within Bay Colony Corporate Center (the “Office Park”).

Tenant’s lease of the Premises shall include the right to use, in common with others and subject to the other provisions of this Lease, the public lobbies, entrances, stairs, elevators and other public portions of the Building and the parking lots, driveways and sidewalks serving the Office Park. All of the windows and outside walls of the Premises and any space in the Premises used for shafts, stacks, pipes, conduits, ducts, electrical equipment or other utilities or Building facilities are reserved solely to Landlord and Landlord shall have rights of access through the Premises for the purpose of operating, maintaining and repairing the same, subject to the provisions of Paragraph 23 below regarding Landlord’s access to the Premises.

2. Certain Basic Lease Terms. As used herein, the following terms shall have the meaning specified below:

a. Floor(s) on which the Premises are located: Second (2nd) floor. The Premises are currently designated as Suite 2200. Landlord and Tenant agree that for the purpose of this Lease, Increment 1 shall be deemed to contain 8,688 rentable square feet of space and Increment 2 shall be deemed to contain 22,813 rentable square feet of space, for a total rentable square footage for the Premises of 31,501 rentable square feet of space.

b. Lease term: Approximately seven (7) years and eight (8) months. The Lease term as to Increment 1 shall commence on the date hereof (the “Increment 1 Commencement Date”). The Lease term as to Increment 2 shall commence on the date of Substantial Completion (as defined in Paragraph 4.b. below) of the portion of the Tenant Improvements (as defined in Paragraph 4.a. below) that are located in Increment 2 (the “Increment 2 Commencement Date”). References in this Lease to the “Commencement Date” shall be deemed to refer to the Increment 1 Commencement Date as to Increment 1 and be deemed to refer to the Increment 2 Commencement Date as to Increment 2.

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The Lease term shall end on the date (the “Expiration Date”) that is the last day of the ninetieth (90th) full calendar month following the Increment 2 Commencement Date.

c. Monthly Rent: The sums set forth below for the respective periods:

Period	Monthly Rate
Increment 1 Commencement Date through July 31, 2004	$	1,810.00	(electricity and cleaning for Increment 1 only)
August 1, 2004 through July 31, 2005	$	50,821.61
August 1, 2005 through July 31, 2007	$	60,376.92
August 1, 2007 through July 31, 2009	$	65,627.08
August 1, 2009 through Expiration Date	$	70,877.25

Notwithstanding the above, Tenant’s Monthly Rent shall be fully abated for the following six (6) calendar months: November and December of 2005, November and December of 2006, and November and December of 2007.

d. Security: Letter of credit in the amount of Three Hundred Ninety Three Thousand Seven Hundred Sixty Two and 50/100 Dollars ($393,762.50).

e. Tenant’s Share: 11.2838%, which percentage is based upon (A) the rentable square feet of the Premises set forth in Paragraph 2.a. above, divided by (B) the total rentable square feet of the Building, which Landlord and Tenant agree, for the purpose of this Lease, shall be deemed to contain 279,189 rentable square feet.

Base Year: The calendar year 2004.

f. Base Tax Year: The fiscal tax year ending June 30, 2005.

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g. Initial Contemplated Use of Premises: Biopharmaceutical development. Paragraph 8.a. below sets forth the permitted uses of the Premises.

h. Real estate broker(s): Shorenstein Realty Services, L.P., Trammell Crow Company and Spaulding & Slye.

i. Tenant’s Electrical Charge: Three Thousand Two Hundred Eighty One and 35/100 Dollars ($3,281.35) per month.

3. Term; Delivery of Possession of Premises.

a. Term. The term of this Lease shall commence as to Increment 1 on the Increment 1 Commencement Date (as defined in Paragraph 2.b. above) and commence as to Increment 2 on the Increment 2 Commencement Date (as defined in Paragraph 2.b. above) and, unless sooner terminated pursuant to the terms hereof or at law, shall expire on the Expiration Date (as defined in Paragraph 2.b.). Upon either party’s request after the Increment 2 Commencement Date, Landlord and Tenant shall execute a letter to substantially the form of Exhibit C attached hereto confirming the Increment 2 Commencement Date.

b. Delivery of Increment 1 and Increment 2. Increment 1 shall initially be delivered by Landlord to Tenant in its as-is condition on the date of this Lease. In the event of any delay in the delivery of Increment 1 to Tenant in its as-is condition caused by fire or other casualty, acts of God or any other cause beyond the reasonable control of Landlord, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but Landlord shall use reasonable diligent efforts to deliver Increment 1 to Tenant as soon as is reasonably possible after the date of this Lease. No delay in delivery of possession of Increment 1 to Tenant shall amend Tenant’s obligations under this Lease; provided, however, that if Increment 1 is not delivered to Tenant on the date of this Lease, then the Increment 1 Commencement Date shall be modified to be the date that Increment 1 is actually delivered to Tenant in its as-is condition. Notwithstanding the initial delivery of Increment 1 to Tenant in its as-is condition, Tenant Improvements will subsequently be constructed in Increment 1 pursuant to Paragraph 4 below.

Increment 2 shall be delivered to Tenant upon Substantive 1 Completion of the portion of the Tenant Improvements that are to be constructed in Increment 2 pursuant to Paragraph 4 below.

If Substantial Completion of the Tenant Improvements I located in Increment 1 and/or Increment 2 is delayed for any reason whatsoever, this Lease shall not be void or voidable. Further, no delay in the Substantial Completion of the Tenant Improvements shall amend Tenant’s obligations under this Lease. In no event shall Landlord be liable to Tenant for any delay in completion of the Tenant Improvements that is caused or occasioned by strikes, lockout, labor disputes, shortages of material or labor, fire or other casualty, acts of God or any other cause beyond the commercially reasonable control of Landlord (“Force Majeure”). Notwithstanding the foregoing, if the Tenant Improvements for both Increment 1 and Increment 2 are not Substantially Completed by the Target Completion Date (as defined in Paragraph 4.c.

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below) due to Landlord’s failure to comply with the construction schedule set forth in Paragraph 4.c. below for any reason other than delays caused by Force Majeure or a Tenant Delay (as defined in Paragraph 4.d. below) (any such delay caused by other than Force Majeure or a Tenant Delay being referred to hereinafter as a “Landlord Delay”), then Tenant’s Monthly Rent shall be abated one (1) day for each day beyond the Target Completion Date that the Tenant Improvements were not Substantially Completed due to a Landlord Delay, which abatement shall be applied as soon as the Target Completion Date (as extended by any delays caused by Force Majeure or a Tenant Delay) has been passed. In no event shall Tenant’s Monthly Rent be abated if the Tenant Improvements are not completed by the Target Completion Date due to Force Majeure and/or a Tenant Delay(s).

c. Early Occupancy. If, at Tenant’s request, Landlord permits Tenant to take occupancy of Increment 1 and/or Increment 2 prior to their respective Commencement Dates set forth above, then the Commencement Date as to that increment shall be the date of such early occupancy by Tenant; provided, however, that the Expiration Date of this Lease shall not be affected by such early occupancy of either increment of the Premises. Tenant’s entry into the Premises for the purposes provided for in Paragraph 4.e. below shall not constitute occupancy of the Premises for the purposes of this Paragraph 3.c.

4. Condition of Premises. Except as otherwise expressly provided in this Paragraph 4, Tenant shall accept the Premises in their “as-is” condition and Landlord shall have no obligation to make or pay for any improvements or renovations in or to the Premises.

a. Tenant Improvements; Final Plans; Budget. Landlord shall cause Landlord’s designated contractor (“Contractor”) to construct the improvements in the Premises (the “Tenant Improvements”) which are specifically described in the construction plans and specifications described on the attached Exhibit D (the “Final Plans”).

As soon as reasonably possible after the date hereof, Landlord shall provide Tenant with an estimated budget for the Tenant Improvements, which budget shall include Contractor’s fee, the Construction Management Fee (as defined in Paragraph 4.e. below) and a reasonable contingency. Tenant shall have three (3) business days after the receipt of the estimated budget to approve or reasonably disapprove of the estimated budget or to approve or reasonably disapprove of particular line items in the estimated budget. If Tenant disapproves of the budget or any line item thereon within such three (3) business day period, then Landlord shall cause Landlord’s architect to modify the Final Plans to satisfactorily address the desired change to the budget. Any and all revisions to the Final Plans shall be subject to Landlord’s reasonable approval. Upon the revision of the Final Plans, Landlord shall cause Contractor to promptly prepare and submit to Tenant a revised estimated budget, Tenant shall respond to the revised estimated budget in the manner described above with regard to the initial budget. Any delay in Substantial Completion of the Tenant Improvements caused directly or indirectly by any revision to the Final Plans or the initial estimated budget or any subsequently revised budget (other than revisions required to correct errors or incomplete work by Landlord, Landlord’s architect or Contractor) shall constitute a Tenant Delay as defined in Paragraph 4.d. below. In the event Tenant shall fail to raise any objections to the initial budget or any revised budget within the three (3) business day period(s) described above, Tenant shall be deemed to have approved the

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proposed budget or revised budget, as applicable. The budget, as approved by Landlord and Tenant, is referred to hereinafter as the “Final Budget”

Notwithstanding anything to the contrary in this Paragraph 4.a, or elsewhere in this Paragraph 4, Landlord and Tenant agree that, although the Final Budget represents a good faith estimate by Contractor of the costs of the construction of the Tenant Improvements, the Final Budget is only an estimate based on information presently known by Contractor with regard to the present condition of the Premises and the anticipated costs of the design and construction of the Tenant Improvements. Tenant hereby authorizes Landlord to make expenditures from the contingency category of the Final Budget to cover any unforeseen expenses; provided, however, in no event may Landlord spend amounts in excess of the Final Budget contingency without Tenant’s prior written consent.

b. Changes. If Tenant requests any change, addition or alteration in or to the Final Plans (“Changes”), Landlord shall cause Landlord’s architect to prepare additional plans implementing such Change (which additional plans shall be subject to Landlord’s reasonable approval) and Landlord’s reasonable architectural charges in connection therewith shall be added to the cost of the Tenant Improvements. As soon as practicable after the completion of such additional plans, Landlord shall notify Tenant of the estimated cost of the Change. Within three (3) business days after receipt of such cost estimate, Tenant shall notify Landlord in writing whether Tenant approves the Change. If Tenant approves the Change, Landlord shall proceed with the Change and the cost of the Change shall be added to the cost of the Tenant Improvements and the Final Budget adjusted accordingly. If Tenant fails to approve the Change within such three (3) business day period, the requested Change shall not be incorporated into the Tenant Improvements.

c. Construction; Substantial Completion. Landlord shall cause Contractor to commence the construction of the Tenant Improvements as soon as is reasonably possible after the approval by Landlord and Tenant of the Final Budget and Tenant’s delivery to Landlord of the Letter of Credit, in the form required by Paragraph 6 below. In no event shall Landlord be required to commence construction of the Tenant Improvements prior to the date the Letter of Credit is received by Landlord. If Tenant has not delivered the Letter of Credit to Landlord on or before the date (the “LOC Date”) that is ten (10) business days following the date of this Lease, then any delay in the Substantial Completion of the Tenant Improvements that is caused by Tenant’s failure to deliver the Letter of Credit to Landlord on or before the LOC Date, shall constitute a Tenant Delay for purposes of the third grammatical paragraph of Paragraph 3 above.

Landlord and Contractor shall adhere to the following schedule for construction:

Receive permits for construction not later than July 15, 2004

Substantial Completion of Tenant Improvements in Increment 2 on or before August 12, 2004

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Substantial Completion of Tenant Improvements in Increment 1 on or before September 16,2004 (“Target Completion Date”)

Tenant acknowledges that the portion of the Tenant Improvements being constructed in Increment 1 will be constructed therein after Tenant has commenced occupancy of Increment 1. Landlord and Tenant shall agree upon a mutually acceptable staging schedule for the construction of the Tenant Improvements so that Tenant can vacate the portions of Increment 1 that are required to be vacated in order for certain of the Tenant Improvement work to be performed therein; provided, however, that any delay in the Substantial Completion of the Tenant Improvements caused by such staging shall constitute a Tenant Delay, rather than a Landlord Delay, for purposes of applying Paragraph 3.b. above. Tenant shall not be entitled to any abatement of the electricity or cleaning charge during the construction of the Tenant Improvements in Increment 1, nor of Monthly Rent if the Tenant Improvements are not completed prior to August 1, 2004; subject, however, to the third grammatical paragraph of Paragraph 3.b. above.

Landlord shall provide and cause to be installed only those wall terminal boxes and/or floor monuments required for Tenant’s telephone or computer systems as are shown on the Final Plans. Landlord will provide ordinary power wiring to locations shown on the Final Plans and shall provide and cause to be installed conduits as required for Tenant’s telephone and computer systems as shown on the Final Plans, but shall in no event install, pull or hook up such wires or provide wiring necessary for special conditioned power to the Premises. Further, notwithstanding anything to the contrary herein, Landlord and Tenant shall cooperate with each other to resolve any space plan issues raised by applicable local building codes. The Tenant Improvements shall be deemed to be “Substantially Completed” when (i) they have, as determined by Landlord’s architect, been completed in accordance with the Final Plans, subject only to correction or completion of “Punch List” items, which items shall be limited to minor items of incomplete or defective work or materials or mechanical maladjustments that are of such a nature that they do not materially interfere with or impair Tenant’s use of the Premises for Tenant’s business and (ii) any governmental approvals (which may be oral approvals by inspectors or other officials, and may be temporary or conditional in accordance with local practice) and permits required for the lega1 occupancy of the Premises have been issued. The definition of “Substantially Completed” shall also apply to the terms “Substantial Completion” and “Substantially Complete”.

d. Tenant Delays. Tenant shall be responsible for, and shall pay to Landlord, any and all costs and expenses incurred by Landlord in connection with any delay in the commencement or completion of the Tenant Improvements and any increase in the cost of the Tenant Improvements caused by (i) any Changes requested by Tenant in the Final Plans (including any cost or delay resulting from proposed changes that are not ultimately made), (ii) any failure by Tenant to timely pay any amounts due from Tenant hereunder, including any additional costs resulting from any Change (it being acknowledged that if Tenant fails to make or otherwise delays making such payments, Landlord may stop work on the Tenant Improvements rather than incur costs which Tenant is obligated to fund but has not yet funded and any delay from such a work stoppage will be a Tenant Delay), (iii) the inclusion in the Tenant Improvements of any so-called “long lead” materials (such as fabrics, paneling, carpeting or other items that are not readily available within industry standard lead times (e.g., custom made

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items that require time to procure beyond that customarily required for standard items, or items that are currently out of stock and will require extra time to back order) and for which suitable substitutes exist), (iv) Tenant’s failure to respond within three (3) business days to reasonable inquiries by Landlord or Contractor regarding the construction of the Tenant Improvements, or (v) any other delay requested or caused by Tenant. Each of the foregoing is referred to herein as a “Tenant Delay”.

e. Cost of Tenant Improvements. Landlord shall bear the cost of the construction of the Tenant Improvements (including the architectural costs for the preparation of the Tenant Approved Plans and the Final Plans, Contractor’s fee and the Construction Management Fee (as defined below)), limited however to a maximum expenditure by Landlord therefor of Four Hundred Seventy Two Thousand Five Hundred Fifteen Dollars ($472,515.00) (“Landlord’s Allowance”). A portion of Landlord’s Allowance not to exceed One Hundred Fifty Seven Thousand Five Hundred Five Dollars ($157,515.00) may be applied to the reasonable architectural and engineering costs for the design of the Tenant Improvements and to wiring and cabling, Tenant’s security system in the Premises, signage, moving expenses and costs of breaking down and reinstalling the Furniture (as defined in Paragraph 51 below) (“Soft Costs”). No portion of Landlord’s Allowance may (i) be applied to the cost of equipment, trade fixtures, furniture or free rent, (ii) be applied to any portion of the Premises which is then the subject of a sublease, or (iii) be used to prepare any portion of the Premises for a proposed subtenant or assignee. Disbursements of Landlord’s Allowance for payment of Soft Costs pursuant to the foregoing shall be made by Landlord within thirty (30) days following Landlord’s receipt of Tenant’s written request therefor accompanied by written invoices (in form reasonably acceptable to Landlord) evidencing the subject costs.

Subject to the expenditure restrictions set forth in the last sentence of Paragraph 4.a. above, Tenant shall pay for all costs of the construction of the Tenant Improvements in excess of Landlord’s Allowance (the “Excess Cost”). Based on the estimated cost of the construction of the Tenant Improvements, as shown on the Final Budget (the “Estimated Costs”), the prorata share of the Estimated Costs payable by Landlord and Tenant shall be determined and an appropriate percentage share established for each (a “Share of Costs”). Tenant and Landlord shall fund the cost of the construction (including the applicable portion of the applicable fees) as the same is performed, in accordance with their respective Share of Costs for the construction, with Tenant’s payments being made to Landlord within thirty (30) days of Landlord’s written demand. At such time as Landlord’s Allowance has been entirely disbursed, Tenant shall pay the remaining Excess Cost, if any, to Landlord, which payment shall be made, at Landlord’s option, in advance or in course of construction installments. Upon Tenant’s written request, Landlord or Contractor shall provide Tenant with a breakdown of all construction costs to date and of Landlord’s and Tenant’s prior contributions toward such costs.

Notwithstanding the foregoing, Landlord shall retain from the amount of Landlord’s Allowance, as compensation to Landlord for review of the Final Plans and for construction inspection, administration and management with regard to the Tenant Improvements, a sum (the “Construction Management Fee”) equal to (i) five percent (5%) of the first One Hundred Thousand Dollars ($100,000.00) of the hard construction costs for the Tenant Improvements and the costs of the mechanical, engineering and plumbing drawings for the

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Tenant Improvements, plus (ii) three percent (3%) of such costs in excess of One Hundred Thousand Dollars ($100,000.00). At the time Landlord makes any disbursement of Landlord’s Allowance, Landlord shall retain from Landlord’s Allowance, as a partial payment of the Construction Management Fee, a proportionate amount of the Construction Management Fee based upon Landlord’s reasonable estimation of the amount required to be withheld from each disbursement in order to ensure that the entire Construction Management Fee is retained over the course of construction on a prorata basis. At such time as Landlord’s Allowance has been entirely disbursed, Tenant shall, within ten (10) business days of written demand, pay to Landlord the remainder, if any, of the Construction Management Fee not yet paid to Landlord. Landlord’s aforementioned written demand shall detail the manner in which the Construction Management Fee was calculated and specify which portion of the Construction Management Fee was previously paid and the portion owed.

f. Early Entry. Notwithstanding anything to the contrary in this Lease, Tenant may, prior to the Substantial Completion of Tenant Improvements, enter the Premises for the purpose of installing telephones, electronic communication or related equipment fixtures, furniture and equipment, provided that Tenant shall be solely responsible for any of such equipment, fixtures, furniture or material and for any loss or damage thereto from any cause whatsoever, excluding only the gross negligence or deliberate misconduct of Landlord or Landlord’s contractors. Such early access to the Premises and such installation shall be permitted only to the extent that Landlord determines that such early access and installation activities will not delay Landlord’s completion of the construction of the Tenant Improvements. Landlord and Tenant shall cooperate in the scheduling of Tenant’s early access to the Premises and of Tenant’s installation activities in an attempt to maximize the benefits to Tenant of this Paragraph 4.e. without interfering with Contractor’s completion of the construction of the Tenant Improvements. The provisions of the final grammatical paragraph of Paragraph 8.a. below, the provisions of Paragraph 9.a. below, and the provisions of Paragraphs 14 and 15 below shall apply in full during the period of any such early entry, and Tenant shall (i) provide certificates of insurance evidencing the existence and amounts of liability insurance carried by Tenant and its agents and contractors, reasonably satisfactory to Landlord, prior to such early entry, and (ii) comply with all applicable laws, regulations, permits and other approvals applicable to such early entry work in the Premises.

5. Monthly Rent.

a. Commencing as of the Commencement Date, and continuing thereafter on or before the first day of each calendar month during the term hereof, Tenant shall pay to Landlord, as monthly rent for the Premises, the applicable Monthly Rent and Tenant’s Electrical Charge specified in Paragraph 2 above for the periods referred to therein. If Tenant’s obligation to pay Monthly Rent hereunder commences on a day other than the first day of a calendar month, or if the term of this Lease terminates on a day other than the last day of a calendar month, then the Monthly Rent and Tenant’s Electrical Charge payable for such partial month shall be appropriately prorated on the basis of a thirty (30)-day month. Monthly Rent, Tenant’s Electrical Charge and the Additional Rent specified in Paragraph 7 shall be paid by Tenant to Landlord, in advance, without deduction, offset, prior notice or demand, in immediately available funds of lawful money of the United States of America, or by good check as described below, to the lockbox location designated by Landlord, or to such other person or at

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such other place as Landlord may from time to time designate in writing. Payments made by check must be drawn either on a California financial institution or on a financial institution that is a member of the federal reserve system. Notwithstanding the foregoing, Tenant shall pay to Landlord together with Tenant’s execution of this Lease an amount equal to the Monthly Rent payable for the first full calendar month of the Lease term after Tenant’s obligation to pay Monthly Rent shall have commenced hereunder, which amount shall be applied to the Monthly Rent first due and payable hereunder.

b. All amounts payable by Tenant to Landlord under this Lease, or otherwise payable in connection with Tenant’s occupancy of the Premises, in addition to the Monthly Rent and Tenant’s Electrical Charge hereunder and Additional Rent under Paragraph 7, shall constitute rent owed by Tenant to Landlord hereunder.

c. Any rent not paid by Tenant to Landlord when due shall bear interest from the date due to the date of payment by Tenant at an annual rate of interest (the “Interest Rate”) equal to the lesser of (i) twelve percent (12%) per annum or (ii) the maximum annual interest rate allowed by law on such due date for business loans (not primarily for personal, family or household purposes) not exempt from the usury law. Failure by Tenant to pay rent when due, including any interest accrued under this subparagraph, shall constitute an Event of Default (as defined in Paragraph 25 below) giving rise to all the remedies afforded Landlord under this Lease and at law for nonpayment of rent.

d. No security or guaranty which may now or hereafter be furnished to Landlord for the payment of rent due hereunder or for the performance by Tenant of the other terms of this Lease shall in any way be a bar or defense to any of Landlord’s remedies under this Lease or at law.

6. Letter of Credit. As security for the performance by ‘ Tenant of Tenant’s obligations hereunder, Tenant shall cause to be delivered to Landlord, within thirty (30) days following the date of this Lease, an original irrevocable standby letter of credit (the “Letter of Credit”) in the amount specified in Paragraph 2.d. above, naming Landlord as beneficiary, which Landlord may draw upon to cure any Event of Default under this Lease or to compensate Landlord for any damage (subject to the limitations on damages expressly provided for in the last grammatical paragraph of Paragraph 14.b. below) Landlord incurs as a result of an Event of Default. Tenant’s failure to deliver the Letter of Credit within the aforementioned thirty (30) day period shall constitute an Event of Default entitling Landlord to exercise the remedies set forth in Paragraph 25.b. below. Any such draw on the Letter of Credit shall not constitute a waiver of any other rights of Landlord with respect to any such Event of Default or failure to perform. The Letter of Credit shall be issued by a major commercial bank reasonably acceptable to Landlord, with a metropolitan Boston, or New York, New York, service and claim point for the Letter of Credit, have an expiration date not earlier than the sixtieth (60th) day after the Expiration Date (or, in the alternative, have a term of not less than one (1) year and be automatically renewable for an additional one (1) year period unless notice of non-renewal is given by the issuer to Landlord not later than sixty (60) days prior to the expiration thereof) and shall provide that Landlord may make partial and multiple draws thereunder, up to the face amount thereof. In addition, the Letter of Credit shall provide that, in the event of Landlord’s assignment or other transfer of its interest in this Lease, the Letter of Credit shall be freely transferable by Landlord,

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without charge and without recourse, to the assignee or transferee of such interest and the bank shall confirm the same to Landlord and such assignee or transferee. The Letter of Credit shall provide for payment to Landlord upon the issuer’s receipt of a sight draft from Landlord together with Landlord’s certificate certifying that the requested sum is due and payable from Tenant and Tenant has failed to pay, and with no other conditions, shall be in the form attached hereto as Exhibit E, or otherwise in form and content satisfactory to Landlord. If the Letter of Credit has an expiration date earlier than the date sixty (60) days following the Expiration Date, then throughout the term hereof (including any renewal or extension of the term) Tenant shall provide evidence of renewal of the Letter of Credit to Landlord at least sixty (60) days prior to the date the Letter of Credit expires. If Landlord draws on the Letter of Credit pursuant to the terms hereof, Tenant shall immediately replenish the Letter of Credit or provide Landlord with an additional letter of credit conforming to the requirement of this paragraph so that the amount available to Landlord from the Letter of Credit(s) provided hereunder is the amount specified in Paragraph 2.d. above. Tenant’s failure to deliver any replacement, additional or extension of the Letter of Credit, or evidence of renewal of the Letter of Credit, within the time specified under this Lease shall entitle Landlord to draw upon the Letter of Credit then in effect. If Landlord liquidates the Letter of Credit as provided in the preceding sentence, Landlord shall hold the funds received from the Letter of Credit as security for Tenant’s performance under this Lease, and Landlord shall not be required to segregate such security deposit from its other funds and no interest shall accrue or be payable to Tenant with respect thereto. No holder of a Superior Interest (as defined in Paragraph 21 below), nor any purchaser at any judicial or private foreclosure sale of the Real Property or any portion thereof, shall be responsible to Tenant for such security deposit unless and only to the extent such holder or purchaser shall have actually received the same. If Tenant is not in default at the expiration or termination of this Lease, Landlord shall return to Tenant the Letter of Credit or the balance of the security deposit then held by Landlord, as applicable within thirty (30) days following the expiration or earlier termination of this Lease; provided, however, that in no event shall any such return be construed as an admission by Landlord that Tenant has performed all of its covenants and obligations hereunder.

7. Additional Rent; Operating Expenses and Tax Expenses.

a. Operating Expenses. Tenant shall pay to Landlord at the times hereinafter set forth, Tenant’s Share, as specified in Paragraph 2.e. above, of any increase in the Operating Expenses (as defined below) incurred by Landlord in each calendar year subsequent to the Base Year specified in Paragraph 2.f. above, over the Operating Expenses incurred by Landlord during the Base Year. The amounts payable under this Paragraph 7.a. and Paragraph 7.b. below are termed “Additional Rent” herein.

The term “Operating Expenses” shall mean the total costs and expenses incurred by Landlord in connection with the management, operation, maintenance, repair and ownership of the Real Property (including, without limitation, costs and expenses incurred in connection with the management, operation, maintenance, repair and ownership of other portions of the Office Park, to the extent fairly allocable to the Real Property), including, without limitation, the following costs: (1) salaries, wages, bonuses and other compensation (including hospitalization, medical, surgical, retirement plan, pension plan, union dues, life insurance, including group life insurance, welfare and other fringe benefits, and vacation, holidays and other paid absence

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benefits) relating to employees of Landlord or its agents engaged in the operation, repair, or maintenance of the Real Property; (2) payroll, social security, workers’ compensation, unemployment and similar fixes with respect to such employees of Landlord or its agents, and the cost of providing disability or other benefits imposed by law or otherwise, with respect to such employees; (3) the cost of uniforms (including the cleaning, replacement and pressing thereof) provided to such employees; (4) premiums and other charges incurred by Landlord with respect to fire, other casualty, rent and liability insurance, any other insurance as is deemed necessary or advisable in the reasonable judgment of Landlord, or any insurance required by the holder of any Superior Interest (as defined in Paragraph 21 below), and, after the Base Year, costs of repairing an insured casualty to the extent of the deductible amount under the applicable insurance policy; (5) water charges and sewer rents or fees; (6) license, permit and inspection fees; (7) sales, use and excise taxes on goods and services purchased by Landlord in connection with the operation, maintenance or repair of the Real Property and Building systems and equipment; (8) telephone, telegraph, postage, stationery supplies and other expenses incurred in connection with the operation, maintenance, or repair of the Real Property; (9) management fees and expenses; (10) costs of repairs to and maintenance of the Real Property, including building systems and appurtenances thereto and normal repair and replacement of worn-out equipment, facilities and installations, but excluding the replacement of major building systems (except to the extent provided in (16) and (17) below); (11) fees and expenses for janitorial, window cleaning, guard, extermination, water treatment, rubbish removal, plumbing and other services and inspection or service contracts for elevator, electrical, mechanical, HVAC and other building equipment and systems or as may otherwise be necessary or proper for the operation, repair or maintenance of he Real Property; (12)costs of supplies, tools, materials, and equipment used in connection with the operation, maintenance or repair of the Real Property; (13) accounting, legal and other professional fees and expenses; (14) fees and expenses for painting the exterior or the public or common areas of the Building and the cost of maintaining the sidewalks, landscaping and other common areas of the Real Property; (15) costs and expenses for electricity, chilled water, air conditioning water for heating, gas, fuel, steam, heat, lights, power and other energy related utilities required ii connection with the operation, maintenance and repair of the Real Property (provided, however, that if the cost of any energy related utility for the Base Year is greater than the cost of such utility in subsequent year(s) of the Lease term due to unusual increases or fluctuations in the rate for such utility in the Base Year and such unusual increases or fluctuations are not present in the applicable subsequent year(s), Operating Expenses for the Base Year may be adjusted, for purposes of determining the Operating Expenses payable by Tenant in the applicable subsequent year(s), to reflect what the cost of such utility would have been in the Base Year had normal rates applied); (16) the cost of any capital improvements made by Landlord to the Real Property or capital assets acquired by Landlord after the Base Year in order to comply with any local, state or federal law, ordinance, rule, regulation, code or order of any governmental entity or insurance requirement (collectively, “Legal Requirement”) with which the Real Property was not required to comply during the Base Year, or to comply with any amendment or other change to the enactment or interpretation of any Legal Requirement from its enactment or interpretation during the Base Year; (17) the cost of any capital improvements made by Landlord to the Building or capital assets acquired by Landlord after the Base Year for the protection of the health and safety of the occupants of the Real Property or that are designed to reduce other Operating Expenses (provided, however, that, with regard to capital improvements or asset; designed to reduce other Operating Expenses, the costs thereof may only

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be included in Operating Expenses if, at the time such costs were incurred, Landlord reasonably estimated (and upon Tenant’s written request, Landlord shall deliver to Tenant a written statement and explanation of Landlord’s estimation) that the annual saving in Operating Expenses that would result from such expenditure would be equal to or exceed the annual amortized amount of the cost to be included in Operating Expenses pursuant to this Paragraph 7.a.); (18) the cost of furniture, draperies, carpeting, landscaping and other customary and ordinary items of personal property (excluding paintings, sculptures and other works of art) provided by Landlord for use in common areas of the Building or the Real Properly or in the Building office (to the extent that such Building office is dedicated to the operation and management of the Real Property); (19) any expenses and costs resulting from substitution of work, labor, material or services in lieu of any of the above itemizations, or for any additional work, labor, services or material resulting from compliance with any Legal Requirement applicable to the Real Property or any parts thereof; and (20) Building office rent or rental value fairly allocated among the buildings within the Office Park. With respect to the costs of items included in Operating expenses under (16) and (17), such costs shall be amortized over a reasonable period, as reasonably determined by Landlord in accordance with generally accepted property management practices, together with interest on the unamortized balance at a rate per annum equal to three (3) percentage points over the six-month United States Treasury bill rate in effect at the time such item is constructed or acquired, or at such higher rate as may have been paid by Landlord on funds borrowed for the purpose of constructing or acquiring such item, but in either case not more than the maximum rate permitted by law at the time such item is constructed or acquired.

Notwithstanding the foregoing, Operating Expenses shall not include the following: (i) depreciation on the Building or equipment or systems therein; (ii) financing or refinancing costs, including all interest, principal, points and other fees or expenses incurred in the application for or obtaining any loan; (iii) rental under any ground or underlying lease; (iv) interest (except as expressly provided in this Paragraph 7.a.); (v) Tax Expenses (as defined in Paragraph 7.b. below); (vi) attorneys’ and other professional fees and expenses incurred in connection with lease negotiations with current or prospective Building tenants, lease disputes with past, current or prospective Building tenants, the enforcement of leases affecting the Real Property, the sale or refinancing of all or any part of the Real Property, the defense of Landlord’s title to or interest in the Real Property, or disputes with past, current or prospective employees of Landlord or Landlord’s agents; (vii) the cost (including any amortization thereof) of any equipment, improvements or alterations which would be properly classified as capital expenditures according to generally accepted property management practices (except to the extent expressly included in Operating Expenses pursuant to Paragraphs 7.a.(16) and (17) above); (viii) the cost (including architectural, engineering and permit costs) of decorating, improving for tenant occupancy, painting or redecorating portions of the Building to be demised to tenants; (ix) wages, salaries, benefits or other similar compensation paid to executive employees of Landlord or Landlord’s agents above the rank of regional property manager or the cost of labor and employees with respect to personnel not located at the Building on a full-time basis unless such costs are appropriately allocated between the Building and the other responsibilities of such personnel; (x) advertising and promotional expenditures; (xi) real estate broker’s or other leasing or sales commissions; (xii) penalties or other costs incurred due to a violation by Landlord, as determined by written admission, stipulation, final judgment or arbitration award, of any of the terms and conditions of this Lease or any other lease relating to

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the Building except to the extent such costs reflect costs that would have been concurred by Landlord absent such violation; (xiii) subject to the provisions of item (4) above, repairs and other work occasioned by fire, windstorm or other casualty, to the extent Landlord is reimbursed by insurance proceeds, and other work paid from insurance or condemnation proceeds; (xiv) costs, penalties or fines arising from Landlord’s violation of any applicable governmental rule or authority except to the extent such costs reflect costs that would have been reasonably incurred by Landlord absent such violation; (xv) overhead and profit increments paid to subsidiaries or affiliates of Landlord for management or other services on or to the Building or for supplies or other materials to the extent that the cost of the services, supplies or materials materially exceed the amounts normally payable for similar goods and services under similar circumstances (taking into account the market factors in effect on the date any relevant contracts were negotiated) in comparable buildings in the Boston metropolitan area; (xvi) charitable and political contributions; (xvii) rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature (except equipment that is not affixed to the Building and is used in providing janitorial services, and except to the extent such costs would otherwise be includable pursuant to items (16) and (17) as set forth in the immediately preceding paragraph); (xviii) any expense for which Landlord is contractually entitled to be reimbursed by a tenant or other party (other than through a provision similar to the first paragraph of this Paragraph 7.a.), including, without limitation, payments for Excess Services; (xix) the cost of services made available at no additional charge to any tenant in the Building but not to Tenant; (xx) the cost of any large-scale hazardous substance abatement, removal, or other remedial activities provided, however, Operating Expenses may include the costs attributable to those abatement, removal, or other remedial activities taken by Landlord in connection with the ordinary operation and maintenance of the Building, including costs of cleaning up any minor chemical spills, when sue! removal or spill is directly related to such ordinary maintenance and operation; (xxi) costs related solely to the sale of all or part of the Real Property; (xxii) Landlord’s general corporate overhead and administrative expense; or (xxiii) any bad debt loss or rent loss or reserves for same.

b. Tax Expenses. Tenant shall pay to Landlord as Additional Rent under this Lease, at the times hereinafter set forth, Tenant’s Share, as specified in Paragraph 2.e. above, of any increase in Tax Expenses (as defined below) incurred by Landlord in each calendar year subsequent to the Base Tax Year specified in Paragraph 2.f. above, over Tax Expenses incurred by Landlord during the Base Tax Year. Notwithstanding the foregoing, if any reassessment, reduction or recalculation of any item included in Tax Expenses during the term results it a reduction of Tax Expenses, then, to the extent Tenant paid the same, Tenant shall be refunded Tenant’s share of such reduction for such year.

The term “Tax Expenses” shall mean all taxes, assessments (whether general or special), excises, transit charges, housing fund assessments or other housing charges, improvement districts, levies or fees, ordinary or extraordinary, unforeseen as well as foreseen, of any kind, which are assessed, levied, charged, confirmed or imposed on the Real Property, on Landlord with respect to the Real Property, on the act of entering into leases of space in the Real Property, on the use or occupancy of the Real Property or any part thereof, with respect to services or utilities consumed in the use, occupancy or operation of the Real Property, on any improvements, fixtures and equipment and other personal property of Landlord located in the Real Property and used in connection with the operation of the Real Property, or on or measured

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by the rent payable under this Lease or in connection with the business of renting space in the Real Property, including, without limitation, any gross income tax or excise tax levied with respect to the receipt of such rent, by the United States of America, the Commonwealth of Massachusetts, Middlesex County, the City of Waltham, or any political subdivision, public corporation, district or other political or public entity or public authority, and shall also include any other tax, fee or other excise, however described, which may be levied or assessed in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other Tax Expense. Tax Expenses shall also include any of the foregoing which are assessed with respect to other portions of the Office Park, to the extent reasonably allocable to the Real Property. Tax Expenses shall include reasonable attorneys’ and professional fees, costs and disbursements incurred in connection with proceedings to contest, determine or reduce Tax Expenses. If it shall not be lawful for Tenant lo reimburse Landlord for any increase in Tax Expenses as defined herein, the Monthly Rent payable to Landlord prior to the imposition of such increases in Tax Expense shall be increased to net Landlord the same net Monthly Rent after imposition of such increases in Tax Expenses as would have been received by Landlord prior to the imposition of such increases in Tax Expenses.

Tax Expenses shall not include income, franchise, transfer, inheritance or capital stock taxes, unless, due to a change in the method of taxation, any of such taxes is levied or assessed against Landlord in lieu of, as a substitute (in whole or in part) for, or as an addition to, any other charge which would otherwise constitute a Tax Expense.

c. Adjustment for Occupancy Factor. Notwithstanding any other provision herein to the contrary, in the event the Building is not at least ninety-five percent (95%) occupied on average during the Base Year and/or any calendar year during the Lease term, an adjustment shall be made by Landlord in computing Operating Expenses for such year so that the Operating Expenses shall be computed for such year as though the Building had been ninety-five percent (95%) occupied on average during such year. In addition, if any particular work or service includable in Operating Expenses is not furnished to a tenant who has undertaken to perform such work or service itself, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would have been incurred if Landlord had furnished such work or service to such tenant. The parties agree that statements in this Lease to the effect that Landlord is to perform certain of its obligations hereunder at its own or sole cost and expense shall not be interpreted as excluding any cost from Operating Expenses or Tax Expenses if such cost is an Operating Expense or Tax Expense pursuant to the terms of this Lease.

d. Intention Regarding Expense Pass-Through. It is the intention of Landlord and Tenant that, except as herein expressly provided, the Monthly Rent paid to Landlord throughout the term of this Lease shall be absolutely net of all increases, respectively, in Tax Expenses and Operating Expenses over, respectively, Tax Expenses for the Base Year and Operating Expenses for the Base Year, and the foregoing provisions of this Paragraph 7 are intended to so provide.

e. Notice and Payment. On or before the first day of each calendar year during the term hereof subsequent to the Base Year, or as soon as practicable thereafter, Landlord shall give to Tenant notice of Landlord’s estimate of the Additional Rent, if any,

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payable by Tenant pursuant to Paragraphs 7.a. and 7.b. for such calendar year subsequent to the Base Year. On or before the first day of each month during each such subsequent calendar year, Tenant shall pay to Landlord one-twelfth (l/12th) of the estimated Additional Rent; provided, however, that if Landlord’s notice is not given prior to the first day of any calendar year Tenant shall continue to pay Additional Rent on the basis of the prior year’s estimate until the month after Landlord’s notice is given. If at any time it appears to Landlord that the Additional Rent payable under Paragraphs 7.a. and/or 7.b. will vary from Landlord’s estimate by more than five percent (5%), Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon the revised estimate. On the first monthly payment date after any new estimate is delivered to Tenant, Tenant shall also pay any accrued cost increases, based on such new estimate.

f. Annual Accounting. Landlord shall maintain adequate records of the Operating Expenses and Tax Expenses in accordance with standard accounting principles. Within one hundred fifty (150) days after the close of each calendar year subsequent to the Base Year, or as soon after such one hundred fifty (150) day period as practicable, Landlord shall deliver to Tenant a statement of the Additional Rent payable under Paragraphs 7.a. and 7.b. for such year. The statement shall be based on the results of an audit of the operations of the Building prepared for the applicable year by a nationally recognized certified public accounting firm selected by Landlord. Upon Tenant’s request, Landlord shall promptly deliver to Tenant a copy of the auditor’s statement on which Landlord’s annual statement is based and such other information regarding the annual statement as may be reasonably required by Tenant to ascertain Landlord’s compliance with this Paragraph 7. Landlord’s annual statement shall be final and binding upon Landlord and Tenant unless either party, within six (6) months after Tenant’s receipt thereof, shall contest any item there n by giving written notice to the other, specifying each item contested and the reason therefor. Notwithstanding the foregoing, the Tax Expenses included in any such annual statement may be modified by any subsequent adjustment or retroactive application of Tax Expenses affecting the calculation of such Tax Expenses. If the annual statement shows that Tenant’s payments of Additional Rent for such calendar year pursuant to Paragraph 7.e. above exceeded Tenant’s obligations for the calendar year, Landlord shall credit the excess to the next succeeding installments of Monthly Rent and estimated Additional Rent or, if the Lease term has ended, Landlord shall forward such credit to Tenant within thirty (30) days after delivery of such statement. If the annual statement shows that Tenant’s payments of Additional Rent for such calendar year pursuant to Paragraph 7.e. above were less than Tenant’s obligation for the calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of such statement.

g. Proration for Partial Lease Year. If this Lease terminates on a day other than the last day of a calendar year, or if Tenant’s Share changes on a day other than the first day of a calendar year, the Additional Rent payable by Tenant pursuant to this Paragraph 7 applicable to the calendar year in which this Lease terminates, or Tenant’s Share is adjusted, shall be prorated on the basis that the number of days from the commencement of such calendar year to and including such termination or adjustment date bears to three hundred sixty (360).

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8. Use of Premises; Compliance with Law.

a. Use of Premises. The Premises may be used solely for general office purposes for the initially contemplated use by Tenant described in Paragraph 2.g above or for any other general office use consistent with the operation of the Building as a first-class office building, provided in no event may the use of the Premises be changed to (1) a use which materially increases over and above that which is typical for general office use in first class office buildings such as the Building, (a) the operating costs for the Building, (b) the burden on the Building services, or (c) the foot traffic, elevator usage or security concerns in the Building, or which creates an increased probability of the comfort and/or safety of the Landlord or other tenants of the Building being compromised or reduced, or (2) use as a school or training facility, an entertainment, sports or recreation facility, retail sales to the public, a personnel or employment agency, an office or facility of any governmental or quasi-governmental agency or authority which is inconsistent with the first-class character of the Building, a place of public assembly (including without limitation a meeting center, theater or public forum), any use by or affiliation with a foreign government (including without limitation an embassy or consulate or similar office), or a facility for the provision of social, welfare or clinical health services or sleeping accommodations (whether temporary, daytime or overnight), or (3) a use which may conflict with any exclusive uses granted to other tenants of the Real Property, or with the terms of any easement, covenant, condition or restriction, or other agreement affecting the Real Property. Upon Tenant’s written request given concurrently with Tenant’s Sublease Notice under Paragraph 13.d. below, Landlord shall advise Tenant of any then existing exclusive uses granted to tenants of the Building.

Tenant shall not do or suffer or permit anything to be done in or about the Premises or the Real Property, nor bring or keep anything therein, which would in any way subject Landlord, Landlord’s agents or the holder of any Superior Interest (as defined in Paragraph 21) to any liability, increase the premium rate of or affect any fire, casualty, liability, rent or other insurance relating to the Real Property or any of the contents of the Building, or cause a cancellation of, or give rise to any defense by the insurer to any claim under, or conflict with, any policies for such insurance. If any act or omission of Tenant results in any such increase in premium rates, Tenant shall pay to Landlord upon demand the amount of such increase. Tenant shall not do or suffer or permit anything to be done in or about the Premises or the Real Property which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them, or use or suffer or permit the Premises to be used for any immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain, suffer or permit any nuisance in, on or about the Premises or the Rea1 Property. Without limiting the foregoing, no loudspeakers or other similar device which can be heard outside the Premises shall, without the prior written approval of Landlord, be used in or about the Premises. Tenant shall not commit or suffer to be committed any waste in, to or about the Premises. Landlord may from time to time conduct fire and life safety training for tenants of the Building, including evacuation drills and similar procedures. Tenant agrees to participate in such activities as reasonably requested by Landlord.

Tenant agrees not to employ any person, entity or contractor for any construction, alteration or installation work in the Premises (including moving Tenant’s equipment and furnishings in, out or around the Premises) whose presence may give rise to a labor or other disturbance in the Building and, if necessary to prevent such a disturbance in a particular situation, Landlord may require Tenant to employ union labor for the work.

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b. Compliance with Law. Tenant shall not do or permit anything to be done in or about the Premises which will in any way conflict with any Legal Requirement (as defined in Paragraph 7.a.(16) above) now in force or which may hereafter be enacted. Tenant, at its sole cost and expense, shall promptly comply with all such present and future Legal Requirements relating to the condition, use or occupancy of the Premises, and shall perform all work to the Premises or other portions of the Real Property required to effect such compliance (or, at Landlord’s election, Landlord may perform such work at Tenant’s cost). Notwithstanding the foregoing, however, Tenant shall not be required to perform any structural changes to the Premises or other portions of the Real Property unless such changes are related to or affected or triggered by (i) Tenant’s Alterations (as defined in Paragraph 9 below), (ii) Tenant’s particular use of the Premises (as opposed to Tenant’s use of the Premises for general office purposes in a normal and customary manner), (iii) Tenant’s particular employees or employment practices, or (iv) the construction of initial improvements to the Premises, if any. The judgment of any court of competent jurisdiction or the admission of Tenant in an action against Tenant, whether or not Landlord is a party thereto, that Tenant has violated any Legal Requirement shall be conclusive of that fact as between Landlord and Tenant. Tenant shall immediately furnish Landlord with any notices received from any insurance company or governmental agency or inspection bureau regarding any unsafe or unlawful conditions within the Premises or the violation of any Legal Requirement.

