10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For quarterly period ended December 31, 2005 or

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

For the transition period from                      to                     

Commission file number 1-9860

BARR PHARMACEUTICALS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	42-1612474
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. — Employer Identification No.)

400 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677-7668
(Address of principal executive offices)

201-930-3300
(Registrant’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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 þ No o

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 (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

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

As of January 27, 2006 the registrant had 105,759,365 shares of $0.01 par value common stock outstanding.

BARR PHARMACEUTICALS, INC.

INDEX TO FORM 10-Q

		Page Number
Part I	Financial Information
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets (unaudited) as of December 31, 2005 and June 30, 2005		3
	Consolidated Statements of Operations (unaudited) for the three months and six months ended December 31, 2005 and 2004		4
	Consolidated Statements of Cash Flows (unaudited) for the six months ended December 31, 2005 and 2004		5
	Notes to Consolidated Financial Statements (unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		28
Item 4.	Controls and Procedures		28
Part II	Other Information
Item 1.	Legal Proceedings		29
Item 4.	Submission of Matters to a Vote of Security Holders		29
Item 6.	Exhibits		30
	Signatures		31

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Part 1. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Barr Pharmaceuticals, Inc. and subsidiaries

Consolidated Balance Sheets
(in thousands, except per share amounts)
(unaudited)

	December 31,			June 30,
	2005			2005
Assets
Current assets:
Cash and cash equivalents	$	30,010		$	115,793
Marketable securities		391,745			527,462
Accounts receivable, net of reserves of $139,690 and $150,000, at December 31, 2005 and June 30, 2005, respectively		192,720			152,599
Other receivables		56,452			21,411
Inventories, net		144,038			137,638
Deferred income taxes		25,759			30,224
Prepaid expenses and other current assets		18,565			8,229
Total current assets		859,289			993,356
Property, plant and equipment, net of accumulated depreciation of $145,889 and $129,617, at December 31, 2005 and June 30, 2005, respectively		269,899			249,485
Deferred income taxes		36,712			60,504
Marketable securities		26,635			53,793
Other intangible assets		434,770			98,343
Goodwill		47,617			17,998
Other assets		11,675			9,367
Total assets	$	1,686,597		$	1,482,846
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	28,697		$	49,743
Accrued liabilities		113,333			144,428
Current portion of long-term debt and capital lease obligations		5,462			5,446
Income taxes payable		—			13,353
Total current liabilities		147,492			212,970
Long-term debt and captial lease obligations		11,520			15,493
Other liabilities		34,507			20,413
Commitments & Contingencies
Shareholders’ equity:
Preferred stock, $1 par value per share; authorized 2,000,000; none issued		—			—
Common stock, $.01 par value per share; authorized 200,000,000; issued 108,340,964 and 106,340,470, at December 31, 2005 and June 30, 2005, respectively		1,083			1,063
Additional paid-in capital		535,544			454,489
Retained earnings		1,057,796			879,669
Accumulated other comprehensive loss		(655	)		(561	)
		1,593,768			1,334,660
Treasury stock at cost: 2,972,997 shares, at December 31, 2005 and June 30, 2005		(100,690	)		(100,690	)
Total shareholders’ equity		1,493,078			1,233,970
Total liabilities and shareholders’ equity	$	1,686,597		$	1,482,846

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Barr Pharmaceuticals, Inc. and subsidiaries

Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2005			2004		2005			2004
Revenues:
Product sales	$	289,386		$	255,793	$	556,179		$	498,792
Alliance, development and other revenue		36,131			1,576		79,777			3,085
Total revenues		325,517			257,369		635,956			501,877
Costs and expenses:
Cost of sales		83,732			78,059		163,794			147,697
Selling, general and administrative		66,114			58,385		134,686			122,715
Research and development		30,940			31,137		66,006			59,651
Earnings from operations		144,731			89,788		271,470			171,814
Interest income		4,429			2,197		8,904			3,977
Interest expense		68			484		147			1,064
Other (expense) income		(138	)		278		(593	)		268
Earnings before income taxes		148,954			91,779		279,634			174,995
Income tax expense		54,070			32,392		101,507			63,473
Net earnings	$	94,884		$	59,387	$	178,127		$	111,522
Earnings per common share — basic	$	0.91		$	0.58	$	1.71		$	1.08
Earnings per common share — diluted	$	0.88		$	0.56	$	1.66		$	1.05
Weighted average shares		104,714			102,526		104,219			103,409
Weighted average shares — diluted		107,410			105,144		106,984			106,028

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Barr Pharmaceuticals, Inc. and subsidiaries

Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2005 and 2004
(in thousands of dollars)
(unaudited)

	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	178,127		$	111,522
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		25,455			21,210
Stock-based compensation expense		13,894			—
Deferred tax income tax expense		28,311			—
Other		(647	)		(156	)
Tax benefit of stock incentive plans		—			20,195
Changes in assets and liabilities (net of business acquired):
(Increase) decrease in:
Accounts receivable and other receivables, net		(66,024	)		75,160
Inventories		14,825			(884	)
Prepaid expenses		(4,513	)		(738	)
Other assets		(79	)		6,523
Increase (decrease) in:
Accounts payable, accrued liabilities and other liabilities		(71,240	)		(54,753	)
Income taxes payable		(13,353	)		36,796
Net cash provided by operating activities		104,756			214,875
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(36,045	)		(24,875	)
Buy-out of product royalty		—			(19,250	)
Purchases of marketable securities		(960,438	)		(617,939	)
Sales of marketable securities		1,124,641			566,235
Acquisitions, net of cash acquired		(378,128	)		(27,000	)
Investment in venture funds		(3,000	)		(4,470	)
Other		(17	)		(700	)
Net cash used in investing activities		(252,987	)		(127,999	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and capital leases		(4,733	)		(6,961	)
Purchase of treasury stock		—			(99,982	)
Tax benefit of stock incentives		24,622			—
Proceeds from exercise of stock options and employee stock purchases		42,559			7,389
Net cash provided by (used in) financing activities		62,448			(99,554	)
Decrease in cash and cash equivalents		(85,783	)		(12,678	)
Cash and cash equivalents at beginning of period		115,793			28,508
Cash and cash equivalents at end of period	$	30,010		$	15,830

SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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BARR PHARMACEUTICALS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except per share amounts)
(unaudited)

1. Basis of Presentation

     The accompanying unaudited interim financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements of Barr Pharmaceuticals, Inc. and its subsidiaries (the “Company”) and accompanying notes that are included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005.

     In our opinion, the unaudited financial statements reflect all adjustments (including those that are normal and recurring) that are necessary in the judgment of management for a fair presentation of such statements in conformity with accounting principles generally accepted in the United States (“GAAP”). In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates. Certain amounts in the consolidated statement of cash flows for the six months ended December 31, 2004 have been reclassified to conform to our consolidated statement of cash flows for the six months ended December 31, 2005. There is no effect on our statement of operations.

2. Recent Accounting Pronouncements

     In March 2005, the Financial Accounting Standards Board (FASB) published Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” which clarifies that the term “conditional asset retirement obligation,” as used in Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations,” that refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. The interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The adoption of this Interpretation during the second quarter of fiscal year 2006 did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

     In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces APB (Accounting Principles Board) Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company does not believe that the adoption of SFAS No. 154 will have a material impact on its results of operations or financial position.

3. Stock-Based Compensation

     The Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), effective July 1, 2005. SFAS 123R requires the recognition of the fair value of stock-based compensation in net earnings. The Company has three stock-based employee compensation plans, two stock-based non-employee director compensation plans and an employee stock purchase plan. Stock-based compensation consists of stock options,

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stock appreciation rights and the employee stock purchase plan. Stock options and stock appreciation rights are granted to employees at exercise prices equal to the fair market value of the Company’s stock at the dates of grant. Generally, stock options and stock appreciation rights granted to employees fully vest three years from the grant date and have a term of 10 years. Stock options and stock appreciation rights granted to directors are generally exercisable on the date of the first annual shareholders’ meeting immediately following the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grants, which generally equals the vesting period.

     Prior to July 1, 2005, the Company accounted for these plans under the intrinsic value method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. The Company, applying the intrinsic value method, did not record stock-based compensation cost in net earnings because the exercise price of its stock options equaled the market price of the underlying stock on the date of grant. The Company has elected to utilize the modified prospective transition method for adopting SFAS 123R. Under this method, the provisions of SFAS 123R apply to all awards granted or modified after the date of adoption. In addition, the unrecognized expense of awards not yet vested at the date of adoption, determined under the original provisions of SFAS 123, shall be recognized in net earnings in the periods after the date of adoption. The Company recognized stock-based compensation expense for the three and six months ended December 31, 2005 in the amount of $7,124 and $13,894, respectively. The Company also recorded tax related benefits for the three and six months ended December 31, 2005 in the amount of $1,826 and $3,383, respectively.

     SFAS 123R requires the Company to present pro forma information for periods prior to the adoption as if it had accounted for all stock-based compensation under the fair value method of that statement. For purposes of pro forma disclosure, the estimated fair value of the options at the date of grant is amortized to expense over the requisite service period, which generally equals the vesting period. The following table illustrates the effect on net earnings and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123R to its stock-based employee compensation for the periods indicated.

	Three Months Ended		Six Months Ended
	December 31, 2004		December 31, 2004
Net earnings, as reported	$	59,387	$	111,522
Deduct:
Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related tax effects		5,214		11,609
Pro forma net earnings	$	54,173	$	99,913
Earnings per share:
Basic — as reported	$	0.58	$	1.08
Basic — pro forma	$	0.53	$	0.97
Diluted — as reported	$	0.56	$	1.05
Diluted — pro forma	$	0.52	$	0.94

     For all of the Company’s stock-based compensation plans, the fair value of each grant was estimated at the date of grant using the Black-Scholes option-pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as the Company has not paid cash dividends recently) and employee exercise behavior. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect in the period of grant. The model incorporates exercise and

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post-vesting forfeiture assumptions based on an analysis of historical data. The expected life of the fiscal 2006 grants is derived from historical and other factors.

     The weighted-average fair value of the stock appreciation rights granted in the three and six months ended December 31, 2005 was $21.94 and $18.18 per right, respectively, determined using the following assumptions:

Average expected term (years)	5.0
Risk-free interest rate	3.72	%
Dividend yield	0.00	%
Expected volatility	36.85	%

     As of December 31, 2005, the total remaining unrecognized compensation cost related to non-vested stock options and stock appreciation rights amounted to $39,530. There were no unrecognized compensation costs related to the employee stock purchase plan at December 31, 2005. The weighted average remaining requisite service period of the non-vested stock options and stock appreciation rights was 24 months.

4. Acquisitions and Business Combinations

     FEI Acquisition

     On November 9, 2005, the Company completed the acquisition of all of the outstanding equity interests of FEI Women’s Health, LLC (“FEI”). FEI is the owner of ParaGard^® T 380A (Intrauterine Copper Contraceptive) IUD, which is approved for continuous use for the prevention of pregnancy for up to 10 years. With this transaction the Company expanded its commitment of contraception beyond oral contraceptive products into a new arena and further strengthened its commitment to leadership in female healthcare by offering enhanced contraceptive options.

     In accordance with SFAS No. 141, “Business Combinations”, the Company used the purchase method to account for this transaction. Under the purchase method of accounting, the assets acquired and liabilities assumed from FEI are recorded at the date of acquisition, at their respective fair values. In connection with the acquisition the Company engaged a valuation firm to evaluate certain assets and liabilities of FEI. The purchase price plus acquisition costs exceeded the fair values of acquired assets and assumed liabilities. This resulted in the recognition of goodwill in the amount of $29,619. The total purchase price, including acquisition costs of $4,810 less cash acquired of $4,372, was $289,428. The consolidated financial statements issued after completion of the acquisition reflect these values, but are not restated retroactively to reflect the historical financial position or results of operations of FEI. The operating results of FEI are included in the consolidated financial statements subsequent to the November 9, 2005 acquisition date.

     The fair values of the assets acquired and liabilities assumed on November 9, 2005 were as follows:

	$(000’s)
Current assets (excluding cash)	$	30,876
Property and equipment		1,955
Intangible assets		256,000
Goodwill		29,619
Other assets		4,677
Total assets acquired	$	323,127
Current liabilities		10,780
Other liabilities		22,919
Total liabilities assumed		33,699
Net assets acquired	$	289,428
Cash paid net of cash acquired	$	289,428

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     The purchase price has been allocated based on an estimate of the fair value of assets acquired and liabilities assumed as of the date of acquisition. The final valuation of net assets is expected to be completed no later than one year from the acquisition date in accordance with GAAP. To the extent that the estimates need to be adjusted, the Company will do so.

     In accordance with the requirements of SFAS No. 142, “Goodwill and Other Intangible Assets”, the goodwill associated with the acquisition will not be amortized. The intangible asset will have a 20-year life and will be amortized over that period. Goodwill and the intangible assets resulting from this acquisition have been allocated to our Proprietary reporting unit.

     The following unaudited pro forma financial information presents the combined results of operations of the Company and FEI as if the acquisition had occurred as of the beginning of the periods presented. The unaudited pro forma financial information is not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition at the dates indicated. In addition, the unaudited pro forma financial information does not purport to project the future results of operations of the combined company.

Barr Pharmaceuticals, Inc. and subsidiaries
Pro Forma Condensed Combined Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Revenues	$	334,206		$	270,791		$	659,094		$	527,240
Earnings from operations		143,287	(1)		83,110	(2)		271,939	(3)		161,399	(4)
Net income		93,435	(1)		52,714	(2)		178,591	(3)		101,114	(4)
Earnings per common share — basic	$	0.89		$	0.51		$	1.71		$	0.98
Earnings per common share - diluted	$	0.87		$	0.50		$	1.67		$	0.95
Weighted average shares		104,714			102,526			104,219			103,409
Weighted average shares — diluted		107,410			105,144			106,984			106,028

The unaudited pro forma financial information above reflects the following:

(1)	This amount includes amortization of $3,200 for the intangible asset that was acquired and an add back of interest expense for the debt that was paid off before the closing of $265.
(2)	This amount includes amortization of $3,200 for the intangible asset that was acquired, an add back of interest expense for the debt that was paid off before the closing of $836 and a charge for the amount of the step-up in inventory to fair value of $5,469.

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(3)	This amount includes amortization of $6,400 for the intangible asset that was acquired and an add back of interest expense for the debt that was paid off before the closing of $671.
(4)	This amount includes amortization of $6,400 for the intangible asset that was acquired, an add back of interest expense for the debt that was paid off before the closing of $1,655 and a charge for the amount of the step-up in inventory to fair value of $10,335.

Mircette® Acquisition

     On June 15, 2005, the Company entered into a non-binding Letter of Intent with Organon (Ireland) Ltd., Organon USA Inc. (“Organon”) and Savient Pharmaceuticals, Inc. (“Savient”) to acquire the New Drug Application (“NDA”) for Mircette®, obtain a royalty-free patent license to promote Mircette in the United States and dismiss all pending litigation between the parties in exchange for a payment by the Company of up to $155,000. At the time of the signing of the Letter of Intent, because the proposed transaction included, as one of its components, a payment in settlement of litigation, it was presumed under GAAP to give rise to a “probable loss,” as defined in SFAS No. 5, “Accounting for Contingencies”. In consultation with outside advisors and based on preliminary valuations of the assets the Company would acquire if the transaction closed on the terms then contemplated, the Company recorded a charge of $63,238 as of June 30, 2005 to reflect the proposed litigation settlement.

     On December 2, 2005, the Company and Organon finalized an agreement that gave the Company exclusive rights for Organon’s Mircette product. The agreement also terminated the ongoing patent litigation regarding the Company’s generic version of Mircette, which is marketed under the trade name Kariva®. The agreement called for the Company to pay Organon $139,000 and Savient $13,750. Based on final valuations of the asset, the Company has recorded an intangible asset in the amount of $88,700 and recorded an additional charge of $813 for the difference between amounts recorded as a probable loss at June 30, 2005 and the final loss amount. The Company also incurred approximately $1,800 of additional legal and accounting costs related to the transaction during the first half of fiscal 2006. Additionally, the Company was reimbursed $11,000 from a third party for partial reimbursement of the Company’s recorded charge on this transaction. This reimbursement is reflected as a reduction of selling, general and administrative expenses.

5. Inventories, net

     Inventories consist of the following:

	December 31,		June 30,
	2005		2005
Raw materials and supplies	$	75,015	$	79,120
Work-in-process		31,855		16,405
Finished goods		37,168		42,113
Total	$	144,038	$	137,638

     Inventories are presented net of reserves of $20,900 and $13,415 at December 31, 2005 and June 30, 2005, respectively. The work-in-process and finished goods amounts include inventory acquired in the FEI transaction that is stated at fair value. The amount included in these line items related to the acquired inventory was $16,501 as of December 31, 2005 including $16,083 for the step-up to fair value. Based on units sold from the closing date through December 31, 2005, the Company charged cost of sales for $4,658 of the initial $20,741 step-up adjustment.

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6. Goodwill and Other Intangible Assets

     As a result of the acquisition of FEI the Company has recorded goodwill in the amount of $29,619. The changes in the carrying amount of goodwill for the six months ended December 31, 2005 were due to the FEI acquisition.

     Intangible assets, excluding goodwill, which are comprised primarily of product licenses and product rights and related intangibles, consist of the following:

	December 31,			June 30,
	2005			2005
Product licenses	$	45,600		$	45,600
Product rights and related intangibles		415,496			70,796
		461,096			116,396
Less: accumulated amortization		(26,326	)		(18,053	)
Other intangible assets, net	$	434,770		$	98,343

     On November 9, 2005, the Company acquired the product rights to ParaGard T 380A IUD through the acquisition of FEI. These product rights had a fair value of $256,000 at the date of acquisition. On December 2, 2005 the Company also acquired the product rights to Mircette. The Company recorded an intangible asset of $88,700 for this acquisition. These amounts are contained in the table listed above.

     Estimated amortization expense on product licenses and product rights and related intangibles for the years ending June 30, 2006 through 2010 is as follows:

2006	$	25,773
2007	$	34,133
2008	$	32,240
2009	$	24,082
2010	$	22,431

     The Company’s product licenses and product rights and related intangibles have weighted-average useful lives of approximately 10 and 18 years, respectively.

7. Income taxes payable

     Income taxes payable decreased by $13,353 from June 30, 2005 due to the tax benefits relating to stock-based compensation and the reversal of certain deferred tax assets. The benefits related to these items combined with our normal tax provision and estimated tax payments created an income tax receivable of $13,247 that has been reclassified into other receivables.

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8. Segment Reporting

     The Company operates in two reportable business segments: Generic Pharmaceuticals and Proprietary Pharmaceuticals. Product sales and gross profit information for the Company’s operating segments consist of the following:

			Three Months Ended December 31,										Six Months Ended December 31,
	2005					2004					2005					2004
			% of					% of					% of					% of
	$’s		sales			$’s		sales			$’s		sales			$’s		sales
Product sales:
Generic	$	209,093		72	%	$	191,616		75	%	$	416,262		75	%	$	371,858		75	%
Proprietary		80,293		28	%		64,177		25	%		139,917		25	%		126,934		25	%
Total product sales	$	289,386		100	%	$	255,793		100	%	$	556,179		100	%	$	498,792		100	%

	$’s		Margin %			$’s		Margin %			$’s		Margin %			$’s		Margin %
Gross profit:
Generic	$	140,494		67	%	$	123,452		64	%	$	278,014		67	%	$	242,207		65	%
Proprietary		65,160		81	%		54,282		85	%		114,371		82	%		108,888		86	%
Total gross profit	$	205,654		71	%	$	177,734		69	%	$	392,385		71	%	$	351,095		70	%

9. Earnings Per Share

     The following is a reconciliation of the numerators and denominators used to calculate earnings per share (“EPS”) in the consolidated statements of operations:

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	Three Months Ended				Six Months Ended
	December 31,				December 31,
(in thousands, except per share amounts)	2005		2004		2005		2004
Earnings per common share — basic:
Net earnings (numerator)	$	94,884	$	59,387	$	178,127	$	111,522
Weighted average shares (denominator)		104,714		102,526		104,219		103,409
Earnings per common share-basic	$	0.91	$	0.58	$	1.71	$	1.08
Earnings per common share — diluted:
Net earnings (numerator)	$	94,884	$	59,387	$	178,127	$	111,522
Weighted average shares		104,714		102,526		104,219		103,409
Effect of dilutive options and warrants		2,696		2,618		2,765		2,619
Weighted average shares — diluted (denominator)		107,410		105,144		106,984		106,028
Earnings per common share-diluted	$	0.88	$	0.56	$	1.66	$	1.05

	2005		2004		2005		2004
Not included in the calculation of diluted earnings per share because their impact is antidilutive:
Stock options outstanding		1		1,830		23		1,795

10. Comprehensive Income

     Comprehensive income is defined as the total change in shareholders’ equity during the period other than from transactions with shareholders. For the Company, comprehensive income is comprised of net earnings and the net changes in unrealized gains and losses on securities classified for SFAS No. 115 purposes as “available for sale.” Total comprehensive income for the three months ended December 31, 2005 and 2004 was $94,884 and $58,935, respectively, and for the six months ended December 31, 2005 and 2004 was $178,033 and $110,717, respectively.

11. Commitments and Contingencies

Leases

     The Company is party to various leases that relate to the rental of office facilities and equipment. The table below shows the future minimum rental payments, exclusive of taxes, insurance and other costs, under noncancellable long-term leases.

For fiscal years ending June 30,

	2006		2007		2008		2009		2010		Thereafter
Operating leases	$	4,459	$	4,125	$	3,528	$	3,436	$	3,345	$	16,165
Capital leases		1,690		856		204		95		32		—
Minimum lease payments	$	6,149	$	4,981	$	3,732	$	3,531	$	3,377	$	16,165

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Product Liability Insurance

     The Company uses a combination of self-insurance and traditional third-party insurance policies to cover product liability claims.

     The Company maintains third-party insurance that provides coverage, subject to specified co-insurance requirements, for the cost of product liability claims arising during the current policy period, which began on October 1, 2005 and ends on September 30, 2006, between an aggregate amount of $25,000 and $75,000. The Company is self-insured for up to the first $25,000 of costs incurred relating to product liability claims arising during the current policy period. In addition, the Company has obtained extended reporting periods under previous policies for claims arising prior to the current policy period. The current period and extended reporting period policies exclude certain products; the Company is responsible for all product liability costs arising from these excluded products.

     The Company continues to incur significant legal costs associated with its hormone therapy litigation (see below). As of December 31, 2005, these costs have been covered under extended reporting period policies that provide up to $25,000 of coverage. As of December 31, 2005, there was approximately $9,700 of coverage remaining under these policies. The Company has recorded a receivable for legal costs incurred and expected to be recovered under these policies. Once the coverage from these extended reporting period policies has been exhausted, future legal and settlement costs will be covered by a combination of self-insurance and other third-party insurance layers.

Indemnity Provisions

     From time-to-time, in the normal course of business, the Company agrees to indemnify its suppliers, customers and employees concerning product liability and other matters. For certain product liability matters, the Company has incurred legal defense costs on behalf of certain of its customers under these agreements. Except as described below, no amounts have been recorded in the financial statements for probable losses with respect to the Company’s obligations under such agreements.

     In June 2005, the Company entered into an agreement with Teva Pharmaceuticals USA, Inc. which allowed Teva to manufacture and launch Teva’s generic version of Aventis’ Allegra^® product during the Company’s 180 day exclusivity period, in exchange for Teva’s obligation to pay the Company a specified percentage of Teva’s operating profit, as defined, on sales of the product. The agreement also provides that each company will indemnify the other for the portion of any patent infringement damages they might incur as a result of the underlying litigation, described below, so that the parties will share any such damage liability in proportion to their respective share of Teva’s operating profit. On September 1, 2005, Teva launched its generic version of Allegra and the Company, in accordance with Financial Accounting Standards Board Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” recorded a $4,057 liability to reflect the fair value of the indemnification obligation it has undertaken. This amount is included in other liabilities on the consolidated balance sheet as of December 31, 2005.

Litigation Settlement

     On October 22, 1999, the Company entered into a settlement agreement with Schein Pharmaceutical, Inc. (now part of Watson Pharmaceuticals, Inc.) relating to a 1992 agreement regarding the pursuit of a generic conjugated estrogens product. Under the terms of the settlement, Schein relinquished any claim to rights in Cenestin in exchange for a payment of $15,000 made to Schein in 1999. An additional $15,000 payment is required under the terms of the settlement if Cenestin achieves total profits (product sales less product-specific cost of goods sold, sales and marketing and other relevant expenses) of greater than $100,000 over any five-year period prior to October 22, 2014. As of December 31, 2005, no amounts have been recorded related to this settlement.

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Litigation Matters

     The Company is involved in various legal proceedings incidental to its business, including product liability, intellectual property and other commercial litigation and antitrust actions. The Company records accruals for such contingencies to the extent that it concludes a loss is probable and the amount can be reasonably estimated. Additionally, the Company records insurance receivable amounts from third party insurers when appropriate.

     Many claims involve highly complex issues relating to patent rights, causation, label warnings, scientific evidence and other matters. Often these issues are subject to substantial uncertainties and therefore, the probability of loss and an estimate of the amount of the loss are difficult to determine. The Company’s assessments are based on estimates that the Company, in consultation with outside advisors, believes are reasonable. Although the Company believes it has substantial defenses in these matters, litigation is inherently unpredictable. Consequently, the Company could in the future incur judgments or enter into settlements that could have a material adverse effect on its consolidated financial statements in a particular period.

     Summarized below are the more significant matters pending to which the Company is a party. As of December 31, 2005, the Company’s reserve for the liability associated with claims or related defense costs for these matters is not material.

Patent Matters

          Desogestrel/Ethinyl Estradiol Suit

     This matter was previously disclosed in the Company’s Form 10-K filed in September 2005.

     On December 2, 2005, the Company entered into a final settlement with Organon (Ireland) Ltd., Organon USA Inc. and Savient Pharmaceuticals, Inc., in which the Company acquired the New Drug Application (“NDA”) for Mircette, obtained a royalty-free patent license to promote Mircette in the United States and dismissed all pending litigation between the parties in exchange for a payment by the Company of $139,000 to Organon and $13,750 to Savient.

          Desmopressin Acetate Suit

     In July 2002, the Company filed an Abbreviated New Drug Application (“ANDA”) seeking approval from the U.S. Food and Drug Administration (“FDA”) to market desmopressin acetate tablets, the generic equivalent of Aventis’ DDAVP® product. The Company notified Ferring AB, the patent holder, and Aventis pursuant to the provisions of the Hatch-Waxman Act in October 2002. Ferring AB and Aventis filed a suit in the U.S. District Court for the Southern District of New York in December 2002 for infringement of one of the four patents listed in the Orange Book for desmopressin acetate tablets, seeking to prevent the Company from marketing desmopressin acetate tablets until the patent expires in 2008. In January 2003, the Company filed an answer and counterclaim asserting non-infringement and invalidity of all four listed patents. In January 2004, Ferring AB amended their complaint to add a claim of willful infringement.

     On February 7, 2005, the court granted summary judgment in the Company’s favor. Ferring AB and Aventis have appealed. On July 5, 2005, the Company launched its generic product. If Ferring AB and Aventis are successful in reversing the grant of summary judgment and ultimately prevail in the case, the Company could be liable for damages for patent infringement that could exceed the Company’s profit on the sale of desmopressin acetate. In addition, depending on when the litigation is ultimately resolved, an adverse ruling likely would prohibit the Company from continuing to sell its desmopressin acetate product.

          Fexofenadine Hydrochloride Suit

     In June 2001, the Company filed an ANDA seeking approval from the FDA to market fexofenadine hydrochloride tablets in 30 mg, 60 mg and 180 mg strengths, the generic equivalent of Aventis’ Allegra® tablet products for allergy relief. The Company notified Aventis pursuant to the provisions of the Hatch-Waxman Act

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and, in September 2001, Aventis filed a patent infringement action in the U.S. District Court for the District of New Jersey-Newark Division, seeking to prevent the Company from marketing this product until after the expiration of various U.S. patents, the last of which is alleged to expire in 2017.

     After the filing of the Company’s ANDAs, Aventis listed an additional patent on Allegra in the Orange Book. The Company filed appropriate amendments to its ANDAs to address the newly listed patent and, in November 2002, notified Merrell Pharmaceuticals, Inc., the patent holder, and Aventis pursuant to the provisions of the Hatch-Waxman Act. Aventis filed an amended complaint in November 2002 claiming that the Company’s ANDAs infringe the newly listed patent.

     On March 5, 2004, Aventis and AMR Technology, Inc., the holder of certain patents licensed to Aventis, filed an additional patent infringement action in the U.S. District Court for the District of New Jersey – Newark Division, based on two patents that are not listed in the Orange Book.

     In June 2004, the court granted the Company summary judgment of non-infringement as to two patents. On March 31, 2005, the court granted the Company summary judgment of invalidity as to a third patent. Discovery is proceeding on the five remaining patents at issue in the case. No trial date has been scheduled.

     On August 31, 2005, the Company received final FDA approval for its fexofenadine tablet products. As referenced above, pursuant to an agreement between the Company and Teva, the Company selectively waived its 180 days of generic exclusivity to Teva, and Teva launched its generic product on September 1, 2005.

     On September 21, 2005, Aventis filed a motion for a preliminary injunction or expedited trial. The motion asked the court to enjoin the Company and Teva from marketing their generic versions of Allegra tablets, 30 mg, 60 mg and 180 mg, or to expedite the trial in the case. The motion also asked the court to enjoin Ranbaxy Laboratories, Ltd. and Amino Chemicals, Ltd. from the commercial production of generic fexofenadine raw material. The preliminary injunction hearing concluded on November 3, 2005. On January 30, 2006, the Court denied the motion by Aventis for a preliminary injunction or expedited trial.

     Aventis also has brought a patent infringement suit against Teva in Israel, seeking to have Teva enjoined from manufacturing generic versions of Allegra tablets and requesting damages for patent infringement.

     If the Company and Teva are unsuccessful in the litigation, the Company and Teva could be liable for Aventis’ lost profits on the sale of Allegra, which could potentially exceed the Company and Teva’s profits on the sale of the generic product.

Product Liability Matters

          Hormone Therapy Litigation

     The Company has been named as a defendant in approximately 3,400 personal injury product liability cases brought against the Company and other manufacturers by plaintiffs claiming that they suffered injuries resulting from the use of certain estrogen and progestin medications prescribed to treat the symptoms of menopause. The cases against the Company involve either or both of the Company’s Cenestin products or the use of the Company’s medroxyprogesterone acetate product, which typically has been prescribed for use in conjunction with Premarin or other hormone therapy products. All of these products remain approved by the FDA and continue to be marketed and sold to customers. While the Company has been named as a defendant in these cases, fewer than a third of the complaints actually allege the plaintiffs took a product manufactured by the Company, and the Company’s experience to date suggests that, even in these cases, a high percentage of the plaintiffs will be unable to demonstrate actual use of a Company product. For that reason, approximately 2,400 of the 3,400 cases have been dismissed and, based on discussions with the Company’s outside counsel, several hundred more are expected to be dismissed in the near future.

     The Company believes it has viable defenses to the allegations in the complaints and is defending the actions vigorously.

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Antitrust Matters

     Invamed, Inc./Apothecon, Inc.

     In February 1998, Invamed, Inc. and Apothecon, Inc., both of which have since been acquired by Sandoz, Inc., which is a subsidiary of Novartis AG, named the Company and several others as defendants in lawsuits filed in the U.S. District Court for the Southern District of New York, alleging violations of antitrust laws and also charging that the Company unlawfully blocked access to the raw material source for warfarin sodium. The two actions have been consolidated. On May 10, 2002, the District Court granted summary judgment in the Company’s favor on all antitrust claims in the case, but found that the plaintiffs could proceed to trial on their allegations that the Company interfered with an alleged raw material supply contract between Invamed and the Company’s raw material supplier. Invamed and Apothecon appealed the District Court’s decision to the U. S. Court of Appeals for the Second Circuit. Trial on the merits was stayed pending the outcome of the appeal.

     On October 18, 2004, the Court of Appeals reversed the District Court’s grant of summary judgment and held that the plaintiffs have raised triable issues of material fact on their antitrust claims. Discovery is ongoing in the District Court. The case is scheduled to be ready for trial by June 2006.

     The Company believes that the suits filed by Invamed and Apothecon are without merit and is vigorously defending its position. The plaintiffs were seeking damages of approximately $120,000 as of December 31, 2000, and if successful on their underlying claims may seek to obtain treble damages.

     Ciprofloxacin (Cipro®) Antitrust Class Actions

     The Company has been named as a co-defendant with Bayer Corporation, The Rugby Group, Inc. and others in approximately 38 class action complaints filed in state and federal courts by direct and indirect purchasers of Ciprofloxacin (Cipro) from 1997 to the present. The complaints alleged that the 1997 Bayer-Barr patent litigation settlement agreement was anti-competitive and violated federal antitrust laws and/or state antitrust and consumer protection laws. A prior investigation of this agreement by the Texas Attorney General’s Office on behalf of a group of state Attorneys General was closed without further action in December 2001.

     The lawsuits included nine consolidated in California state court, one in Kansas state court, one in Wisconsin state court, one in Florida state court, and two consolidated in New York state court, with the remainder of the actions pending in the U.S. District Court for the Eastern District of New York for coordinated or consolidated pre-trial proceedings (the “MDL Case”). On March 31, 2005, the Court in the MDL Case granted summary judgment in the Company’s favor and dismissed all of the federal actions before it. On June 7, 2005, plaintiffs filed notices of appeal to the U.S. Court of Appeals for the Second Circuit. The Court of Appeals has stayed consideration of the merits pending consideration of the Company’s motion to transfer the appeal to the United States Court of Appeals for the Federal Circuit.

     On September 19, 2003, the Circuit Court for the County of Milwaukee dismissed the Wisconsin state class action for failure to state a claim for relief under Wisconsin law. Plaintiffs appealed, and briefing is currently underway. On October 17, 2003, the Supreme Court of the State of New York for New York County dismissed the consolidated New York state class action for failure to state a claim upon which relief could be granted and denied the plaintiffs’ motion for class certification. Plaintiffs have appealed that decision and briefing is complete. On April 13, 2005, the Superior Court of San Diego, California ordered a stay of the California state class actions until after the resolution of any appeal in the MDL Case. On April 22, 2005, the District Court of Johnson County, Kansas similarly stayed the action before it, until after any appeal in the MDL Case. The Florida state class action remains at a very early stage, with no status hearings, dispositive motions, pre-trial schedules, or a trial date set as of yet.

     The Company believes that its agreement with Bayer Corporation reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Based on this belief, the Company is vigorously defending itself in these matters.

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          Tamoxifen Antitrust Class Actions

     To date approximately 31 consumer or third-party payor class action complaints have been filed in state and federal courts against Zeneca, Inc., AstraZeneca Pharmaceuticals L.P. and the Company alleging, among other things, that the 1993 settlement of patent litigation between Zeneca and the Company violated the antitrust laws, insulated Zeneca and the Company from generic competition and enabled Zeneca and the Company to charge artificially inflated prices for tamoxifen citrate. A prior investigation of this agreement by the U.S. Department of Justice was closed without further action. On May 19, 2003, the U.S. District Court dismissed the complaints for failure to state a viable antitrust claim. On November 2, 2005, the United States Court of Appeals for the Second Circuit affirmed the District Court’s order dismissing the cases for failure to state a viable antitrust claim. On November 30, 2005, Plaintiffs petitioned the United States Court of Appeals for the Second Circuit for a rehearing en banc. The Court of Appeals directed the Company to file a response to Plaintiffs’ petition, which the Company submitted on January 26, 2006. The Court has not yet ruled on the merits of the petition.

     The Company believes that its agreement with Zeneca reflects a valid settlement to a patent suit and cannot form the basis of an antitrust claim. Based on this belief, the Company is vigorously defending itself in these matters.

          Ovcon Antitrust Proceedings

     To date, the Company has been named as a co-defendant with Warner Chilcott Holdings, Co. III, Ltd., and others in complaints filed in federal courts by the Federal Trade Commission, 34 State Attorneys General and nine private class action plaintiffs claiming to be direct and indirect purchasers of Ovcon-35®. These actions allege, among other things, that a March 24, 2004 Option and License Agreement between the Company and Galen Holdings PLC (known since January 2005 as Warner Chilcott Holdings Company, Limited) constitutes an unfair method of competition, is anticompetitive and restrains trade in the market for Ovcon-35® and its generic equivalents. These cases, the first of which was filed by the FTC on or about December 2, 2005, remain at a very early stage, with no status hearings, dispositive motions, pre-trial schedules, or trial dates set as of yet.

     The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

     Medicaid Reimbursement Cases

     The Company, along with numerous other pharmaceutical companies, has been named as a defendant in separate actions brought by the states of Alabama, Kentucky, Illinois, Mississippi, the Commonwealth of Massachusetts, the City of New York, and numerous counties in New York. In each of these matters, the plaintiffs seek to recover damages and other relief for alleged overcharges for prescription medications paid for or reimbursed by their respective Medicaid programs.

     The Commonwealth of Massachusetts case and the New York cases, with the exception of the action filed by Erie County, are currently pending in the U.S. District Court for the District of Massachusetts. Those actions are at an early stage with no trial dates set. The Erie County case was recently remanded from federal court in Massachusetts to state court in New York, and is also at an early stage with no trial date set.

     The Alabama case was filed in Alabama state court, removed to the U.S. District Court for the Middle District of Alabama, and returned to state court with no trial date currently set. The Illinois and Kentucky cases were filed in Illinois and Kentucky state courts, removed to federal court, and transferred to the United States District Court for the District of Massachusetts. Illinois and Kentucky have filed motions to have those cases returned to state court. The defendants have filed motions to dismiss, which have not yet been decided.

     The State of Mississippi case was filed in state court on October 20, 2005. This matter is at a very early stage with no trial date set.

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     The Company believes that it has not engaged in any improper conduct and is vigorously defending itself in these matters.