The provisions of this grammatical paragraph (x) are personal to Oscient Pharmaceuticals Corporation, a Massachusetts corporation, and any person or entity to whom the foregoing has assigned its entire interest in this Lease, and shall not apply to any subtenant of all or part of the Premises, and (y) shall be inapplicable during any period that an Event of Default is continuing. Notwithstanding anything to the contrary in the immediately preceding grammatical paragraph, Tenant may defer compliance with a Legal Requirement with which Tenant is required to comply pursuant to the above so long as Tenant shall be contesting the validity thereof, provided that (i) Tenant conducts such contest expeditiously, actively, diligently and in good faith through appropriate legal proceedings, and (ii) neither such contest nor the failure to comply with the subject Legal Requirement during the pendency of such contest subjects Landlord or and other Indemnitee (as defined in Paragraph 14.b. below), or the Premises or any other part of the Real Property, to any criminal, civil, administrative or other action, sanction, penalty, fine or prosecution or subject the Premises or any other part of the Real Property to a lien or condemnation, or create a nuisance or inconvenience to other tenants of the Real Property, or create the risk of harm to persons or property, and (iii) the enforcement of any violation of the contested Legal Requirement is stayed throughout the pendency of such contest, and (iv) all holder(s) of a Superior Interest (as defined in Paragraph 21 below) either consent to such contest or, if such holder(s) condition such contest on the taking of certain action or the furnishing of certain security, such action shall be taken and such security furnished by Tenant, as applicable, at the expense of Tenant, and (v) Tenant keeps Landlord apprised of the status of the contest proceedings. If, in Landlord’s reasonable judgment, Tenant has failed to satisfy any of the aforementioned requirements for the contest of a Legal Requirement, such failure shall automatically terminate Tenant’s right to contest hereunder, shall give Landlord the right to take corrective action at Tenant’s expense, and, in addition, shall constitute a breach of the Lease and,

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upon written notice thereof by Landlord, Paragraph 25.a.8 below shall apply to such breach. Tenant shall hold Landlord and the other Indemnitees harmless from and indemnify them against any and all Claims (as defined in Paragraph 14.b. below) to the extent arising from Tenant’s contest of, or the non-compliance with, the subject Legal Requirement.

Except for those matters that are the responsibility of Tenant pursuant to the preceding two (2) grammatical paragraphs, Landlord shall be responsible for causing (i) the Base Building and the common areas of the Building to comply with all Legal Requirements (including, without limitation, Legal Requirements regarding Hazardous Materials) required for Tenant to occupy the Premises for the purposes leased and (ii) the common areas of the Building that are reasonably anticipated to be in Tenant’s path of travel during the Lease term, to comply with Title III of the Americans with Disabilities Act. For purposes of the foregoing, “Base Building” means the structural portions of the Building (including exterior walls, roof, foundation and core of the Building), the exterior of the Building and all Base Building systems, including without limitation, elevator, plumbing, air conditioning, heating, electrical, security, life safety and power, except those special systems installed for specific tenants and the portion of any other Building system within any specific tenant space which is the responsibility of such tenant. In no event shall the foregoing prevent Landlord from including in Operating Expenses the costs of complying with any Legal Requirement that would otherwise be included in Operating Expenses pursuant to Paragraph 7.a. above.

c. Hazardous Materials. Tenant shall not cause or permit the storage, use, generation, release, handling or disposal (collectively, “Handling”) of any Hazardous Materials (as defined below), in, on, or about the Premises or the Real Property by Tenant or any agents, employees, contractors, licensees, subtenants, customers, guests or invitees of Tenant (collectively with Tenant, “Tenant Parties”), except that Tenant shall be permitted to use normal quantities of office supplies or products (such as copier fluids or cleaning supplies) customarily used in the conduct of general business office activities (“Common Office Chemicals”), provided that the Handling of such Common Office Chemicals shall comply at all times with all legal Requirements, including Hazardous Materials Laws (as defined below). Notwithstanding anything to the contrary contained herein, however, in no event shall Tenant permit any usage of Common Office Chemicals in a manner that may cause the Premises or the Real Property to be contaminated by any Hazardous Materials or in violation of any Hazardous Materials Laws. Tenant shall immediately advise Landlord in writing of (a) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any Hazardous Materials Laws relating to any Hazardous Materials affecting the Premises; and (b) all claims made or threatened by any third party against Tenant, Landlord, the Premises or the Real Property relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from any Hazardous Materials on or about the Premises. Without Landlord’s prior written consent, Tenant shall no take any remedial action or enter into any agreements or settlements in response to the presence of any Hazardous Materials in, on, or about the Premises. Tenant shall be solely responsible for and shall indemnify, defend and hold Landlord and all other Indemnitees (as defined in Paragraph 14.b. below), harmless from and against all Claims (as defined in Paragraph 14.b. below), to the extent arising out of (i) any Handling of Hazardous Materials by any Tenant Party or Tenant’s breach of its obligations hereunder, or (ii) any removal, cleanup, or restoration work and materials necessary to return the Real Property or any other property of whatever nature located on the Real Property to their

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condition existing prior to the Handling of Hazardous Materials in, on or about the Premises by any Tenant Party. Tenant’s obligations under this paragraph shall survive the expiration or other termination of this Lease. For purposes of this Lease, “Hazardous Materials” means any explosive, radioactive materials, hazardous wastes, or hazardous substances, including without limitation asbestos containing materials, PCB’s, CFC’s, or substances defined as “hazardous substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601-9657; the Hazardous Materials Transportation Act of 1975, 49 U.S.C. Section 1801-1812; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901-6987; or any other Legal Requirement regulating, relating to, or imposing liability or standards of conduct concerning any such materials or substances now or at any time hereafter in effect (collectively, “Hazardous Materials Laws”). Notwithstanding anything to the contrary in this Paragraph 8.c, in no event shall Tenant be responsible under this Paragraph 8.c. for any acts or omissions of any customers guests or invitees of Tenant with regard to Hazardous Materials bandied outside of the Premises unless the Hazardous Materials were transported or handled on the Real Property by such person for reasons related to Tenant or Tenant’s business.

Landlord acknowledges that, to the best of Landlord’s knowledge (which, for purposes hereof, shall be limited to the actual knowledge of Shorenstein Fealty Services, L.P. (“Manager”), and to no other constituent owners or representatives of Landlord) as of the date of the Lease, there are no Hazardous Materials on the Real Property in violation of applicable Legal Requirements in effect as of the date of the Lease.

d. Applicability of Paragraph. The provisions of his Paragraph 8 are for the benefit of Landlord, the holder of any Superior Interest (as defined in Paragraph 21 below), and the other Indemnitees only and are not nor shall they be construed to be for the benefit of any tenant or occupant of the Building.

9. Alterations and Restoration.

a. Tenant shall not make or permit to be made any alterations, modifications, additions, decorations or improvements to the Premises, or any other work whatsoever that would directly or indirectly involve the penetration or removal (whether permanent or temporary) of, or require access through, in, under, or above any floor, wall or ceiling, or surface or covering thereof in the Premises (collectively, “Alterations”), except as expressly provided in this Paragraph 9. If Tenant desires any Alteration, except for Cosmetic Alterations as described in the immediately following grammatical paragraph, Tenant must obtain Landlord’s prior written approval of such Alteration, which approval shall not be unreasonably withheld or delayed.

Notwithstanding the foregoing or anything to the contrary contained elsewhere in this Paragraph 9, Tenant shall have the right, without Landlord’s consent, to make any Alteration to the Premises that meets all of the following criteria (a “Cosmetic Alteration”): (i) the Alteration is decorative in nature (such as paint, carpet or other wall or floor finishes, movable partitions or other such work), (b) Tenant provides Landlord with five (5) days’ advance written notice of the commencement of such Alteration, (c) such Alteration does not affect the Building’s electrical, mechanical, life safety, plumbing, security, or HVAC systems or any structural portion of the Building or any part of the Building other than the Premises, (d) the

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work will not decrease the value of the Premises, does not require a building permit or other governmental permit, uses only new materials comparable in quality to those being replaced and is performed in a workman like manner and in accordance with all applicable Legal Requirements and (e) the work does not involve opening the ceiling of the Premises. At the time Tenant notifies Landlord of any Cosmetic Alteration, Tenant shall give Landlord a copy of Tenant’s plans for the work. If the Cosmetic Alteration is of such a nature that formal plans will not be prepared for the work, Tenant shall provide Landlord with a reasonably specific description of the work.

All Alterations shall be made at Tenant’s sole cost and expense (including the expense of complying with all present and future Legal Requirements, including those regarding asbestos, if applicable, and any other work required to be performed in other areas within or outside the Premises by reason of the Alterations). Tenant shall either (i) arrange for Landlord to perform the work on terms and conditions acceptable to Landlord and Tenant, each in its sole discretion or (ii) bid the project out to contractors approved by Landlord in writing in advance (which approval shall not be unreasonably withheld). Tenant shall provide Landlord with a copy of the information submitted to bidders at such time as the bidders receive their copy. Regardless of the contractors who perform the work pursuant to the above, Tenant shall pay Landlord on demand prior to or during the course of such construction an amount (the “Alteration Operations Fee”) equal to five percent (5%) of the total hard cost of the Alteration (and for purposes of calculating the Alteration Operations Fee, such hard cost shall not include permit fees) as compensation to Landlord for Landlord’s internal review of Tenant’s Plans and general oversight of the construction (which oversight shall be solely for the benefit of Landlord and shall in no event be a substitute for Tenant’s obligation to retain such project management or other services as shall be necessary to ensure that the work is performed properly and in accordance with the requirements of this Lease). Notwithstanding the foregoing, the Alteration Operations Fee shall be inapplicable to Cosmetic Alterations. Tenant shall also reimburse Landlord for Landlord’s expenses such as electrical energy consumed in connection with the work, freight elevator operation, additional cleaning expenses, additional security services, fees and charges paid to third party architects, engineers and other consultants for review of the work and the plans and specifications with respect thereto and to monitor contractor compliance with Building construction requirements, and for other miscellaneous costs incurred by Landlord as result of the work.

All such work shall be performed diligently and in a first-class workmanlike manner and in accordance with plans and specifications reasonably approved by Landlord, and shall comply with all Legal Requirements and Landlord’s reasonably and uniformly applied construction procedures, conditions and requirements for the Building as in effect from time to time (including Landlord’s requirements relating to insurance and contractor qualifications). In no event shall Tenant employ any person, entity or contractor to perform work in the Premises whose presence may give rise to a labor or other disturbance in the Building. Default by Tenant in the payment of any sums agreed to be paid by Tenant for or in connection with an Alteration (regardless of whether such agreement is pursuant to this Paragraph 9 or separate instrument) shall entitle Landlord to all the same remedies as for non-payment of rent hereunder. Any Alterations, including without limitation, moveable partitions that are affixed to the Premises (but excluding moveable, free standing partitions) and all carpeting, shall at once become part of the Building and the property of Landlord. Tenant shall give Landlord not less than five (5) days

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prior written notice of the date the construction of the Alteration is to commence. Landlord may post and record an appropriate notice of nonresponsibility with respect to any Alteration and Tenant shall maintain any such notices posted ay Landlord in or on the Premises.

b. If Tenant desires permission to leave a specific Alteration in the Premises at the expiration or earlier termination of the Lease, Tenant shall request such permission from Landlord in writing at the time Tenant requests approval for such Alteration and Landlord shall advise Tenant at the time of Landlord’s approval of the subject Alteration whether Landlord will require the removal of the Alteration or specified portions thereof and restoration of the Premises to its previous condition at the expiration or sooner termination of this Lease; provided, however, that Landlord may only require Tenant to remove those Alterations that are structural in nature or are not in the nature of typical office improvements as to type and quantity. Except for those Alterations that, pursuant to the immediately preceding sentence, may remain in the Premises at the expiration or sooner termination of the Lease, Landlord may require all Alterations made for or by Tenant be removed by Tenant from the Premises at the expiration or sooner termination of this Lease and the Premises restored by Tenant to their condition prior to the making of the Alterations, ordinary wear and tear excepted. The removal of the Alterations so required to be removed from the Premises and the restoration of the Premises shall be performed by a genera] contractor selected by Tenant and reasonably approved by Landlord, in which event Tenant shall pay the general Contractor’s fees and costs in connection with such work. Any separate work letter or other agreement which is hereafter entered into between Landlord and Tenant pertaining to Alterations shall be deemed to automatically incorporate the terms of this Lease without the necessity for further reference thereto.

c. The provisions of this Paragraph 9 are inapplicable to the Tenant Improvements, as defined in Paragraph 4.a. above. Further, the term “Alterations” as used elsewhere in this Lease shall not include the Tenant Improvements.

10. Repair.

a. Except as specifically provided in this Lease, Tenant agrees that the Premises are in good condition and repair. Tenant, at Tenant’s sole cost and expense, shall keep the Premises and every part thereof in the condition received, ordinary wear and tear excepted; provided that Tenant shall not be responsible for repairs to the extent such repairs are (i) necessitated by the negligence or willful misconduct of Landlord or Landlord’s agents, employees or contractors, or (ii) Landlord’s obligation pursuant to Paragraph l0.b. below. Tenant waives all rights to make repairs at the expense of Landlord as provided by any Legal Requirement now or hereafter in effect. It is specifically understood and agreed that, except as specifically set forth in this Lease, Landlord has no obligation and has made no promises to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant.

b. Repairs to the Premises necessitated because of fire, earthquake, act of God or the elements shall be governed by Paragraph 26 below. Landlord shall repair the Premises if they are damaged due to item (i) described in Paragraph l0.a. above. Further,

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Landlord shall (1) at Landlord’s sole cost and expense, repair any defect in the construction of Tenant improvements that exists in the Premises as of the date Tenant takes possession of the Premises and is of a nature which would not normally be discoverable by Tenant in the exercise of reasonable diligence in inspecting the Premises at the commencement of the term of this Lease, provided Tenant give prompt notice of such matter to Landlord promptly upon discovery and no later than twelve (12) months after the Commencement Date, and (2) repair and maintain in good condition and repair the common areas of the Building, the structural portions of the Building and all Building systems, including plumbing, air conditioning, heating, electrical, life safety and other systems installed or furnisher by Landlord, but excluding (i) non-Building standard lighting and electrical wiring and (ii) extraordinary quantities of electrical, plumbing, HVAC or other Building facilities or distribution thereof; provided, however, that to the extent repairs which Landlord is required to make pursuant to this item (2) are necessitated by the negligence or deliberate misconduct of Tenant or Tenant’s agents, employees or contractors, or are due to Alterations performed by or for Tenant, then Tenant shall reimburse Landlord for the cost of such repair to the extent Landlord is not reimbursed therefor by insurance. Landlord shall in no event be obligated to repair any wear and tear to the Premises.

11. Abandonment. Tenant shall not abandon the Premises or any part thereof at any time during the term hereof. Tenant’s mere vacating of the Premises during the term hereof shall not constitute an abandonment under this Lease nor an Event of Default so long as Tenant continues to pay Monthly Rent, Tenant’s Electrical Charge, Additional Rent and all other sums due Landlord under this Lease and maintains the insurance coverage required pursuant to Paragraph 15 of this Lease. Upon the expiration or earlier termination of this Lease, or if Tenant abandons or surrenders all or any part of the Premises or is dispossessed of the Premises by process of law, or otherwise, any movable furniture, equipment, trade fixtures, or other personal property belonging to Tenant and left on the Premises shall at the option of Landlord be deemed to be abandoned and, whether or not the property is deemed abandoned, Landlord shall have the right to remove such property from the Premises and charge Tenant for the removal and any restoration of the Premises as provided in Paragraph 9. Landlord may charge Tenant for the storage of Tenant’s property left on the Premises at such rates as Landlord may from time to time reasonably determine, or, Landlord may, at its option, store Tenant’s property in a public warehouse at Tenant’s expense. Notwithstanding the foregoing, neither the provisions of this Paragraph 11 nor any other provision of this Lease shall impose upon Landlord any obligation to care for or preserve any of Tenant’s property left upon the Premises, and Tenant hereby waives and releases Landlord from any claim or liability in connection with the removal of such property from the Premises and the storage thereof. Landlord s action or inaction with regard to the provisions of this Paragraph 11 shall not be construed as a waiver of Landlord’s right to require Tenant to remove its property, restore any damage to the Premises and the Building caused by such removal, and make any restoration required pursuant to Paragraph 9 above.

12. Liens. Tenant shall pay off or bond off any mechanic’s, materialman’s or other liens arising out of work performed at the Premises by or on behalf of Tenant and filed against the fee of the Real Property or against Tenant’s interest in the Premises. Landlord shall have the right to post and keep posted on the Premises any notices which it deems necessary for protection from such liens. If any such liens are filed, Landlord may, upon ten (10) days’ written notice to Tenant, without waiving its rights based on such breach by Tenant and without releasing Tenant from any obligations hereunder, pay and satisfy the same and in such event the

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sums so paid by Landlord shall be due and payable by Tenant immediately without notice or demand, with interest from the date paid by Landlord through the date Tenant pays Landlord, at the Interest Rate. Tenant agrees to indemnify, defend and bold Landlord and the other Indemnitees (as defined in Paragraph 14 b. below) harmless from and against any Claims (as defined in Paragraph 14.b. below) for mechanic’s, materialmen’s or other liens to the extent arising out of any Alterations, repairs or any work performed, materials furnished or obligations incurred by or for Tenant.

13. Assignment and Subletting.

a. Landlord’s Consent. Landlord’s and Tenant’s agreement with regard to Tenant’s right to transfer all or part of its interest in the Premises is as expressly set forth in this Paragraph 13. Tenant agrees that, except upon Landlord’s prior written consent, which consent shall not (subject to Landlord’s rights under Paragraph 13.d. below) be unreasonably withheld or delayed, neither this Lease nor all or any part of the leasehold interest created hereby shall, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, be as signed, mortgaged, pledged, encumbered or otherwise transferred by Tenant or Tenant’s legal representatives or successors in interest (collectively, an “assignment”) and neither the Premises or any part thereof shall be sublet or be used or occupied for any purpose by anyone other than Tenant (collectively, a “sublease”). Any assignment or subletting without Landlord’s prior written consent shall, at Landlord’s option, be void and shall constitute an Event of Default entitling Landlord to terminate this Lease and to exercise all other remedies available to Landlord under this Lease and at law.

The parties hereto agree and acknowledge that, among other circumstances for which Landlord may reasonably withhold its consent to an assignment or sublease, it shal1 be reasonable for Landlord to withhold its consent where: (i) the proposed assignee or subtenant is a prospective tenant of the Office Park with whom Landlord, within the immediately prior four (4) months, has had written correspondence (such as the issuance of a letter of intent or written proposal of lease terms or the receipt by Landlord of a request for proposal) regarding the leasing of space in the Office Park and Landlord has adequate space in the Office Park to meet such prospective tenant’s space requirements, or the proposed assignee or subtenant is a current tenant of the Office Park and Landlord has adequate available space to meet that tenant’s expansion requirement; (ii) Landlord reasonably disapproves of the proposed assignee’s or subtenant’s reputation or creditworthiness, (iii) Landlord reasonably determines that the character of the business that would be conducted by the proposed assignee or subtenant at the Premises, or the manner of conducting such business, would be inconsistent with the character of the Building as a first-class office building; (iv) the proposed assignee or subtenant is an entity or the affiliate of an entity to whom Landlord or any affiliate of Landlord has previously leased space (or is an entity or an affiliate of an entity that has been a subtenant in a Building owned by Landlord or an affiliate of Landlord) and such entity (or related entity) has been in default (beyond any applicable notice and/or grace period) of any of its obligations under the applicable lease or sublease or has been a party to litigation or other 1egal action involving Landlord (or related entity); (v) the assignment or subletting may (in Landlord’s good faith judgment) conflict with any exclusive uses granted to other tenants of the Real Property o the Office Park, or with the terms of any easement, covenant, condition or restriction, or other agreement affecting the Real Property or the Office Park; (vi) the assignment or subletting would result in a violation of the

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use provisions set forth in Paragraph 8.a. above; or (vii) Landlord reasonably determines that the proposed assignee may be unable to perform all of Tenant’s obligations under this Lease or the proposed subtenant may be unable to perform all of its obligations under the proposed sublease. Landlord’s foregoing rights and options shall continue throughout the entire term of this Lease.

For purposes of this Paragraph 13, the following events shall be deemed an assignment or sublease, as appropriate: (i) the issuance of equity interests (whether stock, partnership interests or otherwise) in Tenant or any subtenant or assignee, or any entity controlling any of them, to any person or group of related persons, in a single transaction or a series of related or unrelated transactions, such that, following such issuance, such person or group shall have Control (as defined below) of Tenant or any subtenant or assignee; (ii) a transfer of Control of Tenant or any subtenant or assignee, or any entity controlling any of them, in a single transaction or a series of related or unrelated transactions (including, without limitation, by consolidation, merger, acquisition or reorganization), except that the transfer of outstanding capital stock or other listed equity interests by persons or parties other than “insiders” within the meaning of the Securities Exchange Act of 1934, as amended, through the “over-the-counter” market or any recognized national or international securities exchange, shall not be included in determining whether Control has been transferred; (iii) a reduction of Tenant’s assets to the point that this Lease is substantially Tenant’s only asset; (iv) a change or conversion in the form of entity of Tenant, any subtenant or assignee, or any entity controlling any of them, which has the effect of limiting the liability of any of the partners, members or other owners of such entity; or (v) the agreement by a third party to assume, take over, or reimburse Tenant for, any or all of Tenant’s obligations under this Lease, in order to induce Tenant to lease space with such third party. “Control” shall mean direct or indirect ownership of fifty percent (50%) or more of all of the voting stock of a corporation or fifty percent (50%) or more of the legal or equitable interest in any other business entity, or the power to direct the operations of any entity (by equity ownership, contract or otherwise).

If this Lease is assigned, whether or not in violation of the terms of this Lease, Landlord may collect rent from the assignee. If the Premises or any part thereof is sublet, Landlord may, upon an Event of Default by Tenant hereunder, collect rent from the subtenant. In either event, Landlord may apply the amount collected from the assignee or subtenant to Tenant’s monetary obligations hereunder.

The consent by Landlord to an assignment or subletting hereunder shall not relieve Tenant or any assignee or subtenant from obtaining Landlord’s express prior written consent to any other or further assignment or subletting. In no event shall any subtenant be permitted to assign its sublease or to further sublet all or any portion of its subleased premises without Landlord’s prior written consent, which consent may be withheld by Landlord it its reasonable discretion. Neither an assignment or subletting nor the collection of rent by Landlord from any person other than Tenant, nor the application of any such rent as provided in this Paragraph 13.a. shall be deemed a waiver of any of the provisions of this Paragraph 13.a. or release Tenant from its obligation to comply with the provisions of this Lease and Tenant shall remain fully and primarily liable or all of Tenant’s obligations under this Lease. If Landlord approves of an assignment or subletting hereunder and this Lease contains any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in the Building, such rights and/or options shall not run to the subtenant or assignee, it being agreed by the parties hereto that any such rights and options are personal to the Tenant originally named herein and may not be transferred.

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b. Processing Expenses. Tenant shall pay to Landlord, as Landlord’s cost of processing each proposed assignment or subletting, an amount equal to the sum of (i) Landlord’s reasonable attorneys’ and other professional fees, plus (ii) the sum of One Thousand Dollars ($1,000.00) for the cost of Landlord’s administrative, accounting and clerical time (collectively, “Processing Costs”), and the amount of all direct and indirect costs and expenses incurred by Landlord arising from the assignee or sublessee taking occupancy of the subject space (including, without limitation, costs of freight elevator operation for moving of furnishings and trade fixtures, security service, janitorial and cleaning service, and rubbish removal service). Notwithstanding anything to the contrary herein, Landlord shall not be required to process any request for Landlord’s consent to an assignment or subletting until Tenant has paid to Landlord the amount of Landlord’s estimate of the Processing Costs and all other direct and indirect costs and expenses of Landlord and its agents arising from the assignee or subtenant taking occupancy.

c. Consideration to Landlord. In the event of my assignment or sublease, whether or not requiring Landlord’s consent, Landlord shall be entitled to receive, as additional rent hereunder, seventy-five percent (75%) of any consideration (including, without limitation, payment for leasehold improvements) paid by the assignee or subtenant for the assignment or sublease and, in the case of a sublease, seventy-five percent (75%) of the excess of the amount of rent paid for the sublet space by the subtenant over the amount of Monthly Rent and Tenant’s Electrical Charge under Paragraph 5 above and Additional Rent under Paragraph 7 above attributable to the sublet space for the corresponding month; except that Tenant may recapture, on an amortized basis over the term of the sublease or assignment (i) any brokerage commission; paid by Tenant in connection with the subletting or assignment (not to exceed commissions typically paid in the market at the time of such subletting or assignment), (ii) reasonable legal fees paid by Tenant in connection with such assignment or subletting (provided that Tenant shall submit to Landlord evidence reasonably acceptable to Landlord of such legal fees actually paid by Tenant, which evidence shall include copies of the applicable attorney bills), (iii) any improvement allowance or construction costs incurred by Tenant in connection with the assignment or sublease and (iv) rent concessions (collectively the “Assignment or Subletting Costs”), provided that, as a condition to Tenant recapturing the Assignment or Subletting Costs, Tenant shall provide to Landlord within ninety (90) days of Landlord’s execution of Landlord’s consent to the assignment or subletting, a detailed accounting of the Assignment or Subletting Costs and supporting documents, such as receipts and construction invoices. To effect the foregoing, Tenant shall deduct from the monthly amounts received by Tenant from the subtenant or assignee as rent or consideration (i) the Monthly Rent, Additional Rent and Tenant’s Electrical Charge payable by Tenant to Landlord for the subject space and (ii) the incremental amount, on an amortized basis, of the Assignment or Subletting Costs, and seventy-five percent (75%) of the then remaining sum shall be paid promptly to Landlord. Upon Landlord’s request, Tenant shall assign to Landlord all amounts to be paid to Tenant by any such subtenant or assignee and that belong to Landlord and shall direct such subtenant or assignee to pay the same directly to Landlord. If there is more than one sublease under this Lease, the amounts (if any) to be paid by Tenant to Landlord pursuant to this Paragraph 13.c. shall be separately calculated for each sublease and amounts due Landlord with regard to any one sublease may not be offset against rental and other consideration pertaining to or due under any other sublease.

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d. Procedures. If Tenant desires to assign this Lease or any interest therein or sublet all or part of the Premises, Tenant shall give Landlord written notice thereof and the terms proposed (the “Sublease Notice”), which Sublease Notice, in the case of a proposed sublease, shall designate the space proposed to be sublet. Landlord shall have the prior right and option (to be exercised by written notice to Tenant given within thirty (30) days after receipt of Tenant’s notice) (i) in the event of a proposed assignment of the Lease, to terminate this Lease in its entirety, and, in the event of a proposed sublease that will expire in the final twelve (12) months of the Lease term (as the same may have been extended) to terminate the Lease as to the portion of the Premises so proposed by Tenant to be sublet, or (ii) regardless of whether (i) applied, to approve Tenant’s proposal to sublet or assign conditional upon Landlord’s subsequent written approval of the specific sublease or assignment obtained by Tenant. If Landlord exercises its option described in (ii) above, then Tenant shall have five (5) months thereafter (provided, however, if, as of the end of such five (5) month period Tenant is then actively negotiating with a particular proposed assignee or subtenant, then the five (5) month period shall be extended, for that particular assignee or subtenant only, until such time as those negotiations are concluded) to submit to Landlord, for landlord’s written approval, Tenant’s proposed sublease agreement (in which the proposed subtenant shall be named, and which agreement shall otherwise meet the requirements of Paragraph 13.e. below), together with a current financial statement of such proposed assignee or subtenant and any other information reasonably requested by Landlord. Landlord shall provide such approval or disapproval within ten (10) business days of receipt of the required information with regard to the sublease. If Tenant fails to submit the specific assignment or sublease and other required information within such time, or if the terms of the specific assignment or sublease submitted by Tenant materially vary (as hereinafter defined) from the terms set forth in the Sublease Notice approved by Landlord pursuant to (ii) above, then Tenant shall be required to submit a new Sublease Notice for Landlord’s evaluation pursuant to the procedures set forth in this paragraph. The terms of a sublease or assignment shall be deemed to materially vary from the terms set forth in the Sublease Notice if (A) the size of the space proposed to be sublet varies by more than five percent (5%) from the size stated in the Sublease Notice or if the location of the sublet space has been materially changed or (B) the length of the term of the sublease has been lengthened or shortened by six (6) months or more. If Landlord fails to exercise any such option to terminate, this shall not be construed as or constitute a waiver of any of the provisions of Paragraphs 13.a., b., c. or d. herein for any subsequent proposed assignment or sublease. If Landlord exercises any option to terminate, any costs of demising the portion of the Premise affected by such termination shall be borne by Tenant. In addition, Landlord shall have no liability for any real estate brokerage commission(s) or with respect to any of the costs and expenses that Tenant may have incurred in connection with its proposed assignment or subletting, and Tenant agrees to indemnify, defend and hold Landlord and all other Indemnitees harmless from and against any and all Claims (as defined in Paragraph 14.b. below), including, without limitation, claims for commissions, arising from such proposed assignment or subletting. Landlord’s foregoing rights and options shall continue throughout the entire term of this Lease.

e. Documentation. No permitted assignment or subletting by Tenant shall be effective until there has been delivered to Landlord a fully executed counterpart of the

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assignment or sublease which expressly provides that (i) the assignee or subtenant may not further assign this Lease or the sublease, as applicable, or sublet the Premises or any portion thereof, without Landlord’s prior written consent (which, in the case of a further assignment proposed by an assignee of this Lease, shall not be unreasonably withheld, subject to Landlord’s rights under the provisions of this Paragraph 13, and in the case of a subtenant’s assignment of its sublease or further subletting of its subleased premises or any portion thereof, may be withheld in Landlord’s sole and absolute discretion), (ii) the assignee or subtenant will comply with all of the provisions of this Lease, and Landlord may enforce the Lease provisions directly against such assignee or subtenant, (iii) in the case of an assignment, the assignee assumes all of Tenant’s obligations under this Lease arising on or after the date of the assignment, and (iv) in the case of a sublease, the subtenant agrees to be and remain jointly and severally liable with Tenant for the payment of rent pertaining to the sublet space in the amount set forth in the sublease, and for the performance of all of the ten is and provisions of this Lease applicable to the sublet space. In addition to the foregoing, no assignment or sublease by Tenant shall be effective until there has been delivered to Landlord a fully executed counterpart of Landlord’s consent to assignment (although such consent shall not be required or an assignment to an Affiliate pursuant to Paragraph 13.g. below) or consent to sublease form, or, in the case of a sublease to an Affiliate pursuant to Paragraph 13.g. below, Landlord’s commercially reasonable waiver and acknowledgment form for Affiliates (“Affiliate Waiver”). The failure or refusal of a subtenant or assignee to execute any such instrument shall not release or discharge the subtenant or assignee from its liability as set forth above. Notwithstanding the foregoing, however, no subtenant or assignee shall be permitted to occupy the Premises or any portion thereof unless and until such subtenant or assignee provides Landlord with certificates evidencing that such subtenant or assignee is carrying all insurance coverage required of such subtenant or assignee under this Lease.

f. No Merger. Without limiting any of the provisions of this Paragraph 13, if Tenant has entered into any subleases of any portion of the Premises, the voluntary or other surrender of this Lease by Tenant, or a mutual cancellation by Landlord and Tenant, shall not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or subtenancies or, at the option of Landlord, operate as an assignment to Landlord of any or all such subleases or subtenancies. If Landlord does elect that such surrender or cancellation operate as an assignment of such subleases or subtenancies, Landlord shall in no way be liable for any previous act or omission by Tenant under the subleases or for the return of any deposit(s) under the subleases that have not been actually delivered to Landlord, nor shall Landlord be bound by any sublease modification(s) executed without Landlord’s consent (which consent shall not be unreasonably withheld or delayed by Landlord at such time as Tenant presents such modification to Landlord for Landlord’s written approval) or for any advance rental payment by the subtenant in excess of one month’s rent.

g. Affiliates. Notwithstanding anything to the contrary in Paragraphs 13.a. and 13.d., but subject to Paragraphs 13.e. and 13.f., Tenant may assign this Lease or sublet the Premises or any portion thereof, without Landlord’s consent, to any partnership, corporation or other entity which controls, is controlled by, or is under common control with Tenant or Tenant’s parent (control being defined for such purposes as ownership of at least 50% of the equity interests in, or the power to direct the management of, the relevant entity) or to any partnership, corporation or other entity resulting from a merger or consolidation with Tenant or

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Tenant’s parent, or to any person or entity which acquires substantially all the assets of Tenant as a going concern (collectively, an “Affiliate”), provided that (i) Landlord receives prior written notice of an assignment or subletting, (ii) the Affiliate’s net worth, taken together with the net worth of (x) any guarantor(s) provided by the Affiliate and (y) if the Tenant remains in existence following the event which resulted in the assignment of the Lease or the sublease to the Affiliate, the net worth of the Tenant, satisfies Landlord’s then financial criteria for new tenants leasing space in the Building of the size of the Premises (in the event of an assignment) or of the size of the space being sublet (in the event of a sublease), (iii) the Affiliate has proven experience in the operation of a first-class business of a type consistent with the use of the Building as a first class office Building, or, if the Affiliate is a newly formed entity, the Affiliate is managed or controlled by individuals who have proven experience in the operation of a such a first class business, (iv) the Affiliate remains an Affiliate for the duration of the subletting or the balance of the term in the event of an assignment (which requirement shall be inapplicable in the event of a merger), (v) the transaction is for legitimate business purposes unrelated to this Lease and the transaction is not a subterfuge by Tenant to avoid its obligations under this Lease or the restrictions on assignment and subletting contained herein, (vi) the Affiliate assumes (in the event of an assignment) in writing all of Tenant’s obligations under this Lease, (vii) Landlord receives a fully executed copy of an assignment or sublease agreement between Tenant and the Affiliate and (viii) in the event of a sublease to an Affiliate, Landlord receives a duly executed Affiliate Waiver from the Affiliate. The provisions of Paragraph 13.b. above shall apply to a sublease or assignment to an Affiliate, except that the Processing Costs shall be limited to Landlord’s reasonable attorneys’ and other professional fees. The provisions of Paragraph 13.c. above shall be inapplicable to an assignment or sublease to an Affiliate.

If Tenant does not promptly provide Landlord with all instruments and information required hereunder which are reasonably required to document that the proposed assignment or sublease is a transfer to an Affiliate not requiring Landlord’s consent hereunder, then Landlord may, at Landlord’s election made by written notice to Tenant, treat the transfer or notice of the assignment or sublease as a notice of intent to assign or sublet to a non-Affiliate, and all of Landlord’s rights hereunder with respect to a proposed assignment or sublease to a non-Affiliate shall thereupon apply as if such request had been made on the date of Landlord’s election.

14. Indemnification of Landlord.

a. Landlord and the holders of any Superior Interests (as defined in Paragraph 21 below) shall not be liable to Tenant and Tenant hereby waives all claims against such parties for any loss, injury or other damage to person or property in or about the Premises, the Real Property or the Office Park from any cause whatsoever, including without limitation, water leakage of any character from the roof, walls, basement, fire sprinklers, appliances, air conditioning, plumbing or other portion of the Premises, the Real Property or the Office Park, or gas, fire, explosion, falling plaster, steam, electricity, or any malfunction within the Premises, the Real Property or the Office Park, or acts of other tenants of the Building; provided, however, that the foregoing waiver shall be inapplicable to any loss, injury or damage resulting directly from the negligence or willful misconduct of Landlord or its agents, employees or contractors. Tenant acknowledges that from time to time throughout die term of this Lease, construction work may be performed in and about the Building, the Real Property or the Office Park by Landlord,

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contractors of Landlord, or other tenants or their contractors, and that such construction work may result in noise and disruption to Tenant’s business. In addition to and without limiting the foregoing waiver or any other provision of this Lease, Tenant agrees that Landlord shall not be liable for, and Tenant expressly waives and releases Landlord and the other Indemnitees (as defined in Paragraph 14.b. below) from any Claims (as defined in Paragraph 14.b. below), including without limitation, any and all consequential damages or interruption or loss of business, income or profits or for abatement of rental, arising or alleged to be arising as a result of any such construction activity. Without limiting the foregoing, Landlord agrees to use reasonable efforts to minimize the duration and extent of any obstructions to the Premises during the course of any such construction activity and Landlord shall act as a reasonable owner of an office building in balancing the needs of tenants likely to be disrupted by construction activities against the needs of tenants for whom construction is required.

b. Tenant shall hold Landlord and the holders of any Superior Interest, and the constituent shareholders, partners or other owners thereof, and all of their agents, contractors, servants, officers, directors, employees and licensees (collectively with Landlord, the “Indemnitees”) harmless from and indemnify the Indemnitees against any and all claims, liabilities, , damages, costs and expenses, including reasonable attorneys’ fees and costs incurred in defending against the same (collectively, “Claims”), to the extent arising from (a) the acts or omissions of Tenant or any other Tenant Parties (as defined in Paragraph 8.c. above) in, on or about the Real Property or Office Park, or (b) any construction or other work undertaken by or on behalf of Tenant in, on or about the Premises, whether prior to or during the term of this Lease, or (c) any breach or Event of Default under this Lease by Tenant, or (d) any accident, injury or damage, howsoever and by whomsoever caused, to any person or property, occurring in, on or about the Premises; except to the extent such Claims are caused directly by the negligence or willful misconduct of Landlord or its agents, employees or contractors. In case any action or proceeding be brought against any of the Indemnitees by reason of any such Claim, Tenant, upon notice from Landlord, covenants to resist and defend at Tenant’s sole expense such action or proceeding by counsel reasonably satisfactory to Landlord. The provisions of this Paragraph 14.b. shall survive the expiration or earlier termination of this Lease with respect to any injury, illness, death or damage occurring prior to such expiration or termination.

Notwithstanding anything to the contrary set forth in this Paragraph 14.b. or elsewhere in this Lease, in no event shall Tenant be liable to Landlord for any consequential or remote damages, except for (i) consequential damages expressly provided for in Paragraph 20.c. of the Lease with regard to Tenant’s failure to timely surrender the Premises to Landlord as provided in such Paragraph 20.c. or (ii) damages caused to Landlord by the loss of a sale or financing due to Tenant’s failure to timely deliver any written agreement required by Paragraph 22 of the Lease after the second written notice from Landlord provided for therein or the estoppel certificate required by Paragraph 29 of this Lease after the second written notice from Landlord provided for therein.

c. Landlord shall hold Tenant and the constituent shareholders, partners or other owners thereof, and all of their agents, contractors, servants, officers, directors and employees (collectively “Tenant’s Indemnitees”) harmless from, and shall be responsible for, and indemnify them against any Claim incurred in connection with or arising from any injury, illness, or death to any person or damage to any property to the extent (i) such injury,

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illness, death or damage is caused by any breach by Landlord of this Lease or by the negligence or willful misconduct ct of Landlord or any of its agents, employees or contractors and (ii) such Claim is not included within the risks insured against under the insurance that Tenant is required to carry under Paragraph 15 below. The provisions of this Paragraph 14.c. shall survive the termination of this Lease with respect to any injury, illness, death or damage occurring prior to such termination. In case any action or proceeding be brought against Tenant or any of Tenant’s Indemnitees by reason of any such Claim, Landlord, upon notice from Tenant, covenants to resist and defend at Landlord’s sole expense such action or proceeding by counsel reasonably satisfactory to Tenant.

d. The provisions of this Paragraph 14 are subject to the provisions of Paragraph 16 below.

15. Insurance.

a. Tenant’s Insurance. Tenant shall, at Tenant’s expense, maintain during the term of this Lease (and, if Tenant occupies or conducts activities in or about the Premises prior to or after the term hereof, then also during such pre-term or post-term period): (i) commercial general liability insurance including contractual liability coverage, with minimum coverages of Three Million Dollars ($3,000,000.00) per occurrence combined single limit for bodily injury and property damage, One Million Dollars ($1,000,000.00) for products-completed operations coverage, One Hundred Thousand Dollars ($100,000.00) fire legal liability, One Million Dollars ($1,000,000.00) for personal and advertising injury (which coverage shall not be subject to the contractual liability exclusion), with a Three Million Dollars ($3,000,000.00) general aggregate limit, for injuries to, or illness or death of, persons and damage to property occurring in or about the Premises or otherwise resulting from Tenant’s operations in the Building, (ii) property insurance protecting Tenant against loss or damage by fire and such other risks as are insurable under then-available standard forms of “special form” (previously known as “all risk”) insurance policies (excluding earthquake and flood but including water damage), covering Tenant’s personal property and trade fixtures in or about the Premises or the Real Property, and any improvements and/or Alterations in the Premises, for the full replacement value thereof without deduction for depreciation; (iii) workers’ compensation insurance in statutory limits; (iv) at least three months’ coverage for loss of business income and continuing expenses, providing protection against any peril included within the classification “special form” insurance, excluding earthquake and flood but including water damage; and (v) if Tenant operates owned, leased or non-owned vehicles on the Real Property, comprehensive automobile liability insurance with a minimum coverage of One Million Dollars ($1,000,000.00) per occurrence, combined single limit. The above described policies shall protect Tenant, as named insured, except for workers’ compensation insurance described in clause (iii) above, shall protect Landlord and all the other Indemnitees and any other parties designated by Landlord, as additional insureds; shall insure Landlord’s and such other parties’ contingent liability with regard to acts or omissions of Tenant; shall specifically include all liability assumed by Tenant under this Lease (provided, however, that such contractual liability coverage shall not limit or be deemed to satisfy Tenant’s indemnity obligations under this Lease); and, if subject to deductibles, shall provide for deductible amounts not in excess of those reasonably approved in advance in writing by Landlord. Landlord reserves the right to increase the foregoing amount of liability coverage from time to time as Landlord reasonably determines is required to adequately

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protect Landlord and the other parties designated by Landlord from the matters insured thereby; provided, however, such increased amounts shall not materially exceed the greater of (a) those amounts normally required for comparable buildings in the Waltham area or (b) those amounts required to provide Landlord with the same relative protection as the amounts set forth above as of the date of this Lease. Notwithstanding the foregoing, Landlord makes no representation that the limits of liability required hereunder from time to time shall be adequate to protect Tenant. Landlord reserves the right to require that Tenant cause any of its contractors, vendors, movers or other parties conducting activities in or about or occupying the Premises to obtain and maintain insurance as reasonably determined by Landlord and as to which Landlord and such other parties designated by Landlord shall be additional insureds.

b. Policy Form. Each insurance policy required pursuant to Paragraph 15.a. above shall be issued by an insurance company licensed in the Commonwealth of Massachusetts and with a general policyholders’ rating of “A-” or better and a financial size ranking of “Class VIII” or higher in the most recent edition of Best’s Insurance Guide. Each insurance policy, other than Tenant’s workers’ compensation insurance, shall (i) provide that it may not be materially changed, cancelled or allowed to lapse unless thirty (30) days’ prior written notice to Landlord and any other insureds designated by Landlord is first given, (ii) provide that no act or omission of Tenant shall affect or limit the obligations of the insurer with respect to any other insured, (iii) include all waiver of subrogation rights endorsements necessary to effect the provisions of Paragraph 16 below, and (iv) provide that the policy and the coverage provided shall be primary, that Landlord, although an additional insured, shall nevertheless be entitled to recovery under such policy for any damage to Landlord or the other Indemnitees by reason of acts or omissions of Tenant, and that any coverage carried by Landlord shall be noncontributory with respect to policies carried by Tenant. Each such insurance policy or a certificate thereof shall be delivered to Landlord by Tenant on or before the effective date of such policy and thereafter Tenant shall deliver to Landlord renewal policies or certificates at least thirty (30) days prior to the expiration dates of expiring policies. If Tenant fails to procure such insurance or to deliver such policies or certificates, Landlord may at its option, procure the same for Tenant’s account, and the cost thereof shall be paid to Landlord by Tenant upon demand. Landlord may inspect and/or copy the relevant insurance policy; provided, however, if Landlord desires to inspect and/or copy a policy pursuant to the foregoing and the policy contains information irrelevant to the coverage issue and/or also covers property other than the Premises, then Tenant shall not be required to release the portions of the policy that are irrelevant to the coverage issue or that relate to such other properties if they are not required for Landlord to reasonably assess the coverage issue.

c. No Implication. Nothing in this Paragraph 15 shall be construed as creating or implying the existence of (i) any ownership by Tenant of any fixtures, additions, Alterations, or improvements in or to the Premises or (ii) any right on Tenant’s part to make any addition, Alteration or improvement in or to the Premises.

d. Landlord’s Insurance. During the term hereof Landlord shall keep the Building and the Tenant Improvements (but expressly excluding any Alterations constructed by or for Tenant, personal property, trade fixtures or other fixtures, office equipment, furniture, artwork and other decorations in any portion of the Premises not affixed to and a part of the Building) insured through reputable insurance underwriters against perils covered by then-available

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standard forms of “special form” (previously known as “all risk”) insurance policies, as such policies are in use from time to time (excluding, at Landlord’s option, perils such as earthquake, flood and other standard exclusions), with a deductible provision deemed commercially reasonable by Landlord, in an amount or amounts equal to not less than eighty percent (80%) of the full replacement value of the Building (excluding the land and the footings, foundations and installations below the basement level) and the Tenant Improvements (or such greater percentage as shall be required to preclude Landlord from being deemed a coinsurer), without deduction for depreciation, including the costs of demolition and debris removal, or such other fire and property damage insurance as Landlord shall reasonably determine to give substantially equal or greater protection.

16. Mutual Waiver of Subrogation Rights. Each party hereto hereby releases the other respective party and, in the case of Tenant as the releasing party, the other Indemnitees, and the respective partners, shareholders, agents, employees, officers, directors and authorized representatives of such released party, from any claims such releasing party may have for damage to the Real Property, Building, the Premises or any of such releasing party’s fixtures, personal property, improvements and alterations in or about the Premises, the Building or the Real Property that is caused by or results from risks insured against under any “special form” insurance policies actually carried by such releasing party or deemed to be carried by such releasing party provided, however, that such waiver shall be limited to the extent of the net insurance proceeds payable by the relevant insurance company with respect to such loss or damage (or in the case of deemed coverage, the net proceeds that would have been payable). For purposes of this Paragraph 16, Tenant shall be deemed to be carrying any of the insurance policies required pursuant to Paragraph 15.a. above but not actually carried by Tenant, and Landlord shall be deemed to carry the insurance policies required by Paragraph 15.d. above but not actually carried by Landlord; provided, however, that, as to the insurance policy required to be carried by Landlord under Paragraph 15.d. above, for purposes of applying the immediately preceding sentence, the “net insurance proceeds payable by the relevant insurance company” shall be the proceeds that would have been payable if Landlord’s insurance policy was for 100% of the full replacement value of the Building (excluding the land and the footings, foundations and installations below the basement level) and if the deductible carried by Landlord did not exceed One Hundred Thousand Dollars ($100,000.00). Each party hereto shall cause each such fire and extended coverage insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against the other respective party and the other released parties in connection with any matter covered by such policy.