     Breach of Contract Action

     On October 6, 2005, plaintiffs Agvar Chemicals Inc., Ranbaxy Laboratories, Inc. and Ranbaxy Pharmaceuticals, Inc. filed suit against the Company and Teva Pharmaceuticals USA, Inc. in the Superior Court of New Jersey. In their complaint, plaintiffs seek to recover damages and other relief, based on an alleged breach of an alleged contract requiring the Company to purchase raw material for the Company’s generic Allegra product from Ranbaxy, prohibiting the Company from launching its generic Allegra product without Ranbaxy’s consent and prohibiting the Company from entering into an agreement authorizing Teva to launch Teva’s generic Allegra product. This matter is at a very early stage, with no status hearings, dispositive motions, pre-trial schedules, or a trial date set as of yet. The Company believes there was no such contract and is vigorously defending itself.

     Other Litigation

     As of December 31, 2005, the Company was involved with other lawsuits incidental to its business, including patent infringement actions, product liability, and personal injury claims. Management, based on the advice of legal counsel, believes that the ultimate outcome of these other matters will not have a material adverse effect on the Company’s consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis addresses material changes in the results of operations and financial condition of Barr Pharmaceuticals, Inc. and subsidiaries for the periods presented. This discussion and analysis should be read in conjunction with the consolidated financial statements, the related notes to consolidated financial statements and Management’s Discussion and Analysis of Results of Operations and Financial Condition included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2005, and the unaudited interim consolidated financial statements and related notes included in Item 1 of this report on Form 10-Q.

Business Development Activities

     On June 15, 2005, we entered into a non-binding Letter of Intent with Organon (Ireland) Ltd., Organon USA Inc. (“Organon”) and Savient Pharmaceuticals, Inc. (“Savient”) to acquire the New Drug Application (“NDA”) for the oral contraceptive product, Mircette®, obtain a royalty-free patent license to promote Mircette in the United States and dismiss all pending litigation between the parties in exchange for a payment by us of up to $155.0 million. At the time of the signing of the Letter of Intent, because the proposed transaction included, as one of its components, a payment in settlement of litigation, it was presumed under GAAP to give rise to a “probable loss,” as defined in SFAS No. 5, “Accounting for Contingencies”. In consultation with outside advisors and based on preliminary valuations of the assets we would acquire if the transaction closed on the terms then contemplated, we recorded a charge of $63.2 million as of June 30, 2005 to reflect the proposed litigation settlement.

     On December 2, 2005, we finalized an agreement with Organon and Savient to acquire the exclusive rights to Mircette. The agreement terminated the ongoing patent litigation regarding our generic version of Mircette, which we market under the trade name Kariva. The agreement called for us to pay Organon $139.0 million and Savient $13.8 million. Based on final valuations of the assets acquired, we recorded an additional charge of $0.8 million for the difference between amounts recorded as a probable loss at June 30, 2005 and the final loss amount. We also incurred transaction costs (primarily legal and accounting fees) for the three and six months ended December 31, 2005 of $0.6 million and $1.8 million, respectively. Additionally, we received $11.0 million from a third party as partial reimbursement of the $64.0 million charge recorded in conjunction with this transaction. The $11.0 million reimbursement, together with the additional settlement charge of $0.8 million and the transactions costs for the three and six months of $0.6 million and $1.8 million, have all been classified in the selling, general and administrative expense line and result in a net benefit to selling, general and administrative expenses of $9.5 million for the three months ended December 31, 2005 and $8.4 million for the six months ended December 31, 2005.

     On November 9, 2005, we completed the acquisition of FEI Women’s Health, LLC (“FEI”). FEI is the owner of ParaGard^® T 380A (Intrauterine Copper Contraceptive) IUD (“Paragard IUD”), which is approved for continuous use for the prevention of pregnancy for up to 10 years. FEI’s results are included in our financial statements subsequent to November 9, 2005. In conjunction with this transaction, we recorded an intangible asset of $256 million, increased the cost of the acquired inventory by $20.7 million to state it at fair value and recorded goodwill of $29.6 million. The intangible asset is being amortized over 20 years while the $20.7 million adjustment to inventory is being charged to cost of sales as the acquired inventory is sold.

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Results of Operations

Comparison of the Three and Six Months Ended December 31, 2005 and December 31, 2004

The following table sets forth revenue data for the three and six months ended December 31, 2005 and 2004 (dollars in millions).

	Three Months Ended December 31,										Six Months Ended December 31,
					Change										Change
	2005		2004		$			%			2005		2004		$			%
Generic products:
Oral contraceptives	$	95.9	$	102.2	$	(6.3	)		-6	%	$	191.2	$	202.2	$	(11.0	)		-5	%
Other generic		113.2		89.4		23.8			27	%		225.1		169.7		55.4			33	%
Total generic products		209.1		191.6		17.5			9	%		416.3		371.9		44.4			12	%
Proprietary products		80.3		64.2		16.1			25	%		139.9		126.9		13.0			10	%
Total Product Sales		289.4		255.8		33.6			13	%		556.2		498.8		57.4			12	%
Alliance, development and other revenue		36.1		1.6		34.5			2156	%		79.8		3.1		76.7			2474	%
Total revenues	$	325.5	$	257.4	$	68.1			26	%	$	636.0	$	501.9	$	134.1			27	%

     Revenues — Product Sales

     Generic Products

     Total generic product sales for the three and six months ended December 31, 2005 increased due to a significant increase in our sales of other generic products, as described below, slightly offset by lower sales of our generic oral contraceptive products.

     Oral Contraceptives

     For the three and six months ended December 31, 2005, sales of generic oral contraceptives declined 6% and 5%, respectively, over the prior year periods. The decline in our generic oral contraceptives reflects the continued decline in demand for many of these non-promoted products and lower pricing and fewer units sold due to the impact of competition especially on certain larger oral contraceptives, such as Aviane and Apri. These factors more than offset higher year-over-year generic substitution rates and the impact of customer buying patterns on certain other products, including Kariva.

     Other Generic Products

     For the three and six months ended December 31, 2005, other generic product sales increased 27% and 33%, respectively over the prior year periods due mainly to the July 2005 launch of Desmopressin and, to a lesser extent, contributions from Didanosine, which we launched in December 2004. We expect Desmopressin sales, which have been favorably impacted in the first half of the year by rapid generic substitution, to decline sharply in the third quarter (and thereafter) due to the launch of a competing product in January 2006. Partially offsetting the strong sales from Desmopressin and Didanosine were lower sales of Mirtazapine and Metformin XR 750mg due to increased competition for these products, and reduced demand for Claravis. Lower sales volumes of Claravis, which is indicated for the treatment of severe acne, are in large part the result of lower customer demand as certain customers reduced inventory in anticipation of new labeling requirements. Manufacturers and marketers of isotrentinoin products, including Claravis, in cooperation with the FDA, are currently implementing an enhanced risk management program, iPledge, which is designed to minimize fetal exposure to isotrentinion. iPledge, which

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is being implemented in stages over the next few months, is expected to replace the existing risk management program.

     Proprietary Products

     For the three and six months ended December 31, 2005 proprietary products sales increased 25% and 10%, respectively, over the prior year periods, primarily the result of (1) an increase in sales of Seasonale, (2) sales of the Paragard IUD and Mircette oral contraceptive, which we acquired in November 2005 and December 2005, respectively, (3) modest increases in sales of Prefest and Nordette, which we acquired in November 2004 and December 2004, respectively, and (4) increased sales of Plan B. These increases more than offset lower sales of Cenestin and Loestrin/Loestrin FE due to volume declines reflecting lower year-over-year prescriptions.

     Seasonale sales totaled $29.5 million for the quarter and $51.6 million for the six months ended December 31, 2005, a 43% and 40% increase, respectively, over the comparable prior year periods. The significant increase for the current periods resulted from higher unit sales — Seasonale prescriptions increased from 193,000 in the prior year quarter to 255,000 in the current quarter — as well as higher pricing. Based on current prescription levels and a continued commitment to consumer advertising, we continue to expect our fiscal 2006 sales of Seasonale to exceed $100 million.

     Revenues — Alliance, Development and Other Revenue

     Alliance, development and other revenue consists mainly of revenue from profit-sharing arrangements, co-promotion agreements, standby manufacturing fees and reimbursements and fees we receive in conjunction with our agreement with the U.S. Department of Defense for the development of the Adenovirus vaccine. Alliance, development and other revenue increased substantially from the prior year primarily due to (1) our profit-sharing arrangement with Teva on sales of their generic Allegra^® product and (2) royalty payments and other fees under our Co-Promotion Agreement and License and Manufacturing Agreement with Kos Pharmaceuticals, Inc. (“Kos”) on Niaspan^® and Advicor^â which we began receiving in the fourth quarter of fiscal 2005.

      The last day of the 180-day exclusivity period on generic Allegra tablets is February 26, 2006. Our agreement with Teva provides for a reduced profit-sharing percentage for product sold after the expiration of the 180-day exclusivity period. In addition, we are aware of competitors that have filed ANDAs with a Paragraph IV certification for generic Allegra tablets. With respect to one such competitor, the 30-month stay of final FDA approval has expired, so that it may be eligible for final approval from the FDA after February 26, 2006. Another competitor’s 30-month stay expires in early June 2006, at which time it may be eligible to receive FDA approval on its ANDA for generic Allegra. If, upon receipt of FDA approval, either of these or any other competitors decide to launch their generic Allegra product “at risk”, Teva’s Allegra revenues and our royalties from Teva could decrease significantly.

     Cost of Sales

     Cost of sales includes the cost of products we purchase from third parties, our manufacturing and packaging costs for products we manufacture, our profit-sharing or royalty payments made to third parties, including raw material suppliers, changes to our inventory reserves and stock-based compensation expense of certain departments. Amortization costs arising from the acquisition of product rights are included in selling, general and administrative expense.

     The following table sets forth cost of sales data, in dollars, as well as the resulting gross margins expressed as a percentage of product sales, for the three and six months ended December 31, 2005 and 2004 (dollars in millions):

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	Three Months Ended December 31,											Six Months Ended December 31,
							Change											Change
	2005			2004			$		%			2005			2004			$		%
Generic products	$	68.6		$	68.2		$	0.4		0.6	%	$	138.3		$	129.7		$	8.6		6.6	%
Gross margin		67.2	%		64.4	%							66.8	%		65.1	%
Proprietary products	$	15.1		$	9.9		$	5.2		52.5	%	$	25.5		$	18.0		$	7.5		41.7	%
Gross margin		81.2	%		84.6	%							81.7	%		85.8	%
Total cost of sales	$	83.7		$	78.1		$	5.6		7.2	%	$	163.8		$	147.7		$	16.1		10.9	%
Gross margin		71.1	%		69.5	%							70.6	%		70.4	%
Charges included in proprietary products cost of sales for step-up inventory	$	4.7		$	—		$	4.7		100.0	%	$	4.7		$	—		$	4.7		100.0	%
Proprietary Gross margin effect		5.8	%		0.0	%							3.4	%		0.0	%
Total Gross margin effect		1.6	%		0.0	%							0.8	%

     Overall gross margins increased for the three and six months ended December 31, 2005 compared to the prior year due to higher margins on our generic products and a higher mix of proprietary products as a percentage of total product sales, partially offset by lower margins on our proprietary products due to product mix and stock-based compensation expense being included in the current year amounts.

     Generic margins increased for the three and six months ended December 31, 2005 due mainly to the launches of new products, specifically Desmopressin and full-period contribution from Didanosine, which carry higher margins than the average of our other generic products. The margin increase related to these products was slightly offset by stock-based compensation expense.

     Proprietary margins declined for the three and six months ended December 31, 2005 due primarily to (a) an additional charge of $4.7 million to cost of sales as described earlier related to the inventory purchased in the FEI acquisition, (b) the inclusion of stock-based compensation expense in the current year and (c) a slight change in the mix of products, as sales of higher margin products declined as a percentage of total proprietary sales.

Selling, General and Administrative Expense

     The following table sets forth selling, general and administrative expense for the three and six months ended December 31, 2005 and 2004 (dollars in millions):

	Three Months Ended December 31,											Six Months Ended December 31,
						Change											Change
	2005			2004		$			%			2005			2004		$			%
Selling, general and administrative	$	66.1		$	58.4	$	7.7			13.2	%	$	134.7		$	122.7	$	12.0			9.8	%
Benefit included in selling, general and admin.	$	(9.5	)	$	—	$	(9.5	)		(100	%)	$	(8.4	)	$	—	$	(8.4	)		(100	%)

23

     Selling, general and administrative expenses for the current quarter increased by 13% over the prior year period and reflect the net benefit of $9.5 million relating to the Mircette transaction, as discussed above. The quarter-over-quarter increase reflects (1) higher selling and marketing costs of $6.9 million, (2) higher information technology costs of $3.4 million, (3) $2.6 million of stock based compensation which we did not have in the prior year period and (4) an increase in legal expenses of $2.9 million. Higher sales and marketing costs are primarily attributable to higher marketing costs for Seasonale as well as costs for Enjuvia, which we expect to launch in late fiscal 2006. The increase also includes higher sales force costs primarily related to the additional sales force acquired in the acquisition of FEI. Higher information technology costs are primarily related to consulting and training costs related to the implementation of our new SAP enterprise resource planning system. Higher legal spending is attributable higher spending on current litigation matters associated with certain antitrust cases and patent challenge matters.

     Selling, general and administrative expenses for the six month period increased by 10% over the prior year period and reflect the net benefit of $8.4 million relating to the Mircette transaction, as discussed above. The period-over-period increase reflects (1) higher selling and marketing costs of $5.5 million, for the reasons discussed in connection with the quarterly comparison above, (2) higher information technology costs of $4.1 million, for the reasons discussed in connection with the quarterly comparison above, and (3) $5.0 million of stock based compensation which we did not have in the prior year period.

Research and Development

     The following table sets forth research and development expenses for the three and six months ended December 31, 2005 and 2004 (dollars in millions):

	Three Months Ended December 31,										Six Months Ended December 31,
					Change										Change
	2005		2004		$			%			2005		2004		$		%
Research and development	$	30.9	$	31.1	$	(0.2	)		-0.6	%	$	66.0	$	59.7	$	6.3		10.6	%

     Research and development expenses for the current three and six month periods includes a reimbursement of $5.0 million for previously incurred costs under a third party development agreement. Excluding this reimbursement the remaining increase for the three month period included $1.7 million in higher clinical trial costs and $1.5 million in stock-based compensation, which we did not have in the prior year. The net increase for the six month period was primarily from $3.0 million in higher clinical trial costs, $2.9 million in stock-based compensation expenses which we did not have in the prior year, $1.3 million in higher raw material costs and $1.3 million in higher third party development costs.

Income Taxes

     The following table sets forth income tax expense and the resulting effective tax rate stated as a percentage of pre-tax income for the three and six months ended December 31, 2005 and 2004 (dollars in millions):

24

	Three Months Ended December 31,											Six Months Ended December 31,
							Change											Change
	2005			2004			$		%			2005			2004			$		%
Income tax expense	$	54.1		$	32.4		$	21.7		67.0	%	$	101.5		$	63.5		$	38.0		59.8	%
Effective tax rate		36.3	%		35.3	%							36.3	%		36.3	%

     The effective tax rate in the prior year quarter was favorably impacted by the retroactive reinstatement on October 4, 2004, of the federal research tax credit which had temporarily expired on June 30, 2004.

     The tax rate for the current quarter was favorably impacted by the benefit of new tax legislation, “Section 199” (Manufacturers Deduction, effective July 1, 2005), partially offset by the unfavorable tax effect of SFAS 123R which prohibits the tax deductibility of certain stock–based compensation until the options are exercised in a disqualifying manner. We expect our effective tax rate for the remainder of the year to be commensurate with the rate recorded in the current quarter.

Liquidity and Capital Resources

     Our primary source of cash is the collection of accounts and other receivables primarily related to product sales and our alliance, development and other revenues. Our primary uses of cash include financing inventory, research and development, marketing, capital projects and business development activities.

     Within the past 12 months cash flows from operations have been more than sufficient to fund our cash needs. At December 31, 2005, our cash, cash equivalents and short-term marketable securities totaled $421.8 million, a decrease of $221.5 million from our position at June 30, 2005. The reduction is primarily due to the acquisitions made during the first half of fiscal 2006.

Operating Activities

     Our operating cash flows for the first half of fiscal 2006 were $104.8 million, compared with $214.9 million for the prior year period. The decline compared to last year reflects an increase in working capital due to the timing of certain accounts receivable collections and the timing of certain liability payments. For example, the prior year’s total included the receipt of $47.7 million from Aventis related to Ciprofloxacin price adjustments which were not repeated during the first half of fiscal 2006. In addition, certain tax benefits which totaled $24.6 million for the six months ended December 31, 2005 were reclassified from operating activities to financing activities in fiscal 2006 as described below.

     Components of the $104.8 million of operating cash flows in the first six months of fiscal year 2006 include: (1) net earnings of $178.1 million, (2) a $66.0 million increase in accounts receivable and other receivables due to the revenue recognized under our agreement with Teva for the sale of generic Allegra and an overall increase in revenues, (3) a decrease in accounts payable and accrued liabilities of $71.2 million due mainly to the payment of the legal settlement with Organon for the Mircette acquisition, (4) the recording of stock-based compensation expense of $13.9 million, and (5) the recording of $28.3 million in deferred taxes primarily related to the Mircette acquisition.

Investing Activities

     Net cash used in investing activities totaled $253.0 million for the first six months of fiscal 2006 compared with $128.0 million in the prior year period. The cash used in investing activities in the current period consisted of our acquisitions of FEI and Mircette for a total of $378.1 million (net of cash acquired) and capital expenditures of $36.0 million, partially offset by net sales of marketable securities of $164.2 million. The prior year included net purchases of marketable securities of $51.7 million, capital expenditures of $24.9 million,

25

buyout of product royalty of $19.3 million and acquisitions of $27.0 million. We expect capital expenditures to be approximately $50-60 million for the fiscal year ending June 30, 2006.

Financing Activities

     Net cash provided by financing activities during the first half of fiscal 2006 was $62.4 million compared with net cash used of $99.6 million in the prior year period. The net cash provided in the current fiscal year primarily reflects proceeds from the exercise of stock options and employee stock purchases of $42.6 million and the tax benefit of stock incentive plans of $24.6 million which was included as a component of operating cash flows in the prior year. The cash generated by options exercised and employee stock purchases is heavily dependent on the Company’s stock price, which increased during the first half of the fiscal year. The level of proceeds from stock option exercises realized in the first six months of fiscal 2006 may or may not be repeated in subsequent periods. The net cash used in the prior year primarily reflected the use of $100.0 million to repurchase shares of our common stock under our share repurchase.

Sufficiency of Cash Resources

     We believe our current cash and cash equivalents, marketable securities, investment balances, cash flows from operations and un-drawn amounts under our revolving credit facility are adequate to fund our operations and planned capital expenditures and to capitalize on strategic opportunities as they arise. We have and will continue to evaluate our capital structure as part of our goal to promote long-term shareholder value. To the extent that additional capital resources are required, we believe that such capital may be raised by additional bank borrowings, debt or equity offerings or other means.

Critical Accounting Policies

     The methods, estimates and judgments we use in applying the accounting policies most critical to our financial statements have a significant impact on our reported results. The Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and results, and/or require us to make our most difficult and subjective judgments. Based on this definition, our most critical policies are the following: (1) revenue recognition and related provisions for estimated reductions to gross revenues (2) inventories and related inventory reserves; (3) income taxes; (4) contingencies; and (5) accounting for acquisitions. Although we believe that our estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. We review the factors that influence our estimates and, if necessary, adjust them. Actual results may differ significantly from our estimates.

     There are no updates to our Critical Accounting Policies from those described in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005, as modified in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Please see the “Critical Accounting Policies” sections of those reports for a comprehensive discussion of our critical accounting policies.

     Recent Accounting Pronouncements

     In March 2005, the FASB published Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations,” which clarifies that the term “conditional asset retirement obligation,” as used in SFAS No. 143, “Accounting for Asset Retirement Obligations,” refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. The interpretation also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. The adoption of this Interpretation during the second quarter of fiscal year 2006 did not have a material effect on our consolidated financial position, results of operations or cash flows.

26

     In June 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections.” SFAS No. 154 replaces APB (Accounting Principles Board) Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. This Statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe that the adoption of SFAS No. 154 will have a material impact on our results of operations or financial position.

Forward-Looking Statements

     Except for the historical information contained herein, the statements made in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by their use of words such as “expects,” “plans,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, in no particular order:

• the difficulty in predicting the timing and outcome of legal proceedings, including patent-related matters such as patent challenge settlements and patent infringement cases;

• the difficulty of predicting the timing of FDA approvals;

• court and FDA decisions on exclusivity periods;

• the ability of competitors to extend exclusivity periods for their products;

• our ability to complete product development activities in the timeframes and for the costs we expect;

• market and customer acceptance and demand for our pharmaceutical products;

• our dependence on revenues from significant customers;

• reimbursement policies of third party payors;

• our dependence on revenues from significant products including royalties on products manufactured and marketed by third parties;

• the use of estimates in the preparation of our financial statements;

• the impact of competitive products and pricing on products, including the launch of authorized generics;

• the ability to launch new products in the timeframes we expect;

• the availability of raw materials;

• the availability of any product we purchase and sell as a distributor;

• the regulatory environment;

• our exposure to product liability and other lawsuits and contingencies;

• the cost of insurance and the availability of product liability insurance coverage;

• our timely and successful completion of strategic initiatives, including integrating companies and products we acquire and implementing our new enterprise resource planning system;

• fluctuations in operating results, including the effects on such results from spending for research and development, sales and marketing activities and patent challenge activities; and

• other risks detailed from time-to-time in our filings with the Securities and Exchange Commission.

     We wish to caution each reader of this report to consider carefully these factors as well as specific factors that may be discussed with each forward-looking statement in this report or disclosed in our filings with the SEC, as such factors, in some cases, could affect our ability to implement our business strategies and may cause actual results to differ materially from those contemplated by the statements expressed herein. Readers are urged to carefully review and consider these factors. We undertake no duty to update the forward-looking statements even though our situation may change in the future.

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our exposure to market risk for a change in interest rates relates primarily to our investment portfolio of approximately $441.1 million. We do not use derivative financial instruments.

     Our investment portfolio consists of cash and cash equivalents and market auction debt securities primarily classified as “available for sale.” The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we maintain our portfolio in a variety of high credit quality debt securities, including U.S., state and local government and corporate obligations, certificates of deposit and money market funds. Over 76% of our portfolio matures in less than three months, or is subject to an interest-rate reset date that occurs within that time. The carrying value of the investment portfolio approximates the market value at December 31, 2005 and the value at maturity. Because our investments consist of cash equivalents and market auction debt securities, a hypothetical 100 basis point change in interest rates is not likely to have a material effect on our consolidated financial statements.

     None of our outstanding debt at December 31, 2005 bears interest at a variable rate. Any borrowings under our $175 million unsecured revolving credit facility will bear interest at a variable rate based on the prime rate, the Federal Funds rate or LIBOR. At December 31, 2005, no amounts were drawn under this facility.

Item 4. Controls and Procedures

     Evaluation of disclosure controls and procedures

     The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Company’s Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

     At the conclusion of the period ended December 31, 2005, the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chairman and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chairman and Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective in alerting them in a timely manner to information relating to the Company required to be disclosed in this report.

Changes in internal controls

     In October 2005, the Company began migrating certain financial and sales processing systems to SAP, a new enterprise resource planning (ERP) platform. The migration of the Company’s remaining financial, operational, and inventory processes will be implemented in two phases during the second half of the fiscal year. In addition to expanding and improving access to information, the new ERP system will provide a standard scalable information platform to accommodate business growth plans. In connection with the ERP system implementation, the Company is updating its internal controls over financial reporting, as necessary, to accommodate modifications to its business processes and to take advantage of enhanced automated controls provided by the system. During the implementation process to date, the Company believes it has taken the necessary steps to maintain internal control systems that provide reasonable assurance of the accuracy of financial information.

28

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Litigation Matters

     The disclosure under Note 11-Commitments and Contingencies-Litigation Matters included in Part 1 of this report is incorporated in this Part II, Item 1 by reference.

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

     The Annual Meeting of the Shareholders of Barr Pharmaceuticals, Inc. was held on November 3, 2005. Of the 106,623,333 shares entitled to vote, 96,967,548 shares were represented at the meeting or by proxy or present in person. The meeting was held for the following purposes:

1. To elect nine directors. All nine nominees were elected based on the following votes cast:

For	Shares
Carole Ben-Maimon		93,285,190
Paul M. Bisaro		93,344,373
Harold Chefitz		96,546,032
Bruce L. Downey		93,561,024
Richard Frankovic		96,750,309
James Gilmore		96,755,960
Jacob M. Kay		93,709,399
Peter Seaver		96,749,591
George P. Stephan		93,487,772

2. To ratify the Audit Committee’s selection of Deloitte & Touche LLP, an independent registered public accounting firm, as independent auditors for the fiscal year ending June 30, 2006, and the result of such vote was as follows:

For:	Against:		Abstain:
92,754,362		4,149,943		63,243

3. To increase the number of shares authorized for issuance under the Barr Pharmaceuticals, Inc. Employee Stock Purchase Plan, and the result of such vote was as follows:

For:	Against:		Abstain:
73,318,744		1,448,736		105,336

4. To eliminate animal-based test methods, as set forth in the shareholder proposal, and the result of such vote was as follows:

For:	Against:		Abstain:
1,123,688		71,709,367		7,039,761

29

Item 6. Exhibits

     (a) Exhibits.

Exhibit No.	Description
2.1	Purchase Agreement dated as of October 14, 2005, by and among Duramed Pharmaceuticals, Inc., Copper 380T, FEI Women’s Health, LLC and the individuals listed on the signature pages thereto.
31.1	Certification of Bruce L. Downey pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of William T. McKee pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.0	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

30

SIGNATURES

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

	BARR PHARMACEUTICALS, INC.
Dated: February 8, 2006	/s/ Bruce L. Downey Bruce L. Downey
	Chairman of the Board and Chief Executive Officer
	/s/ William T. McKee
	William T. McKee
	Vice President, Chief
	Financial Officer, and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

31

EX-2.1

EXECUTION COPY

Exhibit 2.1

PURCHASE AGREEMENT

by and among

COPPER 380T LLC;

FEI WOMEN’S HEALTH, LLC;

The Individuals
Listed on
the Signature Pages Hereto;

and

Duramed Pharmaceuticals, Inc.

Dated as of October 14, 2005

Table of Contents

		Page
ARTICLE I
SETTLEMENT OF UARS AND EARS; SALE OF
UNITS; CLOSING
SECTION 1.1	Settlement of UARs and EARs; Purchase and Sale of Units;		1
SECTION 1.2	Closing		3
SECTION 1.3	Pre-Closing Adjustment		5
SECTION 1.4	Post-Closing Adjustment		6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
SECTION 2.1	Corporate Organization and Authority		8
SECTION 2.2	Capitalization		9
SECTION 2.3	Subsidiaries		9
SECTION 2.4	Consents and Approvals; No Violations		10
SECTION 2.5	Financial Statements		11
SECTION 2.6	Absence of Material Adverse Changes, etc.		12
SECTION 2.7	No Undisclosed Liabilities		12
SECTION 2.8	Taxes		13
SECTION 2.9	Employee Benefit Plans		15
SECTION 2. 10	Environmental Matters		16
SECTION 2.11	Legal Proceedings, etc.		18
SECTION 2. 12	Compliance with Applicable Law		18
SECTION 2. 13	Certain Contracts and Arrangements		18
SECTION 2. 14	Leased Real Property		19
SECTION 2. 15	Labor Matters		20
SECTION 2. 16	Insurance		20
SECTION 2. 17	Intellectual Property		21
SECTION 2. 18	Food and Drug Administration		21
SECTION 2. 19	Certain Fees		22
ii

		Page
SECTION 2.20	Major Customers and Suppliers		22
SECTION 2.21	Indebtedness		23
SECTION 2.22	Affiliate Transactions		23
SECTION 2.23	Accounts Receivable		23
SECTION 2.24	Product Liability		23
SECTION 2.25	Inventory		24
SECTION 2.26	ENIC Fund		24
SECTION 2.27	Disclaimer of Warranties		24
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SELLERS
SECTION 3.1	Authority and Related Matters		24
SECTION 3.2	Unit Ownership		25
SECTION 3.3	Consents and Approvals; No Violations		25
SECTION 3. 4	Certain Fees		25
SECTION 3.5	Legal Proceedings		26
SECTION 3.6	Disclaimer of Warranties		26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
BUYER
SECTION 4.1	Corporate Organization and Authority		26
SECTION 4.2	Consents and Approvals; No Violations		26
SECTION 4.3	Legal Proceedings, etc.		27
SECTION 4.4	Certain Fees		28
SECTION 4.5	Acquisition of Units for Investment		28
SECTION 4.6	Financing		28
SECTION 4.7	Investigation by Buyer; Sellers’ Liability		28
SECTION 4.8	Truth of Sellers’ and Company Representations and Warranties		28
ARTICLE V
COVENANTS
SECTION 5.1	Conduct of the Business		29
iii

		Page
SECTION 5.2	Access to Information; Confidentiality		31
SECTION 5.3	Director and Officer Indemnification		31
SECTION 5.4	Reasonable Best Efforts		32
SECTION 5.5	Governmental Authorizations; Consents		32
SECTION 5.6	Public Announcements		34
SECTION 5.7	Employee Matters		34
SECTION 5.8	Tax Matters		36
SECTION 5.9	Restructuring		39
SECTION 5.10	Sellers’ Representatives’ Agreement with Equityholders		39
SECTION 5.11	Exclusivity		39
SECTION 5.12	Securities Purchase and Investor Rights Agreements, Management Agreements		40
SECTION 5.13	Update		40
SECTION 5. 14	Release		40
SECTION 5. 15	California Operations		41
SECTION 5.16	Certain Financial Matters		41
ARTICLE VI
CONDITIONS TO BUYER’S OBLIGATION TO CLOSE
SECTION 6.1	Representations and Warranties; Covenants		43
SECTION 6.2	Filings; Consents; Waiting Periods		44
SECTION 6.3	No Injunction		44
SECTION 6.4	Other Deliveries		44
SECTION 6.5	Restructuring		44
SECTION 6.6	Opinion		44
SECTION 6.7	Absence of Material Adverse Effect		44
SECTION 6.8	Termination of Management Agreements and Securities Purchase and Investor Rights Agreements		44
ARTICLE VII
CONDITIONS TO SELLERS’ AND THE COMPANY’S
OBLIGATIONS TO CLOSE
SECTION 7.1	Representations and Warranties; Covenants		45
SECTION 7.2	Filings; Consents; Waiting Periods		45
iv

		Page
SECTION 7.3	No Injunction		45
SECTION 7.4	Other Deliveries		45
ARTICLE VIII
TERMINATION
SECTION 8.1	Termination		45
SECTION 8.2	Procedure and Effect of Termination		46
ARTICLE IX
INDEMNIFICATION
SECTION 9.1	Survival		47
SECTION 9.2	Indemnification Provisions for Benefit of Buyer		47
SECTION 9.3	Indemnification Provisions for Benefit of the Sellers		49
SECTION 9.4	Exclusive Remedy		50
SECTION 9.5	Indemnification Procedures		50
SECTION 9.6	Resolution of Notice of Claim		51
SECTION 9.7	Tax Treatment of Indemnification Payments		52
ARTICLE X
MISCELLANEOUS
SECTION 10.1	Certain Definitions		52
SECTION 10.2	Notices		54
SECTION 10.3	Interpretation		55
SECTION 10.4	Amendments, Modification and Waiver		56
SECTION 10.5	Expenses		56
SECTION 10.6	Sellers’ Representatives		56
SECTION 10.7	Successors and Assigns; Binding Effect		57
SECTION 10.8	Governing Law		58
SECTION 10.9	Jurisdiction; Forum		58
SECTION 10.10	Severability		58
SECTION 10.11	Third Party Beneficiaries		58
SECTION 10.12	Schedules		58
SECTION 10.13	Entire Agreement		59
v

		Page
SECTION 10.14	Counterparts		59
SECTION 10.15	Waiver of Jury Trial		59
vi

Defined Terms

401(k) Plans	36
Adjusted Final Allocation	40
Adverse Consequences	50
Affected Employee	35
Affiliates	11
Aggregate EAR Amount	2
Aggregate UAR Amount	2
Agreement	1
Allocation Resolution Period	39
Appreciation Rights Agreements	2
Barr	1
Baseline Valuation	2
Business Day	54
Buyer	1
Buyer Breach	51
Buyer Disclosure Schedule	27
Buyer Indemnified Persons	49
California Claim	54
California Lease	54
Closing	3
Closing Date	3
Closing Statement	6
Closing Time	55
Closing Working Capital	7
COBRA	16
Code	14
Company	1
Company August 31 Balance Sheet	11
Company Board	8
Company Disclosure Schedule	8
Company Financial Statements	11
Company Group	40
Company Indemnitees	33
Company Intellectual Property	21
Company Plans	15
Company September 30 Balance Sheet	11
Confidential Information	55
Confidentiality Agreement	32
Consideration	38
Consolidated Company Accounting Principals	5
Contested Claim	54
Craig Capital	1
Current Assets	6
Current Liabilities	6
D&O Tail Policy	33
vii

EAR	2
EAR Holdback Amount	5
EGTRRA	16
Employee Agreements	36
Encumbrances	10
ENIC Fund Representation	24
Environmental Claim	16
Environmental Laws	16
Equity Securities	55
Equityholder	55
ERISA	15
ERISA Affiliate	15
Escrow Agent	55
Escrow Amount	55
Excluded Claims	55
Fair Value of a Phantom Unit	2
FDA	22
Final Allocation	39
Final Statement	6
Fundamental Representations	49
Fundamental Representations Indemnification Cap	50
FWH	1, 5
FWH Financial Statements	12
GAAP	5
Governmental Authority	10
GUST	16
Hazardous Materials	16
HSR Act	10
Indemnification Basket	50
Indemnification Cap	50
Indemnitee	55
Indemnitor	56
Independent Accounting Firm	6
Intercompany Indebtedness	56
Knowledge of the Company	58
Law	56
Leased Real Property	19
Leases	19
Lehman Brothers	23
License Agreements	21
Lien	56
Major Customers	23
Material Adverse Effect	56
Material Contracts	19
Notice of Claim	52
Order	56
viii

Ordinary Course of Business	56
Per Unit Amount	3
Permits	18
Permitted Encumbrances	19
Person	10
Population Council	33
Population Council Agreement	33
Pre-Closing Tax Period	37
Preliminary Allocation	39
Pro-Forma Consolidated Financial Statements	11
Public Announcement	35
Purchase Price Decrease	7
Purchase Price Increase	7
qualified plan	15
Release	17
Released Claim	42
Releasees	42
Releasors	42
Representatives	32
Restructuring	1
Restructuring Agreement	1
Section 1060 Forms	39
Seller Breach	49
Seller Indemnified Persons	51
Sellers Disclosure Schedule	2
Sellers’ Representatives	59
September Pro-Forma Consolidated Financial Statements	11
Straddle Period	37
Studier Employment Agreement	56
Studier Payment	56
Subsidiary	10
Supplemental Disclosure	41
Target Working Capital	5, 56
Tax	14
Tax Return	14
Third Party Acquisition	41
Third-Party Claim	52
Tinicum	1
Transfer Taxes	38
UAR	2
UAR Holdback Amount	5
Unit	9
Unit Appreciation Rights Agreements	2
Working Capital	6
ix

          PURCHASE AGREEMENT, dated as of October 14, 2005 (this “Agreement’’), by and among COPPER 380T LLC, a Delaware limited liability company (the “Company”), FEI Women’s Health, LLC, a Delaware limited liability company (“FWH”), Tinicum Capital Partners, L.P. (“Tinicum”). Tinicum Capital Partners Parallel Fund, L.P., Tinicum Capital Partners Executive Fund I, L.L.C., Craig Capital Corporation (“Craig Capital”), the Persons (as defined in Section 2.3 hereof) listed on the signature pages hereto (each of the parties designated as Sellers in the signature pages hereto a “Seller” and collectively the “Sellers”) and Duramed Pharmaceuticals, Inc., a Delaware corporation (“Buyer”) and Subsidiary of Barr Pharmaceuticals, Inc. (“Barr”).

WITNESSETH

          WHEREAS, prior to the Closing (as defined in Section 1.2 hereof), the Company will effect a restructuring (the “Restructuring”) that will result in FWH becoming a Subsidiary ( as defined in Section 2.3 hereof) of the Company; the Restructuring will be accomplished pursuant to the Agreement and Plan of Reorganization (the “Restructuring Agreement”) substantially in the form attached hereto as Exhibit A; unless otherwise indicated herein or the context otherwise requires, references in this Agreement to the Company’s Subsidiaries are intended to include FWH as if the Restructuring were effective as of the date hereof;

          WHEREAS, as a result of the Restructuring, all of the Units (as defined in Section 2.2 hereof) and UARs (as defined in Section 1.1(a) hereof) of FWH will convert into Units and UARs of the Company, all EARs (as defined in Section 1.1 (b) hereof) of FWH will be cancelled and all EARs of the Company will be adjusted, all as set forth in the Restructuring Agreement;

          WHEREAS, the Sellers own or hold all of the outstanding Units (as defined in Section 1.1 (c) hereof) of the Company;

          WHEREAS, all UARs (as defined in Section 1.1(a) hereof) and EARs (as defined in Section 1.1 (b) hereof) and any other Equity Securities of the Company (other than the Units) shall be settled by the Company immediately prior to the Closing; and

          WHEREAS, Buyer desires to acquire all of the outstanding Units from the Sellers, and the Sellers who hold any Units desire to sell such Units to the Buyer upon the terms and subject to the conditions set forth herein.

          NOW, THEREFORE, in consideration of the representations, warranties, covenants, agreements and conditions hereafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

          SETTLEMENT OF UARS AND EARS; SALE OF UNITS; CLOSING

     SECTION 1.1 Settlement of UARs and EAR; Purchase and Sale of Units;.

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          (a) Immediately prior to and conditioned upon the occurrence of the Closing, the Company shall cancel, or cause to be cancelled, each outstanding unit appreciation right (each a “UAR”) of the Company granted under the Unit Appreciation Rights Agreements between the Company and the holders of UARs (together, the “Unit Appreciation Rights Agreements”), whether or not the UAR is then vested or exercisable (it being understood that any outstanding UARs shall vest in full upon the Closing), for the right to receive from the Company at the Closing a dollar amount equal to the excess of the “Fair Value of a Phantom Unit” in respect of each UAR (as defined in the Unit Appreciation Rights Agreements) over the “Baseline Valuation” applicable to each UAR (as defined in the applicable Unit Appreciation Rights Agreement), less applicable withholding tax. Each holder of an UAR acknowledges and agrees that the Fair Value of a Phantom Unit shall equal the Per Unit Amount. The aggregate amount paid by the Company to the UAR holders at the Closing pursuant to this Section 1.1 (a) (including applicable withholding tax and together with the UAR Holdback Amount as defined in Section 1.2(d)(iii)) shall be referred to in this Agreement as the “Aggregate UAR Amount”. Each UAR holder and the number of UARs held by such holder upon completion of the Restructuring are set forth in Section l.l(a) of the Sellers Disclosure Schedule (the “Sellers Disclosure Schedule”).