17. Utilities.

a. Basic Services. Landlord shall furnish the following utilities and services (“Basic Services”) for the Premises: (i) during the hours of 8 A.M. to 6 P.M. (“Business Hours”) Monday through Friday (except public holidays) (“Business Days”), electricity for Building standard lighting and power suitable for the use of the Premises for ordinary general office purposes, (ii) during Business Hours on Business Days, heat and air conditioning required in Landlord’s reasonable judgment for the comfortable use and occupancy of the Premises for ordinary general office purposes, (iii) unheated water for the restroom(s) and drinking fountain(s) in the public areas serving the Premises, (iv) elevator service to the floor(s) of the Premises by nonattended automatic elevators for general office pedestrian usage, and (v) on

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Business Days, janitorial services limited to emptying and removal of general office refuse, light vacuuming as needed and window washing as determined by Landlord. Notwithstanding the foregoing, however, Tenant may use water, heat, air conditioning, electric current, elevator and janitorial service in excess of that provided in Basic Services (“Excess Services,” which shall include without limitation any power usage other than through existing standard 110-volt AC outlets; electricity in excess of the lesser of that described in clause (i) above or clause (ii) of Paragraph 17.c. below; electricity and/or water consumed by Tenant in connection with any dedicated or supplemental heating, ventilating and/or air conditioning, computer power, telecommunications and/or other special units or systems of Tenant; chilled, heated or condenser water; or water used for any purpose other than ordinary drinking and lavatory purposes), provided that the Excess Services desired by Tenant are reasonably available to Landlord and to the Premises (it being understood that in no event shall Landlord be obligated to make available to the Premises more than the pro rata share of the capacity of any Excess Service available to the Building or the applicable floor of the Building, as the case may be), and provided further that Tenant complies with the procedures established by Landlord from time to time for requesting and paying for such Excess Services and with all other provisions of this Paragraph 17. Landlord reserves the right to install in the Premises or the Real Property electric current and/or water meters (including, without limitation, any additional wiring, conduit or panel required therefor) to measure the electric current or water consumed by Tenant or to cause the usage to be measured by other reasonable methods (e.g., by temporary “check” meters or by survey).

Notwithstanding the above, (subject to any temporary shutdown for repairs, for security purposes, for compliance with any legal restrictions, or due to strikes, lockouts, labor disputes, fire or other casualty, acts of God, or other causes beyond the reasonable control of Landlord) (A) Tenant shall have access to the Premises 24 hours a day, each day of the Lease term, (B) the services described in (iii) and (iv) above shall be provided to the Premises 24 hours a day, each day of the Lease term, without additional charge to Tenant, and (C) subject to the above provisions of this Paragraph 17.a. regarding availability of Excess Services and Paragraph 17.b. below regarding Tenant’s payment for Excess Services, the electricity and HVAC described in (i) and (ii) above shall be available to the Premises 24 hours a day, each day of the Lease term.

b. Payment for Utilities and Services. The cost of Basic Services shall be included in Operating Expenses. In addition, Tenant shall pay to Landlord upon demand (i) the cost, at Landlord’s prevailing rate, of any Excess Services used by Tenant, (ii) the cost of installing, operating, maintaining or repairing any meter or other device used to measure Tenant’s consumption of utilities, (iii) the cost of installing, operating, maintaining or repairing any Temperature Balance Equipment (as defined in Paragraph 17.d. below) for the Premises and/or any equipment required in connection with any Excess Services requested by Tenant, and (iv) any cost otherwise incurred by Landlord in keeping account of or determining any Excess Services used by Tenant. Landlord’s failure to bill Tenant for any of the foregoing shall not waive Landlord’s right to bill Tenant for the same at a later time.

c. Utility Connections. Tenant shall not connect or use any apparatus or device in the Premises (i) using current in excess of 110 volts, or (ii) which would cause Tenant’s electrical demand load to exceed 1.0 watts per rentable square foot for overhead

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lighting or 2.0 watts per rentable square foot for convenience outlets, or (iii) which would exceed the capacity of the existing panel or transformer serving the Premises. Tenant shall not connect with electric current (except through existing outlets in the Premises or such additional outlets as may be installed in the Premises as part of initial improvements or Alterations approved by Landlord), or water pipes, any apparatus or device for the purpose of using electrical current or water.

Landlord will not permit additional coring or channeling of the floor of the Premises in order to install new electric outlets in the Premises unless Landlord is reasonably satisfied, on the basis of such information to be supplied by Tenant at Tenant’s expense, that coring and/or channeling of the floor in order to install such additional outlets will not weaken the structure of the floor,

d. Temperature Balance. If the temperature otherwise maintained in any portion of the Premises by the heating, air conditioning or ventilation system is affected as a result of (i) the type or quantity of any lights, machines or equipment (including without limitation typical office equipment that is used in excessive amounts or in areas of inadequate size or with inadequate ventilation) used by Tenant in the Premises, (ii) the occupancy of such portion of the Premises by more than one person per two hundred (200) square feet of rentable area there in, (iii) an electrical load for lighting or power in excess of the limits specified in Paragraph 17.c. above, or (iv) any rearrangement of partitioning or other improvements made by Tenant or at Tenant’s request, then at Tenant’s sole cost, Landlord may install any equipment, or modify any existing equipment (including the standard air conditioning equipment) Landlord reasonably deems necessary to restore the temperature balance (such new equipment or modifications to existing equipment termed herein “Temperature Balance Equipment”). Tenant agrees to keep closed, when necessary, draperies and/or window treatments which, because of the sun’s position, must be closed to provide for the efficient operation of the air conditioning system, and Tenant agrees to cooperate with Landlord and to abide by the regulations and requirements which Landlord may prescribe for the proper functioning and protection of the heating, ventilating and air conditioning system; provided that such regulations and requirements are reasonable and uniformly applied and are provided to Tenant. Landlord makes no representation to Tenant regarding the adequacy or fitness of the heating, air conditioning or ventilation equipment in the Building to maintain temperatures that may be required for, or because of, any computer or communications rooms, machine rooms, conference rooms or other areas of high concentration of personnel or electrical usage, or any other uses other than or in excess of the fractional horsepower normally required for office equipment, and Landlord shall have no liability for loss or damage suffered by Tenant or others in connection therewith.

e. Interruption of Services. Landlord’s obligation to provide utilities and services for the Premises are subject to the Rules and Regulations of the Building, applicable Legal Requirements (including the rules or actions of the public utility company furnishing the utility or service), and shutdowns for maintenance and repairs, for security purposes, or due to strikes, lockouts, labor disputes, fire or other casualty, acts of God, or other causes beyond the control of Landlord. In the event of an interruption in, or failure or inability to provide any service or utility for the Premises for any reason, such interruption, failure or inability shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business

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by Tenant, or entitle Tenant to any abatement or offset of Monthly Rent, Additional Rent or any other amounts due from Tenant under this Lease. Tenant hereby waives the provisions of any applicable existing or future Legal Requirement permitting the termination of this Lease due to such interruption, failure or inability. Notwithstanding the foregoing, if any interruption in or failure or inability to provide any of the services or utilities described in Paragraph 17.a. is (i) within the reasonable control of Landlord or its agents or employees and continues for fourteen (14) or more consecutive business days after Landlord becomes aware thereof, whether by Tenant’s written notice to Landlord thereof or otherwise, or (ii) outside of Landlord’s reasonable control and continues for one hundred twenty (120) or more consecutive days after Landlord becomes aware thereof, whether by Tenant’s written notice to Landlord thereof or otherwise, and Tenant is unable to conduct and does not conduct any business in a material portion of the Premises as a result thereof, then Tenant shall be entitled to an abatement of Monthly Rent and Tenant’s Electrical Charge under Paragraph 5 hereof and Additional Rent under Paragraph 7 hereof, which abatement shall commence as of the first day after the expiration of such fourteen (14) consecutive business day or one hundred twenty (120) consecutive day period (as applicable) and terminate upon the cessation of such interruption, failure or inability, and which abatement shall be based on the portion of the Premises rendered unusable for Tenant’s business by such interruption, failure or inability. The abatement provisions set forth above shall be inapplicable to any interruption, failure or inability described in this Paragraph 17.e. that is caused by (x) damage from fire or other casualty (it being acknowledged that such situation shall be governed by Paragraph 26), or (y) the negligence or willful misconduct of Tenant or its agents, employees or contractors.

f. Governmental Controls. In the event any governmental authority having jurisdiction over the Office Park, the Real Property or the Building promulgates or revises any Legal Requirement or building, fire or other code or imposes mandatory or voluntary controls or guidelines on Landlord or the Office Park, the Real Property or the Building relating to the use or conservation of energy or utilities or the reduction of automobile or other emissions (collectively, “Controls”) or in the event Landlord is required or elects to make alterations to the Office Park, the Real Property or the Building in order to comply with such mandatory or voluntary Controls, Landlord may, in its sole discretion, comply with such Controls or make such alterations to the Office Park, the Real Property or the Building related thereto; provided that (a) in making any such alterations, Landlord shall use commercially reasonable efforts to minimize any disruption to Tenant’s business in the Premises and (b) in no event may Landlord comply with voluntary Controls if such compliance will prevent Tenant from reasonably using the Premises for the purposes leased. Such compliance and the making of such alterations shall not constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including, but not limited to, liability for consequential damages or loss of business by Tenant.

18. Personal Property and Other Taxes. Tenant shall pay, at least ten (10) days before delinquency, any and all taxes, fees, charges or other governmental impositions levied or assessed against Landlord or Tenant (a) upon Tenant’s equipment, furniture, fixtures, improvements and other personal property (including carpeting installed by Tenant) located in the Premises, (b) by virtue of any Alterations made by Tenant to the Premises, (c) which is an occupancy tax or tax in lieu thereof related to Tenant’s occupancy of the Premises, and (d) upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. If any such fee, charge or other governmental imposition is paid by Landlord, Tenant shall reimburse Landlord for Landlord’s payment upon demand.

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19. Rules and Regulations. Tenant shall comply with the rules and regulations set forth on Exhibit B attached hereto, as such rules and regulations may be modified or amended by Landlord from time to time (the “Rules and Regulations”), provided that such amendments or modifications shall be reasonable and non-discriminatory and are delivered to Tenant in writing. Landlord shall use reasonable efforts to uniformly enforce the Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance or noncompliance by any other tenant or occupant of the Building of or with any of the Rules and Regulations, but Landlord shall use reasonable efforts to enforce the Rules and Regulations. In the event of any inconsistency between the express provisions of this Lease and the Rules and Regulations, the provisions of this Lease shall govern.

20. Surrender; Holding Over.

a. Surrender. Upon the expiration or other termination of this Lease, Tenant shall surrender the Premises to Landlord vacant and broom-clean, with all improvements and Alterations (except as provided below) in their original condition, except for reasonable wear and tear, damage from casualty or condemnation or resulting from the negligence or willful misconduct of Landlord or its agents, employees or contractors and any changes resulting from approved Alterations; provided, however, that prior to the expiration or termination of this Lease Tenant shall remove from the Premises any Alterations that Tenant is required by Landlord to remove under the provisions of this Lease, and all of Tenant’s personal property (including, without limitation, all voice and data cabling) and trade fixtures. If such removal is not completed at the expiration or other termination of this Lease, Landlord may remove the same at Tenant’s expense. Any damage to the Premises or the Building caused by such removal shall be repaired promptly by Tenant (including the patching or repairing of ceilings and walls) or, if Tenant fails to do so, Landlord may do so at Tenant’s expense. The removal of Alterations from the Premises shall be governed by Paragraph 9 above. Tenant’s obligations under this paragraph shall survive the expiration or other termination of this Lease. Upon expiration or termination of this Lease or of Tenant’s possession, Tenant shall surrender all keys to the Premises or any other part of the Building and shall make known to Landlord the combination of locks on all safes, cabinets and vaults that may be located in the Premises.

b. Holding Over. If Tenant remains in possession of the Premises after the expiration or earlier termination of this Lease with the express written consent of Landlord, Tenant’s occupancy shall be a month-to-month tenancy at a rent equal to one hundred fifty percent (150%) of the Monthly Rent, Tenant’s Electrical Charge and Additional Rent payable under this Lease during the last full month prior to the date of the expiration of this Lease. Except as provided in the preceding sentence, the month-to-month tenancy shall be on the terms and conditions of this Lease, except that any renewal options, expansion options, rights of first refusal, rights of first negotiation or any other rights or options pertaining to additional space in the Building contained in this Lease shall be deemed to have terminated and shall be inapplicable thereto. Landlord’s acceptance of rent after such holding over with Landlord’s written consent shall not result in any other tenancy or in a renewal of the original term of this Lease. If Tenant remains in possession of the Premises after the expiration or earlier termination

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of this Lease without Landlord’s consent, Tenant’s continued possession shall be on the basis of a tenancy at sufferance and Tenant shall pay as Monthly Rent during the holdover period an amount equal to one hundred fifty percent (150%) of the Monthly Rent, Tenant’s Electrical Charge and Additional Rent payable under this Lease for the last full month prior to the date of such expiration or termination.

c. Indemnification. Tenant shall indemnify, defend and hold Landlord harmless from and against all Claims incurred by or asserted against Landlord and arising directly or indirectly from Tenant’s failure to timely surrender the Premises, including but not limited to (i) any rent payable by or any loss, cost, or damages, including lost profits, claimed by any prospective tenant of the Premises or any portion thereof, and (ii) Landlord’s damages as a result of such prospective tenant rescinding or refusing to enter into the prospective lease of the Premises or any portion thereof by reason of such failure to timely surrender the Premises; provided, however, as a condition to Tenant’s obligations under this Paragraph 20.c., Landlord shall give Tenant written notice of the existence of a prospective successor tenant for the Premises or any portion thereof, or the existence of any other matter which might give rise to a claim by Landlord under the foregoing indemnity, at least thirty (30) days prior to the date Landlord shall require Tenant’s surrender of the Premises, and Tenant shall not be responsible to Landlord under the foregoing indemnity if Tenant shall surrender the Premises on or prior to the expiration of such thirty (30) day period (it being agreed, however, that Landlord need not identify the prospective tenant by name in its notice, and it being further agreed that such notice may be given prior to the scheduled expiration date of this Lease).

21. Subordination and Attornment.

a. Within sixty (60) days following the execution of this Lease, or as soon as reasonably possible thereafter, Landlord shall provide Tenant with a Subordination, Non-Disturbance and Attornment Agreement from Fleet National Bank (which is the only holder of a Superior Interest (as defined below) as of the date of this Lease) in the form attached as Exhibit H.

b. As used herein and elsewhere in this Lease, an “Encumbrance” is any mortgage, deed of trust, ground lease, underlying lease or like encumbrance affecting any part of the Real Property or any interest of Landlord therein, and the holder of an Encumbrance that is superior to Tenant’s leasehold interest is referred to in this Lease as the holder of a “Superior Interest.” If an Encumbrance is created following the date of this Lease, then this Lease shall be automatically subject and subordinate to such Encumbrance upon delivery to Tenant of a non-disturbance agreement executed by the holder of the Encumbrance providing that if Tenant is not in default under this Lease beyond any applicable notice and cure period, that such party will recognize this Lease and Tenant’s rights hereunder and will not disturb Tenant’s possession hereunder, and if this Lease is by operation of law terminated in a foreclosure, that a new lease will be entered into on the same terms as this Lease for the remaining term hereof, and including such further matters and conditions to the foregoing as may be customarily and commercially reasonably required by the holder of the Encumbrance. Tenant shall, within fifteen (15) days after Landlord’s request, execute and deliver to Landlord a document evidencing the subordination of this Lease to a particular Encumbrance created after the date of this Lease, provided that the non-disturbance provisions provided for in this

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Paragraph 21.b. are included in such document. If Tenant fails to execute and deliver to Landlord the required instrument within the required fifteen (15) day period, then Landlord may send a second written notice to Tenant requesting that Tenant execute and deliver such instrument to Landlord pursuant to the terms hereof.

Notwithstanding anything to the contrary herein, Tenant shall reimburse Landlord for (i) Landlord’s reasonable attorneys’ fees, if any, incurred in connection with obtaining a non-disturbance agreement and (ii) any fees or charges assessed by the lender in connection with the issuance of the non-disturbance agreement, such reimbursement to be made by Tenant within fifteen (15) days following receipt of Landlord’s written invoice therefor. The aforementioned reimbursement obligation shall only apply to non-disturbance agreements obtained pursuant to this Paragraph 21.b.

c. If the interest of Landlord in the Real Property or the Building is transferred to any person (“Purchaser”) pursuant to or in lieu of proceedings for enforcement of any Encumbrance, Tenant shall immediately attorn to the Purchaser, and this Lease shall continue in full force and effect as a direct lease between the Purchaser and Tenant on the terms and conditions set forth herein upon notice from Landlord of such transfer, subject to the terms of any applicable non-disturbance agreement.

22. Financing Condition. If any lender or ground lessor that intends to acquire an interest in, or holds a mortgage, ground lease or deed of trust encumbering any portion of the Real Property should require either the execution by Tenant of an agreement requiring Tenant to send such lender written notice of any default by Landlord under this Lease, giving such lender the right to cure such default until such lender has completed foreclosure, and preventing Tenant from terminating this Lease (to the extent such termination right would otherwise be available) unless such default remains uncured after foreclosure has been completed, and/or any modification of the agreements, covenants, conditions or provisions of this Lease, then Tenant agrees that it shall, within ten (10) days after Landlord’s request, execute and deliver such agreement and modify this Lease as required by such lender or ground lessor; provided, however, that no such modification shall affect the length of the term or increase the rent payable by Tenant under Paragraphs 5 and 7 or otherwise materially increase the obligations of, or reduce the rights and benefits of, Tenant hereunder. If Tenant fails to execute and deliver to Landlord the required agreement or modification within the required ten (10) day period, then Landlord may send a second written notice to Tenant requesting that Tenant execute and deliver such agreement or modification to Landlord pursuant to the terms hereof. Tenant acknowledges and agrees that its failure to execute any such agreement or modification required by such lender or ground lessor within five (5) business days following such second written notice from Landlord may cause Landlord serious financial damage by causing the failure of a financing transaction and giving Landlord all of its rights and remedies under Paragraph 25 below, including its right to damages caused by the loss of such financing, but only to the extent any such loss is attributable primarily to Tenant’s failure to deliver any such certificate.

23. Entry by Landlord. Landlord may, at any and all reasonable times, and upon reasonable advance notice (provided that no advance notice need be given if an emergency necessitates an immediate entry or prior to entry to provide routine janitorial services), enter the Premises to (a) inspect the same and to determine whether Tenant is in compliance with its

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obligations hereunder, (b) supply janitorial and any other service Landlord is required to provide hereunder, (c) show the Premises to prospective lenders or purchasers, and, curing the final twelve (12) months of the Lease term (as such term may have been extended), to prospective tenants, (d) post notices of nonresponsibility, and (e) alter, improve or repair the Premises or any other portion of the Real Property or the Office Park. In connection with any such alteration, improvement or repair, Landlord may erect in the Premises or elsewhere in the Real Property or the Office Park scaffolding and other structures reasonably required for the work to be performed. In no event shall such entry or work entitle Tenant to an abatement of rent, constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability whatsoever, including but not limited to liability for consequential damages or loss of business or profits by Tenant; provided, however, that Landlord shall use good faith efforts to cause all such work to be done in such a manner as to minimize the extent and duration of the entry or work and to cause as little interference to Tenant as reasonably possible without incurring additional expense; provided, further, if the work is a type of work that is customarily performed by Landlords of first class office buildings after regular business hours, then, unless otherwise agreed to by Tenant, Landlord shall cause the work to be performed after business hours. Notwithstanding anything to the contrary herein, if any such entry or work is (i) necessitated due to reasons within Landlord’s reasonable control and continues for fourteen (14) or more consecutive business days, or (ii) necessitated due to reasons outside Landlord’s reasonable control and continues for sixty (60) or more consecutive days, and during the period of entry or work all or a substantial part of the Premises are rendered unusable by such entry or work so that Tenant is unable to, and does not, conduct its business in the Premises, then Tenant shall be entitled to an abatement of Monthly Rent and Tenant’s Electrical Charge under Paragraph 5 hereof and Additional Rent under Paragraph 7 hereof, which abatement shall commence as of the first day after the expiration of such fourteen (14) consecutive business day or sixty (60) consecutive day period (as applicable) and terminate upon the cessation of such entry or work, and which abatement shall be based on the portion of the Premises rendered unusable for Tenant’s business by such entry or work. The prior sentence is inapplicable to Landlord’s entry into the Premises or work within the Premises that is necessitated due to damage caused by fire or other casualty where such damage is governed by Paragraph 26. Landlord shall at all times retain a key with which to unlock all of the doors in the Premises, except Tenant’s vaults and safes. If an emergency necessitates immediate access to the Premises, Landlord may use whatever force is necessary to enter the Premises and any such entry to the Premises shall not constitute a forcible or unlawful entry into the Premises, a detainer of the Premises, or an eviction of Tenant from the Premises, or any portion thereof.

24. Insolvency or Bankruptcy. The occurrence of any of the following shall constitute an Event of Default under Paragraph 25 below:

a. Tenant ceases doing business as a going concern, makes an assignment for the benefit of creditors, is adjudicated an insolvent, files a petition (or files an answer admitting the material allegations of such petition) seeking for Tenant any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar arrangement under any state or federal bankruptcy or other law, or Tenant consents to or acquiesces in the appointment, pursuant to any state or federal bankruptcy or other law, of a trustee, receiver or liquidator for the Premises, for Tenant or for all or any substantial part of Tenant’s assets; or

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b. Tenant fails within sixty (60) days after the commencement of any proceedings against Tenant seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any state or federal bankruptcy or other Legal Requirement, to have such proceedings dismissed, or Tenant fails, within sixty (60) days after an appointment pursuant to any state or federal bankruptcy or other Legal Requirement without Tenant’s consent or acquiescence, of any trustee, receiver or liquidator for the Premises, for Tenant or for all or any substantial part of Tenant’s assets, to have such appointment vacated; or

c. Tenant is unable, or admits in writing its inability, to pay its debts as they mature; or

d. Tenant gives notice to any governmental body of its insolvency or pending insolvency, or of its suspension or pending suspension of operations.

In no event shall this Lease be assigned or assignable by reason of any voluntary or involuntary bankruptcy, insolvency or reorganization proceedings, nor shall any rights or privileges hereunder be an asset of Tenant, the trustee, debtor-in-possession, or the debtor’s estate in any bankruptcy, insolvency or reorganization proceedings.

25. Default and Remedies.

a. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” by Tenant:

1. Tenant fails to pay when due Monthly Rent, Tenant’s Electrical Charge, Additional Rent or any other rent due hereunder within five (5) business days following written notice from Landlord that such sum is past due; except that Landlord shall only be required to give two (2) such notices in any calendar year, and after two (2) such notices are given any subsequent failure by Tenant in such calendar year to pay any amount due hereunder on the date due will constitute an Event of Default without the requirement of notice from Landlord of such failure; or

2. Deleted; or

3. Tenant fails to deliver any estoppel certificate pursuant to Paragraph 29 below, subordination agreement pursuant to Paragraph 21 above, or document required pursuant to Paragraph 22 above, within five (5) business days after Landlord’s second written notice requesting delivery of the same; or

4. Tenant violates the bankruptcy and insolvency provisions of Paragraph 24 above; or

5. Tenant makes or has made or intentionally furnishes or furnished any warranty, representation or statement to Landlord in connection with this Lease, or any other agreement made by Tenant for the benefit of Landlord, which is or was false or misleading in any material respect when made or furnished; or

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6. Tenant assigns this Lease or subleases any portion of the Premises in violation of Paragraph 13 above; or

7. Defaulted; or

8. Tenant fails to comply with any other provision of this Lease in the manner required pursuant to this Lease within thirty (30) days after written notice from Landlord of such failure (or if the noncompliance cannot by its nature be cured within the 30 day period, if Tenant fails to commence to cure such noncompliance within the 30 day period or thereafter fails to diligently prosecute such cure to completion); except that such thirty (30) day period shall be shortened as set forth in Landlord’s written notice to Tenant as Landlord reasonably determines is necessary if waiting for such thirty (30) day period to expire would jeopardize the health, safety or quiet enjoyment of the Building by its tenants and occupants or cause further damage or loss to Landlord or the Real Property or result in any violation (or continuance of any violation) of any Legal Requirement.

b. Remedies. Upon the occurrence of an Event of Default Landlord shall have the following remedies, which shall not be exclusive but shall be cumulative and shall be in addition to any other remedies now or hereafter allowed by law:

1. Landlord may terminate this Lease at any time by written notice to Tenant, and this Lease shall come to an end on the date of such notice, as fully and completely as if such date were the date herein originally fixed for the expiration of the term; and Tenant will then quit and surrender the Premises to Landlord, but Tenant shall remain liable as hereinafter provided. Tenant expressly acknowledges that in the absence of such written notice from Landlord, no other act of Landlord, including, but not limited to, its re-entry into the Premises, its efforts to relet the Premises, its reletting of the Premises for Tenant’s account, its storage of Tenant’s personal property and trade fixtures, its acceptance of keys to the Premises from Tenant, its appointment of a receiver, or its exercise of any other rights and remedies under this Paragraph 25 or otherwise at law, shall constitute an acceptance of Tenant’s surrender of the Premises or constitute a termination of this Lease. Upon such termination of the Lease, Landlord may, without notice, re-enter the Premises, either by force, summary proceedings, ejectment or otherwise, and remove and dispossess Tenant and all other persons and any and all property from the same, as if this Lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end.

Upon such termination of the Lease, Landlord shall be entitled o recover damages from Tenant as provided in any applicable existing or future Legal Requirement providing for recovery of damages for such breach, including but not limited to the following:

(i) The reasonable cost of recovering the Premises; plus

(ii) The reasonable cost of removing Tenant’s Alterations, trade fixtures and improvements; plus

(iii) All unpaid rent due or earned hereunder prior to the date of termination, less the proceeds of any reletting or any rental received from subtenants

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prior to the date of termination applied as provided in Paragraph 25.b.2. below, together with interest at the Interest Rate, on such sums from the date such rent is due and payable until the date of the award of damages; plus

(iv) The amount by which the rent which would be payable by Tenant hereunder, including Tenant’s Electrical Charge under Paragraph 5 above and Additional Rent under Paragraph 7 above, as reasonably estimated by Landlord, from the date of termination until the date of the award of damages, exceeds the amount of such rental loss as Tenant proves could have been reasonably avoided, together with interest at the Interest Rate on such sums from the date such rent is due and payable until the date of the award of damages, plus

(v) The amount by which the rent payable by Tenant hereunder, including Tenant’s Electrical Charge under Paragraph 5 above and Additional Rent under Paragraph 7 above, as reasonably estimated by Landlord, for the remainder of the then term, after the date of the award of damages exceeds the amount of such rental loss as Tenant proves could have been reasonably avoided, discounted at the discount rate published by the Federal Reserve Bank of San Francisco for member banks at the time of the award plus one percent (1%); plus

(vi) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law, including without limitation any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.

2. Landlord may continue this Lease in full force and effect and may enforce all of its rights and remedies under this Lease, including, but not limited to, the right to recover rent as it becomes due. After the occurrence of an Event of Default, Landlord may enter the Premises without terminating this Lease and sublet all or any part of the Premises for Tenant’s account to any person, for such term (which may be a period beyond the remaining term of this Lease), at such rents and on such other terms and conditions as Landlord deems advisable. In the event of any such subletting, rents received by Landlord from such subletting shall be applied (i) first, to the payment of the costs of maintaining, preserving, altering and preparing the Premises for subletting, the other costs of subletting, including but not limited to brokers’ commissions, attorneys’ fees and expenses of removal of Tenant’s personal property, trade fixtures and Alterations; (ii) second, to the payment of rent then due and payable hereunder; (iii) third, to the payment of future rent as the same may become due and payable hereunder; (iv) fourth, the balance, if any, shall be paid to Tenant upon (but not before) expiration of the term of this Lease. If the rents received by Landlord from such subletting, after application as provided above, are insufficient in any month to pay the rent due and payable hereunder for such month, Tenant shall pay such deficiency to Landlord monthly upon demand. Notwithstanding any such subletting for Tenant’s account without termination, Landlord may at any time thereafter, by written notice to Tenant, elect to terminate this Lease by virtue of a previous Event of Default.

3. During the continuance of an Event of Default, Landlord may enter the Premises without terminating this Lease and remove all Tenant’s personal

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property, Alterations and trade fixtures from the Premises and store them at Tenant’s risk and expense. If Landlord removes such property from the Premises and stores it at Tenant’s risk and expense, and if Tenant fails to pay the cost of such removal and storage after written demand therefor and/or to pay any rent then due, then after the property has been stored for a period of thirty (30) days or more Landlord may sell such property at public or private sale, in the manner and at such times and places as Landlord deems commercially reasonable following reasonable notice to Tenant of the time and place of such sale. The proceeds of any such sale shall be applied first to the payment of the expenses for removal and storage of the property, the preparation for and the conducting of such sale, and for attorneys’ fees and other legal expenses incurred by Landlord in connection therewith, and the balance shall be applied as provided in Paragraph 25.b.2. above.

Tenant hereby waives all claims for damages that may be caused by Landlord’s reentering and taking possession of the Premises or removing and storing Tenant’s personal property pursuant to this Paragraph 25, and Tenant shall indemnify, defend and hold Landlord harmless from and against any and all Claims resulting from any such act. No reentry by Landlord shall constitute or be construed as a forcible entry by Landlord.

4. Landlord may require Tenant to remove any and all Alterations from the Premises that Landlord is permitted by Paragraph 9.b. above to require Tenant to remove at the expiration or earlier termination of the Lease or, if Tenant fails to do so within ten (10) days after Landlord’s request, Landlord may do so at Tenant’s expense.

5. Landlord may cure the Event of Default at Tenant’s expense, it being understood that such performance shall not waive or cure the subject Event of Default. If Landlord pays any sum or incurs any expense in curing the Event of Default, Tenant shall reimburse Landlord upon demand for the amount of such payment or expense with interest at the Interest Rate from the date the sum is paid or the expense is incurred until Landlord is reimbursed by Tenant. Any amount due Landlord under this subsection shall constitute additional rent hereunder.

c. Waiver of Redemption. Tenant hereby waives, for itself and all persons claiming by and under Tenant, all rights and privileges which it might have under any present or future Legal Requirement to redeem the Premises or to continue this Lease after being dispossessed or ejected from the Premises.

26. Damage or Destruction. If all or any part of the Premises or any material portion of the balance of the Real Property is damaged by fire or other casualty, Landlord shall, within sixty (60) days of the date of the damage, give Tenant written notice of landlord’s reasonable estimate of the time required from the date of the damage to repair the damage (the “Damage Estimate”). Landlord shall diligently proceed to repair the damage and this Lease shall remain in full force and effect if (i) the damage is caused by a peril covered by Landlord’s insurance (or required under this Lease to be covered by Landlord’s insurance), the proceeds from such insurance are sufficient to repair the damage (an “Insured Casualty”), and the Damage Estimate is one hundred eighty (180) days or less, or (ii) the damage is caused by a peril not covered (and not required to be covered) by Landlord’s insurance or the proceeds from Landlord’s insurance are not sufficient to repair the damage (an “Uninsured Casualty”), and the

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Damage Estimate is ninety (90) days or less. If the Damage Estimate is more than one hundred eighty (180) days, in the case of an Insured Casualty, or more than ninety (90) days, in the case of an Uninsured Casualty, Landlord, it its option exercised by written notice to Tenant within sixty (60) days of the date of the damage, shall either (a) diligently proceed to repair the damage, in which event this Lease shall continue in full force and effect, or (b) terminate this Lease as of the date specified by Landlord in the notice, which date shall be not less than thirty (30) days nor more than sixty (60) days after the date such notice is given, and this Lease shall terminate on the date specified in the notice; provided, however, that Landlord may only terminate this Lease pursuant to the foregoing if Landlord terminates the leases of all other tenants who are similarly physically affected by the casualty and for whom Landlord has the right to terminate their lease in such instance. If the damage is to the Premises or if the Building is so damaged that access to or use and occupancy of the Premises is materially impaired, the Damage Estimate is more than one (1) year, and Landlord does not give notice terminating this Lease within the sixty (60) day period provided above, then Tenant may give notice to Landlord, within fifteen (15) calendar days after the expiration of the aforesaid sixty (60) day period, terminating this Lease as of the date specified in Tenant’s termination notice, which date shall not be before the date of such notice or more than thirty (30) days after the date of Tenant’s termination notice. If this Lease was not terminated pursuant to the above and Landlord is required by the terms hereof to repair the subject damages, then, if Landlord does not complete the repairs by the later of (i) the date that is ninety (90) days following the estimated date for the completion of the repairs as stated in the Damage Estimate (such ninety (90) day period to be extended by any delays caused by Tenant or its agents) or (ii) the date one (1) year following the date of the damage (such one (1) year period to be extended by any delays caused by Tenant or its agents), then Tenant may terminate this Lease by providing Landlord with written notice of such termination at any time prior to the date the repairs are completed, which written notice shall specify the termination date, which termination date shall not be before the date of such notice nor more than thirty (30) days after the date of such notice.

Notwithstanding anything to contrary contained in this Paragraph 26, if the initial Damage Estimate is more than ninety (90) days, and the date on which Landlord reasonably anticipates the repairs of such damage will be completed is during the last twelve (12) months of the Lease term, Landlord and Tenant shall each have the option to terminate this Lease by giving written notice to the other, in the case of Landlord together with the Damage Estimate, or, in the case of Tenant, within thirty (30) days of Tenant’s receipt of the Damage Estimate, and this Lease shall terminate as of the date specified by the party in its termination notice, which date shall not be before the date of such notice or more than thirty (30) days after the date of such notice.

Notwithstanding anything to the contrary in this Paragraph 26, if damage which would otherwise lead to a right to terminate this Lease results from the willful misconduct of Landlord or Tenant, the party from whose misconduct such damage results shall have no right to terminate this Lease.

If the fire or other casualty damages the Premises or the common areas of the Real Property necessary for Tenant’s use and occupancy of the Premises, Tenant ceases to use any portion of the Premises as a result of such damage, and the damage does not result from the negligence or willful misconduct of Tenant or any other Tenant Parties, then during the period

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the Premises or portion thereof are rendered unusable by such damage and repair, Tenant’s Monthly Rent, Tenant’s Electrical Charge and Additional Rent under Paragraphs 5 and 7 above shall be proportionately reduced based upon the extent to which the damage and repair prevents Tenant from conducting, and Tenant does not conduct, its business at the Premises. Landlord shall not be obligated to repair or replace any of Tenant’s movable furniture, equipment, trade fixtures, and other personal property, nor any Alterations installed in the Premises by Tenant, and no damage to any of the foregoing shall entitle Tenant to any abatement, and Tenant shall, at Tenant’s sole cost and expense, repair and replace such items. All such repair and replacement of Alterations shall be constructed in accordance with Paragraph 9 above regarding Alterations.

A total destruction of the Building shall automatically terminate this Lease. In no event shall Tenant be entitled to any compensation or damages from Landlord for loss of use of the whole or any part of the Premises or for any inconvenience occasioned by any such destruction, rebuilding or restoration of the Premises, the Building or access thereto, except for the rent abatement expressly provided above. Tenant hereby waives any existing or future law providing for termination of hiring upon destruction of the thing hired and/or providing for repairs to and of premises.

27. Eminent Domain.

a. If all or any part of the Premises is taken by any public or quasi-public authority under the power of eminent domain, or any agreement in lieu thereof (a “taking”), this Lease shall terminate as to the portion of the Premises taken effective as of the date of taking. If only a portion of the Premises is taken, Landlord or Tenant may terminate this Lease as to the remainder of the Premises upon written notice to the other party within ninety (90) days after the taking; provided, however, that Tenant’s right to terminate this Lease is conditioned upon the remaining portion of the Premises being of such size or configuration that such remaining portion of the Premises is unusable or uneconomical for Tenant’s business. Landlord shall be entitled to all compensation, damages, income, rent awards and interest thereon whatsoever which may be paid or made in connection with any taking and Tenant shall have no claim against Landlord or any governmental authority for the value of any unexpired term of this Lease or of any of the improvements or Alterations in the Premises; provided, however, that the foregoing shall not prohibit Tenant from prosecuting a separate claim against the taking authority for an amount separately designated for Tenant’s relocation expenses or the interruption of or damage to Tenant’s business or as compensation for Tenant’s personal property, trade fixtures, Alterations or other improvements paid for by Tenant so long as any award to Tenant will not reduce the award to Landlord.

In the event of a partial taking of the Premises which does not result in a termination of this Lease, the Monthly Rent, Tenant’s Electrical Charge and Additional Rent under Paragraphs 5 and 7 hereunder shall be equitably reduced. If all or any material part of the Real Property other than the Premises is taken, Landlord may terminate this Lease upon written notice to Tenant given within ninety (90) days after the date of taking, provided that Landlord also terminates the leases of all other tenants of the Real Property that are similarly affected by the taking and for which Landlord has a termination right.

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b. Notwithstanding the foregoing, if all or any portion of the Premises is taken for a period of time of one (1) year or less ending prior to the end of the term of this Lease, this Lease shall remain in full force and effect and Tenant shall continue to pay all rent and to perform all of its obligations under this Lease; provided, however, that Tenant shall be entitled to all compensation, damages, income, rent awards and interest thereon that is paid or made in connection with such temporary taking of the Premises (or portion thereof), except that any such compensation in excess of the rent or other amounts payable to Landlord hereunder shall be promptly paid over to Landlord as received. Landlord and Tenant each hereby waive the provisions of any applicable existing or future Legal Requirement providing for, or allowing either party to petition the courts of the state in which the Real Property is located for, a termination of this Lease upon a partial taking of the Premises and/or the Building.

28. Landlord’s Liability; Sale of Building. The term “Landlord,” as used in this Lease, shall mean only the owner or owners of the Real Property at the time in question. Notwithstanding any other provision of this Lease, the liability of Landlord for its obligations under this Lease is limited solely to Landlord’s interest in the Real Property as the same may from time to time be encumbered, and no personal liability shall at any time be asserted or enforceable against any other assets of Landlord or against the constituent shareholders, partners, members, or other owners of Landlord, or the directors, officers, employees and agents of Landlord or such constituent shareholder, partner, member or other owner, on account of any of Landlord’s obligations or actions under this Lease. In addition, in the event of any conveyance of title to the Real Property, then the grantor or transferor shall be relieved of all liability with respect to Landlord’s obligations to be performed under this Lease after the date of such conveyance. In no event shall Landlord be deemed to be in default under this Lease unless Landlord fails to perform its obligations under this Lease, Tenant delivers to Landlord written notice specifying the nature of Landlord’s alleged default, and Landlord fails to cure such default within thirty (30) days following receipt of such notice (or, if the default cannot reasonably be cured within such period, to commence action within such thirty (30) day period and proceed diligently thereafter to cure such default). Upon any conveyance of title to the Real Property, the grantee or transferee shall be deemed to have assumed Landlord’s obligations to be performed under this Lease from and after the date of such conveyance, subject to the limitations on liability set forth above in this Paragraph 28. If Tenant provides Landlord with any security for Tenant’s performance of its obligations hereunder, Landlord shall transfer such security to the grantee or transferee of Landlord’s interest in the Real Property, and upon such transfer Landlord shall be released from any further responsibility or liability for such security. Notwithstanding any other provision of this Lease, but not in limitation of the provisions of Paragraph 14.a. above, Landlord shall not be liable for any consequential damages or interruption or loss of business, income or profits, nor shall Landlord be liable for loss of or damage to artwork, currency, jewelry, bullion, unique or valuable documents, securities or other valuables, or for other property not in the nature of ordinary fixtures, furnishings and equipment used in general administrative and executive office activities and functions. Wherever in this Lease Tenant (a) releases Landlord from any claim or liability, (b) waives or limits any right of Tenant to assert any claim against Landlord or to seek recourse against any property of Landlord or (c) agrees to indemnify Landlord against any matters, the relevant release, waiver, limitation or indemnity shall run in favor of and apply to Landlord, the constituent shareholders, partners, members, or other owners of Landlord, and the directors, officers, employees and agents of Landlord and each such constituent shareholder, partner, member or other owner.

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29. Estoppel Certificates. At any time and from time to title, upon not less than ten (10) business days’ prior notice from Landlord, Tenant shall execute, acknowledge and deliver to Landlord a statement certifying the commencement date of this Lease, stating that this Lease is unmodified and in full force and effect (or if there have been modifications, that this Lease is in full force and effect as modified and the date and nature of each such modification), that, to the best of Tenant’s knowledge (and Tenant shall be deemed to have knowledge of any default of which Tenant should have been reasonably aware, based on the circumstances), Landlord is not in default under this Lease (or, if Landlord is in default, specifying the nature of such default), that, to the best of Tenant’s knowledge (and Tenant shall be deemed to have knowledge of any default of which Tenant should have been reasonably aware, based on the circumstances) Tenant is not in default under this Lease (or if Tenant is in default, specifying the nature of such default), the current amounts of and the dates to which the Monthly Rent, Tenant’s Electrical Charge and Additional Rent has been paid, and setting forth such other matters as may be reasonably requested by Landlord. Any such statement may be conclusively relied upon by a prospective purchaser of the Real Property or b) a lender obtaining a lien on the Real Property as security. If Tenant fails to execute and deliver to Landlord the required certificate within the required ten (10) business day period, then Landlord may send Tenant a second written notice requesting that Tenant execute and deliver such certificate to Landlord pursuant to the terms hereof. If Tenant fails to execute and return such certificate to Landlord within five (5) business days following such second written notice, then such failure shall be conclusive upon Tenant that (i) this Lease is in full force and effect, without modification except as may be represented by Landlord in good faith, (ii) there are no uncured defaults in Landlord’s perform* nee of its obligations hereunder, (iii) not more than one month’s installment of Monthly Rent has been paid in advance, and (iv) any other statements of fact reasonably included by Landlord in such statement are correct. Tenant acknowledges and agrees that its failure to execute such certificate within five (5) business days following the second written notice from Landlord may cause Landlord serious financial damage by causing the failure of a sale or financing transaction and giving Landlord all of its rights and remedies under Paragraph 25 above, including its right to damages caused by the loss of such sale or financing, but only to the extent any such loss is attributable primarily to Tenant’s failure to deliver any such certificate.

30. Right of Landlord to Perform. If Tenant fails to make any payment required hereunder (other than Monthly Rent, Tenant’s Electrical Charge and Additional Rent) or fails to perform any other of its obligations hereunder, Landlord may, but shall not be obliged to, and without waiving any default of Tenant or releasing Tenant from any obligations to Landlord hereunder, make any such payment or perform any other such obligation on Tenant’s behalf; provided, however, unless such failure by Tenant, in Landlord’s reasonable judgment, causes an unreasonable annoyance to other tenants of the Building, creates an unsafe condition for person or property or may subject Landlord or any occupants of the Building to a penalty or liability under any Legal Requirement, Landlord may not make the payment or perform the obligation on Tenant’s behalf unless Landlord has provided Tenant with written notice of the failure to pay or perform and Tenant fails to correct the failure within thirty (30) days of such written notice or, if the failure cannot by its nature be cured within the 30 day period, if Tenant fails to commence to cure such noncompliance within the 30 day period and thereafter diligently prosecute such cure to completion or, in any event, if Tenant fails to complete the cure within ninety (90) days of the initial failure to perform. All sums so paid by Landlord and all necessary

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incidental costs in connection with the performance by Landlord of an obligation of Tenant (together with interest thereon from the date of such payment by Landlord until paid at the Interest Rate) shall be payable by Tenant to Landlord upon demand, and Tenant’s failure to make such payment upon demand shall entitle Landlord to the same rights and remedies provided Landlord in the event of non-payment of rent.

31. Late Charge. Tenant acknowledges that late payment of any installment of Monthly Rent, Tenant’s Electrical Charge or Additional Rent or any other amount required under this Lease will cause Landlord to incur costs not contemplated by this Lease and the exact amount of such costs would be extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, late charges that may be imposed on Landlord by the terms of any encumbrance or note secured by the Real Property and the loss of the use of the delinquent funds. Therefore, if any installment of Monthly Rent, Tenant’s Electrical Charge, Additional Rent or any other amount due from Tenant is not received when due, Tenant shall pay to Landlord on demand, on account of the delinquent payment, an additional sum equal to the greater of (i) five percent (5%) of the overdue amount, or (ii) One Hundred Dollars ($100.00), which additional sum represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant’s default with respect to the overdue amount, nor prevent Landlord from exercising its right to collect interest as provided above, rent, or any other damages, or from exercising any of the other rights and remedies available to Landlord.

32. Attorneys’ Fees; Waiver of Jury Trial. In the event of any action or proceeding between Landlord and Tenant (including an action or proceeding between Landlord and the trustee or debtor in possession while Tenant is a debtor in a proceeding under any bankruptcy law) to enforce any provision of this Lease, the losing party shall pay to the prevailing party all costs and expenses, including, without limitation, reasonable attorneys’ fees and expenses, incurred in such action and in any appeal in connection therewith by such prevailing party. The “prevailing party” will be determined by the court before whom the action was brought based upon an assessment of which party’s major arguments or positions taken in the suit or proceeding could fairly be said to have prevailed over the other party’s major arguments or positions on major disputed issues in the court’s decision. Notwithstanding the foregoing, however, Landlord shall be deemed to be prevailing party in any unlawful detainer or other action or proceeding instituted by Landlord based upon any default or alleged default of Tenant hereunder if (i) judgment is entered in favor of Landlord, or (ii) prior to trial or judgment Tenant vacates the Premises or otherwise cures the default claimed by Landlord.

If Landlord becomes involved in any litigation or dispute, threatened or actual, by or against anyone not a party to this Lease, but arising by reason of or related to any act or omission of Tenant or any Tenant Party, Tenant agrees to pay Landlord’s reasonable attorneys’ fees and other costs incurred in connection with the litigation or dispute, regardless of whether a lawsuit is actually filed.

IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY IN SUCH TRIAL.

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33. Waiver. No provisions of this Lease shall be deemed waived by Landlord or Tenant unless such waiver is in a writing signed by the party giving such waiver. The waiver by either party of any breach of any provision of this Lease by the other party shall not be deemed a waiver of any subsequent breach of the same or any other provision of this Lease. No delay or omission in the exercise of any right or remedy of Landlord upon any default by Tenant, or of Tenant upon any default of Landlord, shall impair such right or remedy or be construed as a waiver. Landlord’s acceptance of any payments of rent due under this Lease shall not be deemed a waiver of any default by Tenant under this Lease (including Tenant’s recurrent failure to timely pay rent) other than Tenant’s nonpayment of the accepted sums, and no endorsement or statement on any check or accompanying any check or payment shall be deemed an accord and satisfaction. Tenant’s payment of rent due and Tenant’s continuance in possession shall not constitute a waiver by Tenant of any default of Landlord. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s consent or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.

34. Notices. All notices and demands which may or are required to be given by either party to the other hereunder shall be in writing. All notices and demands by Landlord to Tenant shall be delivered personally or sent by United States mail, postage prepaid, or by any reputable overnight or same-day courier, addressed to Tenant at the Premises, or to such other place as Tenant may from time to time designate by notice to Landlord hereunder; provided, however, that prior to the Commencement Date, notices to Tenant shall be addressed to Tenant at 100 Beaver Street, Waltham, MA 02453-8443. All notices and demands by Tenant to Landlord shall be sent by United States mail, postage prepaid, or by any reputable overnight or same-day courier, addressed to Landlord at 555 California Street, 49th floor, San Francisco, California 94104, Attn: Corporate Secretary, with a copy to Shorenstein Company LLC, 450 Lexington Avenue, New York, New York 10017, with a further copy to the management office of the Building, or to such other place as Landlord may from time to time designate by notice to Tenant hereunder. Notices delivered personally or sent same-day courier will be effective immediately upon delivery to the addressee at the designated address; notices sent by overnight courier will be effective one (1) Business Day after acceptance by the service for delivery; notices sent by mail will be effective two (2) Business Days after mailing. In the event Tenant requests multiple notices hereunder, Tenant will be bound by such notice from the earlier of the effective times of the multiple notices.

35. Deleted.

36. Defined Terms and Marginal Headings. When required by the context of this Lease, the singular includes the plural. If more than one person or entity signs this Lease as Tenant, the obligations hereunder imposed upon Tenant shall be joint and several, and the act of, written notice to or from, refund to, or signature of, any Tenant signatory to this Lease (including, without limitation, modifications of this Lease made by fewer than all such Tenant signatories) shall bind every other Tenant signatory as though every other Tenant signatory had so acted, or received or given the written notice or refund, or signed. The headings and titles to the paragraphs of this Lease are for convenience only and are not to be used to interpret or

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construe this Lease. Wherever the term “including” or “includes” is used in this Lease it shall be construed as if followed by the phrase “without limitation.” The language in all parts of this Lease shall in all cases be construed as a whole and in accordance with its fair meaning and not construed for or against any party simply because one party was the drafter thereof.

37. Time and Applicable Law. Time is of the essence of this Lease and of each and all of its provisions, except as to the conditions relating to the delivery of possession of the Premises to Tenant. This Lease shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

38. Successors. Subject to the provisions of Paragraphs 13 and 28 above, the covenants and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, executors, administrators and assigns.

39. Entire Agreement; Modifications. This Lease (including any exhibit, rider or attachment hereto) constitutes the entire agreement between Landlord and Tenant with respect to Tenant’s lease of the Premises. No provision of this Lease may be amended or otherwise modified except by an agreement in writing signed by the parties hereto. Neither Landlord nor Landlord’s agents have made any representations or warranties with respect to the Premises, the Building, the Real Property, the Office Park or this Lease except as expressly set forth herein, including without limitation any representations or warranties as to the suitability or fitness of the Premises for the conduct of Tenant’s business or for any other purpose, nor has Landlord or its agents agreed to undertake any alterations or construct any improvements to the Premises except those, if any, expressly provided in this Lease, and no rights, easements or licenses shall be acquired by Tenant by implication or otherwise unless expressly set forth herein.

40. Light and Air. Tenant agrees that no diminution of light, air or view by any structure which may hereafter be erected (whether or not by Landlord) shall entitle Tenant to any reduction of rent hereunder, result in any liability of Landlord to Tenant, or in any other way affect this Lease.

41. Name of Building. Tenant shall not use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises without the written consent of Landlord. Landlord reserves the right to change the name of the Building at any time in its sole discretion by written notice to Tenant and Landlord shall not be liable to Tenant for any loss, cost or expense on account of any such change of name.

42. Severability. If any provision of this Lease or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Lease and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.

43. Authority. If Tenant is a corporation, partnership, trust, association or other entity, Tenant and each person executing this Lease on behalf of Tenant, hereby covenants and warrants that (a) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation, (b) Tenant has

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and is duly qualified to do business in the state in which the Real Property is located, (c) Tenant has full corporate, partnership, trust, association or other appropriate power and authority to enter into this Lease and to perform all Tenant’s obligations hereunder, and (d) each person (and all of the persons if more than one signs) signing this Lease on behalf of Tenant is duly and validly authorized to do so.

44. No Offer. Submission of this instrument for examination and signature by Tenant does not constitute an offer to lease or a reservation of or option for lease, and is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.

45. Real Estate Brokers. Landlord and Tenant each represents and warrants to the other that such party has negotiated this Lease directly with the Real Estate Broker(s) identified in Paragraph 2 (“Brokers”) and has not authorized or employed, or acted by implication to authorize or to employ, any other real estate broker or salesperson to act for such party in connection with this Lease. Each party shall hold the other harmless from and indemnify and defend the other against any and all Claims by any real estate broker or salesperson other than the Brokers for a commission, finder’s fee or other compensation as a result of the inaccuracy of such party’s representation above. Notwithstanding anything to the contrary herein, pursuant to separate written agreements, Landlord shall pay any commission or fee due to the Brokers in connection with the execution of this Lease and Tenant shall have no liability therefor.

46. Consents and Approvals. Wherever the consent, approval, judgment or determination of Landlord is required or permitted under this Lease, Landlord’s consent, approval, judgment or determination shall not be unreasonably made or withheld (as applicable), unless the provision providing for such consent, approval, judgment or determination specifies that Landlord’s consent or approval shall be in Landlord’s sole discretion, or otherwise specifies the standards under which Landlord may withhold its consent. Whenever Tenant requests Landlord to take any action or give any consent or approval, Tenant shall reimburse Landlord for all of Landlord’s costs incurred in reviewing the proposed action or consent (whether or not Landlord consents to any such proposed action), including without limitation reasonable attorneys’ or consultants’ fees and expenses, within ten (10) days after Landlord’s delivery to Tenant of a statement of such costs. If it is determined that Landlord failed to give its consent or approval where it was required to do so under this Lease, Tenant’s sole remedy will be an order of specific performance or mandatory injunction of the Landlord’s agreement to give its consent or approval. The review and/or approval by Landlord of any item shall not impose upon Landlord any liability for accuracy or sufficiency of any such item or the quality or suitability of such item for its intended use. Any such review or approval is for the sole purpose of protecting Landlord’s interest in the Real Property, and neither Tenant nor any Tenant Party nor any person or entity claiming by, through or under Tenant, nor any other third party shall have any rights hereunder by virtue of such review and/or approval by Landlord.

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47. Reserved Rights. Landlord retains and shall have the rights set forth below, exercisable without notice and without liability to Tenant for damage or injury to property, person or business and without effecting an eviction, constructive or actual, or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for rent abatement:

a. To grant to anyone the exclusive right to conduct any business or render any service in or to the Building and its tenants, provided that such exclusive right shall not operate to require Tenant to use or patronize such business or service or to exclude Tenant from its use of the Premises expressly permitted herein.

b. To perform, or cause or permit to be performed, at any time and from time to time, including during Business Hours, construction in the common areas and facilities or other leased areas in the Real Property or the Office Park; provided that such activities do not have a materially adverse affect on Tenant’s access to, and use and enjoyment of, the Premises for the purposes leased.

c. To reduce, increase, enclose or otherwise change at any time and from time to time the size, number, location, lay-out and nature of the common areas and facilities and other tenancies and premises in the Real Property or the Office Park, to create additional rentable areas through use or enclosure of common areas, and to dedicate the roads within the Office Park for public use.

48. Financial Statements. Upon submission of this Lease to Landlord and at any time thereafter within thirty (30) days after Landlord’s request therefor (but not more than twice in any twelve (12) month period unless the Building is then the subject of a sale or refinancing), Tenant shall furnish to Landlord copies of true and accurate financial statements reflecting Tenant’s then current financial situation (including without limitation balance sheets, statements of profit and loss, and changes in financial condition), Tenant’s most recent audited or certified annual financial statements, and Tenant’s federal income tax returns pertaining to Tenant’s business, and in addition shall cause to be furnished to Landlord similar financial statements and tax returns for any guarantor(s) of this Lease. Tenant agrees to deliver to any lender, prospective lender, purchaser or prospective purchaser designated by Landlord such financial statements of Tenant as may be reasonably requested by such lender or purchaser. If Tenant has provided any financial information to Tenant that is not otherwise available to the public and Tenant has advised Landlord that such information is confidential, then, except as aforementioned or as may be required by law, Landlord shall use good faith efforts to keep such financial information confidential.

49. Deleted.

50. Nondisclosure of Lease Terms. Tenant agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord, and that disclosure of the terms hereof could adversely affect the ability of Landlord to negotiate with other tenants. Tenant hereby agrees to use reasonable efforts to prevent its partners, officers, directors, employees, agents, real estate brokers and sales persons and attorneys from disclosing the terms of this Lease to any other person without Landlord’s prior written consent, except to any accountants of Tenant in connection with the preparation of Tenant’s financial statements or tax returns, to an assignee of this Lease or sublessee of the Premises, or to an entity or person to whom disclosure is required by applicable law or in connection with any action brought to enforce this Lease.

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51. Furniture. Effective as of the Commencement Date, Landlord conveys to Tenant without charge, and Tenant accepts, all of Landlord’s right, title and interest in and to the furniture listed on attached Exhibit F (the “Furniture”). Landlord makes no representation or warranty to Tenant regarding the condition of the Furniture and Tenant accepts the Furniture in its as-is condition. Upon the expiration or earlier termination of the Lease, Tenant shall remove the Furniture from the Premises in accordance with Paragraph 20.a. of this Lease.

52. Right of First Offer.

a. First Offer Right; Exercise of Right. Subject to the provisions of this Paragraph 52, Tenant shall have a right of first offer to lease the space located on the second (2nd) floor of the Building that is contiguous to the Premises and outlined on attached Exhibit G (the “First Offer Space”) which First Offer Space is, as of the date of this Lease, vacant. Upon the execution of this Lease and every six (6) months thereafter until four (4) such notices have been given to Tenant, Landlord shall send Tenant a written notice (the “First Offer Notice”) offering the First Offer Space to Tenant pursuant to this Paragraph 52; provided, however, that, once Tenant or a third party has leased the First Offer Space, as permitted by the terms hereof, no further First Offer Notices shall be given to Tenant.

Upon Tenant’s receipt of a First Offer Notice for the First Offer Space, Tenant may exercise its right to lease the First Offer Space by notifying Landlord thereof in writing (“Tenant’s Election Notice”) within five (5) business days after the date of the First Offer Notice, (Tenant must lease the entire First Offer Space and may not lease only a portion thereof.) If Tenant does not exercise its right to lease the First Offer Space within such five (5) business day period, then Landlord shall have a period of six (6) months to lease the First Offer Space to any third party on any conditions Landlord desires. If Tenant does not lease the First Offer Space to a third party during such six (6) month period, then an additional First Offer Notice shall be given to Tenant in accordance with the immediately preceding grammatical paragraph, unless the period for the delivery of such First Offer Notices has lapsed.

Notwithstanding anything to the contrary above, if Landlord fails to deliver a First Offer Notice to Tenant on the date such First Offer Notice was required to be sent, such failure shall not constitute a default by Landlord under this Lease or afford Tenant the right to terminate this Lease or the right to any damages, but, in such event, Landlord may not lease the First Offer Space to a third party unless Landlord first delivers a First Offer Notice to Tenant and Tenant thereafter fails to exercise its right to Lease the First Offer Space by written notice to Landlord give within five (5) business days of Tenant’s receipt of the First Offer Notice.

b. Terms and Conditions. If Tenant timely exercises its right to lease the First Offer Space pursuant to the provisions of Paragraph 52.a. above, Landlord and Tenant shall promptly enter into an amendment of this Lease, adding the First Offer Space to the Premises on all the terms and conditions set forth in this Lease as to the Premises originally demised hereunder, except that (i) the First Offer Space shall be delivered to Tenant in its then “as-is” condition, (ii) the term of the lease to Tenant of the First Offer Space shall commence upon the date the First Offer Space is delivered to Tenant and shall continue coextensively with the remaining term hereof and any extension thereof, and (iii) the Monthly Rent payable by Tenant for the First Offer Space shall be the fair market rent (as hereinafter defined) for the First

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Offer Space, provided that, if the term of this Lease as to the First Offer Space will be less than five (5) years, then for the purposes of establishing the fair market rent for the First Offer Space, the term of this Lease shall be deemed to be five (5) years. For purposes of this Paragraph 52.b., the term “fair market rent” shall have the meaning set forth in Paragraph 53.b. below, with all references therein to the “Premises” being deemed to refer to the “First Offer Space,” and disregarding any provisions which by their nature pertain only to the renewal term. If Landlord and Tenant are unable to agree upon the fair market monthly rent within such thirty (30)-day period, then the fair market rent shall be established by appraisal in accordance with Paragraph 53.c. below.

If Tenant exercises the right of first offer granted herein and Landlord is unable, for any reason beyond Landlord’s reasonable control, to deliver the First Offer Space to Tenant on the stated availability date, then, as Tenant’s sole remedy, Tenant’s rent with respect to the First Offer Space shall be abated until Landlord delivers the same to Tenant.

c. Delay in Determination of Monthly Rent. If the fair market rent is not established prior to the commencement of the Lease term as to the First Offer Space, then Tenant shall pay Monthly Rent per rentable square foot for the First Offer Space at the rate per square foot then in effect for the existing Premises and, as soon as the fair market rent for the First Offer Space is determined, Tenant shall, within thirty (30) days of written demand, pay to Landlord any deficiency in the amount paid by Tenant during such period, or, if Tenant paid excess Monthly Rent during such period, Landlord shall credit such excess payments to the Monthly Rent amounts next due.

d. Limitation on Tenant’s Right of First Offer. Notwithstanding the foregoing, if (i) on the date of exercise of the right of first offer, or the date immediately preceding the date the Lease term for the First Offer Space is to commence, there exists in uncured Event of Default or a breach of this Lease by Tenant that subsequently matures into an Event of Default, or (ii) on the date immediately preceding the date the Lease term for the First Offer Space is to commence the Tenant originally named herein (a) is not in occupancy of at least fifty percent (50%) of the Premises then leased hereunder or (b) does not intend to occupy at least fifty percent (50%) of the Premises (as such Premises have increased by the addition of the First Offer Space thereto), then, at Landlord’s option, Tenant shall have no right to lease the First Offer Space and, at Landlord’s option, the exercise of the right of first offer shall be null and void.

53. Renewal Option.

a. Option to Renew. Tenant shall have the option to renew this Lease for one (1) additional term of five (5) years, commencing upon the expiration of the initial term of the Lease. The renewal option must be exercised, if at all, by written notice given by Tenant to Landlord not later than ten (10) months prior to expiration of the initial term of this Lease. Notwithstanding the foregoing, at Landlord’s election, this renewal option shall be null and void and Tenant shall have no right to renew this Lease if (i) as of the date immediately preceding the commencement of the renewal period the Tenant originally named herein and/or an Affiliate of such Tenant is not in occupancy of at least seventy percent (70%) of the Premises then demised hereunder or such Tenant does not intend to continue to occupy at least seventy percent (70%) of

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the Premises (but intends to assign this Lease or sublet more than thirty percent (30%) of the Premises), or (ii) on the date Tenant exercises the option or on the date immediately preceding the commencement date of the renewal period there exists an uncured Event of Default or a breach of this Lease that subsequently matures into an Event of Default.

b. Terms and Conditions. If Tenant exercises the renewal option, then during the renewal period all of the terms and conditions set forth in this Lease as applicable to the Premises during the initial term shall apply during the renewal term, except that (i) Tenant shall have no further right to renew this Lease, (ii) Tenant shall take the Premises in their then “as-is” state and condition, (iii) the Monthly Rent payable by Tenant for the Premises shall be the then-fair market rent for the Premises based upon the terms of this Lease, as renewed and (iv) the Base Year for the Premises shall be the calendar year in which the renewal term commences and the Base Tax Year for the Premises shall be the fiscal tax year in which the renewal term commences. Fair market rent shall include the periodic rental increases, if any, that would be included for space leased for the period of the renewal term. For purposes of this Paragraph 53, the term “fair market rent” shall mean the rental rate that would be applicable for a lease term commencing on the commencement date of the renewal term and that would be payable in any arms length negotiations for the Premises in their then as-is condition, for the renewal term, which rental rate may be established by reference to rental terms actually negotiated for comparable space under primary lease (and not sublease), taking into consideration the location of the Building and such amenities as existing improvements, view, floor on which the Premises are situated and the like, situated in first class office buildings in comparable locations in the Waltham area, in comparable physical and economic condition as the Building, engaged in then-prevailing ordinary rental market practices with respect to tenant concessions such as tenant improvement allowances and free rent (if applicable) (e.g. not offering extraordinary rental, promotional deals and other concessions to tenants in an effort to alleviate cash flow problems, difficulties in meeting loan obligations or other financial distress, or in response to a greater than average vacancy rate in a particular building). The fair market rent shall be mutually agreed upon by Landlord and Tenant in writing within the thirty (30) calendar day period commencing six (6) months prior to commencement of the renewal period. If Landlord and Tenant are unable to agree upon the fair market monthly rent within such thirty (30)-day period, then the fair market rent shall be established by appraisal in accordance with the procedures set forth in Paragraph 53.c. below.

c. Appraisal. Within fifteen (15) days after the expiration of the thirty (30)-day period for the mutual agreement of Landlord and Tenant as to the fair market rent, each party hereto, at its cost, shall engage a real estate appraiser to act on its behalf in determining the fair market rent. The appraisers each shall have at least ten (10) years’ experience with leases in first-class high-rise office buildings in the Boston metropolitan area and shall submit to Landlord and Tenant in advance for Landlord’s and Tenant’s reasonable approval the appraisal methods to be used. If a party does not appoint an appraiser within said fifteen (15)-day period but an appraiser is appointed by the other respective party, the single appraiser appointed shall be the sole appraiser and shall set the fair market rent. If the two appraisers are appointed by the parties as stated in this paragraph, such appraisers shall meet promptly and attempt to set the fair market rent. If such appraisers are unable to agree within thirty (30) days after appointment of the second appraiser, the appraisers shall elect a third appraiser meeting the qualifications stated in this paragraph within ten (10) days after the last

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date the two appraisers are given to set the fair market rent. Each of the parties hereto shall bear one-half (1/2) the cost of appointing the third appraiser and of the third appraiser’s fee. The third appraiser shall be a person who has not previously acted in any capacity for either party.

The third appraiser shall conduct his own investigation of the fair market rent, and shall be instructed not to advise either party of his determination of the fair market rent except as follows: When the third appraiser has made his determination, he shall so advise Landlord and Tenant and shall establish a date, at least five (5) days after the giving of notice by the third appraiser to Landlord and Tenant, on which he shall disclose his determination of the fair market rent. Such meeting shall take place in the third appraiser’s office unless otherwise agreed by the parties. After having initialed a paper on which his determination of fair market rent is set forth, the third appraiser shall place his determination of the fair market rent in a sealed envelope. Landlord’s appraiser and Tenant’s appraiser shall each set forth their determination of fair market rent on a paper, initial the same and place them in sealed envelopes. Each of the three envelopes shall be marked with the name of the party whose determination is inside the envelope.

In the presence of the third appraiser, the determination of the fair market rent by Landlord’s appraiser and Tenant’s appraiser shall be opened and examined. If the higher of the two determinations is 105% or less of the amount set forth in the lower determination, the average of the two determinations shall be the fair market rent, the envelope containing the determination of the fair market rent by the third appraiser shall be destroyed and the third appraiser shall be instructed not to disclose his determination. If either party’s envelope is blank, or does not set forth a determination of fair market rent, the determination of the other party shall prevail and be treated as the fair market rent. If the higher of the two determinations is more than 105% of the amount of the lower determination, the envelope containing the third appraiser’s determination shall be opened. If the value determined by the third appraiser is the average of the values proposed by Landlord’s appraiser and Tenant’s appraiser, the third appraiser’s determination of fair market rent shall be the fair market rent. If such is not the case, fair market rent shall be the rent proposed by either Landlord’s appraiser or Tenant’s appraiser which is closest to the determination of fair market rent by the third appraiser.

d. Minimum Rental. Notwithstanding anything in the foregoing to the contrary, in no event shall the Monthly Rent during the renewal period be less than the aggregate of the amounts of Monthly Rent and Additional Rent payable by Tenant (for all of the Premises leased hereunder) under Paragraphs 2.b., 5 and 7 hereof for the calendar month immediately preceding the commencement of the renewal period. If the fair market rent is not established prior to the commencement of the renewal period, then Tenant shall continue to pay as Monthly Rent and Additional Rent the sums in effect as of the last day of the initial term of the Lease and, as soon as the fair market rent is determined, Tenant shall immediately pay to Landlord any deficiency in the amount paid by Tenant during such period.

54. Notice of Lease; Termination Agreement. Tenant shall not record this Lease or any memorandum without Landlord’s prior written consent; provided, however, Landlord agrees to consent to the recordation or registration of a notice of this Lease, at Tenant’s cost and expense, in substantially the form attached hereto as Exhibit I. Upon the expiration or earlier termination of this Lease, upon Landlord’s request, Tenant shall execute, deliver and

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record an instrument acknowledging such termination or expiration and the date of the termination or expiration of this Lease (which instrument shall be substantially in the form of Termination Agreement attached hereto as Exhibit J) and Tenant appoints Landlord as its attorney-in-fact in its name and behalf to execute the instrument if Tenant fails to execute and deliver the instrument to Landlord within ten (10) days after Landlord’s request therefor.

THIS LEASE IS EXECUTED by Landlord and Tenant as of the date set forth at the top of page 1 hereof.

Landlord:		Tenant:
BAY COLONY CORPORATE CENTER LLC,		OSCIENT PHARMACEUTICALS
a Delaware limited liability company		CORPORATION, a Massachusetts corporation
By:	SHORENSTEIN REALTY SERVICES, L.P., a California limited partnership, its manager
By:		By:
Name:	Ronnie E. Ragoff	Name:	Stephen Cohen
Title:	VP	Title:	Senior Vice President and CFO

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1000 Winter Street

Floor 02

Exhibit A

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EXHIBIT B

RULES AND REGULATIONS

Bay Colony Corporate Center

Waltham, Massachusetts

1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building or any part of the Premises visible from the exterior of the Premises without the prior written consent of Landlord, which consent may be withheld in Landlord’s sole discretion. Landlord shall have the right to remove, at Tenant’s expense and without notice to Tenant, any such sign, placard, picture, advertisement, name or notice that has not been approved by Landlord.

All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord.

If Landlord notifies Tenant in writing that Landlord objects to any curtains, blinds, shades or screens attached to or hung in or used in connection with any window or door of the Premises, such use of such curtains, blinds, shades or screens shall be removed immediately by Tenant. No awning shall be permitted on any part of the Premises.

2. No ice, drinking water, towel, barbering or bootblacking, shoeshining or repair services, or other similar services shall be provided to the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord.

3. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of tenants only and Landlord reserves the right to exclude any other names therefrom.

4. The sidewalks, halls, passages, exits, entrances, elevators and stairways shall not be obstructed by any of the Tenant Parties or used by Tenant for any purpose other than for ingress to and egress from its Premises. The halls, passages, exits, entrances, elevators, stairways, balconies and roof are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants. No tenant and no employees or invitees of any tenant shall go upon the roof of the Building.

5. Tenant shall not alter any lock or install any new or additional locks or any bolts on any interior or exterior door of the Premises without the prior written consent of Landlord.

6. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or invitees, shall have caused it.

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7. Tenant shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof.

8. No furniture, freight or equipment of any kind shall be brought into the Building without the consent of Landlord and all moving of the same into or out of the Building shall be done at such time and in such manner as Landlord shall designate. Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into the Building and also the times and manner of moving the same in and out of the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on a platform of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property from any cause, and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. The elevator designated for freight by Landlord shall be available for use by all tenants in the Building during the hours and pursuant to such procedures as Landlord may determine from time to time. The persons employed to move Tenant’s equipment, material, furniture or other property in or out of the Building must be acceptable to Landlord. The moving company must be a locally recognized professional mover, whose primary business is the performing of relocation services, and must be bonded and fully insured. In no event shall Tenant employ any person or company whose presence may give rise to a labor or other disturbance in the Real Property or the Office Park. A certificate or other verification of such insurance must be received and approved by Landlord prior to the start of any moving operations. Insurance must be sufficient in Landlord’s sole opinion, to cover all personal liability, theft or damage to the Real Property and the Office Park, including, but not limited to, floor coverings, doors, walls, elevators, stairs, foliage and landscaping. Special care must be taken to prevent damage to foliage and landscaping during adverse weather. All moving operations shall be conducted at such times and in such a manner as Landlord shall direct, and all moving shall take place during non-business hours unless Landlord agrees in writing otherwise.

9. Tenant shall not employ any person or persons other than the janitor of Landlord for the purpose of cleaning the Premises, unless otherwise agreed to by Landlord. Except with the written consent of Landlord, no person or persons other than those approved by Landlord shall be permitted to enter the Building for the purpose of cleaning the Building or the Premises. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness.

10. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. In no event shall Tenant keep, use, or permit to be used in the Premises or the Building any guns, firearm, explosive devices or ammunition.

11. No cooking shall be done or permitted by Tenant in the Premises, nor shall the Premises be used for the storage of merchandise, for washing clothes, for lodging, or for any improper, objectionable or immoral purposes. Notwithstanding the foregoing, however, Tenant

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may maintain and use microwave ovens and equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that Tenant shall (i) prevent the emission of any food or cooking odor from leaving the Premises, (ii) be solely responsible for cleaning the areas where such equipment is located and removing food-related waste from the Premises and the Building, or shall pay Landlord’s standard rate for such service as an addition to cleaning services ordinarily provided, (iii) maintain and use such areas solely for Tenant’s employees and business invitees, not as public facilities, and (iv) keep the Premises free of vermin and other pest infestation and shall exterminate, as needed, in a manner and through contractors reasonably approved by Landlord, preventing any emission of odors, due to extermination, from leaving the Premises. Notwithstanding clause (ii) above, Landlord shall, without special charge, empty and remove the contents of one (1) 15-gallon (or smaller) waste container from the food preparation area so long as such container is fully lined with, and the contents can be removed in, a waterproof plastic liner or bag, supplied by Tenant, which will prevent any leakage of food related waste or odors; provided, however, that if at any time Landlord must pay a premium or special charge to Landlord’s cleaning or scavenger contractors for the handling of food-related or so-called “wet” refuse, Landlord’s obligation to provide such removal, without special charge, shall cease.

12. Tenant shall not use or keep in the Premises or the Building any kerosene, gasoline, or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by Landlord.

13. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced into the Premises and the Building. No boring or cutting for wires will be allowed without the prior consent of Landlord. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the prior approval of Landlord.

14. Upon the expiration or earlier termination of the Lease, Tenant shall deliver to Landlord the keys of offices, rooms and toilet rooms which have been furnished by Landlord to Tenant and any copies of such keys which Tenant has made. In the event Tenant has lost any keys furnished by Landlord, Tenant shall pay Landlord for such keys.

15. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises, except to the extent and in the manner approved in advance by Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by the tenant by whom, or by whose contractors, employees or invitees, the damage shall have been caused.

16. No furniture, packages, supplies, equipment or merchandise will be received in the Building or carried up or down in the elevators, except between such hours and in such elevators as shall be designated by Landlord, which elevator usage shall be subject to the Building’s customary charge therefor as established from time to time by Landlord.

17. On Saturdays, Sundays and legal holidays, and on other days between the hours of 6:00 P.M. and 8:00 A.M., access to the Building, or to the halls, corridors, elevators or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the Building in charge and has a pass or is properly

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identified. Landlord shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building during the continuance of the same by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building.

18. Tenant shall be responsible for insuring that the doors of the premises are closed and securely locked before leaving the Building and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before Tenant or Tenant’s employees leave the Building, and that all electricity, gas or air shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness Tenant shall make good all injuries sustained by other tenants or occupants of the Building or Landlord. Landlord shall not be responsible to Tenant for loss of property on the Premises, however occurring, or for any damage to the property of Tenant caused by the employees or independent contractors of Landlord or by any other person.

19. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Building.

20. The requirements of any tenant will be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work or do anything outside of their regular duties unless under special instructions from Landlord, and no employee will admit any person (tenant or otherwise) to any office without specific instructions from Landlord.

21. No vending machine or machines of any description shall be installed, maintained or operated upon the Premises without the prior written consent of Landlord.

22. Subject to Tenant’s right of access to the Premises in accordance with Building security procedures, Landlord reserves the right to close and keep locked all entrance at d exit doors of the Building on Saturdays, Sundays and legal holidays and on other days between the hours of 6:00 P.M. and 8:00 A.M., and during such further hours as Landlord may deem advisable for the adequate protection of the Building and the property of its tenants.

23. Neither Landlord nor any operator of the parking areas within the Real Property and the Office Park, as the same are designated and modified by Landlord, in its sole discretion, from time to time (the “Parking Areas”) shall be liable for loss of or damage to any vehicle or any contents of such vehicle or accessories to any such vehicle, or any property left in any of the Parking Areas, resulting from fire, theft, vandalism, accident, conduct or other users of the Parking Areas and other persons, or any other casualty or cause. Further, tenants understand and agree that: (a) Landlord shall not be obligated to provide any traffic control, security protection or operator for the Parking Areas; (b) tenants use the Parking Areas at their own risk; and (c) Landlord shall not be liable for personal injury or death, or theft, loss of or damage to property sustained in the Parking Areas.

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24. Tenants (including the employees, agents, invitees, and visitor; of tenants) shall use the Parking Areas solely for the purpose of parking passenger model cars, small vans and small trucks and shall comply in all respects with any rules and regulations that may be promulgated by Landlord from time to time with respect to the Parking Areas. The Parking Areas may be used by tenants, or their agents or employees, for occasional overnight parking of vehicles. Tenants shall ensure that any vehicle parked in any of the parking spaces shall be kept in proper repair and shall not leak excessive amounts of oil or grease or any amount of gasoline.

25. Tenant’s right to use the Parking Areas shall be in common with other tenants of the Real Property and the Office Park and with other parties permitted by Landlord to use the Parking Areas. Landlord reserves the right to assign and reassign, from time to time, particular parking spaces within the Parking Areas for use by persons selected by Landlord provided that each tenant’s rights under its respective lease are preserved. Landlord shall not be liable to any tenant for any unavailability of such tenant’s designated spaces, if any, nor shall any unavailability entitle tenants to any refund, deduction, or allowance. Tenants shall not park in any numbered space or any space designated as: RESERVED, HANDICAPPED, VISITORS ONLY, or LIMITED TIME PARKING (or similarly designated).

26. If the Parking Areas are damaged or destroyed, or if the use of the Parking Areas is limited or prohibited by any governmental authority, or the use or operation of the Parking Areas is limited or prevented by strikes or other labor difficulties or other causes beyond Landlord’s control, the tenants’ inability to use their parking spaces shall not subject Landlord or any operator of the Parking Areas to any liability to such tenants and shall not relieve the tenants of any of their obligations under their respective leases.

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EXHIBIT C

Form of Commencement Date Letter

______________, 200_

Oscient Pharmaceuticals Corporation

Re: Lease, dated June__, 2004 (the “Lease”), between Bay Colony Corporate Center LLC, a Delaware limited liability company (“Landlord”) and Oscient Pharmaceuticals Corporation, a Massachusetts corporation (“Tenant”) for premises on the 2nd floor of the building located at 1000 Winter Street, Waltham, MA.

Gentlemen or Ladies:

Pursuant to Paragraph 3.a. of your above-referenced Lease, this letter shall confirm that the portion of the Tenant Improvements (as defined in Paragraph 4.a. of the Lease) that are located in Increment 2 were Substantially Completed (as defined in Paragraph 4.c. of the Lease) on ________________. Accordingly, the Increment 2 Commencement Date (as defined in Paragraph 2.b. of the Lease) is _____________ and the Expiration Date of the Lease (as defined in Paragraph 2.b. of the Lease), is __________.

Please acknowledge Tenant’s agreement to the foregoing by executing both duplicate originals of this letter and returning one fully executed duplicate original to Landlord at the address on this letterhead. If Landlord does not receive a fully executed duplicate original of this letter from Tenant evidencing Tenant’s agreement to the foregoing (or a written response setting forth Tenant’s disagreement with the foregoing) within twenty (20) days of the date of this letter, Tenant will be deemed to have consented to the terms set forth herein.

Very truly yours,
BAY COLONY CORPORATE CENTER LLC, a Massachusetts corporation
By:	SHORENSTEIN REALTY SER /ICES, L.P., a California limited partnership, its manager
	By:
		Its Authorized Signatory

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The undersigned agrees to the dates set forth above:

OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation

By

Name

Title

2

EXHIBIT D

DESCRIPTION OF FINAL PLANS

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EXHIBIT E

Form of Letter of Credit

[Date]

BAY COLONY CORPORATE CENTER LLC

c/o SHORENSTEIN COMPANY LLC

555 California Street, Suite 4900

San Francisco, CA 94104

Attn: Corporate Secretary

IRREVOCABLE STANDBY LETTER OF CREDIT NO.__________

We hereby establish our Irrevocable Letter of Credit in your favor available by your drafts drawn on [NAME OF BANK], at sight, for any sum or sums not exceeding ___________________ Dollars ($________________), for account of [NAME OF TENANT] at [TENANT’S ADDRESS]. Draft(s) must be accompanied by supporting documents as described below:

A written statement to [INSERT NAME OF BANK] stating that “The principal amount [or the portion requested] of this Letter of Credit is due and payable to Beneficiary in accordance with the provisions of that certain Office Lease dated_________, 2004, initially entered into between Bay Colony Corporate Center LLC, and Oscient Pharmaceuticals Corporation.”

The written statement shall be accompanied by this Letter of Credit for surrender; provided, however, that if less than the balance of the Letter of Credit is drawn, this Letter of Credit need not be surrendered and shall continue in full force and effect with respect to the unused balance of this Letter of Credit unless and until we issue to you a replacement Letter of Credit for such unused balance, the term of which replacement Letter of Credit shall be identical to those set forth in this Letter of Credit. We are not required to inquire as to the accuracy of the matters recited in the written statement or as to the authority of the person signing the written statement and may take the act of signing as conclusive evidence of such accuracy and his or her authority to do so. The obligation of [BANK] under this Letter of Credit is the individual obligation of [BANK], and is in no way contingent upon reimbursement with respect thereto.

Each draft must bear upon its face the clause “Drawn under Letter of Credit No.____________, dated _____________, of [BANK].”

This Letter of Credit shall be automatically extended for an additional period of one year from the present or each future expiration date unless we have notified you in writing delivered via U.S. registered mail, return receipt requested, to your address stated above, or to such other address as you shall have furnished to us for such purpose, not less than sixty (60) days before such expiration date, that we elect not to renew this Letter of Credit. Upon your receipt of such notification, you may draw your sight draft on us prior to the then applicable expiration date for the unused balance of the Letter of Credit, which shall be accompanied by your signed written statement that you received notification of our election not to extend.

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Except so far as otherwise expressly stated herein, this Letter of Credit is subject to the “Uniform Customs and Practices for Documentary Credits (1993 Revision), International Chamber of Commerce - Publication No. 500.” If this Letter of Credit expires during an interruption of business as described in article 17 of Publication 500, we hereby specifically agree to effect payment if this Letter of Credit is drawn against within 30 days after the resumption of business.

We hereby agree with you that drafts drawn under and in compliance with the terms of this Letter of Credit will be duly honored if presented to the above-mentioned drawee at our offices at [ADDRESS] on or before ___________ PM [TIME ZONE] Time on [INITIAL EXPIRATION DATE], or such later expiration date to which this Letter of Credit is extended pursuant to the terms hereof.

If at any time Beneficiary or its authorized transferee is not in possession of the original of this letter of credit (together with all amendments, if any) because such original has been delivered to us as required hereunder for a draw thereon or transfer thereof, our obligations as set forth in this letter of credit shall continue in full force and effect as if Beneficiary or such authorized transferee still help such original, and any previous delivery to us, without return by us, of such original shall be deemed to have satisfied any requirement that such original be delivered to us for a subsequent draw hereunder or transfer hereof.

This Letter of Credit may be, without charge and without recourse, assigned to, and shall inure to the benefit of, any successor in interest to Bay Colony Corporate Center LLC, under the Office Lease. Transfer charges, if any, are for the account of the applicant.

Sincerely, [BANK]

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EXHIBIT F

List of Furniture

Property Description	Amount
OFFICES	34
One Task Chair
Desk
File Cabinet and/or Bookcase
2 Guest Chairs
CUBES	66
Systems Furniture
One Task Chair
HUDDLE ROOMS	2
Table and 4 Chairs
MULTIPURPOSE ROOMS	3
Four Tables
18 Chairs
CONFERENCE ROOM TABLE	3
8 Chairs
CONFERENCE ROOM TABLE	1
18 Chairs
FILE CABINETS	42

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1000 Winter Street

Floor 02

Exhibit G

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EXHIBIT H

FLEET SNDA

Recorded at the

Request of and

When Recorded, Return to:

Gail E. McCann, Esq.

Edwards & Angell, LLP

2800 Financial Plaza

Providence, Rhode Island 02903

LEASE SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

This agreement (“Lease Subordination, Non-Disturbance and Attornment Agreement” or “Agreement”) is made as of the                     day of                    , 200    , among FLEET NATIONAL BANK, a national banking association having a place of business at 111 Westminster Street, Suite 800, Providence, Rhode Island 02903, as Agent (“Agent”) for itself and the other institutions who from time to time become Lenders under a Loan Agreement among Borrower, Agent, and Lenders relating to the Property (as defined below), BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company, having an address in care of Shorenstein Company, L.P., 555 California Street, San Francisco, California 94104, Attn.: Legal Dept. (“Landlord” or “Borrower”), OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation, having a place of business at                                         , Waltham, Massachusetts (“Tenant”).

Introductory Provisions

A. Lenders are making a loan to Borrower (“Loan”) to be secured by, among other things, a Mortgage, Security Agreement and Fixture Filing (“Mortgage”) given by Borrower to Agent covering property which may be known as Bay Colony Corporate Center, Waltham, Massachusetts, as more particularly described on Exhibit A attached hereto (“Property”), and a Collateral Assignment of Leases and Rents (“Assignment”) from Borrower to Agent with respect to the Property. The Mortgage, the Assignment and related documents are collectively called the “Mortgage Documents”.

B. Tenant is the tenant under that certain lease (“Lease’) dated as of                     , 2004, as may be amended, made with Landlord, covering a portion (the “Premises”) of the Property as more particularly described in the Lease.

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C. Agent and Lenders require, as a condition to the making and maintaining of the Loan, that the Mortgage be and remain superior to the Lease and that their rights under the Assignment be recognized.

D. Tenant requires as a condition to the Lease being subordinate to the Mortgage that its rights under the Lease be recognized.

E. Agent, on behalf of Lenders, Landlord, and Tenant desire to confirm their understanding with respect to the Mortgage and the Lease.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein, and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and with the understanding by Tenant that Lenders shall rely hereon in making and maintaining the Loan, Agent, Landlord, and Tenant agree as follows:

1. Subordination. The Lease and the rights of Tenant thereunder are subordinate and inferior to the lien of the Mortgage Documents and any amendment, renewal, substitution, extension or replacement thereof and each advance made thereunder as though the Mortgage Documents, and each such amendment, renewal, substitution, extension or replacement were executed and recorded, and the advance made, before the execution of the Lease. Without limiting the foregoing and notwithstanding any other term or provision of this Agreement, Tenant’s rights with respect to proceeds of insurance and of eminent domain awards are expressly made subject and subordinate to the rights of Agent and Lenders, and the disposition of such proceeds shall be governed by the Mortgage Documents, and the other “Loan Documents” referred to therein, in all respects.

2. Non-Disturbance. So long as Tenant is not in default (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed, (i) Tenant’s occupancy of the Premises shall not be disturbed by Agent or Lenders in the exercise of any of their rights under the Mortgage Documents during the term of the Lease, or any extension or renewal thereof made in accordance with the terms of the Lease, (i) Lender will not join Tenant as a party defendant in any action or proceeding for the purpose of terminating Tenant’s interest and estate under the Lease because of any default under the Mortgage Documents and (iii) Lender agrees to recognize the Lease and Tenant’s rights under the Lease, except as may be provided herein.

3. Attornment and Certificates. In the event Agent or Lenders succeed to the interest of Borrower as Landlord under the Lease, or if the Property or the Premises are sold pursuant to the remedies relating to the Mortgage Documents, Tenant shall attorn to Agent, Lenders, or a purchaser upon any such foreclosure sale, and shall recognize Agent, Lenders, or such purchaser thereafter as the Landlord under the Lease; provided that such purchaser agrees not to disturb Tenant’s possession of the Premises and recognizes the Lease and Tenant’s rights under the Lease, except as may be provided herein. Such attornment shall be effective and self-operative without the execution of any further instrument. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of any holders) of any of the indebtedness or other obligations secured by the Mortgage Documents, or upon request of any

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such purchaser, (a) any instrument or certificate which, in the reasonable judgment of such holder(s), or such purchaser, may be necessary or appropriate in any such foreclosure proceeding or otherwise to evidence such attornment, and (b) an instrument or certificate regarding the status of the Lease, consisting of statements, if true (and if not true, specifying in what respect), that (i) the Lease is in full force and effect, (ii) the date through which rentals have been paid, (iii) the duration and date of the commencement of the term of the Lease, (iv) the nature of any amendments or modifications to the Lease, (v) to the best of Tenant’s knowledge, that no default, or state of facts, which with the passage of time, or notice, or both, would constitute a default, exists on the part of either party to the Lease, and (vi) the dates on which payments of additional rent, if any, are due under the Lease.

4. Limitations. If Agent or Lenders exercise any of their rights under the Mortgage Documents, or if Agent or Lenders shall succeed to the interest of Landlord under the Lease in any manner, or if any purchaser acquires the Property, or the Premises, upon or after any foreclosure of the Mortgage, or any deed in lieu thereof, Agent, Lenders or such purchaser, as the case may be, shall have the same remedies by entry, action or otherwise in the event of any default by Tenant (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants and conditions of the Lease on Tenant’s part to be paid, performed or observed that the Landlord had or would have had if Lender or such purchaser had not succeeded to the interest of the present Landlord. From and after any such attornment, Agent, Lenders or such purchaser shall be bound to Tenant under all the terms, covenants and conditions of the Lease, and Tenant shall, from and after such attornment to Agent, Lenders, or to such purchaser, have the same remedies against Agent, Lenders, or such purchaser, for the breach of an agreement contained in the Lease that Tenant might have had under the Lease against Landlord, if Agent, Lenders or such purchaser had not succeeded to the interest of Landlord. Provided, however, that Agent, Lenders or such purchaser shall only be bound during the period of their ownership, and that in the case of the exercise by Agent or Lenders of their rights under the Mortgage Documents or a foreclosure, or deed in lieu of foreclosure, all Tenant claims shall be satisfied only out of the interest, if any, of Agent, Lenders, or such purchaser, in the Property, and Agent, Lenders and such purchaser shall not be (a) liable for any act or omission of any prior landlord (including the Landlord); or (b) liable for or incur any obligation with respect to the construction of the Property or any improvements of the Premises or the Property; or (c) subject to any offsets or defenses which Tenant might have against any prior landlord (including the Landlord); or (d) bound by any rent or additional rent which Tenant might have paid more than one month in advance to any prior landlord (including the Landlord), except to the extent actually received by Agent, Lenders or such purchaser; or (e) bound by any amendment or modification of the Lease, or any consent to any assignment or sublet, made without Agent’s prior written consent if required under the Mortgage and other Loan Documents; or (f) bound by or responsible for any security deposit not actually received by Agent; or (g) liable for or incur any obligation with respect to any breach of warranties or representations of any nature under the Lease or otherwise including without limitation any warranties or representations respecting use, compliance with zoning, landlord’s title, landlord’s authority, habitability and/or fitness for any purpose, or possession; or (h) liable for consequential damages. The foregoing shall not, however: (i) relieve Agent, Lenders or such purchaser of the obligation to remedy or cure any conditions at the Premises the existence of which constitutes a Landlord default under the Lease and which continue at the time of such succession or acquisition, or (ii) deprive the Tenant of the right to

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terminate the Lease for a breach of Landlord covenant which is not cured as provided for herein and in the Lease and as a result of which there is a material interference with Tenant’s permitted use and occupation of the Premises or any permitted business conducted therein.

5. Rights Reserved. Nothing herein contained is intended, nor shall it be construed, to abridge or adversely affect any right or remedy of: (a) the Landlord under the Lease, or any subsequent Landlord, against the Tenant in the event of any default by Tenant (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed; or (b) the Tenant under the Lease against the original or any prior Landlord in the event of any default by the original Landlord to pursue claims against such original or prior Landlord whether or not such claim is barred against Lender or a subsequent purchaser.