          (b) Immediately prior to and condition on the occurrence of the Closing, the Company shall cancel, or cause to be cancelled, each outstanding equity appreciation right (each an “EAR”) of the Company granted under the Appreciation Rights Agreements between the Company and the holders of EARs (together, the “Appreciation Rights Agreements”), whether or not the EAR is then vested or exercisable (it being understood that any outstanding EARs shall vest in full upon the Closing) for the right to receive from the Company at the Closing a portion of the Aggregate EAR Amount (as defined below) as set forth in Section 1.1 (b) of the Sellers Disclosure Schedule, less applicable withholding tax. The aggregate amount paid by the Company at Closing pursuant to this Section 1.1 (b) (including applicable withholding tax and together with the EAR Holdback Amount (as defined in Section 1.2(d)(iii)) shall be referred to in this agreement as the “Aggregate EAR Amount”. Each EAR holder is set forth in Section 1.1 (b) of the Sellers Disclosure Schedule.

          (c) At Closing, Buyer agrees to purchase, acquire and accept from the Sellers (or from the Sellers’ Representatives (as defined in Section 10.6 hereof) acting on behalf of the Sellers) the Units at the Closing for an aggregate price equal to $281,500,000.00 (such amount, as adjusted prior to Closing pursuant to Section 1.3 hereof and as adjusted after Closing pursuant to Section 1.4 hereof, the “Purchase Price”), a portion of which shall be paid in accordance with Sections 1.1 (a) and 1.1 (b) to holders of UARs and EARs. At Closing, each Seller who holds any Units agrees to sell, convey, assign, transfer and deliver to the Buyer each Unit owned by such Seller, as set forth in Section 1.1 (c) of the Sellers Disclosure Schedule attached hereto (such Schedule showing Unit ownership upon completion of the Restructuring) in exchange for the right to receive from the Buyer the Per Unit Amount (as defined below), free and clear of all Encumbrances (as defined in Section 2.3 hereof). Each Seller who holds any Units shall be entitled to receive from Buyer the Per Unit Amount (as defined below) multiplied by the aggregate number of Units next to the name of each such Seller in Section 1.1 (c) of

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the Sellers Disclosure Schedule, and each such Seller shall be (i) entitled to receive from Buyer such Seller’s pro rata portion of any Purchase Price Increase (pursuant to Section 1.4(c) hereof) or (ii) required to pay to Buyer such Seller’s pro rata portion of any Purchase Price Decrease (pursuant to Section 1.4(c) hereof). The Sellers acknowledge and agree that the “Per Unit Amount” shall be calculated as set forth in Section 1.1 (c) of the Sellers Disclosure Schedule.

          (d) To the extent that Buyer has delivered all amounts provided for in this Agreement to the Sellers, Sellers’ Representatives and the Company, and to the extent that the Company has delivered all amounts provided for in this Agreement to the Sellers, Sellers’ Representatives, UAR and EAR holders each Equityholder hereby acknowledges and agrees that neither the Buyer, the Company nor any of their respective Affiliates (determined following the Closing) shall be liable for any payment to the Equityholders with respect to any Equity Securities of the Company or its Subsidiaries and that following the Closing the holders of EARs and UARs shall look solely to the Sellers’ Representatives for payment in respect of any EARs and UARs and shall have no claim against the Company, its Subsidiaries, the Buyer or any of their respective Affiliates therefore.

     SECTION 1.2 Closing.

          (a) The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York 10036 on the fifth business day following the satisfaction or waiver of the conditions set forth in Articles VI and VII hereof; or if the Sellers’ Representatives and Buyer mutually agree on a different date, the date upon which they have mutually agreed. The date on which the Closing occurs and the transactions contemplated hereby become effective is referred to herein as the “Closing Date.”

          (b) At the Closing, the Company shall deliver the following to the Buyer:

               (i) all documents required to be delivered by the Company on or prior to the Closing Date pursuant to this Agreement or otherwise required from the Company in connection herewith;

               (ii) the resignations of the members of the Company Board (as defined in Section 2.1(b) hereof) and the boards of directors of each of its Subsidiaries;

               (iii) the unit books, unit ledgers and minute books of the Company; provided that any of the foregoing items shall be deemed to have been delivered pursuant to this Section 1.2(b)(iii) if such item has been delivered to or is otherwise located at the Company or any offices of the Company or its Subsidiaries;

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               (iv) good standing or equivalent certificates of the Company and each Subsidiary from its jurisdiction of formation and each state or province where each such entity is qualified to conduct business, dated within five (5) days prior to the Closing Date;

               (v) a copy of the resolutions of the board of directors of the Company and its Subsidiaries, as applicable, approving the transactions contemplated by this Agreement and the Restructuring as certified by an officer of the Company;

               (vi) a copy of the Company’s and each Subsidiary’s organizational documentation as certified by an officer of the Company;

               (vii) a certificate, executed by Sellers’ Representatives, on behalf of all Sellers, and an authorized officer of the Company and dated the Closing Date, certifying that the provisions of Section 6.1 (a) and (b) hereof have been satisfied; and

               (viii) An opinion by Skadden, Arps, Slate, Meagher & Flom LLP pursuant to Section 6.6 hereof in substantially the form attached hereto as Exhibit B.

(c) At the Closing, the Buyer shall, in the order specified:

               (i) deliver to each Seller who holds any Units the Per Unit Amount multiplied by the aggregate number of Units next to the name of each Seller in Section 1.1 (c) of the Sellers’ Disclosure Schedule by wire transfer of immediately available funds to the bank account designated by each Seller prior to the Closing;

               (ii) deliver to Escrow Agent the Escrow Amount by wire transfer of immediately available funds;

               (iii) deliver a certificate, executed by a duly authorized officer of the Buyer, certifying that the provisions of Sections 6.1 (a) and (b) of this Agreement have been satisfied;

               (iv) deliver all other documents required to be delivered by the Buyer on or prior to the Closing Date pursuant to this Agreement or otherwise required from Buyer in connection herewith; and

               (v) deliver to the Company the Aggregate UAR Amount and the Aggregate EAR Amount by wire transfer of immediately available funds to a bank account designated by the Company prior to the Closing.

               (vi) Deliver, from the Purchase Price, by wire transfer of immediately available funds the fee payment to such third parties (which

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shall include the fees to Lehman Brothers and the legal fees incurred by the Company in connection with the transactions contemplated by this Agreement and the sales process) as designated prior to Closing by Seller’s Representatives pursuant to Section 10.5 hereof.

          (d) At the Closing, the Sellers’ Representatives (on behalf of each Seller who holds any Units) shall deliver to Buyer unit certificates representing the Units that each Seller is selling to the Buyer and the associated stock transfer powers.

          (e) At the Closing, immediately following the steps set out in Section 1.2(c) and 1.2(d), the Company shall deliver:

               (i) to the UAR holders, as contemplated by Section 1.1 (a) hereof, the Aggregate UAR amount, less any UAR Holdback Amount and subject to applicable withholding tax, by wire transfer of immediately available funds to the bank accounts designated by the Sellers and Sellers’ Representatives prior to the Closing;

               (ii) to the EAR holders, as contemplated by Section 1.1 (b) hereof, the Aggregate EAR Amount, less any EAR Holdback Amount and subject to applicable withholding tax, by wire transfer of immediately available funds to the bank accounts designated by the Sellers and Sellers’ Representatives prior to the Closing; and

               (iii) in accordance with the terms of the Contribution Agreements (as defined in Section 5.10 hereof) to separate accounts designated by the Sellers and Sellers’ Representatives the UAR and EAR Amounts Holdback Amounts (each the “EAR Holdback Amount” and “UAR Holdback Amount”), as instructed by Sellers’ Representatives prior to the Closing;

SECTION 1.3 Pre-Closing Adjustment.

          (a) At least five business days prior to Closing, the Sellers’ Representatives shall deliver to Buyer a statement that sets forth a good faith estimate of the Working Capital (as defined in Section 1.4(a) hereof) of the Company as of the Closing Date (the “Estimated Working Capital”). The Estimated Working Capital shall be determined, on a consolidated basis, in accordance with generally accepted accounting principles (“GAAP”) and consistent with the Company’s and FEI Women’s Health, LLC’s (a Delaware limited liability company (“FWH”)) past practice used in calculating the components of Working Capital for the Company Financial Statements and the FWH Financial Statements, except that in calculating the Estimated Working Capital, all intercompany sales between FWH and the Company shall be eliminated (the “Consolidated Company Accounting Principles”). The Purchase Price (before giving effect to the adjustments pursuant to this Section 1.3 and Section 1.4 hereof) shall be increased by the positive amount by which the Estimated Working Capital exceeds negative five million eight hundred and eighty two thousand six hundred dollars

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($(5,882,600.00)) (the “Target Working Capital”), or the Purchase Price (before giving effect to the adjustments pursuant to this Section 1.3 and Section 1.4 hereof) shall be decreased by the positive amount by which Target Working Capital exceeds the Estimated Working Capital. The Target Working Capital was determined using the same methodology for determining Working Capital, except that, for the purposes of Target Working Capital, Current Assets (as defined in Section 1.4(a) hereof) did not include cash and cash equivalents and the Current Liabilities did not include the then existing portion of indebtedness for borrowed money.

     SECTION 1.4 Post-Closing Adjustment.

          (a) Within 45 days following the Closing Date, the Sellers’ Representatives shall prepare in good faith and deliver to Buyer the statement (the “Closing Statement”) that sets forth as of the Closing Date the Working Capital of the Company and its Subsidiaries. The Working Capital shall be prepared in accordance with GAAP and consistent with the Consolidated Company Accounting Principals. Following the Closing, the Company and Buyer shall provide, upon reasonable notice, Sellers’ Representatives and its Representatives (as defined in Section 5.2(a) hereof) full access to the properties, books, records, work papers and personnel of the Company and shall cooperate fully with Sellers’ Representatives for purposes of preparing the Closing Statement. Buyer shall have 30 days after delivery to Buyer of the Closing Statement during which to notify Sellers’ Representatives of any dispute of any item contained in the Closing Statement, which notice shall set forth in reasonable detail the basis for such dispute and Buyer’s good faith calculation of Working Capital. If Buyer fails to notify the Sellers’ Representatives of any such dispute within such 30-day period, the Closing Statement shall be deemed to be the final statement (“Final Statement”). In the event that Buyer shall so notify the Sellers’ Representatives of any dispute, Buyer and the Sellers’ Representatives and their respective accountants shall cooperate in good faith to resolve such dispute as promptly as possible. “Working Capital” shall mean the sum of Current Assets less Current Liabilities “Current Assets” shall mean the current assets of the Company and its Subsidiaries as set forth on a balance sheet prepared in accordance with GAAP (including cash and cash equivalents) and consistent with the Consolidated Company Accounting Principles. “Current Liabilities” shall mean the current liabilities of the Company and its Subsidiaries as set forth on a balance sheet prepared in accordance with GAAP and consistent with the Consolidated Company Accounting Principles, excluding therefrom any liabilities associated with purchasing the D&O Tail Policy (as defined herein), procuring the Reviewed Financial Statements and the Audited Financial Statements as contemplated by Section 5.16 hereof, the legal fees incurred by the Company in connection with the transactions contemplated by this Agreement to the extent paid pursuant to Section 10.5 out of the Purchase Price, the fees payable to Lehman Brothers as contemplated by Sections 2.19 and 10.5 hereof to the extent paid pursuant to Section 10.5 out of the Purchase Price, and the Studier Payment. For the avoidance of doubt, the Population Council liabilities shall be accounted for in the same manner as by the Company in its calculation of the Target Working Capital.

          (b) If Buyer and the Sellers’ Representatives and their respective accountants are unable to resolve any dispute within 15 days of Buyer’s delivery of any

6

notice of dispute provided pursuant to subsection (a) above, such dispute shall be resolved by KPMG LLP or another mutually agreed to nationally recognized accounting firm (the “Independent Accounting Firm”), which shall be retained to resolve any disputes between Buyer and Sellers’ Representatives over any items contained in the Closing Statement (or which shall be retained to resolve any disputes with respect to the Preliminary Allocation (as defined in Section 5.8(g) hereof)) and shall make its determination as promptly as practicable, and such determination shall be final and binding on the parties. The Independent Accounting Firm shall determine on the basis of the standard set forth in Section 1.3, whether and to what extent, if any, the Closing Statement requires adjustment; provided, however, that the amount of Working Capital as set forth on the Final Statement (the “Closing Working Capital”) must fall within the bounds of Sellers’ Representatives’ and Buyer’s calculations of the Working Capital as of the Closing Date. The Sellers shall collectively bear the percentage of the expenses relating to the engagement of the Independent Accounting Firm that equals the absolute value of the difference between the Sellers’ Representatives’ calculation of the Working Capital as of the Closing Date and the Closing Working Capital divided by the absolute value of the difference between the Sellers’ Representatives’ and Buyer’s calculation of the Working Capital as of the Closing Date. Each Seller shall severally and not jointly be responsible (except that Tinicum shall be jointly and severally responsible for the Persons on Schedule II-A hereto and Craig Capital shall be jointly and severally responsible for the Persons on Schedule II-B hereto) for its pro rata share of any expenses. Buyer shall bear the percentage of the expenses relating to the engagement of the Independent Accounting Firm that equals the absolute value of the difference between Buyer’s calculation of the Working Capital as of the Closing Date and the Closing Working Capital divided by the absolute value of the difference between the Sellers’ Representatives’ and Buyer’s calculation of the Working Capital as of the Closing Date. The Independent Accounting Firm shall be instructed to use every reasonable effort to perform its services within 15 business days of submission of the Closing Statement to it and, in any case, as soon as practicable after submission. The Closing Statement, as modified by resolution of any disputes by the Company and the Sellers’ Representatives or by the Independent Accounting Firm, shall be the Final Statement.

          (c)The Purchase Price (after giving effect only to the adjustment pursuant to Section 1.3 hereof) shall be increased by the positive amount by which the Closing Working Capital exceeds the Estimated Working Capital (the “Purchase Price Increase”), or the Purchase Price (after giving effect only to the adjustment pursuant to Section 1.3 hereof) shall be decreased by the positive amount by which the Estimated Working Capital exceeds the Closing Working Capital (the “Purchase Price Decrease”). To the extent there is a Purchase Price Increase, (x) the Escrow Agent shall deliver the Escrow Amount along with any interest thereon, to Sellers’ Representatives for distribution to the Sellers and UAR Holders and (y) Buyer shall, within ten business days after delivery of the Final Statement, make payment of the Purchase Price Increase, together with interest thereon from the Closing Date until the date of payment at a fixed rate equal to the prime rate per annum as quoted in the Wall Street Journal on the Closing Date, to Sellers’ Representatives for distribution to the Equityholders by wire transfer of immediately available funds to the bank account designated prior to the Closing by the Sellers’ Representatives. To the extent that there is a Purchase Price Decrease, the

7

Escrow Agent shall deliver within ten business days after delivery of the Final Statement, by wire transfer of immediately available funds to the bank account designated by Buyer prior to the Closing, the amount of the Purchase Price Decrease, together with the proportionate amount of interest thereon from the Closing Date until the date of payment earned in the Escrow Fund, and the Escrow Agent shall deliver any remaining balance of the Escrow Amount, together with any proportionate interest thereon, to Sellers’ Representatives for distribution to the Sellers and UAR Holders. Any funds delivered to Sellers’ Representatives hereunder shall be distributed by Sellers’ Representatives to all Sellers and UAR holders on a Fully Diluted pro-rata basis, after giving effect to any payments to the EAR holders.

          (d) Notwithstanding anything to the contrary herein, the Company shall make adequate provision for the payment of withholding, payroll and similar Taxes that arise as a result of the payment of any amounts in respect of UARs and EARs hereunder. Any amount so withheld shall be treated as if actually transferred to the relevant UAR holder or EAR holder.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except as set forth under the section heading referring to a specific section of this Agreement in the disclosure schedule of the Company (the “Company Disclosure Schedule”), the Company and, for purposes of Article IX, the Sellers (severally but not jointly, except that Tinicum shall be jointly and severally liable for the Persons on Schedule II-A hereto and Craig Capital shall be jointly and severally liable for the Persons on Schedule II-B hereto) represent and warrant to Buyer as follows:

     SECTION 2.1 Corporate Organization and Authority.

          (a) Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and has all requisite corporate power and authority to lease and operate the properties leased and operated by it and to carry on the operations of its business as now being conducted by it. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the property leased or operated by it with respect to its business is located or in each jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so duly qualified or in good standing would not have a Material Adverse Effect (as defined in Section 10.1 hereof).

          (b) The Company has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized by the Board of Directors of the Company (the “Company Board”) and no other corporate proceedings on the part of the Company are necessary to authorize the execution, delivery and performance of this

8

Agreement. This Agreement has been duly executed and delivered by the Company and constitutes, assuming due authorization, execution and delivery of this Agreement by Buyer, FWH and the Sellers, a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to or limited by (i) the effect of bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting the rights of creditors generally and (ii)the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).

     SECTION 2.2 Capitalization.

          (a) The entire authorized membership interests of the Company consist of 6,345,970 Class A Common Interests represented by 6,345,970 Class A Units and 907,897 Class B Common Interests represented by 907,897 Class B Units of the Company (each unit of the Company, or FWH, a “Unit”). As of the date of this Agreement, there were 6,345,970 Class A Units of the Company issued and outstanding and 907,897 Class B Units of the Company issued and outstanding. As of the date hereof, the authorized membership interests of FWH consist of 7,450,462.36 Class A Common Interests represented by 7,450, 462.36 Class A Units and 823,529 Class B Common Interests represented by 823,529 Class B Units. As of the date of this Agreement, there were 7,450,462.36 Class A Units of FWH and 823,529 Class B Units of FWH issued and outstanding). All outstanding Units have been duly authorized and validly issued and are fully paid and nonassessable. As of the Closing the Company will directly own all of the Units of FWH as a result of the Restructuring and the entire authorized membership interests of the Company will consist of 13,796,432.36 Class A Common Interests represented by 13,796,432.36 Class A Units and 1,731,426 Class B Common Interests represented by 1,731,426 Class B Units of the Company.

          (b) Except as set forth in this Section 2.2 and Section 2.2 of the Company Disclosure Schedule (such Schedule to reflect all EARs, UARs and other equity obligations as if the Restructuring had occurred as of the date hereof), there are no outstanding (i) Equity Securities of the Company or FWH; (ii) obligations of the Company or FWH to issue, any Equity Securities of the Company or FWH. Except as set forth in this Section 2.2 and Section 2.2 of the Company Disclosure Schedule, there are no outstanding obligations of the Company or FWH to issue, sell, repurchase, redeem or otherwise acquire any Equity Securities of the Company or FWH. Except as set forth in Section 2.2 of the Company Disclosure Schedule, there are no voting trusts or proxies or other voting arrangements with respect to the Company’s or FWH’s Equity Securities. Prior to the Closing, and as set forth in the Restructuring Agreement, each EAR of FWH will be cancelled, each EAR of the Company will be adjusted as contemplated by the Restructuring Agreement, and each UAR of FWH will convert into a UAR of the Company.

     SECTION 2.3 Subsidiaries. Section 2.3 of the Company Disclosure Schedule contains a true and complete list of all Subsidiaries of the Company; (i) their names and jurisdictions of incorporation, (ii) the number of authorized shares for each class of ownership units, (iii) the number of issued and outstanding shares of each class of

9

ownership units, the names of the holders thereof, and the number of shares held by each such holder, and (iv) the number of shares of ownership units held in treasury. All of the Equity Securities of each of the Company’s Subsidiaries have been validly issued and are fully paid and nonassessable and are owned by the Company, or will be owned by the Company as of the Closing, free and clear of all Encumbrances. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any Equity Securities of any Subsidiary of the Company. Neither the Company nor any of its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association that is not a Subsidiary of the Company. Except for the Subsidiaries set forth in Section 2.3 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries owns or has any right to acquire, directly or indirectly, any outstanding Equity Securities in any Person. For purposes of this Agreement “Encumbrances” shall mean any Lien, Tax, pledge, warrant, purchase or other right, contract, commitment, equity, claim, demand or restriction on transfer of any nature whatsoever. For purposes of this Agreement, “Subsidiary” means with respect to any Person, any corporation, limited liability company or other legal entity of which such Person owns, directly or indirectly, more than 50% of the outstanding Equity Securities, the holders of which are entitled to vote for the election of the board of directors or other governing body of such corporation, limited liability company or other legal entity. For purposes of this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint-stock company, a trust, any unincorporated organization, a government or political subdivision thereof or any other entity.

     SECTION 2.4 Consents and Approvals; No Violations.

          (a) Except as set forth in Section 2.4(a) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the performance by the Company of its obligations hereunder will (i) conflict with or result in any breach of any provision of the certificates of formation or limited liability company operating agreements (or similar organizational documents) of the Company or any of its Subsidiaries; (ii) result in a material violation or breach of, or default (or give rise to any right of termination, cancellation, modification or acceleration), conflict with or result in the creation of any Encumbrance under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of Indebtedness, guarantee, license, lease, contract or agreement or similar instrument or obligation to which the Company or any of its Subsidiaries is a party or by which they or any of their assets, whether tangible or intangible, may be bound; or (iii) materially violate any order, injunction, decree, statute, rule or regulation of any governmental agency or authority or court to which the Company or any of its Subsidiaries is subject.

          (b) Except as would not be material to the Company, and except as set forth in Section 2.4(b) of the Company Disclosure Schedule, no filing or registration with, notification to, or authorization, consent or approval of, any local, state, federal or foreign court, legislative, executive, governmental or regulatory authority or agency (each, a “Governmental Authority”) is required in connection with the execution and delivery of this Agreement by the Company or the performance by the Company of its

10

          obligations hereunder, except (i) compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), or any other competition or antitrust law in relevant jurisdictions; and (ii) those that become applicable as a result of the matters specifically related to Buyer or its affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) (“Affiliates”).

     SECTION 2.5 Financial Statements.

          (a) The Company has delivered to Buyer a true and complete copy of the pro-forma unaudited consolidated balance sheet (including FWH) of the Company as of August 31, 2005 (the “Company August 31 Balance Sheet”), and the pro-forma unaudited consolidated (including FWH) statement of income and cash flows of the Company (including FWH) for the eight-month period then ended (the “Pro-Forma Consolidated Financial Statements”). The Pro-Forma Consolidated Financial Statements were prepared in accordance with GAAP, consistently applied, are consistent with the books and records of the Company and the Subsidiaries (which books and records are correct and complete in all material respects), and fairly present, in all material respects, the pro-forma financial condition of the Company and its Subsidiaries (including FWH) as of August 31, 2005 and the pro-forma results of operations and cash flows of the Company and its Subsidiaries (including FWH) for the period then ended (subject, to normal, recurring and year-end audit adjustments and the exclusion of certain footnotes thereto). As promptly as practical after the date hereof, the Company will furnish a true and complete copy of the pro-forma unaudited consolidated balance sheet (including FWH) of the Company as of September 30, 2005 (the “Company September 30 Balance Sheet”) and the pro-forma unaudited consolidated (including FWH) statement of income and cash flows of the Company (including FWH) for the nine-month period then ended (the “September Pro-Forma Consolidated Financial Statements”). The Company September 30 Balance Sheet and September Pro-Forma Consolidated Financial Statements shall be prepared in accordance with GAAP, consistently applied, are consistent with the books and records of the Company and the Subsidiaries (which books and records are correct and complete in all material respects), and fairly present, in all material respects, the pro-forma financial condition of the Company and its Subsidiaries (including FWH) as of September 30, 2005 and the pro-forma results of operations and cash flows of the Company and its Subsidiaries (including FWH) for the period then ended (subject, to normal, recurring and year-end audit adjustments and the exclusion of certain footnotes thereto).

          (b) The Company has delivered to Buyer a true and complete copy of the audited consolidated balance sheets of the Company as of December 31, 2004 and December 31, 2003 and the audited consolidated statements of income and cash flows of the Company for the fiscal years ended December 31, 2004 and December 31, 2003 (including, in each case, any notes thereto) (collectively, the “Company Financial Statements”). The Company Financial Statements were prepared in accordance with GAAP, applied on a consistent basis, are consistent with the books and records of the Company and the Subsidiaries (which books and records are correct and complete in all material respects), and fairly present, in all material respects, the financial condition of

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the Company and its Subsidiaries (other than FWH) as of the dates thereof and the results of operations and cash flows of the Company and its Subsidiaries (other than FWH) for the periods then ended.

          (c) FWH has delivered to Buyer a true and complete copy of the audited balance sheets of FWH as of December 31, 2004 and December 31, 2003 and the audited statements of income and cash flows of FWH for the fiscal years ended December 31, 2004 and December 31, 2003 (including, in each case, any notes thereto) (collectively, the “FWH Financial Statements”). The FWH Financial Statements were prepared in accordance with GAAP, applied on a consistent basis, are consistent with the books and records of FWH (which books and records are correct and complete in all material respects), and fairly present, in all material respects, the financial condition of FWH as of the dates thereof and the results of operations and cash flows of FWH for the periods then ended.

     SECTION 2.6 Absence of Material Adverse Changes, etc.

          (a) Except as set forth in Section 2.6 (a) of the Company Disclosure Schedule or as otherwise contemplated by this Agreement or pursuant to the Restructuring Agreement (including the fees incurred by the Company in connection with the transactions contemplated hereby), since December 31, 2004, there has not been any event, change, occurrence or circumstance that has had, or could reasonably be expected to have, a Material Adverse Effect.

          (b) Except as set forth in Section 2.6 (b) of the Company Disclosure Schedule or as otherwise contemplated by this Agreement and the transactions contemplated hereby, since August 31, 2005 (i) neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that if taken or failed to be taken after the date hereof would be, or could reasonably be expected to result in an event that would be, in violation of Section 5.1 of this Agreement and (ii) neither the Company nor any of its Subsidiaries has experienced any damage, destruction, or loss (whether or not covered by insurance) to its property. Except as set forth in Section 2.6 (b) of the Company Disclosure Schedule or as otherwise contemplated by this Agreement and the transactions contemplated hereby, since December 31, 2004, neither the Company nor any of its Subsidiaries have taken any action or failed to take any action that if taken or failed to be taken after the date hereof would be, or could reasonably be expected to result in an event that would be, in violation of Sections 5.1 (a), (b), (c), (d), (e), (f), (i), (j), (m),(n), or (r) of this Agreement.

     SECTION 2.7 No Undisclosed Liabilities. Except as, and to the extent, set forth in or contemplated by this Agreement or pursuant to the Restructuring Agreement (including the fees incurred by the Company in connection with the transactions contemplated hereby), the Company Disclosure Schedule, the Company August 31 Balance Sheet and FWH August 31, 2005 Balance Sheet, neither the Company nor any of its Subsidiaries had, at August 31, 2005, any material liabilities (whether accrued, absolute, contingent, known or unknown), and neither the Company nor any of its

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Subsidiaries has, since August 31, 2005, incurred any material liability (whether accrued, absolute, contingent, known or unknown) other than in the Ordinary Course of Business.

     SECTION 2.8 Taxes.

          (a) Except as set forth in Section 2.8 of the Company Disclosure Schedule:

               (i) the Company and its Subsidiaries have filed all Tax Returns (as defined below) required to be filed (taking into account extensions), and all such Tax Returns are true, correct and complete;

               (ii) the Company and its Subsidiaries have paid all Taxes (as defined below) owed by any of them (whether or not shown to be due on such Tax Returns);

               (iii) no deficiencies for any Tax have been proposed, asserted or assessed in writing by any taxing authority against the Company or any of its Subsidiaries, none of the Tax Returns of the Company or any of its Subsidiaries currently is being audited, nor has the Company or any of its Subsidiaries received written notice from any taxing authority of any intention to open an audit;

               (iv) neither the Company nor any of its Subsidiaries is a party to any Tax allocation, Tax sharing or other similar agreement;

               (v) there are no agreements to extend the period of assessment or collection of Taxes of the Company or any of its Subsidiaries;

               (vi) there are no liens for Taxes on any asset of the Company or any of its Subsidiaries other than Permitted Encumbrances (as defined in Section 2.14(a) hereof);

               (vii) Since November 15, 2002, the Company has, and since January 3, 2003, FWH has, properly been classified as a partnership within the meaning of Treasury Regulation Section 301.7701-3 for all applicable Tax purposes;

               (viii) each of the Company and its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and all Internal Revenue Service Forms W-2 and 1099 required with respect thereto have been properly completed and timely filed;

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               (ix) neither the Company nor any of its Subsidiaries is currently the beneficiary of any extension of time within which to file any Tax Return;

               (x) neither the Company nor any of its Subsidiaries (nor, to the Knowledge of the Company, any predecessor thereof) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than Tax Returns which include only the Company and any of its Subsidiaries), and neither the Company nor any of its Subsidiaries has any liability for the Taxes of any other Person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or non-United States tax law, as a transferee or successor, by contract or otherwise);

               (xi) neither the Company nor any of its Subsidiaries is party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in any “excess parachute payment” within the meaning of Code Section 280G (or any corresponding provision of state, local or non-United States Tax law);

               (xii) neither the Company nor any of its Subsidiaries has engaged in any “listed transaction” or any “reportable transaction” that has as its principal purpose the avoidance of tax, as defined in the Treasury Regulations promulgated under Sections 6011 and 6012 of the Code; and

               (xiii) the unpaid Taxes of the Company and its Subsidiaries, being current Taxes not yet due and payable, (A) did not, as of the date of the Company August 31 Balance Sheet, exceed the reserve for Taxes (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Company August 31 Balance Sheet (rather than any notes thereto) and (B) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns.

          (b) For purposes of this Agreement, (i) “Code” means the Internal Revenue Code of 1986, as amended; (ii) “Tax” means all United States federal, state or local or non-United States taxes, assessments, charges, duties, levies or other similar governmental charges of any nature, including all income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, stamp duty reserve, license, payroll, withholding, ad valorem, value added, alternative minimum, environmental, customs, social security (or similar), unemployment, sick pay, disability, registration and other taxes, assessments, charges, duties, fees, levies or other similar governmental charges of any kind whatsoever, whether disputed or not, together with all estimated taxes, deficiency assessments, additions to tax, penalties and interest; and (iii) “Tax Return” means any report, return, statement, claim for refund, information return or other written information supplied to a

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taxing authority in connection with Taxes, including any amendment thereof or attachment or schedule thereto.

     SECTION 2.9 Employee Benefit Plans.

          (a) Section 2.9(a) of the Company Disclosure Schedule contains a complete and correct list of each deferred compensation and each bonus or other incentive compensation, option, equity appreciation right and other equity compensation plan, program or arrangement; each severance, medical, surgical, hospitalization, life insurance and other “welfare” plan, fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)); each profit- sharing, 401(k) savings or other “pension” plan, fund or program (within the meaning of Section 3(2) of ERISA); each employment, retention or severance agreement; and each other benefit plan, program, policy, arrangement or agreement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by the Company or any of its Subsidiaries or by any corporation, trade or business, whether or not incorporated (an “ERISA Affiliate”), that together with the Company or any of its Subsidiaries would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA or Section 414 of the Code, or with respect to which the Company or any of its Subsidiaries has any current or potential liability (the “Company Plans”). Accurate and complete copies of all Company Plans and the most recent summary plan description and Internal Revenue Service determination letter, if any, have been made available to Buyer.

          (b) Except as set forth in Section 2.9(b) of the Company Disclosure Schedule: (i) all contributions, distributions and premium payments required to be made with respect to each Company Plan on or prior to the Closing Date have been timely made or have been accurately reflected on Company Financial Statements; (ii) each Company Plan has been maintained, funded and operated in all material respects in accordance with its terms and the requirements of applicable Law; (iii) the Company and its Subsidiaries have not incurred any direct or indirect liability under, arising out of or by operation of Title IV of ERISA, in connection with the termination of, or withdrawal from, any Company Plan or other retirement plan or arrangement that the Company, any Subsidiary of the Company or any ERISA Affiliate maintains or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute, and no fact or event exists that could reasonably be expected to give rise to any such liability; (iv) none of the Company or any Subsidiary of the Company or any Company Plan or any trustee or administrator thereof has engaged in a transaction in connection with which the Company or any Subsidiary of the Company, any Company Plan, or any trustee or administrator thereof, could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code; and (v) no material action, audit, suit, proceeding, hearing, or investigation with respect to any Company Plan (other than routine claims for benefits) is pending or threatened and, to the Knowledge of the Company, there is no basis for any such action, audit, suit, proceeding, hearing or investigation.

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          (c) No Company Plan is subject to Title IV of ERISA or Section 302 of ERISA. None of the Company or any Subsidiary of the Company or any ERISA Affiliate has ever contributed to or been required to contribute to a “multiemployer pension plan,” as defined in Section 3(37) of ERISA.

          (d) Each Company Plan that is intended to meet the requirements of a “qualified plan” under Section 401 (a) of the Code has received a determination from the Internal Revenue Service that such Company Plan is so qualified, and there are no facts or circumstances that could adversely affect the qualification of any Company Plan. [All such Company Plans have been timely amended for the requirements of the legislation commonly known as “GUST” and “EGTRRA” and have been submitted to the Internal Revenue Service for a favorable determination letter on the GUST requirements within the remedial amendment period prescribed by GUST.

          (e) Neither the Company nor any of its Subsidiaries maintains, contributes to or has an obligation to contribute to, or has any obligation or liability with respect to, the provision of any health or life insurance or other welfare-type benefits for current or future retired or terminated directors, officers, employees or contractors (or any spouse or other dependent thereof) other than (i) coverage in accordance with Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code or any similar state law (“COBRA”) or (ii) benefits the full costs of which are borne by the current or former employee. The Company, its Subsidiaries and each ERISA Affiliate have complied in all material respects with the requirements of COBRA.

          (f) The Company and its Subsidiaries have, for purposes of each Company Plan, correctly classified those individuals performing services for the Company and its Subsidiaries as common law employees, leased employees, independent contractors or agents.

     SECTION 2.10 Environmental Matters.

          (a) (i) “Environmental Claim” means any claim, action, cause of action, investigation or written notice by any Person alleging potential liability arising out of, based on or resulting from (a) the presence or Release (as defined below) of, or exposure to, any Hazardous Materials (as defined below) noise or odor or (b) any violation or alleged violation of any Environmental Law (as defined below).

               (ii) “Environmental Laws” means all federal, state, local and foreign laws and regulations, all common law and all other provisions having the force or effect of law relating to pollution or protection of the environment, including, without limitation, those relating to Releases or threatened Releases of Hazardous Materials noise or odor or otherwise relating to the use, treatment, storage, transport exposure to or handling of Hazardous Materials.

               (iii) “Hazardous Materials” means any substance or material that is a “hazardous substance” under the federal Comprehensive

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Environmental Response, Compensation and Liability Act of 1980, as amended, a “hazardous waste” under the federal Resource Conservation and Recovery Act, a “pollutant” or “toxic pollutant” under the federal Clean Water Act, a chemical substance subject to regulation under the federal Toxic Substances Control Act, a “pesticide” under the Federal Insecticide, Fungicide and Rodenticide Act, or substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. § 300.5.

          (iv) “Release” means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials, noise or odor into the environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata).

          (b)  (i) Except as set forth in Section 2.10(b)(i) of the Company Disclosure Schedule, to the Knowledge of the Company the Company and its Subsidiaries are in compliance in all material respects with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws, which are in full force and effect, and compliance with the terms and conditions thereof). As of the date of this Agreement, the Company and its Subsidiaries (other than FWH) have not received since October 30, 2000, and FWH has not received since January 3, 2003, any written communication, whether from a governmental authority, citizens’ group, employee or otherwise, alleging that the Company and its Subsidiaries are not in such compliance with Environmental Laws or may be liable under Environmental Laws for injury or damages to persons, property or the environment or for costs of investigation or cleanup of Hazardous Materials.

          (ii) Except as set forth in Section 2.10(b)(ii) of the Company Disclosure Schedule, there is no material Environmental Claim pending or to the Knowledge of the Company, threatened against the Company and its Subsidiaries or against any Person whose liability for any Environmental Claim the Company and its Subsidiaries has or may have retained or assumed either contractually or by operation of law.

          (iii) There have been no Releases of Hazardous Materials, noise or odor at any of the Leased Real Property, or to the Knowledge of the Company at any third party location to which the Company sent, or caused to be sent, Hazardous Materials or to the Knowledge of the Company at any other location that would be material to the Company.

          (c) Notwithstanding any other provision of this Agreement, the representations and warranties made in this Section 2.10 are the sole and exclusive

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representations made in this Agreement by the Sellers, the Company and its Subsidiaries with respect to environmental matters.

     SECTION 2.11 Legal Proceedings, etc. Except as set forth in Section 2.11 of the Company Disclosure Schedule, there are no suits, grievances, actions, claims, proceedings or investigations pending, or, to the Knowledge of the Company, threatened against or involving the Company or any of its Subsidiaries (or any holders of its Equity Securities, officers or directors of the Company or any of its Subsidiaries in connection with the business or affairs of the Company or any of its Subsidiaries). None of the items set forth in Section 2.11 of the Company Disclosure Schedule, if adversely determined, would have a Material Adverse Effect. Except as set forth in Section 2.11 of the Company Disclosure Schedule, the Company, its Subsidiaries and their assets are not subject to any material judgments, decrees, injunctions, or orders of any (i) United States court or (ii) any other court.

     SECTION 2.12 Compliance with Applicable Law. Except as set forth in Section 2.12 of the Company Disclosure Schedule, each of the Company and its Subsidiaries is in material compliance with all applicable Laws and Orders of any federal, state, local or foreign governmental authority applicable to its business and operations. Except as set forth in Section 2.12 of the Company Disclosure Schedule, as of the date hereof, to the Knowledge of the Company there are no Laws or Orders or pending or proposed legislation that would adversely affect the business of the Company or its Subsidiaries in any geographic area. All material governmental approvals, permits, licenses and other governmental authorizations (collectively, “Permits”) required to conduct the business of the Company and its Subsidiaries are in the possession of the Company or any of its Subsidiaries, are in full force and effect and are being materially complied with.