6. Notice and Right to Cure. Tenant agrees to provide Agent with a copy of each notice of default given to Landlord under the Lease, at the same time as such notice of default is given to the Landlord, and that in the event of any default by the Landlord under the Lease, Tenant will take no action to terminate the Lease (a) if the default is not curable by Lender (so long as the default does not interfere with Tenant’s use and occupation of the Premises), or (b) if the default is curable by Agent or Lenders, unless the default remains uncured for a period of thirty (30) days after written notice thereof shall have been given, postage prepaid, to Landlord at Landlord’s address, and to Agent at the address provided in Section 7 below; provided, however, that if any such default is such that it reasonably cannot be cured within such thirty (30) day period, such period shall be extended for such additional period of time (not to exceed 120 days) as shall be reasonably necessary (including, without litigation, a reasonable period of time to obtain possession of the Property and to foreclose the Mortgage, if necessary to effectuate a cure), if Agent gives Tenant written notice within such thirty (30) day period of Lender’s election to undertake the cure of the default and if curative action (including, without imitation, action to obtain possession and foreclose) is instituted within such thirty-day period and is thereafter diligently pursued. Agent and Lenders shall have no obligation to cure any default under the Lease, except to the extent provided in paragraph 4 above.

7. Notices. Any notice or communication required or permitted hereunder shall be in writing, and shall be given or delivered: (i) by United States mail, registered or certified, postage fully prepaid, return receipt requested, or (ii) by recognized courier service or recognized overnight delivery service; and in any event addressed to the party for which it is intended at its address set forth below:

To Agent:	Fleet National Bank
	111 Westminster Street, Suite 800
	Providence, RI 02903
	Attention: Commercial Real Estate/Loan
	Administration Manager
To Tenant:	OSCIENT PHARMACEUTICALS CORPORATION
	___________________________________________
	___________________________________________

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or such other address as such party may have previously specified by notice given or delivered in accordance with the foregoing. Any such notice shall be deemed to have been given and received on the date delivered or tendered for delivery during normal business hours as herein provided.

8. No Oral Change. This Agreement may not be modified orally or in any manner than by an agreement in writing signed by the parties hereto or their respective successors in interest.

9. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, personal representatives, successors and assigns, and any purchaser or purchasers at foreclosure of the Property or any portion thereof, and their respective heirs, personal representatives, successors and assigns.

10. Payment of Rent To Agent. Tenant acknowledges that it has notice that the Lease and the rent and all sums due thereunder have been assigned to Agent as part of the security for the Obligations secured by the Mortgage Documents. In the event Agent notifies Tenant of a default under the Loan and demands that Tenant pay its rent and all other sums due under the Lease to Agent, Tenant agrees that it will honor such demand and pay its rent and all other sums due under the Lease to Agent, or Agent’s designated agent, until otherwise notified in writing by Agent. Borrower unconditionally authorizes and directs Tenant to make rental payments directly to Lender following receipt of such notice and further agrees that Tenant may rely upon such notice without any obligation to further inquire as to whether or not any default exists under the Mortgage Documents, and that Borrower shall have no right or claim against Tenant for or by reason of any payments of rent or other charges made by Tenant to Agent following receipt of such notice.

11. No Amendment or Cancellation of Lease. So long as the Mortgage remains undischarged of record and except as provided herein to the contrary (including paragraph 6 hereof), Tenant shall not amend or modify the Lease, or consent to an amendment or modification of the Lease, or agree to subordinate the Lease to any other Mortgage, without Agent’s prior written consent in each instance if required under the Mortgage or other Loan Documents, such consent not to be unreasonably withheld.

12. Captions. Captions and headings of sections are not parts of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions of this Agreement.

13. Counterparts. This Agreement may be executed in several counterparts each of which when executed and delivered is an original, but all of which together shall constitute one instrument.

14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

15. Parties Bound. The provisions of this Agreement shall be binding upon and inure to the benefit of Tenant, Agent, Lenders and Borrower and their respective successors and assigns; provided, however, reference to successors and assigns of Tenant shall not

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constitute a consent by Landlord or Borrower to an assignment or sublet by Tenant, but has reference only to those instances in which such consent is not required pursuant to the Lease or for which such consent has seen given.

[SIGNATURES ON NEXT PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

AGENT:
FLEET NATIONAL BANK, As Agent
By
	Name
	Title

TENANT:
OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation
By
	Name
	Title

[For Agent]

STATE OF RHODE ISLAND

COUNTY OF PROVIDENCE Date:                     , 200    

Then personally appeared before me the above-named                                                             , the                                         , of Fleet National, as Agent and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such Bank, as Agent.

____________________, Notary / Public

My Commission Expires: _____________________

[Seal]

[For Tenant]

STATE OF                                              

COUNTY OF                                               Date:                        , 200    

Then personally appeared before me the above-named                                                         , the                                                          of                                                              and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such                                                  .

____________________, Notary / Public

My Commission Expires: _____________________

[Seal]

CONSENT BY LANDLORD

The undersigned acknowledges add approves the terms and conditions of the foregoing Agreement as of this                      day of                     , 200    .

LANDLORD:
BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company
By	SHORENSTEIN REALTY SERVICES, L.P., a California limited partnership, its manager
	By
	Print Name
	Title

STATE OF______________________

______________________________, ss. Date:                        , 200    

Then personally appeared before me the above-named                                     , the                                          of Shorenstein Management, Inc., a California corporation, which is the general partner of Shorenstein Realty Services, L.P., a California limited partnership, which is the manager of Bay Colony Corporate Center LLC, a Delaware limited liability company, and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such corporation, limited partnership, and limited 1 ability company.

____________________, Notary / Public

My Commission Expires: _____________________

[Seal]

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EXHIBIT I

FORM OF NOTICE OF LEASE

Notice is hereby given that on                     , 2004, Bay Colony Corporate Center LLC, a Delaware limited liability company, with a mailing address of 555 California Street, 49th floor, San Francisco, California 94104, Attn: Corporate Secretary, with a copy to Shorenstein Company LLC, 450 Lexington Avenue, New York, New York 10017, with a further copy to the management office of the Building (“Landlord”) and Oscient Pharmaceuticals Corporation, having a mailing address of 1000 Winter Street, Suite 2200, Waltham MA 02451-1297 (“Tenant”) executed a lease of certain space comprising 31,501 rentable square feet of space on the second floor of the building known as 1000 Winter Street, Waltham, MA (the “Lease”).

The term of the Lease shall be for a period of approximately seven (7) years and eight (8) months commencing on the date hereof and ending on the date ninety (90) full calendar months following the delivery of the second and final increment of the leased space. Tenant shall have a right of first offer on certain space located contiguous to the leased premises and shall have an option to renew the lease for an additional period of five (5) years, all on the terms and conditions more fully set forth in the Lease Tenant hereby appoints Landlord as Tenant’s attorney-in-fact in its name and behalf to execute, deliver and record an instrument acknowledging the date of the expiration or termination of the Lease if Tenant shall fail to execute and deliver such instrument within ten (10) days after Landlord’s request therefor.

EXECUTED as a sealed instrument on the                      day of                    , 2004.

Landlord:		Tenant:
BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company		OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation
By:	SHORENSTEIN REALTY SERVICES, L.P., a California limited partnership, its manager
		By:
By:		Name:
Name:		Title
Title

1

[For Landlord]

STATE OF                                              

COUNTY OF                                               Date:                        , 200    

Then personally appeared before me the above-named                                         , the                                         , of Bay Colony Corporate Center LLC and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such company.

____________________, Notary / Public

My Commission Expires: _____________________

[Seal]

[For Tenant]

STATE OF                                              

COUNTY OF                                               Date:                        , 200    

Then personally appeared before me the above-named                                         , the                                          of                                         and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such                                         .

____________________, Notary Public

My Commission Expires: _____________________

[Seal]

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EXHIBIT J

FORM OF TERMINATION AGREEMENT

Bay Colony Corporate Center LLC, a Delaware limited liability company, with a mailing address of 555 California Street, 49th floor, San Francisco, California 94104, Attn: Corporate Secretary, with a copy to Shorenstein Company LLC, 450 Lexington Avenue, New York, New York 10017, with a further copy to the management office of the Building (“Landlord”) and Oscient Pharmaceuticals Corporation, having a mailing address of 1000 Winter Street, Waltham MA 02-51-1297 (“Tenant”) executed a lease dated as of                     , 2004, for certain space comprising 31,501 rentable square feet of space on the second floor of the building known as 1000 Winter Street, Waltham, MA (the “Lease”), A Notice of Lease with respect thereto was recorded with Middlesex South Deeds Book                     Page                     .

Landlord and Tenant hereby agree that, as to anyone relying on Landlord’s record title to the building, the term of the Lease (as the same may be renewed) shall terminate on the earlier of the date set forth in the Notice of Lease or on the date on which this Termination Agreement is recorded in Middlesex South Deeds.

EXECUTED as a sealed instrument on the                      day of                     , 2004.

Landlord:		Tenant:
BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company		OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation
By:	SHORENSTEIN REALTY SERVICES, L.P., a California limited partnership, its manager
		By:
By:
		Name:
Name:
		Title
Title

1

[For Landlord]

STATE OF                                              

COUNTY OF                                               Date:                        , 200    

Then personally appeared before me the above-named                                         , the                                         , of Bay Colony Corporate Center LLC and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such company.

____________________, Notary / Public

My Commission Expires: _____________________

[Seal]

[For Landlord]

STATE OF                                              

COUNTY OF                                               Date:                        , 200    

Then personally appeared before me the above-named                                         , the                                          of                                          and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such                                         .

____________________, Notary Public

My Commission Expires: _____________________

[Seal]

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Page 1 of                     

Record and return to:

Christina J. Fulham

Ropes & Gray LLP

One International Place

Boston, MA 02110-2624

NOTICE OF LEASE

Notice is herby given, pursuant to the provisions of Massachusetts General Laws Chapter 183, Section 4 and Chapter 185, Section 71, of the following lease:

LESSOR:	BCCC Property LLC, a Delaware limited liability company.
LESSEE:	Oscient Pharmaceuticals Corporation, a Massachusetts corporation.
DATE OF LEASE EXECUTION:	Lease was executed as of June 23, 2004. The Lease was subsequently amended by a First Amendment to Lease, executed as of August 12, 2004. (References herein to the “Lease” refer to the Lease as so amended.)
DESCRIPTION OF LEASED PREMISES:	36,230 rentable square feet of space (the “Premises”) on the second floor of the building (the “Building”) known as 1000 Winter Street, Waltham, MA. The Premises are outlined on attached Exhibit A-1 and the land on which the Building is located is described on attached Exhibit A-2.
TERM AND COMMENCEMENT:	September 1, 2004, through March 31, 2012.
RENEWAL OPTION:	One (1) option to renew for a five (5) year period, upon and subject to the terms of Paragraph 53 of the Lease.

For Lessor’s title see Deed at Document No. 1362633

Southern Middlesex Land Court Registry District

on Certificate of Title No. 233038 in Book 1295, Page 83

EXECUTED as a sealed instrument on the                     day of                     , 2006.

LESSOR:	LESSEE:
BCCC Property LLC, a Delaware limited liability company	OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation
By:	By:
Name:	Name:
Title:	Title:

[For Lessor]

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.

On this                      day of                     , 200    , before me, the undersigned notary public, personally appeared , proved to me through satisfactory evidence of identification, which was                                         , to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he/she signed it voluntarily for its stated purpose, as                                          [capacity] of Oscient Pharmaceuticals Corporation.

Notary Public

My Commission Expires: _____________________

[Seal]

[For Lessee]

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.

On this                      day of                     , 200    , before me, the undersigned notary public, personally appeared                     , proved to me through satisfactory evidence of identification, which was                     , to be the person whose name is signed on the preceding or attached document, and acknowledged to me that he/she signed it voluntarily for its stated purpose, as                     [capacity] of Oscient Pharmaceuticals Corporation.

Notary Public

My Commission Expires: _____________________

[Seal]

EXHIBIT A-1

Outline of Leased Premises

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1000 Winter Street

Floor 02

Exhibit A-2

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EXHIBIT A-2

Legal Description Of Land

Parcel I:

That certain Parcel of land together with all buildings and improvements now or hereafter situate in Waltham in the County of Middlesex, Commonwealth of Massachusetts, described as follows:

Northeasterly by Winter Street, eight hundred sixty-six and 87/100 feet;

Easterly by land now or formerly of City of Cambridge, four hundred forty-two and 93/l00 feet;

Southwesterly by land now or formerly of Waltham Resources Corp., ten hundred and fifty feet; and

Northerly by three lines measuring together, four hundred fourteen and 19/100 feet,

Northwesterly by three lines measuring together, seven hundred forty-three and 28/100 feet,

Southwesterly being a curving line, three hundred sixty-four and 63/100 feet,

Northwesterly, one hundred forty and 15/100 feet,

Northeasterly, ninety-two and 37/100 feet,

Northwesterly, twenty feet,

Northeasterly, three hundred and eight-three feet, and

Northwesterly, twenty feet, all by lot 6 as shown on plan hereinafter mentioned.

Said Parcel is shown as lot 5, Sheet 4, on said plan (Plan No. 41218C).

All of said boundaries are determined by the Land Court to be located as shown on a subdivision plan, as approved by the Land Court, filed in the Land Registration Office, a copy of which is filed in the Middlesex South Registry District of the Land Court in Registration Book 1051, Page 79, with Certificate 184229.

Parcel II:

That certain Parcel of land together with all buildings and improvements now or hereafter situate in Waltham in the County of Middlesex, Commonwealth of Massachusetts, described as follows:

Northeasterly by Winter Street, four hundred and one feet;

Southeasterly, twenty feet,

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Southwesterly, three hundred and eighty-three feet,

Southeasterly, twenty feet,

Southwesterly, ninety-two and 37/100 feet,

Southeasterly, one hundred forty and 15/100 feet,

Northeasterly, being a curving line, three hundred sixty-four and 63/100 feet,

Southeasterly, by three lines measuring together, seven hundred forty-three and 28/100 feet,

Southerly, by three lines measuring together, four hundred fourteen and 19/100 feet, all by lot 5 as shown on plan hereinafter mentioned;

Southwesterly by land now or formerly of Waltham Resources Corp., four hundred eighty-nine and 18/100 feet;

Northerly, four hundred twelve and 10/100 feet, and

Northwesterly, three hundred twenty-six and 44/100 feet, by lot 7 on said plan; and

Northeasterly, thirteen and 10/100 feet,

Northwesterly, three hundred seventy-nine and 63/100 feet,

Northwesterly, again, four hundred forty-seven and 33/100 feet,

Northeasterly, two hundred five and 91/100 feet; and

Northwesterly, twenty feet, all by lot 8 on said plan.

Said Parcel is shown as lot 6, Sheet 3, on said plan (Plan No. 41218C).

All of said boundaries are determined by the Land Court to be located as shown on a subdivision plan, as approved by the Land Court, filed in the Land Registration Office, a copy of which is filed in the Middlesex South Registry District of the Land Court in Registration Book 1051, Page 79, with Certificate 184229.

Parcel III:

Those certain Parcels of land together with all buildings and improvements now or hereafter situate in Waltham, in the County of Middlesex, Commonwealth of Massachusetts being shown as lots 10 and 11 on a plan entitled “Land Court Plan of Land in Waltham, Mass., Prepared For: London & Leeds Development Corp.”, scale: 1”=80’ dated May 2,1995, prepared by Schofield Brothers of New England Inc., 1071 Worcester Read, Framingham, Mass. 01701, filed in the Middlesex South Registry District of the Land Court as Land Court Plan No. 41218E.

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Together with the rights, easements, benefits and appurtenances contained in the following instruments:

(1) Declaration of Easement dated April 30, 1984 filed in the Middlesex South Registry District of the Land Court as Document No. 661086 (affects Parcels I, II, and III);

(2) Declaration of Restrictions dated October 20, 1983 recorded in the Middlesex South District Registry of Deeds in Book 15274, Page 590 (affects Parcels I and II);

(3) Grant of Utility Easements dated October 20, 1983 and recorded in said Registry in Book 15274, Page 577 and filed as Document No. 649824 (affects Parcels I, II, and III);

(4) License Agreement dated June 8, 1984 recorded in said Registry in Book 15651, Page 171 (affects Parcels I and II);

(5) Declaration of Easements and Covenants dated October 30, 1986 filed as Document No. 726257 as amended by First Amendment of Declaration of Easements and Covenants dated December 15, 1997 filed as Document No. 1049953 (affects Parcels I, II and III); and

(6) Grant of Drainage Easements dated October 20,1983 recorded in Book 15274, Page 597 (affects Parcels I, II and III).

NOTE: As herein used, “recorded” shall mean “recorded with the Middlesex South District Registry of Deeds”, and “registered/filed” shall mean “registered/filed with the Middlesex South Registry District of the Land Court”.

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DOCUMENT 01401030

Southern Middlesex LAND COURT

REGISTRY DISTRICT

RECEIVED FOR REGISTRATION

On: Jan 27, 2006 at 08:19A

Document Fee:   75.00

Receipt Total: $150.00

CERT: 233038        BK: 01295        PG: 83

Recorded at the

Request of and

When Recorded, Return to:

Gail E. McCann, Esq.

Edwards & Angell, LLP

2800 Financial Plaza

Providence, Rhode Island 02903

LEASE SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

This agreement (“Lease Subordination, Non-Disturbance and Attornment Agreement” or “Agreement”) is made as of the ____ day of July, 2004, among FLEET NATIONAL BANK, a national banking association having a place of business at 111 Westminster Street, Suite 800, Providence, Rhode Island 02903, as Agent (“Agent”) for itself and the other institutions who from time to time become Lenders under a Loan Agreement among Borrower, Agent, and Lenders relating to the Property (as defined below), BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company, having an address in care of Shorenstein Company, L.P., 555 California Street, San Francisco, California 94104, Attn.: Legal Dept (“Landlord” or “Borrower”), OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation, having a place of business at 1000 Winter Street, Suite 2200, Waltham, MA 02451 (“Tenant”).

Introductory Provisions

A. Lenders are making a loan to Borrower (“Loan”) to be secured by, among other things, a Mortgage, Security Agreement and Fixture Filing (“Mortgage”) given by Borrower to Agent covering property which may be known, as Bay Colony Corporate Center, Waltham, Massachusetts, as more particularly described on Exhibit A attached hereto (“Property”), and a Collateral Assignment of Leases and Rents (“Assignment”) from Borrower to Agent with respect to the Property. The Mortgage, the Assignment and related documents are collectively called the “Mortgage Documents”.

B. Tenant is the tenant under that certain lease (“Lease”) dated as of June 23, 2004, as may be amended, made with Landlord, covering a portion (the “Premises”) of the Property as more particularly described in the Lease.

C. Agent and Lenders require, as a condition to the making and maintaining of the Loan, that the Mortgage be and remain superior to the Lease and that their rights under the Assignment be recognized.

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D. Tenant requires as a condition to the Lease being subordinate to the Mortgage that its rights under the Lease be recognized.

E. Agent, on behalf of Lenders, Landlord, and Tenant desire to confirm their understanding with respect to the Mortgage and the Lease.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein, and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, and with the understanding by Tenant that Lenders shall rely hereon in making and maintaining the Loan, Agent, Landlord, and Tenant agree as follows:

1. Subordination. The Lease and the rights of Tenant thereunder are subordinate and inferior to the lien of the Mortgage Documents and any amendment, renewal, substitution, extension or replacement thereof and each advance made thereunder as though the Mortgage Documents, and each such amendment, renewal, substitution, extension or replacement were executed and recorded, and the advance made, before, the execution of the Lease. Without limiting the foregoing and notwithstanding any other term or provision of this Agreement, Tenant’s rights with respect to proceeds of insurance and of eminent domain awards are expressly made subject and subordinate to the rights of Agent and Lenders, and the disposition of such proceeds shall be governed by the Mortgage Documents, and the other “Loan Documents” referred to therein, in all respects.

2. Non-Disturbance. So long as Tenant is not in default (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed, (i) Tenant’s occupancy of the Premises shall not be disturbed by Agent or Lenders in the exercise of any of their rights under the Mortgage Documents during the term of the Lease, or any extension or renewal thereof made in accordance with the terms of the Lease, (ii) Lender will not join Tenant as a party defendant in any action or proceeding for the purpose of terminating Tenant’s interest and estate under the Lease because of any default under the Mortgage Documents and (iii) Lender agrees to recognize the Lease and Tenant’s rights under the Lease except as may be provided, herein.

3. Attornment and Certificates. In the event Agent or Lenders succeed to the interest of Borrower as Landlord under the Lease, or if the Property or the Premises are sold pursuant to the remedies relating to the Mortgage Documents, Tenant shall attorn to Agent, Lenders, or a purchaser upon any such foreclosure sale, and shall recognize Agent, Lenders, or such purchaser, thereafter as the Landlord under the Lease; provided that such purchaser agrees not to disturb Tenant’s possession of the Premises and recognizes the Lease and Tenant’s rights under the Lease, except as may be provided herein. Such attornment shall be effective and self-operative without the execution of any further instrument. Tenant agrees, however, to execute and deliver at any time and from time to time, upon the request of any holder(s) of any of the indebtedness or other obligations secured by the Mortgage Documents, or upon request of any such purchaser, (a) any instrument or certificate which, in the reasonable judgment of such holder(s), or such purchaser, may be necessary or appropriate in any such foreclosure proceeding or otherwise to evidence such attornment, and (b) an instrument or certificate regarding the status of the Lease, consisting of statements, if true (and if not true, specifying in what respect), that (i) the Lease is

2

in full force and effect, (ii) the date through which rentals have been paid, (iii) the duration and date of the commencement of the term of the Lease, (iv) the nature of any amendments or modifications to the Lease, (v) to the best of Tenant’s knowledge, that no default, or state of facts, which with the passage of time, or notice, or both, would constitute a default, exists on the part of either party to the Lease, and (vi) the dates on which payments of additional rent, if any, are due under the Lease.

4. Limitations. If Agent or Lenders exercise any of their rights under the Mortgage Documents, or if Agent or Lenders shall succeed to the interest of Landlord under the Lease in any manner, or if any purchaser acquires the Property, or the Premises, upon or after any foreclosure of the Mortgage, or any deed in lieu thereof, Agent, Lenders or such purchaser, as the case may be, shall have the same remedies by entry, action or otherwise in the event of any default by Tenant (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants and conditions of the Lease on Tenant’s part to be paid, performed or observed that the Landlord had or would have had if Lender or such purchaser had not succeeded to the interest of the present Landlord. From and after any such attornment, Agent, Lenders or such purchaser shall be bound to Tenant under all the terms, covenants and conditions of the Lease, and Tenant shall, from and after such attornment to Agent, Lenders, or to such purchaser, have the same remedies against Agent, Lenders, or such purchaser, for the breach of an agreement contained in the Lease that Tenant might have had under the Lease against Landlord, if Agent, Lenders or such purchaser had not succeeded to the interest of Landlord. Provided, however, that Agent, Lenders or such purchaser shall only be bound during the period of their ownership, and that in the case of the exercise by Agent or Lenders of their rights under the Mortgage Documents or a foreclosure, or deed in lieu of foreclosure, all Tenant claims shall be satisfied only out of the interest, if any, of Agent, Lenders, or such purchaser, in the Property, and Agent, Lenders and such purchaser shall not be (a) liable for any act or omission of any prior landlord (including the Landlord); or (b) liable for or incur any obligation with respect to the construction of the Property or any improvements of the Premises or the Property; or (c) subject to any offsets or defenses which Tenant might have against any prior landlord (including the Landlord); or (d) bound by any rent or additional rent which Tenant might have paid more than one month in advance to any prior landlord (including the Landlord), except to the extent actually received by Agent, Lenders or such purchaser; or (e) bound by any amendment or modification of the Lease, or any consent to any assignment or sublet, made without Agent’s prior written consent if required under the Mortgage and other Loan Documents; or (f) bound by or responsible for any security deposit not actually received by Agent; or (g) liable for or incur any obligation with respect to any breach of warranties or representations of any nature under the Lease or otherwise including without limitation any warranties or representations respecting use, compliance with zoning, landlord’s title, landlord’s authority, habitability and/or fitness for any purpose, or possession; or (h) liable for consequential damages. The foregoing shall not, however: (i) relieve Agent, Lenders or such purchaser of the obligation to remedy or cure any conditions; at the Premises the existence of which constitutes a Landlord default under the Lease and which continue at the time of such succession or acquisition, or (ii) deprive the Tenant of the right to terminate the Lease for a breach of Landlord covenant which is not cured as provided for herein and in the Lease and as a result of which there is a material interference with Tenant’s permitted use and occupation of the Premises or any permitted business conducted therein.

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5. Rights Reserved. Nothing herein contained is intended, nor shall it be construed, to abridge or adversely affect any right or remedy of: (a) the Landlord under the Lease, or any subsequent Landlord, against the Tenant in the event of any default by Tenant (beyond any period expressed in the Lease within which Tenant may cure such default) in the payment of rent or in the performance or observance of any of the terms, covenants or conditions of the Lease on Tenant’s part to be performed or observed; or (b) the Tenant under the Lease against the original or any prior Landlord in the event of any default by the original Landlord to pursue claims against such original or prior Landlord whether or not such claim is barred against Lender or a subsequent purchaser.

6. Notice and Right to Cure. Tenant agrees to provide Agent with a copy of each notice of default given to Landlord, under the Lease, at the same time as such notice of default is given to the Landlord, and that in the event of any default by the Landlord under the Lease, Tenant will take no action to terminate the Lease (a) if the default, is not curable by Lender (so long as the default does not interfere with Tenant’s use and occupation of the Premises), or (b) if the default is curable by Agent or Lenders, unless the default remains uncured for a period of thirty (30) days after written notice thereof shall have been given, postage prepaid, to Landlord at Landlord’s address, and to Agent at the address provided in Section 7 below; provided, however, that if any such default is such that it reasonably cannot be cured within such thirty (30) day period, such period shall be extended for such additional period of time (not to exceed 120 days) as shall be reasonably necessary (including, without limitation, a reasonable period of time to obtain possession of the Property and to foreclose the Mortgage, if necessary to effectuate a cure), if Agent gives Tenant written notice within such thirty (30) day period of Lender’s election to undertake the cure of the default and if curative action (including, without limitation, action to obtain possession and foreclose) is instituted within such thirty-day period and is thereafter diligently pursued. Agent and Lenders shall have no obligation to cure any default under the Lease, except to the extent provided in paragraph 4 above.

7. Notices. Any notice or communication required or permitted hereunder shall be in writing, and shall be given or delivered: (i) by United States mail, registered or certified, postage fully prepaid, return receipt requested, or (ii) by recognized courier service or recognized overnight delivery service; and in any event addressed to the party for which it is intended at its address set forth below:

To Agent:	Fleet National Bank 111 Westminster Street, Suite 800 Providence, RI 02903 Attention: Commercial Real Estate/Loan Administration Manager
To Tenant:	OSCIENT PHARMACEUTICALS CORPORATION 1000 Winter Street, Suite 2200 Waltham, MA 02451

or such other address as such party may have previously specified by notice given or delivered in accordance with the foregoing. Any such notice shall be deemed to have been given and received on the date delivered or tendered for delivery during normal business hours as herein provided.

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8. No Oral Change. This Agreement may not be modified orally or in any manner than by an agreement in writing signed by the parties hereto or their respective successors in interest.

9. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their respective heirs, personal representatives, successors and assigns, and any purchaser or purchasers at foreclosure of the Property or any portion thereof, and their respective heirs, personal representatives, successors and assigns.

10. Payment of Rent To Agent. Tenant acknowledges that it has notice that the Lease and the rent and all sums due thereunder have been assigned to Agent as part: of the security for the Obligations secured by the Mortgage Documents. In the event Agent notifies Tenant of a default under the Loan and demands that Tenant pay its rent and all other sums due under the Lease to Agent, Tenant agrees that it will honor such demand and pay its rent and all other sums due under the Lease to Agent, or Agent’s designated agent, until otherwise notified in writing by Agent. Borrower unconditionally authorizes and directs Tenant to make rental payments directly to Lender following receipt of such notice and further agrees that Tenant may rely upon such notice without any obligation to further inquire as to whether or not any default exists under the Mortgage Documents, and that Borrower shall have no right or claim against Tenant for or by reason of any payments of rent or other charges made by Tenant to Agent following receipt of such notice.

11. No Amendment or Cancellation of Lease. So long as the Mortgage remains undischarged of record and except as provided herein to the contrary (including paragraph 6 hereof), Tenant shall not amend or modify the Lease, or consent to an amendment or modification of the Lease, or agree to subordinate the Lease to any other Mortgage, without Agent’s prior written consent in each instance if required under the Mortgage or other Loan Documents, such consent not to be unreasonably withheld.

12. Captions. Captions and headings of sections are not parts of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions of this Agreement.

13. Counterparts. This Agreement may be executed in several counterparts each of which when executed and delivered is an original, but all of which together shall constitute one instrument.

14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

15. Parties Bound. The provisions of this Agreement shall be binding upon and inure to the benefit of Tenant, Agent, Lenders and Borrower and their respective successors and assigns; provided, however, reference to successors and assigns of Tenant shall not constitute a consent by Landlord or Borrower to an assignment or sublet by Tenant, but has reference only to those instances in which such consent is not required pursuant to the Lease or for which such consent has been given.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

AGENT: FLEET NATIONAL BANK, As Agent
By
	Name
	Title
TENANT: OSCIENT PHARMACEUTICALS CORPORATION, a Massachusetts corporation
By
	Name
	Title

(Continued on next page)

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[For Agent]

STATE OF RHODE ISLAND

COUNTY OF PROVIDENCE

On                                         , 2004 before me,                                         , a Notary Public in and for the State of Rhode Island, personally appeared                                         , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Signature (Seal)

[For Tenant]

STATE OF ________________

COUNTY OF ______________

On                                         , 2004 before me,                                         , a Notary Public in and for the State of                                         , personally appeared _______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that his/her signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Signature (Seal)

	, Notary Public
My Commission Expires:
[Seal]

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CONSENT BY LANDLORD

The undersigned acknowledges and approves the terms and conditions of the foregoing Agreement as of this __________ day of July, 2004.

LANDLORD:
BAY COLONY CORPORATE CENTER LLC, a Delaware limited liability company
By	SHORENSTEIN REALTY SERVICES, L.P., a California limited partnership, its manager
	By
		Print Name

Title

STATE OF NEW YORK

________________________________________________, ss. Date: July __ 2004

Then personally appeared before me the above-named                                          of Shorenstein Management, Inc., a California corporation, which is the general partner of _______________, the Shorenstein Realty Services, L.P., a California limited partnership, which is the manager of Bay Colony Corporate Center LLC, a Delaware limited liability company, and acknowledged the foregoing to be his/her free act and deed and the free act and deed of such corporation, limited partnership, and limited liability company.

	, Notary Public
My Commission Expires:
[Seal]

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TABLE OF CONTENTS

Exhibit A

Legal Description of Property

	Page
Parcel I:
That certain Parcel of land together with all buildings and improvements now or hereafter situate in Waltham in the County of Middlesex, Commonwealth of Massachusetts, described as follows:
Northeasterly by Winter Street, eight hundred sixty-six and 87/100 feet;
Easterly by land now or formerly of City of Cambridge, four hundred forty-two and 93/10) feet;
Southwesterly by land now or formerly of Waltham Resources Corp., ten hundred and fifty feet; and
Northerly by three lines measuring together, four hundred fourteen and 19/100 feet,
Northwesterly by three lines measuring together, seven hundred forty-three and 28/100 feet,
Southwesterly being a curving line, three hundred sixty-four and 63/100 feet,
Northwesterly, one hundred forty and 15/100 feet,
Northeasterly, ninety-two and 37/100 feet,
Northwesterly, twenty feet,
Northeasterly, three hundred and eight-three feet, and
Northwesterly, twenty feet, all by lot 6 as shown on plan hereinafter mentioned.
Said Parcel is shown as lot 5, Sheet 4, on said plan (Plan No. 41218C).
All of said boundaries are determined by the Land Court to be located as shown on a subdivision plan, as approved by the Land Court, filed in the Land Registration Office, a copy of which is filed in the Middlesex South Registry District of the Land Court in Registration Book 1051, Page 79, with Certificate 184229.
Parcel II:
That certain Parcel of land together with all buildings and improvements now or hereafter situate in Waltham in the County of Middlesex, Commonwealth of Massachusetts, described as follows:

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TABLE OF CONTENTS

(CONTINUED)

	Page
Northeasterly by Winter Street, four hundred and one feet;
Southeasterly, twenty feet,
Southwesterly, three hundred and eighty-three feet,
Southeasterly, twenty feet,
Southwesterly, ninety-two and 37/100 feet,
Southeasterly, one hundred forty and 15/100 feet,
Northeasterly, being a curving line, three hundred sixty-four and 63/100 feet,
Southeasterly, by three lines measuring together, seven hundred forty-three and 28/100 feet,
Southerly, by three lines measuring together, four hundred fourteen and 19/100 feet, all by lot 5 as shown on plan hereinafter mentioned;
Southwesterly by land now or formerly of Waltham Resources Corp., four hundred eighty-nine and 18/100 feet;
Northerly, four hundred twelve and 10/100 feet, and
Northwesterly, three hundred twenty-six and 44/100 feet, by lot 7 on said plan; and
Northeasterly, thirteen and 10/100 feet,
Northwesterly, three hundred seventy-nine and 63/100 feet,
Northwesterly, again, four hundred forty-seven and 33/100 feet,
Northeasterly, two hundred five and 91/100 feet; and
Northwesterly, twenty feet, all by lot 8 on said plan.
Said Parcel is shown as lot 6, Sheet 3, on said plan (Plan No. 41218C).
All of said boundaries are determined by the Land Court to be located as shown on a subdivision plan, as approved by the Land Court, filed in the Land Registration Office, a copy of which is filed in the Middlesex South Registry District of the Land Court in Registration Book 1051, Page 79, with Certificate 184229.

2

TABLE OF CONTENTS

(CONTINUED)

	Page
Parcel III:
Those certain Parcels of land together with all buildings and improvements now or hereafter situate in Waltham, in the County of Middlesex, Commonwealth of Massachusetts, being shown as lots 10 and 11 on a plan entitled “Land Court Plan of Land in Waltham, Mass., Prepared For: London & Leeds Development Corp.”, scale: 1”=80’ dated May 2, 1995, prepared by Schofield Brothers of New England Inc., 1071 Worcester Read, Framingham, Mass, 01701, filed in the Middlesex South Registry District of the Land Court as Land Court Plan No. 41218E.
Together with the rights, easements, benefits and appurtenances contained in the following instruments:
(1) Declaration of Easement dated April 30, 1984 filed in the Middlesex South Registry District of the Land Court as Document No. 661086 (affects Parcels I, II, and III);
(2) Declaration of Restrictions dated October 20, 1983 recorded in the Middlesex South District Registry of Deeds in Book 15274, Page 590 (affects Parcels I and II);
(3) Grant of Utility Easements dated October 20, 1983 and recorded in said Registry in Book 15274, Page 577 and filed as Document No. 649824 (affects Parcels I, II, and III);
(4) License Agreement dated June 8, 1984 recorded in said Registry in Book 15651, Page 171 (affects Parcels I and II);
(5) Declaration of Easements and Covenants dated October 30, 1986 filed as Document No. 726257 as amended by First Amendment of Declaration of Easements and Covenants dated December 15, 1997 filed as Document No. 1049953 (affects Parcels I, II and III); and
(6) Grant of Drainage Easements dated October 20, 1983 recorded in Book 15274, Page 597 (affects Parcels I, II and III).
NOTE: As hereinafter used, “recorded” shall mean “recorded with the Middlesex South District Registry of Deeds”, and “registered/filed” shall mean “registered/filed with the Middlesex South Registry District of the Land Court”.

3

EX-10.43

Exhibit 10.43

AMENDMENT NO. 7 TO LICENSE & OPTION AGREEMENT

THIS AMENDMENT NO. 7 TO THE LICENSE & OPTION AGREEMENT (“Amendment No. 7”) is made and entered into this 27^th day of December, 2006 (the “Amendment No. 7 Effective Date”) by and between Oscient Pharmaceuticals Corporation (“OSCIENT”), a Massachusetts corporation, having a principal place of business at 1000 Winter Street, Suite 2200, Waltham, Massachusetts 02451, and LG Life Sciences, LTD (“LGLS”), a corporation organized under the laws of the Republic of Korea, having a principal place of business at LG Twin Tower, 20 yoido-dong, Youngdungpo-gu, Seoul, 150-721, Republic of Korea. LGLS and OSCIENT may be referred to herein individually as a “Party” and collectively as the “Parties”.

W I T N E S S E T H

WHEREAS, LGLS and GeneSoft Pharmaceuticals, Inc. entered into a certain License and Option Agreement dated October 22, 2002 and amended said License and Option Agreement by Amendment No. 1 dated November 21, 2002, Amendment No. 2 dated December 6, 2002, Amendment No. 3 dated October 16, 2003, Amendment No. 4 dated March 31, 2005, Amendment No. 5 dated February 3, 2006, and Amendment No. 6 dated February 3, 2006 (as amended, the “License”);

WHEREAS, Genesoft merged into Genesoft Pharmaceuticals, LLC (then Guardian Holdings, LLC (“Guardian”)) on February 6, 2004 and the benefits of and obligations under the License were assigned to Guardian, and then, Guardian assigned all of its right, title and interest in, to and under the License to OSCIENT;

WHEREAS, OSCIENT is about to enter into a Partnership agreement with Menarini (as defined below) for Menarini’s marketing of the Product in the European Territory (as defined below) immediately after the execution of this Amendment No. 7 based on and in accordance with the License; and the Parties desire to amend the License to, among other things, provide certain terms and conditions necessary for such Partnership deal between OSCIENT and Menarini and amend the supply price, royalty rate and milestones related to sales of the Product; and

WHEREAS, the terms used herein with capital initial letters and not otherwise defined shall have the same meanings as set forth in the License.

NOW THEREFORE, in consideration of the premises, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. Section 1.36 shall be deleted in its entirety and replaced with the following:

1.36 “Territory” means the United States of America, Canada, Mexico, France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino, Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia.

2. A new Section 1.46 shall be inserted to define “Centralized Procedure” as follows:

1.46 “Centralized Procedure” shall mean the centralized procedure for obtaining a Marketing Authorization in the European Union as set forth in Regulation (EC) 726/2004.

3. A new Section 1.47 shall be inserted to define “European Territory” as follows:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

1.47 “European Territory” means France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino, Vatican City, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Liechtenstein, Malta, Cyprus, Romania, Bulgaria, Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Albania and the Former Yugoslav Republic of Macedonia.

4. A new Section 1.48 shall be inserted to define “Major Countries” as follows:

1.48 “Major Countries” shall mean each of France, Germany, Italy, Spain and the United Kingdom.

5. A new Section 1.49 shall be inserted to define “Marketing Authorization” as follows:

1.49 “Marketing Authorization” shall mean an authorization issued by the European Medicines Agency, or any other national, regional, state or local regulatory agency in the European Territory with the relevant regulatory authority, necessary to market and sell the Product in the European Territory or in any country in the European Territory.

6. A new Section 1.50 shall be inserted to define “Menarini” as follows:

1.50 “Menarini” means Menarini International Operations Luxembourg SA at Avenue de la Gare, 1, L-1611 Luxembourg GD and any of its Affiliates.

7. Section 2.5 shall be deleted in its entirety and replaced with the following:

2.5 Costs of Development. All Development expenses shall be borne by OSCIENT; provided that, LGLS shall reimburse OSCIENT for 50% of all amounts paid to Menarini by OSCIENT for all reasonable and verifiable regulatory development expenses incurred by Menarini in the European Territory; provided that in no event such reimbursement payments by LGLS shall exceed $[*] in the aggregate. With respect to any such regulatory development expenses to be reimbursed by LGLS, OSCIENT shall provide LGLS with a copy of the statement prepared by Menarini setting forth in detail such development expenses incurred by Menarini in the relevant quarter and proof of payment of such expenses by OSCIENT, such as receipt or payment slip. LGLS shall reimburse OSCIENT as provided for in this Section 2.5 within thirty (30) days of its receipt of all such statements and proofs. OSCIENT shall cause Menarini to keep complete and accurate books and financial records pertaining to such costs and expenses of regulatory development. LGLS shall have the right, at its discretion, to annually audit all such books and records of OSCIENT and Menarini upon advance notice to OSCIENT, and OSCIENT shall duly cooperate with LGLS. OSCIENT shall also cause Menarini to duly cooperate with LGLS with respect to such audit.

8. A new Section 4.3(d)(iii) shall be inserted as follows:

4.3 Co-Promotion.

(d)(iii) Upon Oscient entering into a Partnership in the European Territory with Menarini, LGLS’ option under subsection 4.3(a) above with respect to the European Territory shall terminate and no longer be exercisable.

9. Section 5.1(a)(ii) shall be deleted in its entirety and replaced with the following:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

5.1 General.

(a) (ii) Following the expiration or termination of the Initial Period and until the expiration or termination of the License (the “Remaining Period”), LGLS shall supply to OSCIENT, and OSCIENT shall exclusively purchase from LGLS, all of OSCIENT’s requirements of API; provided that OSCIENT’s obligation to exclusively purchase API to be supplied in Mexico, Canada or the European Territory shall expire on the last to expire of the LGLS Patents and GLAXO Patents claiming or covering such Product in Mexico, Canada or the European Territory, as the case may be. Notwithstanding anything herein to the contrary, OSCIENT agrees that it shall exclusively purchase from LGLS all its requirements of API for Mexico, Canada, and/or the European Territory, as the case may be, so long as and to the extent that OSCIENT continues to supply API or Final Product in Mexico, Canada or the European Territory irrespective of any expiry of LGLS Patents and GLAXO Patents.

LGLS shall not sell and shall procure that its Affiliates, sublicensees and distributors shall not sell, Final Product or API to any Third Party for use or resale in the European Territory so long as and to the extent that OSCIENT exclusively purchases from LGLS all its requirements of API and OSCIENT’s sublicensees and distributors exclusively purchases from OSCIENT all their requirements of API.

10. A new Section 5.2(iv) shall be inserted as follows:

5.2 Supply Price.

(iv) Notwithstanding anything to the contrary in Section 5.2(iii), the API supply price to OSCIENT for use by Menarini or its Affiliates or subcontractors in Finished Product marketed, sold and distributed in the European Territory shall be $[*] per kg irrespective of the volume of API purchased by OSCIENT after the grant of Marketing Authorization in at least one country in the European Territory is obtained. Prior to obtaining the Marketing Authorization in at least one country in the European Territory, the API supply price to OSCIENT for use by Menarini or its Affiliates shall be (A) prior to January 1, 2008, the same as the supply price to OSCIENT for the US, and (B) on or after January 1, 2008, $[*] per kg up to an aggregate of [*] kg with any additional amounts to be purchased at the then current supply price to OSCIENT for the US.

11. A new Section 5.6.4 (i) shall be inserted as follows:

(i) OSCIENT acknowledges and agrees that all API for use by Menarini shall be manufactured by LGLS. OSCIENT shall ensure that all such API shall be delivered to Menarini directly. OSCIENT shall forward to LGLS all purchase orders for API placed by Menarini at least 90 days prior to the date upon which LGLS is requested to ship such API. OSCIENT shall use best efforts to ensure that all API delivered to Menarini shall be used in the European Territory only and that such API shall not be shipped, distributed or otherwise be used in any way whatsoever and howsoever outside the European Territory.

12. Section 10.2 shall be deleted in its entirety and replaced with the following:

10.2 Milestone Payments.

(i) Following the achievement of each milestone set forth below, OSCIENT shall owe a non-refundable milestone payment to LGLS in the amount and at the times set forth below. Each milestone payment shall be due only once, notwithstanding the number of Products actually

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

developed or commercialized by OSCIENT hereunder. Milestone Payments 1, 2 and 3, when earned by LGLS, shall be payable in two installments, the first of which shall be payable on the first day of July or the first day of January (which comes first following the date on which the milestone was earned) and the second installment due six months thereafter. All other milestone payments shall be due 30 days after the relevant milestone event unless otherwise indicated.

Milestone Event	Payment
1. Upon annual Net Sales in the United States reaching $[*] million.	$[*] million
2. Upon both: (i) approval for the first Additional Indication or approval of an IV formulation of the Product, and (ii) annual Net Sales in the Territory reaching $[*] million.	$[*] million
3. Upon both: (i) approval for a second Additional Indication or approval of an IV formulation of the Product, and (ii) annual Net Sales in the Territory reaching $[*] million.	$[*] million
4. Upon approval of the Product in Canada, except for any indication approved prior to the Amendment # 5 Effective Date.	$[*]

As used in this Section 10.2, “IV formulation” shall mean a formulation of Product for intravenous administration.

(ii) Within thirty (30) days after receipt of any and all signing or license fees, milestone payments or royalties or any other forms of payments from Menarini or within sixty (60) days following the achievement of such events pursuant the terms of a Partnership agreement with Menarini (excluding, for the avoidance of doubt, any payment with respect to the supply of API), whichever is sooner, OSCIENT shall owe and pay a non-refundable payment to LGLS in an amount equal to [*] percent ([*]%) of all such payments made by Menarini to OSCIENT (except for the signing fee of $[*], the milestone payments of $[*]M related to the receipt of the Marketing Authorization and $[*]M related to the achievement of annual sales revenues exceeding $100M, which will be paid separately in accordance with the payment scheme set forth below in this Section 10.2(ii)). Attached hereto as Exhibit 10.2(ii) is the entire portion of the finally executed Partnership agreement between OSCIENT and Menarini covering all the signing and license fees, milestone payments and royalties and all other forms of payments and other payment terms of the Partnership agreement by and between OSCIENT and Menarini.

Subject to the preceding paragraph, within thirty (30) days after receipt of the related payment or within sixty (60) days following the achievement of the following events pursuant the terms of a Partnership agreement with Menarini, whichever is sooner, OSCIENT shall pay LGLS:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

(a) a non-refundable upfront signing fee payment of $[*] upon the signing of a Partnership agreement with Menarini with respect to the European Territory; and

(b) a non-refundable milestone payment of $[*]:

i. in lump sum for obtaining the Marketing Authorization for the Product via the Centralized Procedure; or

ii. according to the following schedule in case the Marketing Authorization is obtained on a country-by-country basis (not by Centralized Procedure) in the Major Countries:

Milestone	Payment
Upon obtaining the Marketing Authorization in the United Kingdom	$[*]
Upon obtaining the Marketing Authorization in France	$[*]
Upon obtaining the Marketing Authorization in Germany	$[*]
Upon obtaining the Marketing Authorization in Italy	$[*]
Upon obtaining the Marketing Authorization in Spain	$[*]

in the event Menarini is able to obtain in at least one country in the Major Countries the Marketing Authorization meeting the minimum label requirement set forth in the Partnership agreement between Menarini and OSCIENT (which the entire portion of the finally executed Partnership agreement between OSCIENT and Menarini covering such minimum label requirement shall be attached hereto under Exhibit 10.2(ii)); provided that, the foregoing provision shall not apply and LGLS shall be entitled to the milestone(s) payment of up to $[*] in accordance with this Section 10.2(ii)(b) if OSCIENT receives any milestone payments from Menarini related to the grant of the Marketing Authorization whether or not Menarini obtains in at least one country in the Major Countries the Marketing Authorization for CAP and either AECB or ABS, and an approved label for the Product with the minimum criteria set forth in the Partnership agreement as stated in subsections (I) and (II) herein; and

(c) a one-time, non-refundable milestone payment of $[*] in lump sum if Marketing Authorization is obtained in all Major Countries, upon the first achievement of Net Sales exceeding $100 million in (i) the twelve month period following the first commercial sale of the Product in any country in the European Territory or (ii) each successive twelve month period thereafter.

13. Section 10.3 shall deleted in its entirety and replaced with the following:

10.3 Royalty Payments. In addition to the foregoing license fee and milestone payments, commencing on the second anniversary of the first commercial sale of the Product in the United States of America,

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

(i) OSCIENT shall, subject to Sections 4.3 and 10.4, pay to LGLS royalties on Net Sales in the Territory, except for (a) any Net Sales in Mexico if OSCIENT enters into a Partnership in Mexico with a Third Party, (b) any Net Sales in Canada if OSCIENT enters into a Partnership in Canada with a Third Party, and (c) any Net Sales in the European Territory if OSCIENT enters into a Partnership in the European Territory with Menarini, for each calendar year at the following rates:

Annual Net Sales	Royalty Rate
On the first $[*] million	[*] percent
Over $[*] million to $[*] million	[*] percent
Over $[*] million to $[*] million	[*] percent
Over $[*] million to $[*] million	[*] percent
Over $[*] million	[*] percent

(ii) OSCIENT shall, subject to Sections 4.3 and 10.4 and in lieu of the royalty obligations set forth in Section 10.3(i) above with respect to Net Sales in Mexico, Canada and the European Territory, pay to LGLS (a) a royalty of [*]% on Net Sales in Mexico for each calendar year; (b) a royalty of [*]% on Net Sales in Canada for each calendar year; and (c) a royalty of [*]% on Net Sales in the European Territory for each calendar year; provided, however, that if the Partnership entered into in Mexico or Canada or the Partnership entered into with Menarini in the European Territory, as the case may be, terminates, then from and after such termination the royalties payable in respect of Net Sales in Mexico, Canada or the European Territory, as the case may be, shall be paid in accordance with clause (i) of this Section 10.3.

The Parties acknowledge that LGLS has incurred a royalty obligation to GLAXO at a rate of [*] percent of Net Sales for the use of the GLAXO Patents, the GLAXO Know-how and the Trademarks (the “GLAXO Royalty”). OSCIENT shall pay royalties to LGLS at the royalty rates set forth above, and LGLS shall be solely responsible for payment of the GLAXO Royalty and shall indemnify OSCIENT and hold OSCIENT harmless from and against any claims by GLAXO as a result of such use by OSCIENT of the GLAXO Patents.

14. Section 10.4 shall be deleted in its entirety and replaced with the following:

10.4 Term of Royalty Obligations. OSCIENT’s obligation to make royalty payments pursuant to 10.3 shall commence as provided in Section 10.3 and shall continue until the later of: (i) the expiration of the last to expire of the LGLS Patents and GLAXO Patents claiming or covering such Product in such country, and (ii) 10 years after first commercial sale of such Product in such country; provided however, that, OSCIENT’s obligation to make royalty payments pursuant to 10.3 for Net Sales in Mexico, Canada or the European Territory shall continue until the later of: (I) the expiration of the last to expire of the LGLS Patents and GLAXO Patents claiming or covering such Product in Mexico, Canada or the European Territory, as the case may be, and (II) the period of data exclusivity in Mexico, Canada or the European Territory, as the case may be (provided that, for purposes of clarification, “data exclusivity” in the European Territory shall mean the period of data and market exclusivity for the Product in the European Territory provided by Directive 2001/83/EC). Following the expiration of OSCIENT’s royalty obligations, OSCIENT shall retain a non-exclusive, royalty-free right to use, sell and offer for sale Product in the Territory, using LGLS Know-how and GLAXO Know-how licensed to OSCIENT as of the Effective Date and the exclusive right to use the Trademarks for such purposes. OSCIENT shall continue to pay LGLS a royalty in return for such right to use the Trademark, as provided in Section 11.4 below.

15. A new Section 10.8(c) shall be inserted as follows:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

(c) OSCIENT shall keep, and shall require its Affiliates to keep, complete and accurate records of the latest three (3) years of API shipped and/or supplied to Menarini for sale of Product in the European Territory. For the purpose of verifying such shipments with regard to OSCIENT’s payment obligations pursuant to Section 5.2(iv) above, LGLS shall have the right annually, at LGLS’s expense, to retain an independent certified public accountant selected by LGLS and reasonably acceptable to OSCIENT, to review such records in the locations(s) where such records are maintained by OSCIENT and its Affiliates upon reasonable notice and during regular business hours and under obligations of confidence. Results of such review shall be made available to both LGLS and OSCIENT.

16. Section 11.4 shall be deleted in its entirety and replaced with the following:

Expiration of the Agreement. Following the expiration of OSCIENT’s royalty obligations as provided in Section 10.4 above, and for so long as OSCIENT continues to use the Trademark in the use or sale of the Product, OSCIENT shall pay to LGLS a royalty equal to [*] percent of Net Sales; provided that, for use of the Trademark in the European Territory after the expiration of OSCIENT’s royalty obligations in the European Territory, OSCIENT shall pay to LGLS a royalty equal to [*]% percent of Net Sales in the European Territory (the “Minimum Royalty Amount”) plus [*]% of any amount in excess of the Minimum Royalty Amount paid by Menarini to OSCIENT for use of the Trademark following the expiration of OSCIENT’s royalty obligations in the European Territory.

17. Following termination of the License, any sublicense granted by OSCIENT under the LGLS Patents, LGLS Know-How, GLAXO Patents and GLAXO Know-How (including pursuant to any Partnership) shall terminate. Following termination of this Amendment No. 7, any sublicense granted by OSCIENT under the LGLS Patents, LGLS Know-How, GLAXO Patents and GLAXO Know-How (including pursuant to any Partnership) for the European Territory shall terminate.

18. OSCIENT represents and warrants that (i) the summary of financial terms set forth in Schedule 18 attached hereto represent an accurate description of all of the financial terms of the Partnership agreement between OSCIENT and Menarini; and (ii) its Partnership agreement with Menarini shall not in any way adversely affect or contravene with the terms and conditions of the License and this Amendment No. 7 or the rights and obligations of LGLS thereof.

Without limiting the foregoing, OSCIENT agrees to provide LGLS the entire portion of the finally executed Partnership agreement with Menarini covering the financial terms and the minimum label criteria as set forth in Section 10.2 above within five (5) days from the Amendment No. 7 Effective Date, which such part of the finally executed Partnership agreement shall be attached hereto as Exhibit 10.2(ii) immediately thereafter within such five-day period.

19. This Amendment No. 7 shall automatically become null and void and of no force and effect after ninety (90) days of the Amendment No. 7 Effective Date, unless (i) OSCIENT enters into a Partnership agreement with Menarini during such 90-day period, or (b) the Parties mutually agree to extend such 90-day period.

20. OSCIENT shall timely inform and update LGLS in writing of the process and activities related to obtaining the Marketing Authorization by Menarini. OSCIENT shall also timely inform and update LGLS of any material changes or revisions to the Partnership agreement between

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

OSCIENT and Menarini, including but not limited to the financial terms or termination thereof. LGLS may terminate this Amendment No. 7 upon notice at its sole discretion in case (i) Menarini fails to obtain the complete Marketing Authorization in at least one country in the European Territory within three years from the effective date of the Partnership agreement between OSCIENT and Menarini and/or (ii) the Partnership agreement between OSCIENT and Menarini is terminated.

[Remainder of page intentionally left blank]

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

IN WITNESS WHEREOF, the Parties have caused this Amendment No. 7 to be executed by their duly authorized officers on the Amendment No. 7 Effective Date.

OSCIENT PHARMACEUTICALS CORPORATION		LG LIFE SCIENCES, LTD.
By:		By:
Name:	Steven M. Rauscher	Name:	In-Chull Kim, Ph.D.
Title:	Chief Executive Officer & President	Title:	Chief Executive Officer & President
Date:		Date:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

Schedule 10(ii)

[*]

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Confidential

Schedule 18

[*]

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

EX-10.44

Exhibit 10.44

LICENSE, SUPPLY AND MARKETING AGREEMENT

THIS LICENSE, SUPPLY AND MARKETING AGREEMENT (this “Agreement”) is made effective as of December 28^th, 2006 (the “Effective Date”) by and between Oscient Pharmaceuticals Corporation, a Massachusetts corporation with a principal place of business at 1000 Winter Street, Suite 2200, Waltham, Massachusetts (“Oscient”), Menarini International Operation Luxembourg SA, a Luxembourgian company with a place of business at 1, Avenue de La Gare, L-1611 Luxembourg GD (“MIOL”) Oscient and MIOL are each hereafter referred to individually as a “Party” and together as the “Parties”.

WHEREAS, Oscient is the owner or licensee of certain patent rights, know-how, trademark rights and other intellectual property rights relating to the Compound in the Territory (each as defined below); and

WHEREAS, Oscient wishes to grant MIOL rights under such intellectual property rights and appoint MIOL as its exclusive distributor of the Finished Product (as defined below) in the Territory and MIOL wishes to obtain such a license on the terms and subject to the conditions set forth below; and

WHEREAS, the Active Pharmaceutical Ingredient (as defined below) for the Finished Product is manufactured by L.G. Life Sciences Ltd and supplied to Oscient to fulfill Oscient and its sublicensees’ requirements for Active Pharmaceutical Ingredient; and

WHEREAS, the Parties desire that Oscient supply MIOL with such Active Pharmaceutical Ingredient under this Agreement on the terms and subject to the conditions set forth below.

NOW THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions. Whenever used in the Agreement with an initial capital letter, the terms defined in this Section 1.1 shall have the meanings specified.

(a) “ABS” shall mean acute bacterial sinusitis.

(b) “Active Pharmaceutical Ingredient” shall mean the Compound in active bulk form meeting the Specifications.

(c) “Actual Weighted Average Price Per Tablet” shall mean, subject to Section 9.2(d)(iii), the product of (i) the quotient equal to (A) the sum of the Gross Sales in Euros for each country in the Territory for the applicable Quarter, divided by (B) the total number of Tablets sold by MIOL and its Affiliates and Sub-Distributors in the Territory in the applicable Quarter (as determined using verifiable, written data from MIOL), multiplied by (ii) [*]%, multiplied by (iii) the Calculated Exchange Rate; provided that, Gross Sales and the total number of Tablets sold by MIOL and its Affiliates and Sub-Distributors in the Territory for the first whole Quarter after the First Commercial Sale shall include Gross Sales and Tablets sold by MIOL and its Affiliates and Sub-Distributor in the prior partial Quarter, if any.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(d) “Additional Products” shall mean any pharmaceutical product that (i) is not the Finished Product, and (ii) is a formulation of a product containing the Compound as an active ingredient except any single enantiomer-based product containing gemifloxacin as an active ingredient.

(e) “Adverse Event” shall have the meaning as set forth in the Pharmacovigilance Joint Operating Policy to be agreed between the Parties pursuant to Section 8.3.

(f) “AECB” shall mean acute bacterial exacerbations of chronic bronchitis.

(g) “Affiliate” shall mean in respect of any Party any corporation, firm, limited liability company, partnership or other entity which controls or is controlled by or is under common control with such Party. For the purpose of this definition only, “control” means direct or indirect beneficial ownership of fifty percent (50%) or more of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or fifty percent (50%) or more of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity.

(h) “Annual Exchange Rate” shall mean the quotient determined by dividing (i) the sum of the conversion rate for Euros to U.S. Dollars existing in the United States (as reported in The Wall Street Journal) on each Business Day in the twelve-month period preceding the date upon which the Annual Exchange Rate is to be calculated, by (ii) the number of Business Days in such twelve-month period. If The Wall Street Journal ceases to be published, then the rate of exchange to be used shall be that reported in such other business publication of national circulation in the United States as the Parties reasonably agree.

(i) “Annual Calculated Exchange Rate” shall be equal to (i) if the Annual Exchange Rate is greater than [*]% of the Base-Exchange Rate and less than [*]% of the Base-Exchange Rate, the Annual Exchange Rate, or (ii) if the Annual Exchange Rate is less than [*]% of the Base-Exchange Rate or greater [*]% of the Base-Exchange Rate, the number equal to:

Base-Exchange Rate – Annual Exchange Rate	+	Annual Exchange Rate
2

(j) “Applicable Law” shall mean all applicable laws, rules and regulations, including any rules, regulations, guidelines or other requirements of any Regulatory Authority and industry guidelines or codes of conduct, that may be in effect from time to time, including relevant provisions of Directive 2001/83/EC, Regulation (EC) 726/2004, relevant national, International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”), European Commission and

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Committee for Medicinal Products for Human Use (“CHMP”) guidance and, in particular, those guidelines published by the European Commission in the Rules Governing Medicinal Products in the European Union, as updated and amended from time to time and, in each case where relevant, the national implementations of these rules.

(k) “Assumed Weighted Average Price Per Tablet” shall mean the product of (i) the weighted average reimbursed ex-factory per tablet price in Euros (as determined or accepted by the applicable Regulatory Authority (as set forth in Section 9.5(b) herein) at the time of calculation) for [*], as determined within thirty (30) days of the date of the first calculation of the Transfer Price, multiplied by (ii) [*]%, multiplied by (iii) the Calculated Exchange Rate; provided that, (A) on and after the second anniversary of the First Commercial Sale, the Assumed Weighted Average Price Per Tablet shall be equal to the last Actual Weighted Average Price Per Tablet calculated pursuant to Section 9.2(c) below, and (B) in no event shall the Assumed Weighted Average Price Per Tablet be less than $[*] per Tablet.

(l) “Base-Exchange Rate” shall be the currency factor for conversion of Euros to Dollars equal to [*].

(m) “Business Day” shall mean any day other than a Saturday or Sunday on which banking institutions in both Massachusetts, United States of America and Grand Duchy of Luxemburg are open for business.

(n) “Calculated Exchange Rate” shall be equal to (i) if the Quarterly Exchange Rate is greater than [*]% of the Base-Exchange Rate and less than [*]% of the Base-Exchange Rate, the Quarterly Exchange Rate, or (ii) if the Quarterly Exchange Rate is less than [*]% of the Base-Exchange Rate or greater [*]% of the Base-Exchange Rate, the number equal to:

Base-Exchange Rate – Quarterly Exchange Rate	+	Quarterly Exchange Rate
2

(o) “Call” shall mean a personal visit by a Sales Representative to a member of the Target Audience in the Territory.

(p) “CAP” shall mean community-acquired pneumonia of mild-to-moderate severity.

(q) “Centralized Procedure” shall mean the centralized procedure for obtaining a Marketing Authorization in the European Union as set forth in Regulation (EC) 726/2004.

(r) “Commercialize” and “Commercialization” shall mean (i) all activities relating to the marketing, promotion, handling, distribution, storage, sale, shipping, offer for sale and importation for sale of the Finished Product in the Territory and (ii) all activities relating to the handling, storage, shipping and importation of the Active Pharmaceutical Ingredient for the Finished Product.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(s) “Compound” shall mean the form of gemifloxacin mesylate having the molecular formula [*].

(t) “Confidential Information” shall mean with respect to a Party (the “Receiving Party”), all information and materials (including compositions of matter, assays and biological materials (if any)) which are disclosed by another Party (the “Disclosing Party”) to the Receiving Party hereunder or to any of its employees, consultants, Affiliates, licensees or, in the case of MIOL, Third-Party Manufacturers or Sub-Distributors, except to the extent that the Receiving Party can demonstrate by written record or other suitable physical evidence that such information, (i) as of the date of disclosure is demonstrably known to the Receiving Party or its Affiliates other than by virtue of a prior confidential disclosure to the Receiving Party or its Affiliates by the Disclosing Party; (ii) as of the date of disclosure is in, or subsequently enters, the public domain, through no fault or omission of the Receiving Party; (iii) is obtained from a Third Party having a lawful right to make such disclosure free from any obligation of confidentiality to the Disclosing Party; or (iv) is independently developed by or for the Receiving Party without reference to or reliance upon any Confidential Information of the Disclosing Party.

(u) “Controlled” shall mean, with respect to any Patent Rights, know how, Regulatory Documentation, Trademarks, the MIOL Information, the Oscient Information or other intellectual property right, possession of the right, whether directly or indirectly, and whether by ownership, license or otherwise (other than pursuant to this Agreement), to grant access to such information or Regulatory Documentation or to assign, or grant a license, sublicense or other right to or under, such Patent Rights, information, Regulatory Documentation, Trademarks or other intellectual property right as provided for herein, without violating the terms of any agreement, or other arrangement, with any Third Party.

(v) “Copyrights” shall mean all copyright works including literary and artistic works.

(w) “Detail” or “Detailing” shall mean the communication by a Sales Representative during a Call (i) involving face-to-face contact; (ii) describing in a fair and balanced manner the approved indicated uses and other relevant characteristics of the Finished Product; (iii) using marketing, promotional and educational materials in an effort to increase the Target Audience prescribing and/or hospital ordering preferences of the Finished Product for its approved indicated uses; and (iv) made at the Target Audience member’s office, in a hospital, at marketing meetings sponsored by MIOL or a Sub-Distributor for the Finished Product or other appropriate venues conducive to pharmaceutical product informational communication where the principal objective is to place an emphasis, either primary, secondary or tertiary, on the Finished Product and not simply to discuss the Finished Product with a member of the Target Audience.

(x) “Develop” and “Development” shall mean all activities relating to obtaining advice on, seeking, obtaining and/or maintaining Regulatory Approvals and

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

public and private formulary listings, including clinical studies and trials (subject to Section 6.3 herein), regulatory affairs, statistical analysis and report writing and the preparation, submission, review and development of data related thereto and all other pre-approval activities, but excluding (i) activities relating to synthesis, manufacture or otherwise making or having made any Active Pharmaceutical Ingredient, or any component or formulation thereof; or (ii) non-clinical research and drug development activities of the Finished Product.

(y) “Development Plan” shall mean the plan for the Development of the Finished Product in the Territory developed and agreed to by the Steering Committee on an annual basis.

(z) “Diligent Efforts” shall mean using commercially reasonable efforts and resources, consistent with prudent business judgment, including the carrying out of obligations or tasks consistent with the standard of practice in the research-based pharmaceutical industry for the commercialization of a pharmaceutical product having similar market potential, profit potential or strategic value as the Finished Product, based on conditions then prevailing, including the maturity of the Finished Product and the intellectual property protection surrounding the Finished Product. Diligent Efforts requires that MIOL, at a minimum, provided that such actions are commercially reasonable: (i) determine the general industry practices with respect to the applicable activities; (ii) reasonably promptly assign responsibility for such obligations to specific employee(s) who are held accountable for progress, and monitor such progress on an on-going basis; (iii) set and consistently seek to achieve specific and meaningful objectives for carrying out such obligations; and (iv) make and implement decisions and allocate resources designed to advance progress with respect to such objectives; provided that, MIOL will not be found not to have met its Diligent Effort obligations hereunder to the extent such failure has been caused by Oscient’s failure to perform its obligations under this Agreement.

(aa) “EMEA” shall mean the European Medicines Agency and any successor agency thereto.

(bb) “Exploit” shall mean to Develop, Manufacture or Commercialize and “Exploitation” means the act of Exploiting.

(cc) “Finished Product” shall mean the pharmaceutical product containing the Compound in finished tablet form labeled and packaged in accordance with Applicable Law in the Territory, including the package inserts and other components reasonably necessary for its sale or distribution in the Territory, and ready for sale to the market or distribution as professional samples in the Territory, but specifically excluding any single enantiomer-based product or non-oral formulations.

(dd) “First Commercial Sale” shall mean the date of the first arm’s length sale of Finished Product in a country in the Territory after Regulatory Approval for the Finished Product has been obtained in such country by or on behalf of MIOL, other than sales by MIOL to Sub-Distributor.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(ee) “Gross Sales” shall mean gross invoiced sales of the Finished Product sold by MIOL, its Affiliates or a Sub-Distributor to Third Parties throughout the Territory minus any Government Payments (calculated on a Per Tablet basis) for the applicable period.

(ff) “Government Payment” shall mean any mandatory rebate imposed by, or any sum to be paid to, any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity with respect to, in whole or in part, the Finished Product to the extent identified on the relevant invoice or through other written, verifiable evidence.

(gg) “Good Manufacturing Practices” or “GMP” shall mean the then current standards for good manufacturing practices in the Territory as promulgated under Applicable Law, including Directive 2001/83/EC, Directive 2003/94/EC and any applicable guidance on good manufacturing practices adopted pursuant to Section 47 of Directive 2001/83/EC, in particular relevant guidance on good manufacturing practices contained in Volume 4 of the Rules Governing Medicinal Products in the European Union and the national implementations of these rules.

(hh) “ICH Q7A” shall mean the good manufacturing practice guidance for active pharmaceutical ingredients developed under the auspices of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use.

(ii) “LG” shall mean L.G. Life Sciences Ltd or its successors or assigns.

(jj) “LG License” shall mean the License and Option Agreement between Oscient (formerly Genesoft Pharmaceuticals, Inc.) and LG dated October 22, 2002, as amended from time to time.

(kk) “Licensed Patent Rights” shall mean the Patent Rights set forth in Schedule 1.1(kk) attached hereto.

(ll) “Major Countries” shall mean each of France, Germany, Italy, Spain and the United Kingdom.

(mm) “Mandatory Supply Term” shall mean the period commencing on the First Commercial Sale and continuing, until the later of (i) the expiration of the last to expire of the Patent Rights granted in the Territory set forth in Schedule 1.1(mm), or (ii) the expiration of the period of data and market exclusivity for the Finished Product in the Territory provided for by Directive 2001/83/EC.

(nn) “Manufacture” shall mean the activities related to the fill-finish manufacturing of Finished Product in accordance with the written specifications delivered to MIOL by Oscient, including the conversion of Active Pharmaceutical Ingredient into Finished Product, manufacturing of supplies of Finished Product for commercial sale, packaging, labeling, in-process and finished product testing, release of product or any component or ingredient thereof, quality assurance activities related to manufacturing and

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

release of product, ongoing stability tests and regulatory activities related to any of the foregoing; but excluding activities relating to synthesis, manufacture or otherwise making or having made any Active Pharmaceutical Ingredient, or any component or formulation thereof.

(oo) “Marketing Authorization” shall mean an authorization issued by the relevant Regulatory Authority to market Finished Product in the Territory or in a country in the Territory as the case may be.

(pp) “MIOL Information” shall mean all information, know-how, materials, data, documents and plans relating to the Active Pharmaceutical Ingredient and/or Finished Product, excluding Oscient Information, but including Regulatory Documentation and data resulting from clinical trials, Controlled by MIOL and/or its Third-Party Manufacturer and/or Sub-Distributors from time to time during the Term.

(qq) “Minimum Labeling Requirements” shall mean the approved label for Finished Product in a particular country in the Territory which contains (i) [*]; and (ii) is otherwise substantially consistent with the minimum criteria set forth on Schedule 1.1(qq).

(rr) “Net Sales” shall mean the gross invoiced sales price for all Finished Products sold by MIOL, its Affiliates or a Sub-Distributor to Third Parties throughout the Territory during each Quarter, less the following amounts incurred or paid by MIOL or Sub-Distributor during such Quarter with respect to sales of Finished Products regardless of the Quarter in which such sales were made:

(i) trade, cash and quantity discounts or rebates actually allowed or taken, where permitted by law;

(ii) credits or allowances actually given or made for rejection of, and for uncollectible amounts on, or return of previously sold Finished Products;

(iii) reasonable transportation and insurance charges directly related to the sale of the Finished Products to a Third Party in the Territory, each to the extent separately invoiced and paid by MIOL; and

(iv) any tax, tariff, duty, Government Payment and governmental charge levied on the sales, transfer, transportation or delivery of the Finished Products to a Third Party, other than franchise or income tax of any kind whatsoever.

Provided that, any amount deducted from gross invoiced sales in item “(iv)” above which is later paid back to MIOL shall be deemed to be Net Sales upon receipt by MIOL.

Deductions due to (i), (ii) and (iii) above shall not exceed a total of [*] percent ([*]%) of the gross invoiced sales. “Net Sales” shall not include sales or transfers of Finished Products between MIOL and its Affiliates or Sub-Distributors, unless the Finished Product is consumed by such Affiliate or

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Sub-Distributor. For the purpose of this definition and the definition of Gross Sales, Finished Product shall be deemed to have been sold by MIOL or a Sub-Distributor at the earliest of (A) such Finished Product being shipped to the Third Party purchaser by MIOL or a Sub-Distributor as the case may be, (B) such Third Party being invoiced by MIOL or a Sub-Distributor, or (C) such Finished Product being paid for, by or on behalf of MIOL’s or Sub-Distributor’s customer.

(ss) “Oscient Information” shall mean all information and know-how relating to the Oscient Product Controlled by Oscient that is necessary or reasonably required by MIOL to enable MIOL to obtain advice on, apply for or maintain Regulatory Approvals in accordance with this Agreement, including information relating to toxicology, pharmacology, pharmacokinetics, metabolism, general chemistry and pharmacy of the Oscient Product and any information provided to MIOL pursuant to Section 6.3(a); provided that Oscient Information shall not include any information relating to the bulk chemical manufacture or the formulation of the Compound or Active Pharmaceutical Ingredient, other than information that is included in the Applicant’s Part of the Active Substance Master File submitted to EMEA or any other relevant Regulatory Authority.

(tt) “Oscient Intellectual Property” shall mean the Licensed Patent Rights, Trademarks and any Copyrights or other intellectual property rights in the Oscient Information.

(uu) “Oscient Product” shall mean gemifloxacin mesylate 320 mg tablets for oral administration sold in the United States of America under the trade name Factive^® Tablets.

(vv) “Patent Rights” shall mean any and all (i) patents, (ii) pending patent applications, including all provisional applications, continuations, continuations-in-part, divisions, reissues, renewals, and all patents granted on such pending patent applications, (iii) all patents-of-addition, reissue patents, re-examinations and extensions or restorations by existing or future extension or restoration mechanisms, supplementary protection certificates or the equivalent thereof, and (iv) any equivalent of any of the foregoing in any jurisdiction.

(ww) “Person” shall mean any individual, firm, corporation, partnership, limited liability company, trust, joint venture, governmental entity, or other entity or organization.

(xx) “Printed Materials” shall mean product labels, printed packaging materials or packaging inserts relating to the Finished Product.

(yy) “Quarter” shall mean each successive period of three (3) months commencing January 1, April 1, June 1 or September 1 and “Quarterly” shall have a corresponding meaning.

(zz) “Quarterly Exchange Rate” shall mean the quotient determined by dividing (i) the sum of the conversion rate for Euros to U.S. Dollars existing in the

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

United States (as reported in The Wall Street Journal) on the first Business Day and the last Business Day of the applicable Quarter immediately preceding the date upon which the Assumed Weighted Average Price Per Tablet or Actual Weighted Average Price Per Tablet, as the case may be, is to be calculated, by (ii) two. If The Wall Street Journal ceases to be published, then the rate of exchange to be used shall be that reported in such other business publication of national circulation in the United States as the Parties reasonably agree.

(aaa) “Regulatory Approval” shall mean any and all approvals (including any applicable supplements, amendments, variations, pre- and post-approvals, governmental price and reimbursement approvals and approvals of applications for regulatory exclusivity), product and establishment licenses, registrations or authorizations of any kind of any Regulatory Authority necessary for the Exploitation of the Finished Product in the Territory, including, for the avoidance of doubt, all registrations, licenses and authorizations required to permit the Active Pharmaceutical Ingredient of the Finished Product to be imported into the Territory.

(bbb) “Regulatory Authority” shall mean the EMEA or any other national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity with authority with respect to the Development, Manufacture or Commercialization of the Finished Product in the Territory.

(ccc) “Regulatory Documentation” shall mean all applications, registrations, governmental licenses, authorizations and approvals (including all Regulatory Approvals), all correspondence submitted to or received from Regulatory Authorities and all supporting documents and all results of pre-clinical and clinical studies and tests, relating to the Finished Product, and all data contained in any of the foregoing.

(ddd) “Reimbursement Price” shall mean, for each country within the Territory, the price per Tablet, expressed in Euros, at which the Finished Product is or will be reimbursed, in whole or in part, by the national health system or any broadly equivalent scheme in that country at the time of calculation.

(eee) “Sales Representative” shall mean a professional pharmaceutical sales representative engaged or employed by MIOL or any of its Affiliates or Sub-Distributors to conduct, among other sales responsibilities, Detailing and other promotional efforts with respect to the Finished Product.

(fff) “Serious Adverse Event” shall have the meaning as set forth in the Pharmacovigilance Joint Operating Policy to be agreed between the Parties pursuant to Section 8.3.

(ggg) “Specifications” shall mean, for the Active Pharmaceutical Ingredient for the Finished Product, such specifications as set forth in Schedule 1.1(ggg), as such specifications may be supplemented or modified from time to time hereafter in accordance with the provisions of this Agreement or as provided by Regulatory Authorities.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(hhh) “Sub-Distributor” shall mean any Affiliate or Third Party (as hereinafter defined) to whom MIOL has granted the right to promote and distribute the Finished Product in the Territory (or part of it) in accordance with the terms of this Agreement.

(iii) “Tablet” shall mean one 320mg tablet of Finished Product.

(jjj) “Target Audience” shall mean, for the Finished Product, general practitioners and specialists involved in the treatment of upper and lower respiratory infections who prescribe pharmaceutical products or issue hospital orders for pharmaceutical products in the Territory as identified in the applicable Marketing Plan, as may be amended from time to time by the Steering Committee.

(kkk) “Territory” shall mean France, Germany, the United Kingdom, Luxembourg, Ireland, Italy, Spain, Portugal, Belgium, the Netherlands, Austria, Greece, Sweden, Denmark, Finland, Norway, Iceland, Switzerland, Andorra, Monaco, San Marino, Vatican City, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Bulgaria, Romania, Croatia, Macedonia and Liechtenstein.

(lll) “Third Party” shall mean any Person other than Oscient or MIOL or their respective Affiliates.

(mmm) “Transfer Price Per Kilo” shall mean the product of: (i) the Assumed Weighted Average Price Per Tablet, multiplied by (ii) [*].

(nnn) “Trademarks” shall mean the trademarks described in Schedule 1.1(nnn) attached hereto as may be amended from time to time in accordance with this Agreement.

1.2 Interpretation.

In this Agreement a reference to:

(i) a particular Article, Section, Schedule or Exhibit shall be a reference to that article, section, schedule or exhibit in or to this Agreement;

(ii) the singular shall include the plural and vice versa and a reference to any gender shall include all genders;

(iii) a statutory provision includes a reference to the statutory provision as modified or re-enacted or both from time to time before or after the date of this Agreement and any subordinate legislation made under the statutory provision (as so modified or re-enacted) before or after the date of this Agreement;

(iv) a document (or section thereof) is a reference to that document as modified, amended, restated or replaced from time to time;

(v) a “month” is a reference to a calendar month;

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(vi) “herein”, “hereof”, “hereunder”, “hereafter”, and words of similar import refer to this Agreement as a whole and not to any particular Article or Section hereof;

(vii) money herein or “$” are references to United States Dollars unless otherwise specifically noted; and

(viii) “include”, “includes”, “including” and “in particular” are to be construed as if they were immediately followed by the words “without limitation”.

1.3 If any payment is required to be made or other action required to be taken pursuant to this Agreement, except for any action required to be taken pursuant to Section 8.3, on a day which is not a Business Day, then such payment or action shall be made or taken on the next Business Day.

1.4 In calculating interest payable under this Agreement for any period of time, the first day of such period shall be included and the last day of such period shall be excluded.

1.5 The table of contents hereto and the headings of any Article, Section or part thereof are inserted for purposes of convenience only and do not form part of this Agreement.

2. LICENSE RIGHTS

2.1 Appointment and License. Subject to the terms and conditions of this Agreement, Oscient hereby appoints MIOL as its exclusive distributor of the Finished Product in the Territory and in connection with such appointment hereby grants to MIOL subject to Section 2.2:

(a) the exclusive sublicense and right under the Licensed Patent Rights to import into the Territory Active Pharmaceutical Ingredient supplied by Oscient in accordance with Articles 3 and 4 (“Oscient API”);

(b) the exclusive, subject as set out below, sublicense and right under the Licensed Patent Rights to Exploit Finished Product, in which the only Active Pharmaceutical Ingredient is Oscient API, under the Trademark throughout the Territory;

(c) subject to Section 6.3, the exclusive right to use the Oscient Information to Exploit the Finished Product, in which the only Active Pharmaceutical Ingredient is Oscient API, under the Trademark throughout the Territory; and

(d) the exclusive right to use the Trademarks solely in connection with the Exploitation of Finished Product in which the only Active Pharmaceutical Ingredient is Oscient API in the Territory.

2.2 Right to Appoint Third-Party Manufacturer/Sub-Distributor. MIOL may appoint (A) Sub-Distributors and/or (B) Third Parties to Manufacture Finished Product pursuant to Section 3.4 herein (each a “Third-Party Manufacturer”); provided, however, that (i) Oscient shall be notified of and shall have consented to such appointment, such consent not to be unreasonably withheld; provided however, that, Oscient confirms its consent to the appointment of any Affiliates of MIOL as a Sub-Distributor or Third-Party Manufacturer; (ii) the terms of the agreement with any Sub-Distributor or Third-Party Manufacturer shall be consistent with the terms and conditions of this Agreement; (iii) a Sub-Distributor shall have no right to Develop or Manufacture or further appoint a sub-distributor, nor to assign or

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

delegate all or any part of its rights; (iv) a Third-Party Manufacturer shall have no right to Develop or further sub-contract its obligations to Manufacture and shall sell all Finished Products manufactured by it to MIOL or MIOL’s Affiliates; (v) such appointment shall not relieve MIOL of any of its obligations under this Agreement and in particular MIOL shall remain obligated for the payment to Oscient of all of its payment obligations hereunder, including the payment of any fees described in Article 9 hereof; (vi) to the maximum extent permitted by Applicable Law, each Sub-Distributor shall be required to purchase all its requirements of Finished Product from MIOL; and (vii) except as Oscient may in its discretion agree in writing, any agreement with any Sub-Distributor or Third-Party Manufacturer shall terminate upon termination of this Agreement.

2.3 Retained Rights. Subject to the other terms of this Agreement, Oscient retains the right (a) to use and exploit the Trademarks and the Oscient Information for (i) uses in the Territory relating to governmental obligations or requirements and investor promotions (i.e., Oscient exhibit booths or magazine publications discussing Oscient’s business); and (ii) any and all uses outside of the Territory and (b) to conduct clinical trials for Oscient Product in the Territory and fill-finish Oscient Product in the Territory for sale outside the Territory. All rights not expressly granted under this Agreement to MIOL are reserved to Oscient. For the avoidance of doubt, MIOL is not granted any rights to use Oscient Information to seek any approval from EMEA or any other regulatory authority to market or otherwise exploit any product other than Finished Product in which the only Active Pharmaceutical Ingredient is Oscient API.

2.4 Modification of Product. Oscient reserves the right to modify, change, develop or improve the Active Pharmaceutical Ingredient, including changes in the manufacturing process or the site at which such manufacture is to occur, (an “Alteration”) during the Term and shall give prior notice to MIOL of any Alteration which could give rise to notification requirements to Regulatory Authorities or the need for any Regulatory Approval under Applicable Law; provided that any material change to the Specifications shall require MIOL’s consent, not to be unreasonably withheld. Any reasonable and verifiable costs associated with any such Alteration shall be borne by Oscient. It is however understood that if an Alteration requires a Regulatory Approval no Active Pharmaceutical Ingredient manufactured after implementation of such Alteration shall be supplied pursuant to this Agreement before the Regulatory Approval is granted. The Parties agree to pursue diligently any such Regulatory Approvals following notice of any proposed Alteration from Oscient. Oscient agrees that it shall not cause an Alteration to be made after MIOL submits an application for Marketing Authorization and prior to receipt of such Market Authorization.

2.5 Grant of Rights to Oscient. MIOL shall, and shall procure that each Third-Party Manufacturer and Sub-Distributor shall, during the Term, promptly make available to Oscient all MIOL Information and MIOL hereby grants to Oscient a non-exclusive, perpetual, fully paid-up, irrevocable, worldwide (not including the Territory during the Term) license to use the MIOL Information with the right to grant sublicenses. In connection with such use, Oscient may disclose MIOL Information to any Regulatory Authority or equivalent regulatory authority outside the Territory.

3. SUPPLY OF PRODUCT

3.1 Supply Terms. Until expiration of the Mandatory Supply Term, Oscient shall supply to MIOL, and MIOL will exclusively purchase from Oscient, all of MIOL’s requirements for Active Pharmaceutical Ingredient for use in Manufacturing Finished Product in the Territory

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

pursuant to purchase orders delivered from time to time by MIOL to Oscient in accordance with Section 4.2. During the Mandatory Supply Term, neither Oscient nor any of its Affiliates shall have the right to manufacture or supply any Active Pharmaceutical Ingredient for or to any Third Party in the Territory (except to a Third Party appointed to manufacture Oscient Product for sale outside the Territory as permitted by Section 2.2). Notwithstanding any other provision of this Agreement to the contrary, Oscient will not be liable to MIOL with regard to Finished Product or Active Pharmaceutical Ingredient sold into the Territory by, or otherwise originating from, customers of Oscient located outside of the Territory, nor will such sales constitute a breach by Oscient of this Agreement. Unless otherwise specified herein or expressly consented to in writing by MIOL and Oscient, MIOL shall have no direct relationship with LG regarding all activities necessary to supply MIOL with Active Pharmaceutical Ingredient manufactured by or on behalf of LG as contemplated hereunder. The relationship with LG shall be maintained by Oscient acting according to reasonable standard industry practice. All manufacturers of Active Pharmaceutical Ingredient supplied to MIOL pursuant to this Agreement shall manufacture Active Pharmaceutical Ingredient for supply pursuant to this Agreement in compliance with GMP. Unless provided otherwise and only as and if permitted herein, a Party’s sublicensing, subcontracting or delegating activities to be performed under this Agreement to an Affiliate or Third Party shall not release such Party from the performance of any of its responsibilities hereunder.

After the expiry of the Mandatory Supply Term, MIOL shall have the right to source Active Pharmaceutical Ingredient, the Compound and the Finished Product from any Third Party and to continue using the Trademarks and the Regulatory Approvals subject to the payment obligations set forth in Section 9.4.

3.2 Initial Supply of Finished Product. Oscient agrees to discuss with MIOL its ability to supply MIOL with Finished Product instead of Active Pharmaceutical Ingredient until the transfer of technology pursuant to Section 3.4 is completed. Any such supply shall be on the terms of a supply agreement to be agreed to by the Parties.

3.3 Miscellaneous Supply of API by Oscient in the Territory. Notwithstanding anything to the contrary contained herein, Menarini agrees to allow Oscient to supply certain amounts of Active Pharmaceutical Ingredient to Third Parties in the Territory solely for academic, non-commercial purposes.

3.4 MIOL Manufacturing and Packaging. MIOL shall Manufacture (or have Manufactured on its behalf (subject to Section 2.2 above)) Finished Product for distribution in the Territory in accordance with Applicable Law and the specifications provided by Oscient. If requested by Oscient, MIOL shall provide Oscient with all artwork, copy or other material developed or produced by MIOL or any Sub-Distributor for such Printed Materials. All use of Trademarks shall be in accordance with Sections 7.6 and 11.8 and unless otherwise specified by Oscient, the Finished Product shall indicate that the Trademark is a registered trademark, if applicable. Pursuant to the provisions of Article 6 below, MIOL shall submit for approval proposed labeling (including package inserts and primary packages) for Finished Product to the Regulatory Authority, to the extent approval by the Regulatory Authority is required, at MIOL’s sole cost and expense. Notwithstanding anything to the contrary herein, MIOL is responsible for ensuring all Printed Materials comply with Applicable Law.

3.5 Technology Transfer and Support Activities. To the extent not previously disclosed, Oscient shall, without additional compensation, disclose and make available to

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

MIOL the Oscient Information promptly after the Effective Date and thereafter shall reasonably promptly disclose any additional Oscient Information. Reasonably in advance before Menarini starts to Manufacture the Finished Product, Oscient shall provide to MIOL (or its Third Party Manufacturer) for a period not exceeding nine (9) months such assistance as MIOL may reasonably request in connection with the technology transfer of the Oscient Information. Such supporting activities shall include the assistance to MIOL’s technical staff both at Oscient and at the MIOL’s production site, transfer of relevant chemical and microbiological analyses and technical documentation including all available stability data forming part of the Oscient Information provided that if MIOL requests Oscient’s representatives to visit any MIOL facility, Oscient shall only be required to make up to two (2) appropriate representatives available for up to ten (10) days each and MIOL shall reimburse Oscient for its reasonable and verifiable expenses of travel and accommodations for such representatives.

3.6 Quality Agreement. Oscient and MIOL shall negotiate and agree to, within ninety (90) days following the Effective Date, a quality agreement with respect to Oscient’s supply of Active Pharmaceutical Ingredient (the “Quality Agreement”), which shall (a) be on terms consistent with those standard in the industry for transactions similar to this Agreement and (b) become effective as of the Effective Date. Each Party agrees to comply with the Quality Agreement. To the extent there are any inconsistencies or conflicts between this Agreement and the Quality Agreement, the terms and conditions of this Agreement shall control unless otherwise agreed to in writing by Oscient and MIOL in the form of an amendment to this Agreement. In the event that the Quality Agreement contains material provisions that differ from Applicable Law, Applicable Law shall control.

3.7 Documentation, Monitoring and Recordkeeping. Oscient (or its Third Party licensors), MIOL and all Sub-Distributors and Third-Party Manufacturers shall maintain complete and accurate documentation of all validation data, stability testing data, batch records, quality control and laboratory testing, as applicable, and any other data required under Applicable Law and other requirements of any relevant Regulatory Authority generated in connection with the performance of any manufacturing hereunder. Throughout the Term, and for so long thereafter as is required by Applicable Law, each Party shall monitor and maintain reasonable records respecting its compliance with GMP for Finished Product (in the case of MIOL) and ICH Q7A (in the case of Oscient), including through the establishment and implementation of such operating procedures as are reasonably necessary to assure such compliance.

4. FORECASTING, ORDERING AND SHIPPING

4.1 Rolling Forecasts. Throughout the Term, MIOL shall provide Oscient, by the 15^th day of every month of each calendar year, with a rolling forecast (“Forecast”) prepared in good faith by MIOL projecting MIOL’s requirements of Active Pharmaceutical Ingredient for the twenty-four (24) month period commencing on the first day of the next calendar month (i.e. 1 March, 1 June, 1 September or 1 December, as the case may be), specifically indicating such projected requirements for each month during such twenty-four (24) month period and forecasted monthly prescription volumes of Tablets for each country in the Territory.

4.2 Submission of Purchase Orders. MIOL shall issue a purchase order, in substantially the format attached hereto as Exhibit A, for the Active Pharmaceutical Ingredient to be manufactured and shipped to it on a date (the “Required Delivery Date”) not less than [*]

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

days from the date of such purchase order. The quantities of Active Pharmaceutical Ingredient ordered in each such purchase order shall be firm and binding on MIOL and shall not be subject to reduction by MIOL. All purchase orders shall be sent by MIOL to the attention of the employee of Oscient as may from time to time be designated by Oscient. To the extent the terms of any purchase order or acknowledgment thereof are inconsistent with, or additional to, the terms of this Agreement, such terms are of no force and effect.

4.3 Terms of Delivery. Oscient shall execute all accepted purchase orders consistent with this Agreement and use commercially reasonable efforts to deliver Active Pharmaceutical Ingredient to MIOL’s designated carrier at Oscient’s designated facility (determined in Oscient’s reasonable discretion, currently in South Korea), within +/- seven (7) days of the delivery date specified in MIOL’s purchase orders in accordance with Section 4.2. MIOL shall be responsible for arranging, at its expense, all shipping, freight and insurance, customs clearance and payment of any customs duties and import fees for its orders of Active Pharmaceutical Ingredient. Title and risk of loss will pass to MIOL when each order of Active Pharmaceutical Ingredient is delivered to MIOL’s designated carrier at Oscient’s designated facility. If MIOL does not timely indicate in writing its selection of a carrier to Oscient, Oscient shall be entitled to select an appropriate carrier. Oscient shall package each order of Active Pharmaceutical Ingredient for shipment in accordance with customary industry practices therefor, unless otherwise reasonably specified in writing by MIOL.

4.4 Accompanying Documentation. With each shipment of Active Pharmaceutical Ingredient, Oscient shall provide MIOL with (i) all appropriate documentation directly related to the Active Pharmaceutical Ingredient necessary to allow MIOL to export the Active Pharmaceutical Ingredient and (ii) with a certificate of analysis and certificate of conformity pursuant to the terms of the Quality Agreement.

4.5 Retention of Samples. Oscient or its Third Party manufacturer shall properly store and retain appropriate samples of the Active Pharmaceutical Ingredient that it supplies to MIOL in conditions and for times consistent with Applicable Law and to permit appropriate or required internal and regulatory checks and references.