     SECTION 2.13 Certain Contracts and Arrangements. Section 2.13 of the Company Disclosure Schedule sets forth all written and oral (a) Leases (as defined in Section 2.14(a) hereof), Company Plans, and collective bargaining agreements, (b) personal property leases involving annual payments in excess of $100,000, (c) guarantees, (d) leases or agreements under which the Company or any of its Subsidiaries is lessor of or permits any third party to hold or operate any property, real, personal or intangible, owned or controlled by the Company or any of its Subsidiaries, (e) contracts or group of related contracts with the same party for the purchase or sale of supplies, products or other personal property or for the furnishing or receipt of services which will extend over a period of more than one year, or involves a sum in excess of $250,000 annually (excluding any purchase orders or tooling orders), (f) agreements concerning any partnership or joint venture, (g) agreements with any of the Sellers or their Affiliates, (h) profit sharing, security option, security purchase, security appreciation, deferred compensation, severance or other plan or arrangement for the benefit of the Company’s or its Subsidiaries’ current or former directors, officers or employees, (i) agreements for the employment of an individual on a full-time, part-time, consulting, or other basis or providing severance benefits in excess of $10,000, (j) agreements under which the Company or any of its Subsidiaries has advanced or loaned any amount to any Person, (k) agreements under which the consequences of a default or termination would likely have a

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Material Adverse Effect, (1) settlements, conciliations or similar agreements, the performance of which will involve payment of a material amount after the Closing Date, (m) contracts which prohibit the Company or its Subsidiaries from freely engaging in business anywhere in the world and (n) any other agreements (or group of related agreements) the performance of which involves consideration in excess of $250,000 (collectively, the “Material Contracts”) to which the Company or any Subsidiary of the Company is a party. Except as set forth in Section 2.13 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries, or, to the Knowledge of the Company, any other party thereto, is in material breach of, or default under, any of the Material Contracts or License Agreements in any material respect, or under any other group of agreements that individually or in the aggregate involves payments in excess of $250,000 annually and no event has occurred that with notice or passage of time or both would constitute such a material breach or default thereunder by the Company or any of its Subsidiaries, or, to the Knowledge of the Company, any other party thereto. The Company has delivered or made available copies of or summaries of oral arrangements the Material Contracts and License Agreements to Buyer.

SECTION 2.14 Leased Real Property.

          (a) For purposes of this Agreement, “Permitted Encumbrances” means (i) mechanics’, carriers’, workers’, repairers’, materialmen’s, warehousemen’s, landlord’s and other similar Encumbrances arising or incurred in the Ordinary Course of Business for amounts which are not due and payable and which would not, individually or in the aggregate, have a Material Adverse Effect on the property to which such Encumbrances relate; (ii) Encumbrances arising or resulting from any action taken by Buyer; (iii) Encumbrances for current Taxes, assessments and other governmental charges not yet due and payable or that may subsequently by paid without penalty; (iv) Encumbrances for current Taxes, assessments and other governmental charges that have become due and payable that are being contested in good faith by appropriate proceedings for which appropriate reserves in accordance with GAAP have been established; (v) Encumbrances which would appear on an accurate survey of Leased Real Property; (vi) any other covenants, conditions, restrictions, reservations, rights, claims, rights-of-ways, easements and other similar matters of record affecting title, which do not or would not individually or in the aggregate materially adversely affect the value or current use of any of the Leased Real Property; (vii) zoning, building, land use, and other similar restrictions imposed by law, statute, rule, regulation, ordinance, order or process promulgated by any Governmental Authority; (viii) matters of public record; (ix) the terms of the Leases (as defined below) and liens of the lessor under the Leases for sums not yet due and payable; and (x) matters set forth in Section 2.14(a) of the Company Disclosure Schedule. “Leases” means the real property leases, subleases, licenses and use or occupancy agreements pursuant to which the Company or any of its Subsidiaries is the lessee, sublessee, licensee, user or occupant of real property, or interests therein. The Leased Real Property comprises all real property necessary for the conduct of, or otherwise material to, the business of the Company or any of its Subsidiaries as it is currently conducted. “Leased Real Property” means all interests in real property leased, subleased, licensed, used or occupied by the Company or any of its Subsidiaries pursuant to the Leases. Neither the Company nor any of its Subsidiaries owns any real property.

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          (b) Section 2.14(b) of the Company Disclosure Schedule sets forth a complete and correct list of all Leased Real Property setting forth information sufficient to identify specifically such Leased Real Property and a true and complete list of all Leases for each such Leased Real Property. Each Lease grants the Company and its Subsidiaries the right to use and occupy the applicable Leased Real Property in accordance with the terms thereof, subject to Permitted Encumbrances. The Company and its Subsidiaries have valid leasehold estates or other similar interests in the Leased Real Property created under its respective Leases, which leasehold estates are free and clear of any Encumbrances other than Permitted Encumbrances. Except as set forth in Section 2.14(b) of the Company Disclosure Schedule, with respect to each of the Leases: (i) the Company’s or Subsidiary’s possession and quiet enjoyment of the Leased Real Property under such Lease has not been disturbed, and to the Company’s knowledge, there are no disputes with respect to such Lease other than disputes which would not be expected to have a Material Adverse Effect; (ii) no security deposit or portion thereof deposited with respect such Lease has been applied in respect of a breach or default under such Lease which has not been redeposited in full; (iii) neither the Company nor Subsidiary owes, or will owe in the future, any brokerage commissions or finder’s fees with respect to such Lease; (iv) the other party to such Lease is not an Affiliate of, and otherwise does not have any economic interest in, the Company or any Subsidiary; (v) the Company or Subsidiary has not subleased, licensed or otherwise granted any Person the right to use or occupy such Leased Real Property or any portion thereof; and (vi) the Company or Subsidiary has not collaterally assigned or granted any other security interest in such Lease or any interest therein.

          SECTION 2.15 Labor Matters. Except as set forth in Section 2.15 of the Company Disclosure Schedule, (i) the Company and its Subsidiaries are not a party to or bound by any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its Subsidiaries, nor does the Company know of any activities or proceedings on behalf of or by any labor union to organize any such employees; (ii) there are no unfair labor practice charges or complaints, or any current union representation questions, involving employees or former employees of the Company or its Subsidiaries pending against the Company or its Subsidiaries before the National Labor Relations Board or similar foreign entity; and (iii) there is no labor strike, lockout, organized slowdown or organized work stoppage in effect or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries.

          SECTION 2.16 Insurance. Section 2.16 of the Company Disclosure Schedule sets forth all insurance policies with respect to the property, assets, operation and business of the Company and its Subsidiaries. All such insurance policies are in full force and effect, all premiums currently owed thereon have been paid, and the Company and the Subsidiaries are otherwise in compliance with the terms and provisions of such policies. Neither the Company nor any Subsidiary is in default under any of the insurance policies set forth in Section 2.16 of the Company Disclosure Schedule (or required to be set forth in Section 2.16 of the Company Disclosure Schedule). Except as set forth in Section 2.16 of the Company Disclosure Schedule, neither the Company nor any Subsidiary has received any notice of cancellation or non-renewal of any such policy

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or arrangement nor, to the Knowledge of the Company, has any termination of any such policies or arrangements been threatened.

     SECTION 2.17 Intellectual Property. Except as set forth in Section 2.17 of the Company Disclosure Schedule:

          (a) The Company and its Subsidiaries own free and clear of all Encumbrances or have the right to use pursuant to a License Agreement all patents, new drug application, drug master file, trademarks and service marks, domain names, copyrights, computer software, trade secrets, and other intellectual property, necessary or used for the operation of the business of the Company and it Subsidiaries as currently conducted, collectively, the “Company Intellectual Property”). The Company Intellectual Property is valid, subsisting and enforceable, and the Company has taken reasonable measures to maintain and protect the Company Intellectual Property.

          (b) Section 2.17(b) of the Company Disclosure Schedule sets forth, for the intellectual property owned or used by the Company and its Subsidiaries, a complete list of all: (i) patents and patent applications; (ii) trademark registrations and trademark applications; (iii) Internet domain name registrations; (iv) copyright registrations and copyright applications, (v) trade or corporate names, (vi) material unregistered trademarks, and (vii) material computer software (other than commercially available, shrink-wrap software with a replacement cost and/or annual license fee of less than $25,000). Section 2.17(b) of the Company Disclosure Schedule also sets forth a complete and accurate list of all licenses and other agreements under which the Company or any of its Subsidiaries grants or obtains any rights in or to any intellectual property (other than licenses for commercially available, shrink-wrap software with a replacement cost and/or annual license fee of less than $25,000) (collectively, “License Agreements”). There are no pending or, to the Knowledge of the Company, threatened proceedings or litigation or other adverse claims by any Person against the Company or any of its Subsidiaries contesting the use or ownership by the Company and its Subsidiaries or the validity or enforceability of any Company Intellectual Property, and no such claims were made against the Company or any of its Subsidiaries within the past five (5) years. The Company Intellectual Property is not subject to any outstanding consent, settlement, decree, order, injunction, judgment or ruling restricting the use thereof.

          (c) To the Knowledge of the Company, (i) the conduct of the business of the Company and its Subsidiaries as currently conducted does not infringe upon, misappropriate or otherwise conflict with the intellectual property rights of any third party, and the Company and its Subsidiaries have not received any notice of the foregoing (including any offers or demands to license any intellectual property), and (ii) to the Knowledge of the Company no third party is infringing upon, misappropriating or otherwise conflicting with any Company Intellectual Property.

SECTION 2.18 Food and Drug Administration.

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          (a) Neither the Company nor any of its Subsidiaries currently is or, at any time in the past, has been, the subject of any enforcement action brought by or on behalf of the Food and Drug Administration (the “FDA”);

          (b) Neither the Company nor any Subsidiary has ever received any warning letter from the FDA;

          (c) The Company has provided Buyer with copies of all Establishment Inspection Reports of FDA inspections of the Company’s and its Subsidiaries’ facilities and Form FDA-483’s issued to or received by the Company or its Subsidiaries within the past five (5) years;

          (d) All deficiencies noted in any Form FDA-483 issued to the Company or its Subsidiaries have been corrected;

          (e) Section 2.18 of the Company Disclosure Schedule lists all changes to the manufacturing process, controls or labeling of the products manufactured by the Company, including without limitation copper-bearing intrauterine devices, that have been implemented since approval of the last New Drug Application Supplement relating to the Company’s or its Subsidiaries’ products; none of such changes listed in Section 2.18 of the Company Disclosure Schedule required or requires approval by the FDA before implementation;

          (f) No FDA inspection has been conducted at the Company or its Subsidiaries other than those that are the subject of the Establishment Inspection Reports and/or Form FDA-483’s that are the subject of Section 2.18(c) above;

          (g) To the Knowledge of the Company, no action has been threatened by the FDA that would materially affect the New Drug Application pursuant to which the Company or its Subsidiaries manufactures and markets its products; and

          (h) The Company and its Subsidiaries have complied, and are in compliance, with in all material respects all obligations and prohibitions imposed on it by the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations, guidance, and other applicable regulatory policies promulgated thereunder.

     SECTION 2.19 Certain Fees. Except for Lehman Brothers (“Lehman Brothers”), (i) the Company and its Subsidiaries have not employed any financial advisor or finder and (ii) the Company and its Subsidiaries have not incurred any liability for any financial advisory or finders’ fees or similar compensation in connection with this Agreement or the transactions contemplated hereby. The fees incurred by Lehman Brothers shall be paid in accordance with Section 10.5 hereof.

     SECTION 2.20 Major Customers and Suppliers. Section 2.20 of the Company Disclosure Schedule contains a list of the top ten (10) customers of the Company and its Subsidiaries (by volume in dollars of sales to such customers) for each of the 12-month periods ended December 31, 2003 and December 31, 2004, and any additional customers expected to be among the top ten (10) customers of the Company and its Subsidiaries for

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the 12-month period ended December 31, 2005 (the “Major Customers”) Except as set forth in Section 2.20 of the Company Disclosure Schedule, since December 31, 2004, none of the Company and the Subsidiaries has received any written notice from any Major Customer to the effect that such Major Customer will stop or materially reduce its purchases from the Company and its Subsidiaries. Except as set forth on Section 2.20 of the Company Disclosure Schedule, since December 31, 2004, to the Knowledge of the Company none of the Company and the Subsidiaries has received any notice from any of the Company’s and its Subsidiaries’ ten (10) largest suppliers (by volume in dollars of purchases from such suppliers)(the “Major Suppliers”) to the effect that such Major Supplier will stop or materially reduce the aggregate volume of its supply of materials, products or services to the Company and the Subsidiaries; provided, however, that the Company and its Subsidiaries ceased being supplied polyethylene by Dupont in approximately 1994.

     SECTION 2.21 Indebtedness. There is no outstanding indebtedness for borrowed money of the Company or its Subsidiaries.

     SECTION 2.22 Affiliate Transactions. Except as disclosed in Section 2.22 of the Company Disclosure Schedule, no Seller, and no director, executive officer or employee of the Company or the Subsidiaries (or, to the Knowledge of the Company, any of the members of the immediate family (including spouse, brother, sister, descendant, ancestor or in-law) or Affiliates of the aforementioned) is currently a party to any contract or transaction with the Company or any Subsidiary, or has any interest in any property, whether real, personal or mixed, or tangible or intangible, used in or necessary to the business of the Company and the Subsidiaries. Without limiting the foregoing, except as disclosed in Section 2.22 of the Company Disclosure Schedule, no Seller, and no director, executive officer or employee of the Company or the Subsidiaries (or, to the Knowledge of the Company, any of the relatives or Affiliates of the aforementioned) is a director, executive officer or employee of any customer or supplier of the Company or any Subsidiary.

     SECTION 2.23 Accounts Receivable. All notes and accounts receivable of the Company and its Subsidiaries are reflected properly on the books and records of the Company and its Subsidiaries, are valid receivables subject to no setoffs or counterclaims, are current and collectible, and will be collected in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth on the balance sheets of the Company Financial Statements as adjusted for the passage of time through the Closing Date in the Ordinary Course of Business. Except as set forth in Section 2.23 of the Company Disclosure Schedule, no Person has any Lien on any Accounts Receivable or any part thereof, and no agreement for deduction, free goods or services, discount or other deferred price or quantity adjustment has been made by the Company or any Subsidiary or requested by any customer with respect to any notes or accounts receivable other than in the Ordinary Course of Business.

     SECTION 2.24 Product Liability. To the Knowledge of the Company, neither the Company nor any of its Subsidiaries has any material liability not covered by insurance or an insurance fund arising out of any injury to individuals as a result of the

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use of any product manufactured, sold or delivered by the Company or any of its Subsidiaries.

     SECTION 2.25 Inventory. The inventory of polyethylene (including in its blended form) of the Company and its Subsidiaries currently consists of at least 49,505 pounds of polyethylene, and since October 26, 2000 such inventory has remained fit for the purpose for which it was procured for use in the Company’s and its Subsidiaries’ manufacturing processes.

     SECTION 2.26 ENIC Fund

          In the event of a termination, dissolution or liquidation of, or a distribution or dividend from, the ENIC Fund (a Vermont captive insurance company formed in 1994 for the purpose of providing product liability coverage for the Company and its Subsidiaries’s product), the Company or its Subsidiaries is entitled to receive 25% of any such dividend or distribution or proceeds from such dissolution or liquidation, if any (the “ENIC Fund Representation”)

     SECTION 2.27 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE II, THE COMPANY AND ITS SUBSIDIARIES DO NOT MAKE AND HAVE NOT MADE ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, RELATING TO ITS AND ITS SUBSIDIARIES’ BUSINESS, INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE FUTURE SALES OR PROFITABILITY OF THE BUSINESS, OR REPRESENTATIONS OR WARRANTIES ARISING BY STATUTE OR OTHERWISE IN LAW, FROM A COURSE OF DEALING OR USAGE OF TRADE. ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY THE COMPANY.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

          In order to induce the Buyer to enter into this Agreement, each Seller severally (as to himself, herself or itself and not as to any other Seller) represents and warrants to Buyer as follows:

     SECTION 3.1 Authority and Related Matters. Such Seller has all requisite power to execute and deliver this Agreement and to perform its obligations hereunder. With respect to any Seller that is a corporation, limited liability company or a partnership, the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by such Seller have been duly and validly authorized by the Board of Directors or other governing body of such Seller and no other corporate or similar proceedings on the part of such Seller and, as the case may be, its board of directors or other governing body, its Equityholders or partners or other governing individuals are necessary therefore. This Agreement has been duly executed and delivered by such Seller, and constitutes, assuming the due execution hereof by each of the Company,

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FWH, Buyer and the other Sellers, a valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, except that such enforcement may be subject to or limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting the rights of creditors generally and (ii) the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). With respect to any Seller that is a corporation, limited liability company or partnership, such Seller, to the extent applicable, is duly organized, validly existing and in good standing under the laws of its state of organization.

     SECTION 3.2 Unit Ownership. Except as set forth in Section 3.2 of the Sellers Disclosure Schedule attached hereto (such Schedule reflecting ownership after the Restructuring), such Seller is the record and beneficial owner of the aggregate number of Units or UARs of the Company or FWH, as the case may be, listed opposite its respective name in Section 3.2 of the Sellers Disclosure Schedule. Except for this Agreement and the transactions contemplated hereby, and except as disclosed in Section 2.2 of the Company Disclosure Schedule, there are no agreements, arrangements, warrants, options, puts, calls, rights, contracts, equities, claims, demands, purchase or other rights or other commitments or understandings of any character to which such Seller is a party or by which any of his, her or its respective assets is bound and relating to the issuance, sale, purchase, redemption, conversion, exchange, registration, voting or transfer of any Equity Securities of the Company or FWH or other securities convertible into Equity Securities of the Company or FWH.

     SECTION 3.3 Consents and Approvals; No Violations.

          (a) Neither the execution and delivery by such Seller of this Agreement nor the performance by such Seller of its obligations hereunder will (i) conflict with or result in any breach of any provision of any certificate of incorporation, operating agreement, bylaws, trust agreement, partnership agreement, certificate of partnership or other constituent documents of such Seller that is an entity; (ii) result in the creation or imposition of any Encumbrance upon any of such Seller’s Units; or (iii) materially violate any order, injunction, decree, statute, rule or regulation of any Governmental Authority to which such Seller is subject.

          (b) Except as set forth in Section 2.4(b) of the Company Disclosure Schedule or Section 3.3(b) of the Sellers Disclosure Schedule, no filing or registration with, notification to, or authorization, consent or approval of any Governmental Authority is required in connection with the execution and delivery of this Agreement by such Seller or the performance by such Seller of its obligations hereunder, except (i) compliance with any applicable requirements of the HSR Act or any other competition or antitrust law in relevant jurisdictions; or (ii) those that become applicable as a result of matters specifically related to Buyer or its Affiliates.

     SECTION 3.4 Certain Fees. Except for Lehman Brothers, (i) such Seller has not employed any financial advisor or finder and (ii) such Seller has not incurred any

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liability for any financial advisor or finders’ fees or similar compensation in connection with this Agreement or the transactions contemplated hereby.