5. INSPECTION AND DEFECTIVE PRODUCTS

5.1 Receipt of Active Pharmaceutical Ingredient by MIOL. MIOL shall be entitled to reject any portion or all of any shipment of Active Pharmaceutical Ingredient that does not conform to the certificate of analysis and certificate of conformity or otherwise fails to comply with the warranties set forth in Section 12.1(e) of this Agreement (unless such nonconformity was attributable to an act or omission of MIOL, Third-Party Manufacturer, Sub-Distributor or the common carrier once the Active Pharmaceutical Ingredient was delivered by Oscient to such common carrier); provided, that MIOL shall notify Oscient within [*] days after receipt of such shipment if it is rejecting a shipment pursuant to this Section 5.1. If no notice is provided by MIOL within the relevant time periods, then MIOL shall be deemed to have accepted the shipment. Any notice of rejection by MIOL shall be accompanied by a reasonably detailed statement of its reasons for rejection and a report of any pertinent analysis performed by MIOL on the allegedly nonconforming product, together with the methods and procedures used. Oscient shall notify MIOL as promptly as reasonably possible, but in any event within [*] days after receipt of such notice of rejection, whether it accepts MIOL’s assertions of nonconformity.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

5.2 Replacement Active Pharmaceutical Ingredient. Whether or not Oscient accepts MIOL’s assertion of nonconformity, promptly upon receipt of a notice of rejection, unless otherwise specified by MIOL, Oscient shall use its commercially reasonable efforts to provide replacement Active Pharmaceutical Ingredient for that rejected by MIOL in the original shipment. If the Active Pharmaceutical Ingredient rejected by MIOL from such original shipment ultimately is found to be nonconforming (whether pursuant to Section 5.3 or if Oscient so acknowledges in writing), Oscient shall bear all expenses for such replacement Active Pharmaceutical Ingredient (including all transportation and/or disposal charges and cost of manufacture for such nonconforming Active Pharmaceutical Ingredient) to the extent MIOL previously paid for any corresponding nonconforming Active Pharmaceutical Ingredient. If it is determined subsequently that such Active Pharmaceutical Ingredient was in fact conforming (whether pursuant to Section 5.3 or if MIOL so acknowledges in writing), then MIOL shall be responsible not only for the purchase price of the allegedly nonconforming Active Pharmaceutical Ingredient (including all transportation charges), but also, upon receipt and acceptance by MIOL in accordance with the procedures (and at the same price charged in the original shipment) set forth above, the replacement Active Pharmaceutical Ingredient. Replacement shipments shall also be subject to the procedures contained in Article 4.

5.3 Independent Laboratory Analysis. If Oscient disagrees with any alleged nonconformity timely notified to Oscient under Section 5.1, then an independent laboratory (or other expert) of recognized repute reasonably acceptable to Oscient and MIOL (the “Independent Laboratory”) shall analyze (i) a sample from the relevant shipment provided by MIOL and (ii) a Shipment Sample as retained by Oscient in accordance with Section 4.5, as may be necessary to substantiate whether the shipment rejected by MIOL conformed in all material respects to the certificate of analysis and the pertinent Specifications or otherwise failed to comply with the warranties set forth in Section 12.1(e) of this Agreement at the time of delivery to the common carrier. At the same time each of Oscient and MIOL furnishes to the Independent Laboratory its sample, such Party shall also furnish to the other Party a split sample of such sample. In conducting its analysis hereunder, the Independent Laboratory shall use the same analytical methodology used by Oscient. Oscient shall provide a reasonably detailed description of such analytical methodology to the Independent Laboratory. Both Oscient and MIOL agree to cooperate with the Independent Laboratory’s reasonable requests for assistance in connection with its analysis hereunder. The Independent Laboratory’s results of analysis, absent manifest error, shall be deemed final as to any dispute over compliance of the Active Pharmaceutical Ingredient in all material respects with the certificate of analysis and/or the pertinent Specifications and/or the warranties set forth in Section 12.1(e) of this Agreement. If the analysis of the Independent Laboratory shows that the Active Pharmaceutical Ingredient did not at the material time(s) conform in all material respects to the certificate of analysis or the pertinent Specifications or the warranties set forth in Section 12.1(e) of this Agreement at the time of delivery to the common carrier, the costs of such analysis shall be paid by Oscient. If the analysis of the Independent Laboratory shows that the Active Pharmaceutical Ingredient did at the material time(s) conform in all material respects to the certificate of analysis and the pertinent Specifications and the warranties set forth in Section 12.1(e) of this Agreement at the time of delivery to the common carrier, the costs of such analysis shall be paid by MIOL.

5.4 Disposition of Non-Conforming Active Pharmaceutical Ingredient. If Oscient acknowledges an alleged nonconformity (or if the Independent Laboratory concludes that the Active Pharmaceutical Ingredient was nonconforming in accordance with Section 5.3),

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Oscient promptly (and in any case within thirty (30) days thereafter) shall make arrangements for the return, reworking or disposal, at Oscient’s option, of the nonconforming Active Pharmaceutical Ingredient. If Oscient requests that MIOL dispose of such nonconforming Active Pharmaceutical Ingredient, Oscient shall give MIOL written instructions as to how MIOL or its agent shall, at Oscient’s expense, lawfully dispose of any nonconforming Active Pharmaceutical Ingredient, and MIOL shall provide Oscient with written certification of such destruction. Oscient shall pay, or reimburse MIOL, for any reasonable return shipping charges or out-of-pocket costs incurred by MIOL for such return shipment or lawful disposal of such nonconforming Active Pharmaceutical Ingredient in accordance with Oscient’s instructions.

6. DEVELOPMENT OF PRODUCTS

6.1 Regulatory Approval.

(a) Subject to Steering Committee review as set forth below, MIOL shall use Diligent Efforts in, and be responsible for, all activities relating to obtaining and/or maintaining all Regulatory Approvals from Regulatory Authorities in the Territory for the Commercialization and Manufacture of the Finished Product in the Territory, including using Diligent Efforts (A) to obtain Marketing Authorizations for [*], [*] and [*] indications for the Finished Product consistent with the Minimum Labeling Requirements according to the Development Plan, (B) to request a scientific advice meeting with the EMEA on eligibility of the Finished Product for the Centralized Procedure, proposed risk management plan, scientific data supporting the Marketing Authorization application; in case of non-eligibility possibility to request further advice from other national Regulatory Authorities, (C) to submit the letter of intent to submit a Marketing Authorization application to the EMEA, (D) to prepare the Common Technical Document for submission to the EMEA or other relevant Regulatory Authorities, (E) to submit the application for a Marketing Authorization to the EMEA or other relevant Regulatory Authorities, and (F) to follow up on all the regulatory applications. MIOL agrees: (i) to keep Oscient informed as to the status of its draft regulatory applications and to permit Oscient to review, in advance, any filing, correspondence, communication or other documentation to be filed with Regulatory Authorities during their preparation, (ii) to confer with Oscient regarding the preparation of such filings and communications and the registration process, (iii) to provide Oscient, upon request, with copies of all written communications with Regulatory Authorities with respect thereto, and (iv) where practical, to give reasonable prior notice to Oscient in order to allow Oscient to attend all material meetings with Regulatory Authorities. MIOL shall conduct all such regulatory activities in accordance with Applicable Law. Subject to Section 9.7 below, costs of Development and related Regulatory Approvals shall be borne by MIOL. Immediately upon obtaining any Regulatory Approval, MIOL shall provide true copies of the same to Oscient.

(b) Subject to Section 6.1(a), MIOL shall be responsible for communications with the Regulatory Authorities with respect to the Regulatory Documentation. Oscient shall provide reasonable assistance to MIOL in preparing documentation to support pre- and post-authorization meetings and in responding to any queries from a Regulatory Authority. Oscient will be responsible for the transfer of all the relevant information on the Active Pharmaceutical Ingredient and the Finished Product to allow MIOL to prepare the necessary documentation for Regulatory Applications (both pre- and post-authorization) including electronic version of the preclinical and clinical documentation to be included in the Regulatory Documentation. Notwithstanding anything to the contrary herein, Oscient shall

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

not be required to deliver any information or data not already in its Control or to perform any development activities; in particular Oscient shall be under no obligation to provide to MIOL any information relating to the bulk chemical manufacture or the formulation of the Compound or Active Pharmaceutical Ingredient, other than information that is included in the Applicant’s Part of the Active Substance Master File submitted to EMEA or any other relevant Regulatory Authority. Oscient shall or shall procure that LG shall be responsible for supplying Active Pharmaceutical Ingredient manufacturing process information direct to the EMEA or any other relevant Regulatory Authorities and will respond to relevant queries from Regulatory Authorities regarding the same. MIOL shall advise Oscient of material developments and events relating to regulatory issues in writing within three (3) Business Days after notice of such material developments and events. MIOL shall take the steps necessary to ensure that all information submitted to Regulatory Authorities is kept confidential.

(c) For the avoidance of doubt, during the Development and subject to the Steering Committee review and approval pursuant to Sections 6.2 and 6.3 herein, MIOL shall have the right, but not the obligation, to perform clinical trials necessary to obtain the Regulatory Approval(s), at MIOL’s sole discretion.

(d) As soon as reasonably possible, Oscient agrees to withdraw the regulatory application previously submitted to MHRA by Oscient.

6.2 Joint Steering Committee.

(a) Within ninety (90) days of the date of this Agreement, a joint steering committee, comprised of equal representation by both Parties (up to a maximum of three (3) representatives per Party (the “Steering Committee”)), shall be established by both Parties. Except as otherwise provided in this Agreement, the Steering Committee shall have authority to make all necessary strategic decisions relating to the Development of Finished Product and the implementation of any Development Plan. The Steering Committee shall also review and approve any amendments to the Development Plans and shall review the MIOL Information and all filings made with any Regulatory Authority as well as to perform such other functions as appropriate to further the purposes of this Agreement as determined by the Parties. In addition, MIOL shall keep Oscient informed of the following matters through the Steering Committee:

(i) Plans and updates relating to the Commercialization of the Finished Product, including updates on achievement of objectives set forth in the applicable Marketing Plan (as defined in Section 7.2 below), progress towards sales goals, and related sales and marketing activities;

(ii) Prices, discounts, rebates and similar policies for the Finished Product in each country in the Territory;

(iii) Reporting and pricing information to government authorities in accordance with Applicable Law;

(iv) Manufacturing issues; and

(v) Summary and analysis of any Adverse Event information or other medical inquires specified in Section 8.3 herein.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) A Party may change or replace its representatives on the Steering Committee as it deems appropriate, by notice to the other Party provided that all such representatives shall be individuals of suitable authority and seniority with significant experience or expertise in pharmaceutical drug development, commercialization or marketing. Any member of the Steering Committee may designate a substitute of equal experience and seniority to attend and perform the functions of that member at any meeting of the Steering Committee. Each Party may invite (at its discretion and with the consent of the other Party) additional employees, or consultants to attend Steering Committee meetings. The Steering Committee shall hold meetings at such times and places as shall be determined by the co-chairpersons. The meetings shall be held no less frequently than (i) once every three (3) months prior to the grant of a Marketing Authorization obtained through the Centralized Procedure or, if Marketing Authorizations are sought on a country by country basis (rather than via the Centralized Procedure), the grant of a Marketing Authorization in each of the Major Countries and (ii) once every six (6) months thereafter. Steering Committee meetings may be held in person or by telephone or video conference.

(c) In the event of a dispute within the Steering Committee such that no decision can be made with respect to a particular issue, the matter may be referred by either Party to Oscient’s chief executive officer and MIOL’s Managing Director for attempted resolution by good faith negotiation. If such individuals are unable to resolve the dispute within thirty (30) days after referral, subject to Section 6.3 below, then MIOL shall make the final determination to the extent not inconsistent with the terms and conditions of this Agreement, provided that any such determination shall be commercially reasonable and consistent with Applicable Law and MIOL shall not be entitled to make a unilateral determination: (i) if the proposed Development activities would be inconsistent with the U.S. label for the Oscient Product or might reasonably be expected to have an adverse effect on the development, manufacture or commercialization of Oscient Product or any other product containing the Compound outside the Territory, or (ii) to apply for Marketing Authorizations on a country by country basis (rather than via the Centralized Procedure); and any such determination shall require Oscient’s prior written consent. Prior to resolving any such dispute unilaterally, MIOL shall consider in good faith Oscient’s position in reaching any such decision and shall act in good faith and in the best interests of the Development and Commercialization of the Finished Product.

(d) The Steering Committee shall only have such powers as are expressly delegated to it in this Agreement. The Steering Committee is not a substitute for the rights or obligations of the Parties and shall not have the authority to amend this Agreement.

(e) Each Party will designate one of its members of the Steering Committee to act as a co-chairperson to facilitate the performance of its rights and satisfaction of its obligations hereunder.

6.3 Clinical Development.

(a) Subject to Oscient’s review and agreement, the Parties agree that MIOL may, but is not obligated to, pursue in the Territory Regulatory Approval for additional indications beyond the currently approved U.S. indications for the Oscient Product, CAP and AECB; provided that, the Parties agree that MIOL will seek to obtain Marketing Authorizations for each of ABS and CAP based on a 5-day duration of therapy. Any activities relating to additional indications shall form part of the Development Plan and shall be subject to review and approval by the Steering Committee. Oscient shall provide to MIOL data from new

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

clinical studies for the Oscient Product conducted or completed by Oscient or its Affiliates or its licensee after the Effective Date if and to the extent Controlled by Oscient, to support MIOL if MIOL pursues such additional indications. Oscient shall promptly provide to MIOL data from post-marketing clinical trials concerning the Oscient Product before and after the Effective Date if and to the extent Controlled by Oscient in order to include them in the Regulatory Documentation.

(b) Upon reasonable notice, Oscient shall have the right to (a) review any raw data generated in any clinical trial conducted by or on behalf of MIOL or its Affiliates with respect to the Finished Product, (b) visit clinical investigators and centers involved in the performance of such clinical trials, and (c) discuss any such clinical trial and its results in detail with such clinical investigators. MIOL shall provide Oscient with the data resulting from all clinical trials conducted by MIOL in accordance with Section 6.3(a). Oscient shall be free to use the results of any or all such clinical trials in connection with the marketing, promotion, packaging, handling, distribution, use, storage, sale and offer for sale and product licensing of Oscient Product outside the Territory. Except as required by Applicable Law, the results of any clinical studies shall not be publicized or published in any way without the prior written consent of Oscient. All patentable inventions conceived, discovered, developed or otherwise made by or on behalf of MIOL or its Affiliates which are Developed hereunder shall be jointly owned in accordance with Section 11.1.

6.4 Inspections, Inquiries and Complaints.

(a) MIOL shall advise Oscient of any visit to, or written or oral inquiry about, any facilities or procedures relating to the Manufacture and/or Commercialization of the Finished Product by or from any Regulatory Authority, promptly (but in no event later than one (1) Business Day) after notice of such visit or inquiry is received by MIOL or its Affiliates or Third-Party Manufacturer or Sub-Distributors. MIOL shall, within three (3) Business Days of receipt or submission, furnish to Oscient any report or correspondence issued by or provided to the Regulatory Authority in connection with such visit or inquiry.

(b) Oscient shall advise MIOL of any visit to, or written or oral inquiry about, any facilities or procedures relating to the manufacture of the Active Pharmaceutical Ingredient by or from any Regulatory Authority, or comparable regulatory authority outside the Territory, promptly (but in no event later than one (1) Business Day) after notice of such visit or inquiry is received by Oscient.

(c) MIOL shall advise Oscient within twenty four (24) hours of any investigation, complaint, claim or potential claim, whether from a Regulatory Authority or not, about the Finished Product relating to a safety issue, and shall also advise Oscient within two (2) Business Days of any issue that may give rise to a potential recall.

7. COMMERCIALIZATION OF PRODUCT

7.1 Responsibility and Efforts. From and after the Effective Date, MIOL shall have full control and authority over the Commercialization of Finished Products in the Territory, and shall exercise Diligent Efforts in Commercializing Finished Products in the Territory. MIOL shall (i) diligently seek formulary listings and Reimbursement Prices in each country in the Territory, in order to maximize the commercial potential for the Finished Product in the Territory, and (ii) Commercialize the Finished Product in each country in the Territory in which MIOL receives a Reimbursement Price of at least $[*] (after applying the Annual

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Calculated Exchange Rate in effect at such time) (the “Acceptable Country”); provided that, if the Actual Weighted Average Price Per Tablet at the time of receipt of a Reimbursement Price is less than $[*], then, MIOL shall not be obligated to Commercialize the Finished Product in such Acceptable Country. All activities relating to Commercialization under this Agreement shall be undertaken at MIOL’s sole cost and expense. MIOL and Oscient shall discuss and agree in good faith, at least three months before the launch in each of the Major Countries that have received Marketing Authorization approval, on the minimum number of Calls to be made by MIOL in each of the Major Countries using as a reference the projections used to develop the target promotional plan set forth in Schedule 7.1.

7.2 Annual Marketing Plan. Within sixty (60) days of the First Commercial Sale and thereafter not later than each anniversary date of the First Commercial Sale, MIOL shall submit to Oscient a business and marketing plan for the following year for each country in the Territory (each a “Marketing Plan”). The Marketing Plan shall be in a form reasonably required by Oscient, and shall include: (i) a description of the market and marketing, promotional and customer service programs anticipated for the following year and budgets for each on a country by country basis; (ii) an outline of training and regulatory activities expected for the following year, (iii) the number and type of Details to be performed; (iv) the aggregate amount of Commercializing expenses to be incurred; (v) a three-year forecast of purchases of Active Pharmaceutical Ingredient from Oscient and sales of the Finished Product to customers; (vi) an inventory status report; and (vii) such other information concerning the market, the status of customers and competitors, the business of MIOL or such other matters related to the Finished Product as Oscient may reasonably request. MIOL shall consider in good faith any comments made by Oscient in connection with any Marketing Plan and in particular any concerns that Oscient may have that execution of any Marketing Plan in accordance with its terms would not constitute Diligent Efforts in Commercializing Finished Products in the relevant country.

7.3 Standards and Sales Activities. MIOL shall, at its sole expense, Commercialize the Finished Product in accordance with good commercial practice with respect to regulated pharmaceutical products, including Applicable Law. MIOL shall avoid using any practice that would prejudice Oscient’s name, the Trademarks, or the quality of the Finished Product. MIOL shall market the Finished Product in a manner that maximizes the goodwill and the value over the long term of the Finished Product.

7.4 Training. MIOL shall ensure that each of its and its Sub-Distributors’ sales force and employees are fully trained with respect to the Finished Product and reporting of Adverse Event information in accordance with Applicable Law.

7.5 Sales Outside the Territory. MIOL and its Sub-Distributors shall not: (i) establish any branch, sales offices, warehouse or other facilities outside of the Territory with respect to the Finished Product, (ii) adopt a policy of selling the Finished Product outside the Territory nor undertake the sale or promotion of sales of the Finished Product outside the Territory, (iii) seek customers or solicit orders from any prospective customer whose principal address or place of business is located outside the Territory, (iv) provide any price quotations for the Finished Product to any prospective customer whose principal address or place of business is located outside the Territory, and/or (v) directly or indirectly sell to any person (including a pharmacy or wholesaler) that MIOL knows or has reason to believe, directly or indirectly sells to any person outside of the Territory. If MIOL or Sub-Distributor receives an order from a prospective customer located outside the Territory, MIOL and Sub-Distributor shall immediately refer that order to Oscient. Without Oscient’s prior consent, MIOL, or

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Sub-Distributor may not deliver or tender, or cause to be delivered or tendered, the Finished Product (or any sample of the Product) outside the Territory. Neither MIOL, nor Sub-Distributor shall sell any Finished Product to any purchaser if (A) it knows, or has reason to believe, that such purchaser intends to remove the Finished Product from the Territory, either directly or indirectly, or if (B) such purchaser is known to remove pharmaceuticals from the Territory, either directly or indirectly.

7.6 Marketing, Promotional and Educational Materials. Unless otherwise agreed by Oscient, the Finished Product shall be sold under the trade name Factive ^®; provided, however, that MIOL may propose alternative trade names for specific countries, and upon Oscient’s prior written consent, not to be unreasonably withheld, and subject to any necessary Regulatory Approvals, the Finished Product shall be marketed under such trade name (the “New Trademark”). The New Trademark shall be the property of Oscient or its designee and shall be registered by Oscient or its designee. If the New Trademark is initially registered by MIOL, MIOL shall promptly on request assign all its rights and interest in any such New Trademark to Oscient or as Oscient may direct. The definition of “Trademark” hereunder shall include any such New Trademark registered in Oscient’s name. All marketing, promotional and educational materials related to the Finished Product and prepared for use in the Territory by MIOL or a Sub-Distributor (the “Promotional Materials”) shall be prepared in a manner consistent with Applicable Law and relevant self-regulatory codes of conduct and guidelines. Oscient shall be presented at least thirty (30) days in advance of use with samples or proofs of all such Promotional Materials for review and comments. Notwithstanding this, MIOL shall remain at all times responsible for ensuring that all Promotional Materials and their use are in compliance with Applicable Law. All Promotional Materials shall display the Trademarks in a manner that promotes the Finished Product and each of the Parties in a manner consistent with good commercial practice in dealing with regulated pharmaceutical products and shall unless otherwise agreed by Oscient indicate that any Trademark is a registered trademark, if applicable. Oscient shall have the right to reproduce, distribute and otherwise use outside the Territory all Promotional Materials. MIOL shall provide and distribute to customers and prospective customers marketing, promotional and educational materials reasonably necessary to promote the Finished Product in the Territory. MIOL shall be responsible for all expenses relating to the advertising, promotion or sales of the Finished Product. Oscient shall provide MIOL with samples of Product-related marketing and promotional materials prepared by Oscient, including related logos and graphics, for use by MIOL in connection with the development of Promotional Materials.

8. RECORDS AND REPORTS

8.1 Records. MIOL shall maintain complete and accurate records of all inventories, Finished Product in storage, movements, shipments, sales and potential problems involving the Finished Product by unit, by batch number and by customer so that all such matters can be traced quickly and effectively. Upon request, MIOL shall provide copies of such records to Oscient, and shall provide Oscient, or its representatives, with access to the place where the Finished Product is Manufactured, stored and/or shipped and other facilities used by MIOL in carrying out this Agreement, during normal business hours and upon reasonable notice, for the purpose of inspecting such facilities for compliance with the terms of this Agreement. MIOL shall maintain all such records for at least five (5) years or such longer period as may be required by Applicable Law.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

8.2 Reports. MIOL shall provide Oscient with written reports regarding the Development and Commercialization of the Finished Product. MIOL shall provide such written reports no less frequently than annually during the Term. In addition, MIOL shall provide Oscient with prompt written notice of the occurrence of the First Commercial Sale of the Finished Product in each country in the Territory. All reports, updates, Adverse Event information and other information provided by one Party to another Party under this Agreement shall be considered Confidential Information of the Disclosing Party, subject to the terms of Article 10 hereof.

8.3 Adverse Events. The Parties shall comply with the Pharmacovigilance Joint Operating Policy, which shall be negotiated and agreed to within ninety (90) days from the Effective Date, with respect to the investigation and reporting of Adverse Events and shall regularly review and update the Pharmacovigilance Joint Operating Policy as may be required to enable both Parties to comply with Applicable Law relating to pharmacovigilance. The Parties shall provide each other on a regular basis and in accordance with the Pharmacovigilance Joint Operating Policy with any information which has become available to them and which is relevant to the safe use of the Finished Product or the Oscient Product or which is required by Applicable Law in all countries where the Finished Product or the Oscient Product is marketed or is in a clinical study. MIOL, at its sole expense, shall be responsible for conducting any post-marketing surveillance of the Finished Products sold by MIOL pursuant to this Agreement and for reporting Serious Adverse Events and Non-Serious Adverse Events arising in connection with any Finished Product to the appropriate Regulatory Authorities in the Territory in accordance with Applicable Law. Oscient, or its Third Party sublicensor and sublicensees shall be responsible for making all Adverse Event reports outside the Territory. The Parties shall transmit to each other a copy of any report relating to a Serious Adverse Event for a Finished Product or an Oscient Product made to any Regulatory Authority, comparable regulatory authority outside the Territory or ethics committee within two (2) calendar days following submission to the relevant regulatory authority or ethics committee made by MIOL, its Affiliates or its Sub-Distributors (or within two (2) calendar days following notice of submission to the relevant regulatory authority made by a Third Party (other than a Sub-Distributor)) by transmitting it in accordance with such procedures as the Parties may agree in writing from time to time.

8.4 MIOL Information. During the Term MIOL shall promptly provide to Oscient copies of any and all MIOL Information.

9. PAYMENTS AND FEES

9.1 License Fee. In consideration of the license described in Article 2 hereof, MIOL agrees to pay to Oscient a non-refundable license fee of $[*] within ten (10) Business Days from the Effective Date.

9.2 Transfer Price.

(a) Oscient shall supply free of any charge up to one (1) kilogram of Active Pharmaceutical Ingredient ordered by MIOL for the purposes of obtaining necessary Regulatory Approvals to Commercialize the Finished Product in the Territory; provided that, any such Active Pharmaceutical Ingredient may not be used to Manufacture Finished Product to be Commercialized in the Territory.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) For each kilogram of Active Pharmaceutical Ingredient delivered by Oscient to MIOL during the Term, MIOL shall pay to Oscient an amount per kilogram of Active Pharmaceutical Ingredient equal to the Transfer Price Per Kilo. Each invoice for Active Pharmaceutical Ingredient shall specify the purchase order number to which it corresponds. All amounts due to Oscient pursuant to Sections 9.2(a) and 9.2(d) shall be paid by MIOL within fifty (50) days following the date of invoice and otherwise in accordance with this Article 9.

(c) Within twenty (20) days following the end of every Quarter after the First Commercial Sale, MIOL shall provide to Oscient a report detailing (i) the Gross Sales (including specifics related to applicable Government Payments) and Net Sales (including an accounting of deductions taken in the calculation of Net Sales) for each country in the Territory for the applicable Quarter, (ii) the total number of Tablets sold by MIOL or its Affiliates or Sub-Distributors in each such country in that Quarter, and (iii) the reconciliation of the Assumed Weighted Average Price Per Tablet and the Actual Weighted Average Price Per Tablet (calculated for the applicable Quarter) pursuant to Section 9.2(d) below (the “Quarterly Report”). MIOL shall cause its or the applicable Affiliate’s Managing Director to certify that the information contained in each Quarterly Report is complete and accurate.

(d)(i) If in any Quarter the Actual Weighted Average Price Per Tablet is greater than the Assumed Weighted Average Price Per Tablet for the same Quarter, then MIOL shall owe and pay to Oscient an amount equal to (A) the difference between the Actual Weighted Average Price Per Tablet and the Assumed Weighted Average Price Per Tablet, multiplied by (B) the number of Tablets sold (including the number of professional samples of Tablets given to medical professionals without cost) by MIOL and its Affiliates and Sub-Distributors (as determined using verifiable, written data from MIOL) in the applicable Quarter, to be paid to Oscient pursuant to the provisions of Section 9.8 below).

(ii) If in any Quarter the Assumed Weighted Average Price Per Tablet is greater than the Actual Weighted Average Price Per Tablet for the same Quarter, then Oscient shall owe to MIOL an amount equal to (A) the difference between the Assumed Weighted Average Price Per Tablet and the Actual Weighted Average Price Per Tablet, multiplied by (B) the number of Tablets sold (including the number of professional samples of Tablets given to medical professionals without cost) by MIOL and its Affiliates and Sub-Distributors (as determined using verifiable, written data from MIOL) in the applicable Quarter, such sum to be paid to MIOL pursuant to the provisions of Section 9.8 below.

(iii) Notwithstanding anything hereunder to the contrary, when calculating the Actual Weighted Average Price Per Tablet for any applicable Quarter for purposes of the reconciliation set forth in this Section 9.2(d), in no event shall the Actual Weighted Average Price Per Tablet be less than $.[*] per Tablet. In the event the Actual Weighted Average Price Per Tablet calculated for two (2) consecutive Quarters would, but for this Section 9.2(d)(iii), be less than $.[*] per Tablet, MIOL may notify Oscient in writing that it wishes to negotiate in good faith a new minimum per Tablet price which is mutually acceptable to both Parties.

(e) During the Mandatory Supply Term, MIOL shall provide to Oscient, on the 75^th day after the end of each Quarter, IMS audit data detailing Gross Sales, the total number of Tablets sold by MIOL and its Affiliates and Sub-Distributors and the total number packs of Finished Product sold to pharmacies (pharmacy sell-in) (including corresponding Tablets per package in each case in the Quarter, in the Territory. At the end of every Sales Year (as

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

defined below), the Parties shall reconcile such IMS data received by Oscient against the Quarterly information presented by MIOL and shall make appropriate payments to each other if use of the IMS data would have resulted in a change of such payments made pursuant to this Section 9.2 in such Sales Year of greater than [*] percent ([*]%) of the actual payments made pursuant to this Section 9.2 during such Sales Year.

(f) For purposes of clarification, Schedule 9.2 is attached hereto to provide hypothetical forecasted examples of the calculation of the Actual Weighted Average Price Per Tablet.

9.3 Additional Payments. In further consideration of the grant of the license and rights by Oscient pursuant to Article 2, and subject to the other terms of this Agreement (including the remainder of this Section 9.3), commencing on the date of the First Commercial Sale and continuing for the duration of the Mandatory Supply Term, if Annual Net Sales in any Sales Year are in excess of $[*] million, MIOL shall make a non-refundable payment to Oscient in an amount equal to [*] percent ([*]%) of such Annual Net Sales which are in excess of $[*] million in that Sales Year multiplied by the Annual Calculated Exchange Rate (as calculated on the last day of the applicable Sales Year) (“Additional Payment”). Unless otherwise expressly provided, MIOL shall make any Additional Payment owed to Oscient hereunder in arrears, within twenty (20) days from the end of each Sales Year in which such Additional Payment accrues. MIOL shall provide to Oscient, by no later than twenty (20) days after each Sales Year, a report detailing sales of Finished Products in the preceding Sales Year in the Territory and specifying: for each month in the relevant Sales Year, on a country by country basis, the Gross Sales (including specifics related to applicable Government Payments) and Net Sales in the Territory and aggregate gross sales and Net Sales; the amounts payable, including an accounting of deductions taken in the calculation of Net Sales; and the applicable Annual Calculated Exchange Rate to convert from Euros into United States Dollars under this Section 9.3.

9.4 Royalties After Mandatory Supply Term. During the Term, following expiration of the Mandatory Supply Term, MIOL shall make Quarterly royalty payments to Oscient on Net Sales in each country in the Territory equal to [*] percent ([*]%) of Net Sales in the relevant Quarter multiplied by the Annual Calculated Exchange Rate (as calculated on the last day of the applicable Quarter) (the “Quarterly Royalty”) for so long as MIOL or any Affiliate or Sub-Distributor continues to use the Trademarks, the Regulatory Approvals or otherwise Commercializes the Finished Product in such country. Unless otherwise expressly provided, MIOL shall make any Quarterly Royalty owed to Oscient hereunder in arrears, within twenty (20) days from the end of the Quarter in which such Quarterly Royalty accrues. Each Quarterly Royalty made pursuant to this Section 9.4 shall be accompanied by a report detailing for each month in the relevant Quarter on a country by country basis sales of Finished Products covered by such statement and specifying: the gross sales and Net Sales, the amounts payable, including an accounting of deductions taken in the calculation of Net Sales, and the applicable Annual Calculated Exchange Rate to convert from Euros into United States Dollars. MIOL shall cause its or the applicable Affiliate’s Managing Director to certify that the information contained in each such report is complete and accurate.

9.5 Milestone Payments.

(a) Approval Milestones Payment. In further consideration of the rights granted hereunder and subject to the other terms and conditions of this Agreement, MIOL shall: (i) if a Marketing Authorization for the Finished Product is granted via the Centralized Procedure

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

and MIOL has not elected to terminate the Agreement pursuant to Section 15.4below, make a non-refundable, non-creditable payment of $[*] million within thirty (30) days of the grant by the European Commission of such Marketing Authorization for the Finished Product or (ii) if MIOL has applied for any Marketing Authorization by a procedure other than the Centralized Procedure, (A) make a non-refundable, non-creditable payment of $[*] million to Oscient within thirty (30) days of receipt of Marketing Authorization in at least three (3) the Major Countries, and (B) make the following non-refundable, non-creditable payments to Oscient within (30) days of the first occurrence of each of the following events:

Milestone	Payment
Upon grant of the first Marketing Authorization in the United Kingdom	$	[	*]
Upon grant of the first Marketing Authorization in France	$	[	*]
Upon grant of the first Marketing Authorization in Germany	$	[	*]
Upon grant of the first Marketing Authorization in Italy	$	[	*]
Upon grant of the first Marketing Authorization in Spain	$	[	*]

(b) Reimbursement Milestones Payment. In further consideration of the rights granted hereunder and subject to the other terms and conditions of this Agreement, MIOL shall make the following nonrefundable, non-creditable payments to Oscient within thirty (30) days of the occurrence of each of the following events or circumstances (“Reimbursement Milestones”):

Milestone	Payment
Upon inclusion of the Finished Product in Part VIII of the National Health Service Drug Tariff for England and Wales	$	[	*]
Upon publication in the Journal Officiel of the price for such Finished Product agreed with or set by the Comité Économique des Produits de Santé in France	$	[	*]
If, 60 days after the first Marketing Authorization has been granted in Germany, the Gemeinsamer Bundesausschuss has not published a determination that the Finished Product may not be reimbursed	$	[	*]
Upon publication in the Italian Official Gazette of a Decision of the Agenzia Italiana del Farmaco to reimburse the Finished Product in Italy	$	[	*]
Upon resolution of the Ministerio de Sanidad y Consumo to reimburse the Finished Product in Spain	$	[	*]

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

In the event that the specific Reimbursement Milestone described above for a Major Country has not occurred, but the Finished Product is nevertheless marketed in that Major Country and is in fact reimbursed, in whole or in part, by the national health system or any broadly equivalent scheme in that Major Country, the Reimbursement Milestone for that Major Country shall be deemed to have occurred and MIOL shall pay the relevant Reimbursement Milestone payment within thirty (30) days of the first such reimbursement.

(c) Sales Milestone Payment. In further consideration of the rights granted hereunder and subject to the other terms and conditions of this Agreement, MIOL shall make the following nonrefundable, non-creditable payments to Oscient within thirty (30) days of the first occurrence of each of the following milestones (“Sales Milestones”):

Milestone	Payment
Annual Net Sales exceed $[*] million dollars	$	[	*]
Annual Net Sales exceed $[*] million dollars	$	[	*]
Annual Net Sales exceed $[*] million dollars	$	[	*]
Annual Net Sales exceed $[*] million dollars	$	[	*]

For the avoidance of doubt, each of the Sales Milestones detailed in this Section 9.5(c) are payable only once but may fall due for payment in the same Sales Year. For example, if Annual Net Sales are $105 million in a Sales Year and no payment has previously been made by MIOL on Annual Net Sales exceeding $50 million, MIOL shall pay Oscient a non-refundable, non-creditable sum of $[*].

(d) Determination that Payments are Due. MIOL shall promptly (and in any event within ten (10) Business Days) provide Oscient with written notice upon its or its Affiliates’ or Sub-Distributors’ achievement of each of the milestones set forth in Sections 9.5(a), (b) and (c). In the event that Oscient believes any milestone payment is due pursuant to Sections 9.5(a), (b) and (c) in spite of not having received notice from MIOL, it shall so notify MIOL and shall provide to MIOL the data and information supporting its belief that the conditions for payment have been achieved. If MIOL does not provide adequate evidence that such milestone has not been achieved within thirty (30) days of receipt of the data and information from Oscient, the conditions for payment shall be deemed to have been achieved.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(e) Milestone Payments Terms. Unless otherwise expressly provided, MIOL shall make any milestone payment owed to Oscient pursuant to this Section 9.5 in arrears, within thirty (30) days from the achievement of such milestone.

9.6 Calculation of Annual Net Sales. For purposes of Section 9.3 and Section 9.5, “Annual Net Sales” shall be calculated (i) based on the twelve (12) month period commencing on the first day of the first full Quarter following the First Commercial Sale of the Finished Product (the “First Sales Year”) and each successive twelve (12) month period thereafter (each a “Sales Year”); provided that, Annual Net Sales in the First Sales Year shall also include any Net Sales completed in the Quarter in which the First Commercial Sale occurred; and (ii) using the Annual Calculated Exchange Rate as calculated at the end of each Quarter.

9.7 Development Expenses. Within thirty (30) day of the end of each Quarter following the Effective Date, MIOL shall provide Oscient with a statement setting forth the costs and expenses incurred by MIOL (together with the relevant invoices and such supporting documentation as Oscient may reasonably require), and Oscient shall reimburse MIOL within thirty (30) days of receipt of such statement all reasonable and verifiable expenses incurred by MIOL in such Quarter in undertaking Development of the Finished Product in accordance with this Agreement (the “MIOL Development Expenses”); provided that, (i) Oscient shall not be obligated to pay more than [*] Dollars ($[*]) in any applicable Quarter and (ii) the aggregate amount to be paid by Oscient for such expenses shall not exceed [*] Dollars ($[*]). MIOL shall keep complete and accurate books and financial records pertaining to its costs and expenses of Developing the Finished Product, which books and financial records shall be retained by MIOL until two (2) years after the end of the Quarter to which they pertain. Oscient shall have the right to inspect and audit, during normal business hours and upon reasonable prior written notice, the books and financial records of MIOL relating to its costs and expenses of Developing the Finished Product during any Quarter; provided that Oscient shall not have the right to inspect or audit any Quarter more than once and will not go back over records more than two (2) years old unless a discrepancy is found.

9.8 Payment Terms. All sums payable by MIOL pursuant to this Agreement shall be paid in United States dollars by bank wire transfer in immediately available funds to the following account unless MIOL is otherwise notified in writing by Oscient:

Bank Account:	Citizens Bank 28 State Street Boston, MA 02109 USA 1-877-471-1961
Account Number:	1135568364
Bank ABA Number:	011500120

9.9 Overdue Payments. Subject to the other terms of this Agreement, any payments not paid within the time period set forth in this Article 9 shall bear interest at a rate of LIBOR plus [*] percent ([*]%) for the applicable month from the due date until paid in full, provided that in no event shall said annual rate exceed the maximum interest rate permitted by law in regard to such payments. Such payment when made shall be accompanied by all interest so accrued. Said interest and the payment and acceptance thereof shall not negate or waive the right of Oscient to any other remedy, legal or equitable, to which it may be entitled because of the delinquency of the payment.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

9.10 Tax Withholding; Restrictions on Payment. It is the Parties’ understanding that no withholding or deduction should be required to be made from any payment made to Oscient pursuant to this Article 9. Any payments payable by either Oscient or MIOL (the “Withholding Party”) to the other under this Agreement may be reduced by the amount required to be withheld or deducted from such payment pursuant to any applicable law (“Withholding Taxes”); provided however, that Withholding Party shall withhold taxes at the lowest tax rate allowed in the applicable tax treaties. The Withholding Party shall submit to the other Party a copy of an original receipt received by the Withholding Party showing payment thereof to the relevant governmental authority, or if such receipt is not available, other reasonable proof of such payment of any Withholding Taxes withheld or deducted, together with an accounting of the calculations of such taxes, as promptly as practicable but in no case later than thirty (30) days after such Withholding Taxes are remitted to the proper governmental authority. All taxes (“Other Taxes”) other than Withholding Taxes shall be borne by the Party upon which such Other Tax is imposed. Oscient and MIOL will cooperate reasonably in completing and filing documents required under the provisions of any applicable Luxembourg tax law or under any other applicable Luxembourg law in connection with the making of any required withholding or deduction, or in connection with the payment of any such withholding or deduction to the proper governmental authority or in connection with any claim to a refund of or credit for any such payment.

9.11 Records Retention; Review.

(a) Records. Commencing as of the date of First Commercial Sale of the Finished Product hereunder, MIOL and Sub-Distributors shall keep for at least five (5) years from the end of the calendar year to which they pertain complete and accurate records of sales by MIOL or Sub-Distributor, as the case may be, of the Finished Product and the reimbursement price from time to time in each country in the Territory and total units of Finished Products dispensed in each country by month, in sufficient detail to allow the accuracy of the payments hereunder to be confirmed.

(b) Review. Subject to the other terms of this Section 9.11, at the request of Oscient, which shall not be made more frequently than once per calendar year during the Term, upon at least thirty (30) days’ prior written notice from Oscient, and at the expense of Oscient (except as otherwise provided herein), MIOL shall permit independent accountants (who may be certified public accountants or chartered accountants) reasonably selected by Oscient to inspect (during regular business hours) the relevant records required to be maintained by MIOL under this Section 9.11. Results of any such review shall be binding on the Parties absent manifest error. Each Party agrees to treat the results of any such accountant’s review of the Party’s records under this Section 9.11 as Confidential Information of such other Party subject to the terms of Article 10. If any review reveals a deficiency in the calculation and/or payment of royalties by MIOL, then (i) MIOL shall promptly pay Oscient the amount remaining to be paid, and (ii) if such underpayment is by [*] percent ([*]%) or more, MIOL shall pay the reasonable out-of-pocket costs and expenses incurred by Oscient in connection with the review.

(c) Sub-Distributors. MIOL shall include in any agreement with the Sub-Distributor terms requiring such party to retain records as required in this Section 9.11 and to permit Oscient to inspect such records as required by this Section 9.11.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

10. TREATMENT OF CONFIDENTIAL INFORMATION

10.1 Confidential Obligations. Oscient and MIOL each recognize that the other Party’s Confidential Information constitutes highly valuable and proprietary confidential information. Oscient and MIOL each agree that during the Term and for five (5) years thereafter, it will keep confidential, and will cause its employees, consultants, Affiliates and, in the case of MIOL, Third-Party Manufacturer, Sub-Distributors and, in the case of Oscient, LG to keep confidential, all Confidential Information of the Disclosing Party; provided that, MIOL agrees to keep, and will cause its employees, consultants, Affiliates and Third-Party Manufacturer and Sub-Distributors to keep, Confidential Information regarding the manufacturing process for Active Pharmaceutical Ingredient confidential for a further period of ten (10) years after expiration or termination of this Agreement. Neither Oscient nor MIOL nor any Third-Party Manufacturer nor Sub-Distributor, nor any of their respective employees, consultants or Affiliates shall use the Disclosing Party’s Confidential Information for any purpose whatsoever other than exercising any rights granted to it or reserved by it hereunder. Without limiting the foregoing, the Receiving Party may disclose information to the extent such disclosure is reasonably necessary to (a) file and prosecute patent applications and/or maintain patents which are filed or prosecuted in accordance with the provisions of this Agreement, or (b) file, prosecute or defend litigation in accordance with the provisions of this Agreement or (c) comply with Applicable Law, court orders or the rules of any nationally recognized securities exchange, quotation system or over-the-counter market on which the Receiving Party or its Affiliates or, in the case of MIOL, the relevant Third-Party Manufacturer or Sub-Distributor is listed or traded; provided, however, that if the Receiving Party is required to make any such disclosure of the Disclosing Party’s Confidential Information in connection with any of the foregoing, it will give reasonable advance notice to the Disclosing Party of such disclosure requirement and, except to the extent inappropriate in the case of patent applications, will use reasonable efforts to assist the Disclosing Party in efforts to secure confidential treatment of such information required to be disclosed.

10.2 Limited Disclosure and Use. Oscient and MIOL each agree that any disclosure of the Disclosing Party’s Confidential Information to any officer, employee, consultant or agent of the Receiving Party or any of its Affiliates, or in the case of Menarini, any Third-Party Manufacturer or Sub-Distributor, shall be made only if and to the extent necessary to carry out its rights and responsibilities under this Agreement, shall be limited to the maximum extent possible consistent with such rights and responsibilities and shall only be made to the extent any such persons are bound by written confidentiality obligations to maintain the confidentiality thereof and not to use such Confidential Information except as expressly permitted by this Agreement. Oscient and MIOL each further agree not to disclose or transfer the Disclosing Party’s Confidential Information to any Third Parties under any circumstance without the prior written approval from the Disclosing Party (such approval not to be unreasonably withheld), except as otherwise required by Applicable Law, and except as otherwise expressly permitted by this Agreement. Oscient shall be permitted to disclose Confidential Information to LG to the extent required pursuant to the LG License. The Receiving Party shall take such action, and shall cause its Affiliates to take such action, to preserve the confidentiality of the Disclosing Party’s Confidential Information as it would customarily take to preserve the confidentiality of its own Confidential Information, using, in all such circumstances, not less than reasonable care. The Receiving Party, upon the request of the Disclosing Party, will return all the Confidential Information disclosed or transferred to it by the Disclosing Party pursuant to this Agreement, including all copies and extracts of documents and all manifestations in whatever form, within sixty (60) days of such request or,

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

if earlier, the termination or expiration of this Agreement; provided however, that the Receiving Party may retain (a) any Confidential Information of the Disclosing Party which is the subject of a continuing license to the Receiving Party at the time of such request or termination or expiry of this Agreement as the case may be and (b) one (1) copy of all other Confidential Information in inactive archives solely for the purpose of establishing the contents thereof.

10.3 Publicity. Neither Oscient nor MIOL may publicly disclose the existence or terms or any other matter of fact regarding this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed; provided, however, that any Party may make such a disclosure (a) to the extent required by Applicable Law or by the requirements of any nationally recognized securities exchange, quotation system or over-the-counter market on which such Party has its securities listed or traded, (b) to any investors, prospective investors, lenders and other potential financing sources who are obligated to keep such information confidential, or (c) in the case of Oscient, as required under the LG License. In the event that such disclosure is required as aforesaid, the Party required to make such disclosure shall make reasonable efforts to provide the other Party with notice beforehand and to coordinate with the other Party with respect to the wording and timing of any such disclosure. The Parties, upon the execution of this Agreement, will mutually agree to a press release with respect to this transaction for publication. Once such press release or any other written statement is approved for disclosure by the Parties, either Party may make subsequent public disclosure of the contents of such statement without the further approval of the other Party.

10.4 Use of Name. No Party shall employ or use the name of another Party in any promotional materials or advertising relating to this Agreement without the prior express written permission of the other Party or as specifically set out in this Agreement.

10.5 Access to Information. If MIOL, Third-Party Manufacturer or Sub-Distributor receives an access to information or freedom of information request relating to Finished Product, it shall notify Oscient within two days of such request, and provide a copy of its proposed response to such request to Oscient at least five days before the deadline for responding. If Oscient suggests that the proposed response should be amended to keep additional information confidential, MIOL, Third-Party Manufacturer or Sub-Distributor, as applicable, shall amend the proposed response accordingly.

11. INTELLECTUAL PROPERTY RIGHTS

11.1 Ownership of Intellectual Property.

(a) Oscient Intellectual Property. Subject to the license granted by Oscient to MIOL under this Agreement, as between the Parties, Oscient shall own and retain all right, title and interest in and to the Oscient Intellectual Property.

(b) Joint Intellectual Property. As between the Parties, each Party shall own an undivided one-half interest in and to any patentable invention conceived, discovered developed or otherwise made, by or on behalf of MIOL, its Affiliates or its Third-Party Manufacturer or Sub-Distributors pursuant to this Agreement (a “Joint Invention”) regardless of inventorship, provided that Oscient may designate LG or any Affiliate of LG (a “Designee”) as the joint owner of any Joint Invention in its place, with full ownership rights in and to any field and each Party and any Designee shall have the right, subject to the rights

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

and licenses granted under, and the other provisions of, this Agreement, to freely exploit, transfer, license or encumber its rights in any Joint Invention (together with all Patent Rights in that subject matter (the “Joint Patent Rights”)) without the consent of, or payment or accounting to, the other Party, and each Party waives any right it may have under any Applicable Law to require such payment, accounting or consent. This Section 11.1 shall survive termination of this Agreement howsoever caused. During the Term, MIOL shall and shall procure that each Third-Party Manufacturer and Sub-Distributor shall, promptly disclose to Oscient in writing, the characterization, conception, development or making of any Joint Invention and notwithstanding any other provision of this Agreement, Oscient shall be free to disclose details of such Joint Invention to LG or any Designee. MIOL shall, and does hereby, assign, and shall cause its Affiliates, Third-Party Manufacturers and Sub-Distributors to so assign, to Oscient, or as Oscient may direct, without additional compensation, such right, title and interest in and to any Joint Inventions as well as any Patent Rights therein, as is necessary to fully effect the joint ownership provided for in this Section.

11.2 Patent Filing, Prosecution and Maintenance. As between the Parties, Oscient shall be responsible for preparing, filing, prosecuting, obtaining and maintaining, at its sole cost, expense and discretion (but acting reasonably), all Licensed Patent Rights and Joint Patent Rights in the Territory; provided however, MIOL shall reimburse Oscient one-half of the costs and expenses relating to the Joint Patent Rights in the Territory. Oscient will keep MIOL reasonably informed of the status of such filing, prosecution, obtaining and maintenance and MIOL, at its cost, shall provide such assistance as Oscient may reasonably require in connection with such filing, prosecution, obtaining and maintenance.

11.3 Trademarks Filing, Prosecution and Maintenance. Oscient may seek and maintain such registrations as it deems advisable in respect of the Trademarks in the Territory, and will keep MIOL reasonably informed of the status of such registrations and applications therefore. Oscient may from time to time add to, modify or delete any Trademarks.

11.4 Infringement. If, during the Term, any Party learns of any actual, alleged or threatened infringement by a Third Party of any of the Oscient Intellectual Property or the Joint Patent Rights, such Party shall promptly notify the other Party and shall provide the other Party with available evidence of such infringement and the Parties shall consult in good faith to determine the appropriate action to be taken in relation to such infringement.

11.5 Violation of Intellectual Property by Third Party(ies). MIOL shall have the first right (but not the obligation), at its own expense and with legal counsel of its own choice, to bring suit (or take other appropriate legal action) against any actual, alleged or threatened infringement or other violation of the Oscient Intellectual Property or the Joint Patent Rights in the Territory. Oscient and LG shall have the right, at their own expense, to be independently represented in any such action by MIOL by counsel of Oscient’s own choice; provided, however, that under no circumstances shall the foregoing affect the right of MIOL to control the suit as described in the first sentence of this Section 11.5. If MIOL does not notify Oscient of its decision as to whether it intends to file an action or proceeding against a material infringement or other violation (the “Notice”) within thirty (30) days after the later of (i) MIOL’s notice to Oscient under Section 11.4 above, or (ii) a written request from Oscient to take action with respect to such infringement (the “Notice Date”) or, having given notice of its intention to file an action or proceeding, MIOL fails to initiate such action or proceeding or having done so fails to diligently prosecute such action or proceeding then Oscient (or LG) shall have the right (but not the obligation), at its own expense, to bring suit

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(or take other appropriate legal action) against such actual, alleged or threatened infringement, with legal counsel of its own choice. MIOL acknowledges that LG, as the person licensing certain of the Oscient Intellectual Property to Oscient, is entitled to be represented in suits or actions involving the Oscient Intellectual Property in the Territory, and to have its costs and expenses incurred in respect of such litigation reimbursed, pro rata with Oscient, from any damages, monetary awards, costs or other amounts recovered through such suits or actions, or settlement thereof; subject to any deductions required to be made in order to reimburse LG as aforesaid. Any damages, monetary awards, costs or other amounts recovered, whether by judgment or settlement, pursuant to any suit, proceeding or other legal action taken under this Section 11.5, shall applied as follows:

(a) First, to reimburse Oscient, LG and MIOL for their respective costs and expenses (including reasonable legal fees, expert fees and other disbursements) incurred in prosecuting such enforcement action;

(b) Second, to reimburse MIOL for MIOL’s profits on lost sales associated with Finished Products and to reimburse Oscient for Oscient’s profits on lost sales of Active Pharmaceutical Ingredient to MIOL and Additional Payments, Quarterly Royalties and milestone payments owing hereunder based on such lost sales;

(c) Third, any amounts remaining shall be allocated as follows: (A) if Oscient is the Party bringing such suit or proceeding or taking such other legal action, [*] percent ([*]%) to Oscient, (B) if MIOL is the Party bringing such suit or proceeding or taking such other legal action, [*] percent ([*]%) to MIOL, and (C) if the suit is brought jointly, [*] percent ([*]%) to each of Oscient and MIOL.

If either of Oscient or MIOL brings any such action or proceeding hereunder, the other agrees to be joined as party plaintiff if necessary to prosecute such action or proceeding, and to give the Party bringing such action or proceeding reasonable assistance and authority to file and prosecute the suit; provided, however, that neither Oscient nor MIOL shall be required to transfer any right, title or interest in or to any property to the other, to any Sub-Distributor or any Third Party to confer standing on a Party hereunder.

The Party that controls the prosecution of any such action or proceeding shall also have the right to control settlement of such action; provided, however, that no settlement shall be entered into without the written consent of the other Party if such settlement would materially adversely affect the interests of such other Party.

11.6 Infringement of Third Party Patents.

If MIOL receives notice from a Third Party claiming that the importation of Active Pharmaceutical Ingredient into the Territory or the Exploitation of the Finished Product in the Territory by MIOL or its Affiliates or Sub-Distributors infringes or misappropriates any Patent Rights of such Third Party in any country in the Territory, MIOL shall promptly notify Oscient and the Parties shall consult in good faith to determine the appropriate action to be taken in relation to such alleged infringement or misappropriation. MIOL shall have the first right, but not the obligation, through counsel of its choosing, to negotiate and obtain a licence from such Third Party as necessary for MIOL and its Affiliates to import Active Pharmaceutical Ingredient into the relevant country and/or MIOL and its Affiliates, Sub-Distributors and Third-Party Manufacturers to Exploit the Finished Products in the Territory or the relevant country (a “Third Party License”). Oscient shall have the right, but not

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

obligation, at its own expense, to participate in any such negotiations and to be independently represented by counsel of Oscient’s own choice. MIOL shall conduct any negotiations with such Third Party in co-operation with Oscient, and shall not conclude any Third Party License without the prior written consent of Oscient, such consent not to be unreasonably withheld or delayed.

In the event that MIOL is required to pay a royalty based on Net Sales of the Finished Product pursuant to a Third Party License (a “Third Party Royalty”), Oscient shall during the Mandatory Supply Term, reimburse MIOL (or, if the Parties agree, pay to the Third Party directly), Quarterly in arrears an amount equal to [*] percent ([*]%) of the Third Party Royalty payable by MIOL with respect to the preceding Quarter; provided that the amount to be paid by Oscient with respect to any Quarter shall not exceed the lower of:

(i) [*] percent ([*]%) of Net Sales in that Quarter; and

(ii) an amount equal to the product of (A) the Actual Weighted Average Price Per Tablet in that Quarter minus $[*], multiplied by (B) the number of Tablets sold by MIOL or its Affiliates or Sub-Distributors in that Quarter (as determined in accordance with Section 9.2).

If, with respect to one or more countries in the Territory, MIOL reasonably determines that it requires, but is unable to obtain a Third Party License on commercially reasonable terms, MIOL shall have the right to cease Commercialization in such country upon not less than ninety (90) days written notice to Oscient; provided that prior to serving any such notice, MIOL shall promptly notify Oscient in writing of such determination together will all relevant information with respect to such determination and the Parties shall consult in good faith to determine the appropriate action to be taken.

11.7 Right to Use Intellectual Property. MIOL acknowledges that it has no interest in, and agrees that it will not at any time assert or claim any interest in, nor register or attempt to register any form of intellectual property which would infringe or otherwise violate any of the Oscient Intellectual Property, and will cooperate with Oscient to secure Oscient’s rights under the Oscient Intellectual Property in the Territory. All benefit and goodwill arising from MIOL’s or Sub-Distributor’s use of the Trademarks shall, as among the Parties, inure to the benefit of Oscient.

11.8 Trademarks. No right, title or interest of any kind in or to the Trademarks is transferred by this Agreement to MIOL, except the rights granted pursuant to Section 2.1. MIOL agrees that it will not, in the Territory, use, except in accordance with the terms hereof, or attempt to register, the Trademarks, or any marks similar thereto, in any language or adopt any trademark that is confusingly similar to or a colorable imitation of the Trademarks.

11.9 Patent Term Extensions. Oscient shall make all determinations as to whether to seek patent term extensions, including supplementary protection certificates and any other extensions that are now or become available in the future regarding the Licensed Patent Rights with respect to the Finished Product and MIOL shall not seek any such extensions or any extension of any other Patent Rights with respect to the Finished Product without Oscient’s prior written consent. MIOL shall provide Oscient with a copy of any and all Marketing Authorizations within four (4) weeks of obtaining such Marketing Authorization(s), shall timely and in writing provide any other data reasonably required by

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Oscient to complete any applications for such patent term extensions and agrees to provide such assistance as Oscient may reasonably require in connection with such extensions.

11.10 Further Assurance. Each Party undertakes that all employees, consultants and agents shall be engaged on terms, recorded in writing, that provide that all discoveries and inventions conceived or reduced to practice by that individual as a result of or in connection with such engagement shall be promptly reported, fully disclosed, and assigned to the engaging Party. In the event that a patent application is filed directed to the subject matter of any such discovery or invention, any such assignment shall be promptly recorded in the appropriate patent office(s).

12. WARRANTIES

12.1 Oscient Warranties. Oscient warrants to MIOL that:

(a) the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate Oscient corporate action;

(b) this Agreement is a legal and valid obligation binding upon Oscient and enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by the Parties does not conflict with any agreement, instrument or understanding to which Oscient is a party or by which it is bound;

(c) Oscient has the full right and legal capacity to grant the rights granted to MIOL hereunder in the Territory without violating the rights of any Third Party;

(d) Oscient is not aware of any Third Party patent, patent application or other intellectual property rights in the Territory that would be infringed (i) by using the Trademarks, or (ii) by making, using, distributing, offering for sale or selling the Finished Product; and

(e) Oscient warrants exclusively to MIOL to manufacture the Active Pharmaceutical Ingredient in accordance with Applicable Law. Oscient warrants exclusively to MIOL that all Active Pharmaceutical Ingredient shipped in accordance with this Agreement: (i) shall meet Oscient’s specifications for the shelf life of such Product when stored and handled in accordance with Oscient’s labeled conditions, (ii) shall be manufactured in accordance with ICH Q7A and Applicable Law in effect at the time of manufacture, and (iii) shall conform with Oscient’s specifications for the Finished Product. Subject to Section 14.1 (b), Oscient’s sole obligation and MIOL’s sole remedy under this warranty is replacement of any Active Pharmaceutical Ingredient or a refund of the purchase price that Oscient reasonably determines to be covered by this warranty.

12.2 MIOL Warranties. MIOL warrants to Oscient that:

(a) the execution and delivery of this Agreement and the performance of the transactions contemplated hereby have been duly authorized by all appropriate MIOL corporate action;

(b) this Agreement is a legal and valid obligation binding upon MIOL and enforceable in accordance with its terms, and the execution, delivery and performance of this

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Agreement by the Parties does not conflict with any agreement, instrument or understanding to which MIOL is a party of or by which it is bound.

(c) MIOL has the capacity to fulfill all its obligations under this Agreement.

(d) MIOL warrants that it shall Manufacture, Commercialize and Develop the Finished Product in accordance with Applicable Law.

12.3 No Warranties.

(a) Nothing in this Agreement is or shall be construed as:

(i) a warranty or representation by any Party as to the validity or scope of any patent application or patent licensed hereunder; or

(ii) a warranty or representation that anything made, used, sold or otherwise disposed of under any license granted pursuant to this Agreement is or will be free from infringement of patents, copyrights, and other rights of Third Parties.

(b) Except as expressly set forth in this Agreement, NO PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED. ALL OTHER WARRANTIES, CONDITIONS AND TERMS, EXPRESS OR IMPLIED BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, WHETHER OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF NON-INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADEMARK, OR OTHER RIGHTS OF THIRD PARTIES, OR ANY OTHER EXPRESS OR IMPLIED WARRANTIES ARE HEREBY EXPRESSLY EXCLUDED TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW.

13. PRODUCT RECALL

In the event that: (i) a Regulatory Authority or any other governmental agency or authority issues a request or orders that the Finished Product be recalled; (ii) a court of competent jurisdiction in the Territory orders that the Finished Product be recalled; or (iii) Oscient reasonably determines, after consultation with MIOL, that the Finished Product should be recalled or a notice is required relating to restrictions on use of the Finished Product, MIOL and Sub-Distributor shall attend to the same, as determined by the mutual agreement of Oscient and MIOL, and the Parties shall co-operate in a manner which is appropriate and take all appropriate corrective action. In the event such action results from: (a) Oscient’s negligence or willful misconduct, Oscient shall be responsible for the expenses thereof or, if applicable, a proportionate share of such recall costs according to the extent to which Oscient is responsible, (b) MIOL’s, its Affiliate’s and/or Third-Party Manufacturer’s and/or Sub-Distributor’s negligence or willful misconduct, MIOL shall be responsible for the expenses thereof or, if applicable, a proportionate share of such recall costs according to the extent to which they are responsible; and (c) otherwise, Oscient and MIOL shall share equally the expenses of the action. For purposes of this Agreement, the expenses of the action shall be the expenses of notification and return or destruction (if authorized by Oscient) of the Finished Product, the cost of replacement of the Finished Product, and any costs directly associated with the distribution of replacement Finished Product. Oscient, MIOL, Third-Party Manufacturer and Sub-Distributor shall cooperate fully with one another in carrying out such action.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

14. INDEMNIFICATION

14.1 Indemnification.

(a) MIOL Indemnity. MIOL shall indemnify, defend and hold harmless Oscient, its Affiliates and their respective directors, officers, employees, stockholders and agents and their respective successors, heirs and assigns (the “Oscient Indemnitees”) from and against any liability, damage, loss or expense (including reasonable legal fees and expenses of litigation) incurred by or imposed upon such Oscient Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including personal injury and product liability matters, to the extent arising out of (i) handling of the Active Pharmaceutical Product, or the Manufacture, Development or Commercialization of the Finished Product, by MIOL, its Affiliates, Third-Party Manufacturers or Sub-Distributors, or (ii) any material breach of this Agreement by MIOL, all except to the extent of Oscient’s responsibility therefor under Section (b) below.

(b) Oscient Indemnity. Subject to Section 14.1(a) above, Oscient shall indemnify, defend and hold harmless MIOL, its Affiliates and their respective directors, officers, employees, and agents, and their respective successors, heirs and assigns (the “MIOL Indemnitees”), from and against any liability, damage, loss or expense (including reasonable legal fees and expenses of litigation) incurred by or imposed upon such MIOL Indemnitees, or any of them, in connection with any Third Party claims, suits, actions, demands or judgments, including personal injury and product liability matters, to the extent arising out of (i) any material breach of this Agreement by Oscient, or (ii) any supply of Active Pharmaceutical Ingredient in violation of warranties set forth in Section 12.1(e).

14.2 Indemnification Procedures. In the event that any Indemnitee is seeking indemnification under Section 14.1 above from a Party (the “Indemnifying Party”), the other Party shall notify the Indemnifying Party of such claim with respect to such Indemnitee as soon as reasonably practicable after the Indemnitee receives notice of the claim, and the Party (on behalf of itself and such Indemnitee) shall permit the Indemnifying Party (or if the Indemnifying Party is Oscient, LG) to assume direction and control of the defense of the claim (including the right to settle the claim solely for monetary consideration) and shall cooperate as requested (at the expense of the Indemnifying Party) in the defense of the claim. The indemnification obligations under Section 14.1 shall not apply to any harm suffered as a direct result of any delay in notice to the Indemnifying Party hereunder or to amounts paid in settlement of any claim, demand, action or other proceeding if such settlement is effected without the consent of the Indemnifying Party, which consent shall not be withheld or delayed unreasonably. The Indemnitee, its employees and agents, shall reasonably cooperate with the Indemnifying Party and its legal representatives in the investigation of any claim, demand, action or other proceeding covered by Section 14.1.

14.3 Insurance Covenant. From the Effective Date and for a period of five years after the termination of this Agreement, each Party shall obtain, and thereafter maintain, at its sole cost and expense, product liability insurance in amounts which are reasonable and customary in the U.S. pharmaceutical industry (with respect to Oscient) and the Territory (with respect to Menarini) for companies of comparable size and activities. Such product liability insurance shall insure against all liability arising as a result of administration of Finished Product to humans (including liability for personal injury, physical injury, and property damage). The Parties expressly agree that, for the period commencing as of the Effective Date and ending as of the fifth anniversary of the Effective Date, the reasonable and customary amount of

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

product liability insurance shall be construed to be as follows: Primary coverage in the amount of at least [*] dollars ($[*]) per occurrence and [*] dollars ($[*]) in the annual aggregate. Each Party shall provide written proof of the existence of such insurance to the other Party promptly upon request. MIOL may self insure any or a portion of the above required insurance if (i) such self-insurance is effected through a captive insurance company duly authorized by an appropriate authority in a favorably recognized domicile; or (ii) MIOL can demonstrate to have proceeded with adequate accruals in its balance sheet destined only for product liability self-insurance.

15. TERM AND TERMINATION

15.1 Termination Rights for Breach. Subject to the other terms of this Agreement, this Agreement and the rights and options granted herein may be terminated (i) by Oscient upon any material breach by MIOL, or (ii) by MIOL upon any material breach by Oscient, of any material obligation or condition, effective thirty (30) days after giving written notice to the breaching Party of such termination, which notice shall describe such breach in reasonable detail. The foregoing notwithstanding, if such default or breach is cured or remedied or shown to be non-existent within the aforesaid thirty (30) day period, the notice shall be automatically withdrawn and of no effect.

15.2 Termination for Bankruptcy. In the event that either Oscient or MIOL files for protection under bankruptcy laws, makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof, or any other analogous event occurs in any jurisdiction, then the other may terminate this Agreement effective immediately upon written notice to such Party.

15.3 Oscient Right to Terminate. Upon thirty (30) days’ written notice to MIOL, Oscient shall have the right to terminate this Agreement if: (i) MIOL challenges the validity of any of the Oscient Intellectual Property, (ii) in the event that aggregate Net Sales in the Sales Year commencing on or after the third anniversary of the date of First Commercial Sale are less than $50 million (calculated pursuant to Section 9.6); provided that MIOL has prior to the end of that Sales Year launched the Finished Product in at least three (3) Major Countries, (iii) if MIOL has applied for a Marketing Authorization by a Centralized Procedure, MIOL has not received Marketing Authorization on or before the third anniversary of the Effective Date, (iv) if MIOL has applied for any Marketing Authorization by a procedure other than the Centralized Procedure, MIOL has not received Marketing Authorization in at least two (2) of the Major Countries on or before the third anniversary of the Effective Date, (v) MIOL manufactures or has manufactured Active Pharmaceutical Ingredient, or purchases Active Pharmaceutical Ingredient from any Third Party, for Exploitation in the Territory, or (vi) MIOL has not secured a Reimbursement Price of at least $[*] (after applying the Annual Calculated Exchange Rate in effect at such time) in at least one (1) of the Major Countries on or before the third anniversary of the Effective Date.

15.4 MIOL Right to Terminate. Upon thirty (30) days’ written notice to Oscient, MIOL shall have the right to terminate this Agreement: (i) if, prior to MIOL submitting an application for a Marketing Authorization via the Centralized Procedure, the EMEA confirms to MIOL in writing before or after the scientific advice Procedure that (A) the Finished Product is not eligible for approval via the Centralized Procedure and/or (B) that the risk-

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

benefit ratio for more than one of the proposed indications is not favorable, subject to the Minimum Labeling Requirements; (ii) in the event that MIOL has submitted an application for a Marketing Authorization via the Centralized Procedure, if (a) at any time following MIOL’s response to the list of questions from the EMEA’s Committee for Medicinal Products for Human Use (“CHMP”), customarily provided on day 120 of the Centralized Procedure, the CHMP or the CHMP’s Rapporteurs for the Marketing Authorization application inform MIOL that the CHMP will adopt a negative opinion, recommending that the Commission do not grant a Marketing Authorization in accordance with the Minimum Labeling Requirements, or (b) if the CHMP in fact adopts any such negative opinion; or (c) the Commission has granted a Marketing Authorization not in compliance with the Minimum Labeling Requirements; (iii) in the event that MIOL has applied for any Marketing Authorization by a procedure other than the Centralized Procedure, if the Regulatory Authorities in at least three (3) Major Countries have refused to grant a Marketing Authorization in accordance with the Minimum Labeling Requirements; or (iv) if, within three (3) months of the date on which MIOL serves notice on Oscient pursuant to Section 9.2(d)(iii) above, the Parties are unable to establish a new minimum per Tablet price for the Actual Weighted Average Price Per Tablet; provided that in each case notice of such termination shall be served within thirty (30) days of the occurrence of the relevant trigger event and shall include reasonably satisfactory evidence of such event.

15.5 Term. The term of the agreement shall commence on the Effective Date and continue, until the [*] ([*]) anniversary after the expiry of the Mandatory Supply Term (the “Initial Term”); provided that, MIOL may, prior to the expiry of the Initial Term, extend the term for an additional [*] ([*]) years following the Initial Term upon not less than six (6) month written notice to Oscient (the “Extended Term” and together with the Initial Term, the “Term”); provided however, that, Oscient shall have no obligations under this Agreement during the Extended Term other than the granting of the Trademark and the Oscient Information license set forth in Sections 2.1(c). and 2.1(d).

15.6 Termination of LG License. This Agreement shall automatically terminate on the termination of the LG License. Provided that MIOL is not in breach of this Agreement on such termination or has committed willful misconduct with respect to this Agreement, Oscient hereby has furnished MIOL with a letter dated the date hereof from LG (the LG Warranty Letter”) under which, if requested by MIOL in writing within thirty (30) days of such termination, LG shall have a direct relationship with MIOL concerning the subject matter of this Agreement at terms and conditions set forth in such LG Warranty Letter.

15.7 Effects of Termination.

(a) Upon termination of this Agreement for any reason, as of the effective date of such termination, all relevant licenses and sublicenses granted by Oscient to MIOL hereunder shall terminate automatically and MIOL shall and shall procure that and any Third-Party Manufacturer and Sub-Distributor shall cease Manufacturing, Commercializing or Developing the Finished Product or using the Oscient Intellectual Property.

(b) Upon termination of this Agreement for any reason (other than where LG and MIOL enter into the LG/MIOL Agreement pursuant to Section 15.6 herein), MIOL shall transfer, assign and fully release to Oscient, or its designee, at Oscient’s expense, any and all Regulatory Approvals obtained by MIOL pursuant to this Agreement. For purposes of the foregoing, MIOL shall, on or before the expiry of ten (10) Business Days after such expiration or termination, transfer the Regulatory Documentation to Oscient and take all

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

measures and execute such documents as Oscient considers necessary or reasonably useful to perfect the transfer of all Regulatory Approvals to Oscient or its designee. For the avoidance of doubt, no compensation shall be payable to MIOL for such transfer of Regulatory Approvals.

(c) Upon termination of this Agreement, MIOL shall co-operate with Oscient in the cancellation of all or any licenses registered pursuant to this Agreement and shall execute such documents and do all acts and things as may be necessary to effect such cancellation.

(d) Upon termination of this Agreement, MIOL shall immediately deliver to Oscient, or such other person as it may designate, all promotional material, including catalogues, Finished Product price lists, and any other documents or material (including any material delivered in electronic form and Confidential Information) provided by Oscient to MIOL or prepared or developed by MIOL with respect to the Finished Product or its Commercialization in the Territory.

(e) For a period of one (1) year from termination of this Agreement, MIOL shall cooperate with Oscient, its representatives and agents, including any new distributor designated by Oscient in place of MIOL, in taking over the importing into the Territory of the Active Pharmaceutical Ingredient and the Commercialization of the Finished Product in place of MIOL.

(f) From and after the termination of this Agreement, MIOL shall have a period of four (4) months to sell its remaining inventory of the Finished Product (with royalties and other fees to be paid to Oscient on all Net Sales of such Finished Products as provided for in Sections 9.3, 9.4 and 9.5, if applicable), provided it shall do so at a price not less than its market price in effect immediately prior to the termination.

(g) From and after the termination of this Agreement, the Oscient license of MIOL Information set forth in Section 2.4 shall be expanded to allow Oscient to use and sublicense such information and data in the Territory.

(h) MIOL agrees, upon Oscient request, to provide services for the continued Development of the Finished Product in the Territory in consideration for reasonable industry standard fees related to such regulatory Development services for a maximum period of two (2) years from termination of this Agreement,

(i) If MIOL terminates the Agreement pursuant to Sections 15.4(i), or 15.4(ii), or 15.4(iii) herein, Oscient shall pay to MIOL all MIOL Development Expenses incurred by MIOL through such date of termination; provided that, the aggregate amount to be paid by Oscient for such MIOL Development Expenses at such date of termination shall not exceed [*] Dollars ($[*]) minus all amounts previously paid by Oscient pursuant to Section 9.7 above.

15.8 Remedies. Except as otherwise expressly set forth in this Agreement, the termination provisions of this Article 15 are in addition to any other relief and remedies available to the Parties at law.

15.9 Surviving Provisions. Notwithstanding any provision herein to the contrary, the rights and obligations of the Parties set forth in Sections 1.1 (to the extent applicable to other surviving provisions), 1.2, 2.5 (only for purposes of the perpetual license granted therein),

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

4.5, 8.1, 9.11, 10, 11.1, 11.7, 11.8, 14, 15.7, 15.8, 15.9, 16 and 18 (other than 18.21) as well as any rights or obligations otherwise accrued hereunder (including any accrued payment obligations), shall survive the expiration or termination of the Term. Without limiting the generality of the foregoing, MIOL shall have no obligation to make any milestone or royalty payment to Oscient that has not accrued prior to the effective date of any termination of this Agreement, but shall remain liable for all such payment obligations accruing prior to the effective date of such termination.

16. DISPUTES

16.1 Negotiation. The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the Term which relates to any Party’s rights and/or obligations hereunder. In the event of the occurrence of such a dispute, any Party may, by written notice to the other Party, have such dispute referred to their respective senior officials designated below or their successors or designees, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated senior officials are as follows:

For MIOL: Managing Director

For Oscient: Chief Executive Officer

In the event the designated senior officials are not able to resolve such dispute within the thirty (30) day period, any Party may invoke the provisions of Section 16.2.

16.2 Arbitration. Subject to Section 16.1, any dispute, controversy or claim initiated by any Party arising out of, or in connection with this Agreement, or the performance by another Party of its obligations under this Agreement (other than bona fide third party actions or proceedings filed or instituted in an action or proceeding by a Third Party against a Party), whether before or after termination of this Agreement, including any question regarding its existence, validity or termination, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce of Paris by a panel of three arbitrators appointed in accordance with such Rules. Any such arbitration shall be held in London (UK) and the language of the arbitration shall be English. The arbitrators shall have the power to grant injunctions and/or specific performance and to allocate amongst the Parties the costs of arbitration in such equitable manner as they determine. Judgment upon any award rendered by the arbitration panel may be entered in any court having jurisdiction or application may be made to such court for judicial acceptance of any award and for an order of enforcement, as the case may be. In no event shall a demand for arbitration be made after the date when institution of a legal or equitable proceeding based upon such claim, dispute or other matter in question would be barred by the applicable statute of limitations. Notwithstanding the foregoing, any Party shall have the right, without waiving any right or remedy available to such Party under this Agreement or otherwise, to seek and obtain from any court of competent jurisdiction any interim or provisional relief that is necessary or desirable to protect the rights or property of such Party, pending the selection of the arbitrators hereunder or pending the arbitrators’ determination of any dispute, controversy or claim hereunder.

17. NON-COMPETITION

17.1 MIOL shall not and shall procure that its Affiliates and Sub-Distributors shall not directly or indirectly for a period of [*] ([*]) years from the date of the first Marketing

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Authorization, develop, import, market, promote, distribute, sell, offer for sale or otherwise exploit in such country of the Territory any (i) [*] (“Competitive Products”). The Parties hereby agree that the foregoing provisions of this Article 17 shall not apply to the products listed in Schedule 17.1 that are sold and/or marketed by MIOL or any MIOL’s Affiliates in the Territory on the Effective Date.

In addition, MIOL shall not and shall procure that its Affiliates and their respective directors, officers and employees shall not directly or indirectly during the Term and for [*] ([*]) year thereafter, solicit any of Oscient’s employees or take any action to cause or that might reasonably be expected to cause Oscient to lose any of its employees, agents, distributors, customers, customer contacts or other elements of its goodwill.

17.2 During the period beginning on the fifth anniversary of the date of the first Marketing Authorization, until the expiry of the Mandatory Supply Term, MIOL shall and shall procure that its Affiliates shall purchase from Oscient at least [*]% of the Active Pharmaceutical Ingredient required by MIOL in connection with the supply of the Finished Product or Competitive Products in the Territory.

18. MISCELLANEOUS

18.1 Notification. All notices, requests and other communications hereunder shall be in writing, shall be addressed to the receiving Party’s address set forth below or to such other address as a Party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by facsimile transmission (to be followed with written fax confirmation), (iii) sent by international courier service providing evidence of receipt, or (iv) sent by airmail. The addresses and other contact information for the Parties are as follows:

If to Oscient:	Oscient Pharmaceutical Corporation 1000 Winter Street, Suite 2200 Waltham, MA 02451 Attention: Chief Executive Officer
With a copy to:	Oscient Pharmaceutical Corporation 1000 Winter Street, Suite 2200 Waltham, MA 02451 Attention: Legal

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

If to MIOL:	Menarini International Operations Luxembourg SA 1, Avenue de la Gare, L-1611 Luxembourg Attention: Menaring Director
With a copy to:	A. Menarini Industrie Farmaceutiche Riunite Srl 3, Via Sette Santi 50131 Florence – Italy Attention: Legal Affairs

All notices, requests and other communications hereunder shall be deemed to have been given either (i) if by hand, at the time of the delivery thereof to the receiving Party at the address of such Party set forth above, (ii) if made by telecopy or facsimile transmission, at the time that receipt thereof has been acknowledged by the recipient, (iii) if sent by international courier, on the day such notice is delivered to the recipient, or (iv) if sent by airmail, on the fifth (5^th) Business Day following the day such mailing is made.

18.2 Language. This Agreement has been prepared in the English language and the English language shall control its interpretation.

18.3 Governing Law. This Agreement will be construed, interpreted and applied in accordance with the laws of England (excluding its body of law controlling conflicts of law).

18.4 Entire Agreement. This is the entire Agreement between the Parties with respect to the subject matter hereof and supersedes all prior representations, understandings and agreements whether written or oral between the Parties with respect to the subject matter hereof. Each Party confirms that, in agreeing to enter into this Agreement, it has not relied on any representation, warranty, collateral contract or other assurance except those set out in this Agreement (and in respect of which the only remedy shall be for breach of contract) and to the extent any other representation, warranty, collateral contract or assurance was made to a Party, such Party waives all rights and remedies with respect thereto. Nothing in this Agreement will operate or limit to exclude a Party’s liability for fraud. No modification of this Agreement shall be effective unless in writing with specific reference to this Agreement and signed by the Parties.

18.5 Waiver. The terms or conditions of this Agreement may be waived only by a written instrument executed by the Party waiving compliance. The failure of any Party at any time or times to require performance of any provision hereof shall in no manner affect its rights at a later time to enforce the same. No waiver by any Party of any condition or term shall be deemed as a continuing waiver of such condition or term or of another condition or term.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

18.6 Headings. Article, Section and subsection headings are inserted for convenience of reference only and do not form part of this Agreement.

18.7 Assignment. Neither this Agreement nor any right or obligation hereunder may be assigned, delegated or otherwise transferred, in whole or part, by any Party without the prior express written consent of the others; provided, however, that Oscient may without the written consent of MIOL, assign this Agreement and its rights and delegate its obligations hereunder to its Affiliates, or in connection with the transfer or sale of all or substantially all of its assets or business, or in the event of its merger, consolidation, change in control or similar transaction. Any permitted assignee shall assume all obligations of its assignor under this Agreement. Any purported assignment in violation of this Section 18.7 shall be void. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the permitted successors and assigns of the Parties.

18.8 Force Majeure. No Party shall be liable for failure of or delay in performing obligations set forth in this Agreement (excluding any payment obligation under this Agreement), and no Party shall be deemed in breach of its obligations, if such failure or delay is due to natural disasters, labor strikes or any other form of industrial action, trade embargo, fire explosion, flood, act of God, civil disturbance, terrorism, pandemic, epidemic or any other cause beyond the reasonable control of such Party. In event of such force majeure, the Party affected thereby shall given prompt notice to the other Parties and use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

18.9 Construction. The Parties hereto acknowledge and agree that: (i) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.

18.10 Severability. If any provision(s) of this Agreement are or become invalid, are ruled illegal by any court of competent jurisdiction or are deemed unenforceable under then current applicable law from time to time in effect during the Term hereof, it is the intention of the Parties that the remainder of this Agreement shall not be affected thereby. The Parties hereto covenant and agree to renegotiate any such term, covenant or application thereof in good faith in order to provide a reasonably acceptable alternative to the term, covenant or condition of this Agreement or the application thereof that is invalid, illegal or unenforceable, it being the intent of the Parties that the basic purposes of this Agreement are to be effectuated.

18.11 Status. Nothing in this Agreement is intended or shall be deemed to create a relationship of co-venturers, partners, associates, principal and agent, master and servant, employer and employee, or any similar relationship between the Parties. MIOL shall perform its duties under the terms of this Agreement as an independent contractor acting as a principal for its own account. MIOL is not the representative of Oscient for any purpose and shall not have the power or authority as agent or in any other capacity to represent, act for, bind, or otherwise create or assume any obligation on behalf of Oscient for any purpose whatsoever. Neither MIOL nor Oscient has or shall represent or hold itself out to a Third Party as having power or authority to bind the other in any way.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

18.12 Limitation of Liability. EXCEPT FOR ANY BREACH OF ANY CONFIDENTIALITY OBLIGATIONS OR THE PROVISIONS OF SECTION 7.5 HEREUNDER OR TO THE EXTENT CAUSED BY RECKLESSNESS OR WILFUL MISCONDUCT BY A PARTY, IN NO EVENT SHALL ANY PARTY BE LIABLE TO THE OTHER OR ANY OF THEIR AFFILIATES FOR LOSS OF REVENUE, LOSS OF ACTUAL OR ANTICIPATED PROFITS, LOSS OF BUSINESS OR LOSS OF GOOD WILL (WHETHER SUCH LOSSES WERE DIRECT OR INDIRECT OR FORESEEN OR FORESEEABLE) NOR FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES SUFFERED OR INCURRED BY SUCH OTHER PARTY OR ITS AFFILIATES IN CONNECTION WITH A BREACH OR ALLEGED BREACH OF THIS AGREEMENT, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE.

18.13 Export Compliance.

(a) MIOL shall be responsible for the importation of the Active Pharmaceutical Ingredient for the Finished Product into the Territory, in its name as importer of record, and shall obtain at its expense, all permits and authorizations, and shall comply with all customs laws, regulations and official standards applicable to such importation into the Territory and shall pay any customs duties and import fees associated therewith.

(b) MIOL shall comply with all European and United States laws and regulations controlling the export of certain commodities and technical data, including all Export Administration Regulations of the United States Department of Commerce (collectively, “Export Control Laws”). Among other things, these Export Control Laws prohibit or require a license for the export of certain types of commodities and technical data to specified countries. MIOL hereby gives written assurance that it will comply with, and will cause its Affiliates, Third-Party Manufacturers and Sub-Distributors to comply with, all Export Control Laws, that it bears sole responsibility for any violation thereof by itself or its Affiliates Third-Party Manufacturers or Sub-Distributors, and that it will indemnify, defend, and hold Oscient harmless (in accordance with Article 14) for the consequences of any such violation.

18.14 Anti-Corruption. MIOL shall not and shall procure that none of its Affiliates, Third-Party Manufacturers or Sub-Distributors, or any of their respective employees, consultants or representatives make any payment, contribution or gift (including any payoff, bribe, rebate or kickback) to any official or employee of any government, Regulatory Authority or other agency or instrumentality of any government, or to any prescriber or potential prescriber of the Finished Products for the purpose of obtaining Regulatory Approvals, medical reimbursement coverage, favorable treatment in securing or maintaining business, influencing prescribing decisions or influencing in any other way any act or decision of such person.

18.15 Further Assurances. Each Party agrees to execute, acknowledge and deliver such further instructions, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement. In particular, by way of security, MIOL shall on the date of notice of termination of the Agreement pursuant to Section 15 herein execute, or have executed by any Affiliate, a perpetual irrevocable power of attorney in favor of Oscient in the form set out in Exhibit B (the “Power of Attorney”) to enable Oscient to effect the transfer, assignment and release of any and all Regulatory Approvals on termination of this Agreement for any reason. If requested by Oscient upon termination,

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

MIOL shall, and shall procure that any Affiliate at that time holding a Marketing Authorization shall, execute such further documents as Oscient considers necessary or reasonably useful to enable Oscient or its designee, as the case may be, to effect the transfer, assignment and release of any and all Regulatory Approvals on termination of this Agreement for any reason.

18.16 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

18.17 Third Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or enforceable by any Third Party, including any creditor of any Party whether pursuant to The Contracts (Rights of Third Parties) Act 1999 or otherwise. No such Third Party shall obtain any right under any provision of this Agreement or shall by reasons of any such provision make any claim in respect of any debt, liability or obligation (or otherwise) against any Party.

18.18 LG. MIOL acknowledges that certain rights granted pursuant to this Agreement are designed to enable Oscient to comply with its obligations to LG under the LG License. Without creating any direct relationship between MIOL and LG, MIOL shall permit Oscient to exercise its rights under this Agreement for the benefit of LG; provided that, OSCIENT represents and warrants that any Confidential Information of MIOL shall be treated by LG as per the terms of this Agreement.

18.19 Non-Solicitation. Until the [*] ([*]) year anniversary of the termination or expiration of this Agreement, no Party nor its respective Affiliates shall, and shall cause each of its Affiliates not to, directly or indirectly, without the other Parties’ prior written consent, solicit the employment of any employee (or former employee bound by a non-competition obligation know to that Party) of the other Parties or their respective Affiliates with whom it has come in contact in conducting activities under this Agreement; provided, however, that the foregoing provisions shall not apply to a general advertisement or solicitation program that is not specifically targeted at such persons.

18.20 United Nations Convention on Sale of Goods. The United Nations Convention on Sale of Goods is hereby expressly excluded from application to this Agreement.

18.21 Additional Product Option.

(a) Oscient hereby grants MIOL for the Mandatory Supply Term an exclusive option (the “Option”) to acquire an exclusive sublicense for the Territory under the Licensed Patents Rights (and any other relevant patents to which Oscient has Control), to develop and commercialize Additional Products. Oscient shall notify MIOL in the event that it is planning to commercialize an Additional Product in the Territory (the “Notice”), and the Notice shall contain all relevant information available in connection therewith (provided that, any such information shall be deemed to be Confidential Information of Oscient for the purposes of Section 10.1 herein). MIOL will have thirty (30) days from the date of receipt of such Notice from Oscient to give written notice to Oscient of MIOL’s election to exercise the Option, failing which the Option shall expire and be of no further force or effect. In the event that MIOL elects to exercise the Option, the Parties shall enter into good faith negotiations regarding the terms and conditions of such sublicense and further agree to negotiate economic terms that are fair and reasonable to both Parties.

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

(b) In the event that the Parties fail to reach an agreement regarding the economic terms of such sublicense within ninety (90) days after MIOL’s exercise of the Option (the “Negotiation Period”), then Oscient may offer any and all rights to such Additional Products to one or more Third Parties; provided, however, that, prior to consummating a transaction with a Third Party, Oscient shall offer to MIOL a right to acquire the sublicense on the same economic terms and conditions as agreed upon with the Third Party, if the economic terms for rights to the Additional Product are, in the aggregate, more favorable to such Third Party than the terms and pricing last offered to MIOL by Oscient. MIOL shall thereupon have thirty (30) days to accept such terms and conditions in which case, Oscient shall grant such sublicense to Menarini on such terms and conditions.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representative in two (2) originals.

Menarini International Operation Luxembourg SA	OSCIENT PHARMACEUTICALS CORPORATION
By:	By:
Title:	Title:

[*] = Portions of this exhibit have been omitted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission.

Schedule 1.1(kk)

[*]

Schedule 1.1(mm)

[*]

Schedule 1.1(qq)

[*]

Schedule 1.1(ggg)

[*]

Schedule 1.1(nnn)

[*]

Schedule 7.1

[*]

Schedule 9.2

[*]

Schedule 17.1

[*]

EXHIBIT A

[*]

EXHIBIT B

[*]

EX-12.1

Exhibit 12.1

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(in thousands)

	For the Year Ended December 31,
	2006			2005			2004			2003			2002
Earnings (loss)—
Loss before income taxes	$	(78,298	)	$	(88,593	)	$	(93,271	)	$	(29,789	)	$	(34,017	)
Add fixed charges:
Interest expense on indebtedness		9,574			6,557			4,480			990			1,936
Estimated interest on rental expense		3,979			3,900			1,611			300			329
Amortization of deferred closing costs related to convertible notes		827			816			521			156			294
Amortization of discount on convertible notes		—			—			—			271			511
Total adjusted loss	$	(63,918	)	$	(77,320	)	$	(86,659	)	$	(28,072	)	$	(30,947	)
Fixed charges—
Interest expense on indebtedness	$	9,574		$	6,557		$	4,480		$	990		$	1,936
Estimated interest on rental expense		3,979			3,900			1,611			300			329
Amortization of deferred closing costs related to convertible notes		827			816			521			156			294
Amortization of discount on convertible notes		—			—			—			271			511
Total fixed charges	$	14,380		$	11,273		$	6,612		$	1,717		$	3,070
Coverage deficiency	$	(78,298	)	$	(88,593	)	$	(93,271	)	$	(29,789	)	$	(34,017	)

EX-21.1

Exhibit 21.1

Oscient Pharmaceuticals Corporation & Wholly-Owned Subsidiaries

1. Oscient Pharmaceuticals Corporation

• Organized under the laws of Massachusetts

• Registered as a foreign entity in New Jersey

2. Genesoft Pharmaceuticals, LLC

• Organized under the laws of Delaware

• Registered as a foreign entity in California

3. Guardian II Acquisition Corporation

• Organized under the laws of Delaware

• Registered as a foreign entity in Massachusetts.

4. Collaborative Securities Corporation

• Organized under the laws of Massachusetts

5. Collaborative Genetics, Inc. MA

• Organized under the laws of Massachusetts

6. Oscient Pharmaceuticals UK, Ltd.

• Organized under the laws of the United Kingdom

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-137596, No. 333-133370, No. 333-128735, No. 333-118026, No. 333-113359, No. 333-111273, No. 333-110006 and No. 333-106602) and in the Registration Statements on Form S-8 (No. 333-138309, No. 333-116707, No. 333-112810, No. 333-106563, No. 333-97139, No. 333-58274, No. 333-39390, No. 333-30920, No. 333-92951, No. 333-49069, No. 333-30617, No. 333-15935, No. 033-61191, No. 033-75136, No. 033-45432, No. 033-27885, No. 033-12633, No. 002-95446, No. 002-81123 and No. 002-77846) of Oscient Pharmaceuticals, Corporation of our reports dated March 12, 2007, with respect to the consolidated financial statements and schedule of Oscient Pharmaceuticals Corporation, Oscient Pharmaceuticals Corporation’s management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Oscient Pharmaceuticals Corporation, included in the Annual Report (Form 10-K) for the year ended December 31, 2006.

/s/ Ernst & Young LLP

Boston, Massachusetts

March 12, 2007

EX-31.1

Exhibit 31.1

OSCIENT PHARMACEUTICALS CORPORATION

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Steven M. Rauscher, President and Chief Executive Officer of Oscient Pharmaceuticals Corporation., certify that:

1. I have reviewed this annual report on Form 10-K of Oscient Pharmaceuticals.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    STEVEN M. RAUSCHER        

Steven M. Rauscher

President & Chief Executive Officer

Date: March 14, 2007

EX-31.2

Exhibit 31.2

OSCIENT PHARMACEUTICALS CORPORATION

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Philippe M. Maitre, Senior Vice President and Chief Financial Officer of Oscient Pharmaceuticals Corporation, certify that:

1. I have reviewed this annual report on Form 10-K of Oscient Pharmaceuticals Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    PHILIPPE M. MAITRE        

Philippe M. Maitre

Senior Vice President & Chief Financial Officer

Date: March 14, 2007

EX-32.1

Exhibit 32.1

OSCIENT PHARMACEUTICALS CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Oscient Pharmaceuticals Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, Steven M. Rauscher, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    STEVEN M. RAUSCHER        

Steven M. Rauscher

President & Chief Executive Officer

Date: March 14, 2007

EX-32.2

Exhibit 32.2

OSCIENT PHARMACEUTICALS CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Oscient Pharmaceuticals Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2006 as filed with the Securities and Exchange Commission (the “Report”), I, Philippe M. Maitre, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    PHILIPPE M. MAITRE        

Philippe M. Maitre

Senior Vice President & Chief Financial Officer

Date: March 14, 2007