     SECTION 3.5 Legal Proceedings. As of the date of this Agreement, there are no suits, actions, claims, proceedings, or investigations pending against any Seller which, if adversely determined, would have a material adverse effect on the ability of such Seller to consummate the transactions contemplated hereby.

     SECTION 3.6 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III., THE SELLERS DO NOT MAKE AND HAVE NOT MADE ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, RELATING TO THE COMPANY’S AND ITS SUBSIDIARIES’ BUSINESS, INCLUDING ANY REPRESENTATIONS OR WARRANTIES AS TO THE FUTURE SALES OR PROFITABILITY OF THE BUSINESS, OR REPRESENTATIONS OR WARRANTIES ARISING BY STATUTE OR OTHERWISE IN LAW, FROM A COURSE OF DEALING OR USAGE OF TRADE. ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED BY THE SELLERS.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE BUYER

          In order to induce the Company and each of the Sellers to enter into this Agreement, the Buyer hereby represents and warrants to the Company and Sellers as follows:

     SECTION 4.1 Corporate Organization and Authority.

          (a) Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

          (b) Buyer has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly and validly authorized by the board of directors of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly executed and delivered by Buyer and constitutes, assuming due authorization, execution and delivery of this Agreement by the Company, FWH and the Sellers, a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except that such enforcement may be subject to or limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting the rights of creditors generally and (ii) the effect of general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).

     SECTION 4.2 Consents and Approvals; No Violations.

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          (a) Except as set forth in Section 4.2(a) of the disclosure schedule of the Buyer (the “Buyer Disclosure Schedule”), neither the execution and delivery of this Agreement nor the performance by Buyer of its obligations hereunder will (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws (or similar organizational documents) of Buyer or any of its Subsidiaries; (ii) result in a violation or breach of, or default (or give rise to any right of termination, cancellation or acceleration) or result in the creation of any Encumbrance under any of the terms, conditions or provisions of any note, mortgage, letter of credit, other evidence of indebtedness, guarantee, license, lease or agreement or similar instrument or obligation relating to the business of Buyer or to which Buyer or any of its Subsidiaries is a party or by which Buyer or any of its Subsidiaries or any of the assets used or held for use by Buyer or any of its Subsidiaries may be bound; or (iii) assuming that the filings, registrations, notifications, authorizations, consents and approvals referred to in subsection (b) below have been obtained or made, as the case may be, violate any order, injunction, decree, statute, rule or regulation of any Governmental Authority to which Buyer is subject, excluding from the foregoing clauses (ii) and (iii) such defaults, breaches or violations that would not individually, or in the aggregate, reasonably be expected to materially impact the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by, this Agreement.

          (b) No filing or registration with, notification to, or authorization, consent or approval of, any Governmental Authority is required in connection with the execution and delivery of this Agreement by Buyer or the performance by Buyer of its obligations hereunder, except (i) compliance with any applicable requirements of the HSR Act or any other competition or antitrust law in relevant jurisdictions and (ii) such other consents, approvals, orders, authorizations, notifications, registrations, declarations and filings the failure of which to be obtained or made would not reasonably be expected to materially impact the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by, this Agreement.

     SECTION 4.3 Legal Proceedings, etc. Except as set forth in Section 4.3 of the Buyer Disclosure Schedule, as of the date of this Agreement, there are no suits, actions, claims, proceedings or investigations pending, or, to the knowledge of Buyer, threatened against or involving Buyer or any of its Subsidiaries (or any of their respective officers or directors in connection with the business or affairs of Buyer and its Subsidiaries) before any court, arbitrator or administrative or governmental body, United States or foreign which, if adversely determined, would reasonably be expected to materially impact the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by, this Agreement. As of the date of this Agreement, there are no such suits, actions, claims, proceedings or investigations pending or, to the knowledge of Buyer, threatened challenging the validity or propriety of the transactions contemplated by this Agreement. Neither Buyer nor any of its Subsidiaries is subject to any judgment, decree, injunction or orders of any court, which would reasonably be expected to materially impact the ability of Buyer to perform its obligations under, and to consummate the transactions contemplated by, this Agreement.

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     SECTION 4.4 Certain Fees. Except as set forth in Section 4.4 of the Buyer Disclosure Schedule, (i) the Buyer has not employed any financial advisor or finder and (ii) the Buyer has not incurred any liability for any financial advisory or finders’ fees or similar compensation in connection with this Agreement or the transactions contemplated hereby.

     SECTION 4.5 Acquisition of Units for Investment. The Buyer has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its purchase of the Units. Buyer confirms that the Company and the Sellers have made available to Buyer the opportunity to ask questions of the officers and management employees of the Company and its Subsidiaries and to acquire additional information about the business and financial condition of the Company and its Subsidiaries. The Buyer is acquiring the Units for investment and not with a view toward or for sale in connection with any distribution thereof, or with any present intention of distributing or selling the Units. The Buyer agrees that the Units may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act of 1933, as amended, or any applicable state securities laws, except pursuant to an exemption from such registration available under the Securities Act of 1933, as amended, or any applicable state securities laws.

     SECTION 4.6 Financing. Buyer currently has and as of the Closing will have all funds necessary to consummate the transactions contemplated by this Agreement, including the payment at Closing of the Purchase Price and the payment of all expenses incurred by Buyer in connection with the transactions contemplated by this Agreement.

     SECTION 4.7 Investigation by Buyer; Sellers’ Liability. Buyer has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition, software, technology and prospects of the Company and its Subsidiaries and acknowledges that Buyer has been provided access to the personnel, properties, premises and records of the Company and its Subsidiaries for such purpose. In entering into this Agreement, Buyer has relied solely upon its own investigation and analysis and the representations and warranties made by the Company and Sellers hereby, and Buyer acknowledges that none of the Sellers, the Company, the Subsidiaries or any of their respective directors, officers, managers, Equityholders, employees, Affiliates, controlling Persons, agents, advisors or Representatives makes or has made any representation or warranty, either express or implied, as to the accuracy of completeness of any of the information provided or made available to Buyer or its directors, officers, managers, employees, Affiliates, controlling Persons, agents, advisors or Representatives, other than pursuant to the representations and warranties set forth in Article II or Article III of this Agreement, respectively, but always subject to the limitations and restrictions contained herein.

     SECTION 4.8 Truth of Sellers’ and Company Representations and Warranties.

          Neither Buyer nor Barr are aware of any breach by the Company or Sellers of any representation or warranty contained in Article II or III of this Agreement.

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ARTICLE V

COVENANTS

     SECTION 5.1 Conduct of the Business. The Company agrees that, during the period from the date hereof until the earlier of the Closing or the termination of this Agreement, except as (i) otherwise expressly contemplated hereby; (ii) set forth in Section 5.1 of the Company Disclosure Schedule; (iii) consented to by Buyer in writing, which request for consent will be considered by Buyer in good faith; or (iv) required by the Restructuring Agreement, the Company shall, and shall cause each of its Subsidiaries, to:

          (a) (i) cause its business operations to be conducted in the ordinary course and in compliance with all Laws and Orders and (ii) use its commercially reasonable efforts to preserve intact its assets, properties, business organization in all material respects;

          (b) not amend its certificate of formation, operating agreement or other organizational documents;

          (c) not issue, deliver, sell, pledge, dispose of or encumber, or authorize or commit to the issuance, sale, pledge, disposition or encumbrance of any Equity Securities of any class (except upon the exercise of UARs or Options outstanding on the date hereof) of the Company or any of its Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any Equity Securities of, or any other ownership interest in, the Company or any of its Subsidiaries;

          (d) not declare, set aside, make or pay any dividend or other distribution, payable in cash, Equity Securities, property or otherwise, with respect to any of its member interests or any security or right exchangeable or exercisable for, or convertible into, its Equity Securities;

          (e) not reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its Equity Securities, or any security or right exchangeable or exercisable for, or convertible into, its Equity Securities;

          (f) not (i) incur any Indebtedness for (except for short term indebtedness incurred in the Ordinary Course of Business); (ii) make any capital expenditures in excess of $100,000; (iii) sell or dispose of any of its properties or assets having a value individually or in the aggregate in excess of $100,000 other than for fair consideration in the Ordinary Course of Business; (iv) make any loans, advances or capital contributions to, or investments in, any other Person on behalf of the Company or any of its Subsidiaries; or (v) make any change in any of the present accounting methods and practices of its business, except as required by changes in GAAP;

          (g) other than in the Ordinary Course of Business and only after consulting with Buyer, not enter into any Material Contracts or License Agreements, provided that without the prior written consent of Buyer, the Company will not enter into

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any such Contract or Agreement which provides for annual payments in excess of $500,000 or provides for performance more than one year after the date of such Contract or Agreement;

          (h) not amend or terminate any Material Contracts or License Agreements;

          (i) not modify or amend the employment arrangements with its senior executive officers, except (i) for the payment of annual bonuses and increases in compensation in the Ordinary Course of Business or (ii) in connection with the promotion, relocation or termination of such executive officers in the Ordinary Course of Business, enter into or amend any employment, severance, termination or other similar agreement (except in connection with the hiring of any new employee earning less than $100,000 per year), adopt any new or amend any existing employee benefit plan, program, agreement or arrangement (except as may be required by applicable law or as necessary or advisable to comply with Section 409 A of the Code), or make any loans to any of its officers, directors, employees, agents or consultants;

          (j) not impose any Encumbrances (other than Permitted Encumbrances) upon any of its assets, tangible or intangible;

          (k) not delay or postpone the payment of accounts payable and other liabilities outside the Ordinary Course of Business;

          (l) not cancel, compromise, waive, or release any right or claim (or series of related rights and claims);

          (m) not transfer, assign, or grant any license or sublicense of any rights under or with respect to any Company Intellectual Property;

          (n) not take any action, or not fail to take any action that could reasonably be expected to result in the loss, lapse, abandonment, invalidity or enforceability of any Company Intellectual Property;

          (o) not enter into any transaction with any Affiliate of the Company, its Subsidiaries or the Equityholders;

          (p) not discharge a material liability or Encumbrance outside the Ordinary Course of Business;

          (q) not disclose any Confidential Information outside the Ordinary Course of Business;

          (r) to the extent that such action would affect the Taxes of the Company or any of its Subsidiaries after Closing, not make or change any material election, change an annual accounting period, adopt or change any accounting method, file any material amended Tax Return, enter into any material closing agreement, settle any material Tax claim or assessment of Taxes, consent to any extension or waiver of the

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limitation period applicable to any material Tax claim or assessment relating to the Company or any of its Subsidiaries; and

          (s) not agree, commit, or adopt any plan or proposal to take any of the actions set forth in clauses (b) through (q) above.

     SECTION 5.2 Access to Information; Confidentiality.

          (a) Upon reasonable advance notice, between the date hereof and the earlier of the Closing or the termination of this Agreement in accordance with its terms, the Company and its Subsidiaries shall give Buyer, its and its Subsidiaries’ counsel, financial advisors, financing sources, auditors and other authorized representatives (collectively, “Representatives”) reasonable access during normal business hours and after providing the Sellers reasonable advance notice to (i) the offices, properties, books and records of the Company and its Subsidiaries and (ii) the officers, facilities, and personnel of the Company and its Subsidiaries; and the Company will cooperate with Buyer in requesting, and use all commercially reasonable efforts to cause, it’s attorneys and accountants to provide Buyer with reasonable access during normal business hours to any information in their possession concerning the Company.

          (b) Buyer will treat and hold any information and materials it receives in the course of the reviews contemplated by Section 5.2(a) in accordance with the confidentiality agreement between Buyer and the Company, dated July 14, 2005 (the “Confidentiality Agreement”). Upon consummation of the transactions contemplated by this Agreement, the Confidentiality Agreement shall automatically terminate and have no more force or effect.

          (c) In consideration of the mutual covenants contained herein, and except to the extent necessary to enforce any rights under this Agreement, each of the Equityholders agrees that such Equityholder will not, at any time, directly or indirectly disclose to any unauthorized Person prior to the Closing or any Person after the Closing or use for his, her or its own account any Confidential Information or any information which in faith and good conscience ought to be treated as Confidential Information, or permit any Person to examine and/or make copies of any documents which contain or are derived from Confidential Information, whether prepared by the Equityholder or otherwise coming into the Equityholder’s possession or control without the prior written permission of Buyer; except as required by law or court order or as directed by Buyer, and unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of such Equityholder’s acts or omissions to act. Each of the Equityholders further agrees to use his, her or its commercially reasonable efforts and diligence to safeguard the Confidential Information and to protect it against disclosure, misuse, espionage, loss or theft; provided that there shall be no indemnification for any breach of this provision by an Equityholder that remains an employee of the Company or its Subsidiaries after Closing.

     SECTION 5.3 Director and Officer Indemnification.

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          (a) If the Closing occurs, Buyer agrees that all rights to indemnification and all limitations on liability existing in favor of any Company Indemnitee (as defined below) as provided in the certificate of formation or operating agreement of the Company or of any of its Subsidiaries shall survive the consummation of the transactions contemplated by this Agreement and continue in full force and effect and be honored after the Closing by the Company and its Subsidiaries. Buyer shall not, nor shall it cause or permit, any of the provisions relating to the indemnification of officers and directors in the certificate of formation or operating agreement of the Company or any of its Subsidiaries, as appropriate, to be amended, repealed or otherwise modified for a period of six years after the Closing in a manner that would adversely affect in any material respect the rights thereunder of individuals who at any time prior to the Closing were directors or officers of the Company or any of its Subsidiaries (collectively, the “Company Indemnitees”) in respect of actions or omissions occurring at or prior to the Closing.

          (b) The Company shall extend the existing director and officer insurance policy, on substantially its current terms, through the Closing, and shall purchase a six year director and officer tail policy providing substantially the same coverage (the “D&O Tail Policy”).

     SECTION 5.4 Reasonable Best Efforts.

          (a) Upon the terms and subject to the conditions provided herein, except as otherwise provided in Section 5.5, each of the parties hereto agrees to use its reasonable best efforts to take or cause to be taken all action, to do or cause to be done, and to assist and cooperate with any party hereto in doing all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement, including, but not limited to, (i) the satisfaction of the conditions precedent to the obligations of any of the parties hereto; (ii) the obtaining of consents, waivers or approvals of third parties; (iii) the defending of any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder; and (iv) the execution and delivery of such instruments, and the taking of such other actions as the other party hereto may reasonably require in order to carry out the intent of this Agreement.

          (b) In the event that The Population Council, Inc. (the “Population Council”) requests that a guarantee of the obligations under the Asset Purchase Agreement, dated as of November 18,2002, by and among the Population Council and FWH (as amended January 3, 2003 and March 31, 2005) (the “Population Council Agreement”) be made by Buyer, or another appropriate affiliate of Barr, Buyer or such affiliate consent to provide such guarantee of the obligations under the Population Council Agreement.

     SECTION 5.5 Governmental Authorizations; Consents.

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          (a) The Company, FWH and Sellers’ Representatives, on the one hand, and Buyer, on the other hand, shall promptly file all necessary registrations and filings, including, but not limited to, filings under the HSR Act or any other competition or antitrust law in relevant jurisdictions and submissions of additional information requested by any Governmental Authority; provided that the Company, FWH, the Sellers’ Representatives and the Buyer agree to take reasonable best efforts to cause the filing under the HSR Act to occur not later than five (5) Business Days following the execution of this Agreement. Each of Buyer, the Company, FWH and Sellers’ Representatives further agrees that it will, and will cause its Affiliates to, comply with any applicable post-Closing notification or requirements of any antitrust, trade competition, investment or control reporting or similar law or regulation or any Governmental Authority with competent jurisdiction. Each of Buyer, the Company, FWH and Sellers’ Representatives agrees to cooperate with and promptly to consult with, to provide any reasonably available information with respect to, and to provide, subject to appropriate confidentiality provisions, copies of all presentations and filings to any Governmental Authority to, the Company, FWH, Sellers’ Representatives or Buyer, as the case may be, or the counsel of the Company, FWH, Sellers’ Representatives or Buyer, as the case may be. Each of Buyer, the Company, FWH and Sellers’ Representatives shall promptly inform one another of any oral communication with, and provide copies of written communications with, any Governmental Authority regarding any such filings or any such transaction. Neither Buyer, the Company, FWH nor the Sellers’ Representatives shall independently participate in any formal meeting with any Governmental Authority in respect of any such filings, investigation, or other inquiry without giving Buyer, the Company, FWH and Sellers’ Representatives, as the case may be, prior notice of the meeting and, to the extent permitted by such Governmental Authority, the opportunity to attend and/or participate.

          (b) In addition to the agreements set forth in Section 5.5(a) above, the Company, FWH and Buyer shall each use their reasonable best efforts to ensure that the consents, approvals, waivers or other authorizations from Governmental Authorities, including without limitation antitrust clearance under the HSR Act, are obtained as promptly as practicable and that any conditions set forth in or established by any such Governmental Authorities are wholly satisfied. In fulfillment of this covenant, the Company and Buyer each agrees, among other steps or actions and without limiting the scope of Buyer’s and the Company’s obligations, to:

               (i) take reasonable best efforts to satisfy any additional conditions imposed by Governmental Authorities with respect to the acquisition of the Company; and

               (ii) oppose, in good faith, any litigation relating to this Agreement or the transactions contemplated hereby, including, if reasonably requested by the other party hereto, to commence or threaten to commence and to pursue litigation reasonably believed by the other party hereto to be helpful in obtaining authorization from Governmental Authorities or in terminating any outstanding proceedings.

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     SECTION 5.6 Public Announcements. No press release or announcement concerning the transactions contemplated hereby shall be issued by the Company or any of its Subsidiaries, Sellers’ Representatives, the Buyer or any Seller without the prior consent of the Buyer, the Sellers’ Representatives and the Company, except as such press release or announcement may be required by law, rule or regulation, in which case the party required to issue the release or announcement shall allow Buyer, Sellers’ Representatives and the Company reasonable time to comment on such release or announcement in advance of the issuance of such release or announcement. To the extent that any press release or announcement is issued after gaining the necessary consent described in this Section 5.6 (a “Public Announcement”), any additional press release or announcements shall not require additional consent to the extent that press release or announcements are consistent with any Public Announcement.

     SECTION 5.7 Employee Matters.

          (a) Each individual who is employed by the Company or any Subsidiary shall be listed in Section 5.7 of the Company Disclosure Schedule and shall remain an employee of the Company or such Subsidiary following the Closing Date (each such employee, an “Affected Employee”); provided, however, that this Section 5.7 shall not be construed to limit the ability of the applicable employer to terminate the employment of any Affected Employee following the Closing Date in accordance with applicable law, provided further that this Section 5.7 shall not be construed to require that any employee or group of employees located in California shall remain as an employee of the Company or its Subsidiaries as of or following the Closing.

          (b) Buyer shall, or shall cause the Company or the applicable Subsidiary of the Company to, give Affected Employees full credit for purposes of eligibility, vesting, benefit accrual and determination of the level of benefits under any employee benefit plans or arrangements (other than equity based plans) maintained by Buyer, the Company or any Subsidiary of the Company for such Affected Employees’ service with, or recognized by, the Company or any Subsidiary of the Company to the same extent recognized by the Company or such Subsidiary immediately prior to the Closing Date.

          (c) Buyer shall, or shall cause the Company or the applicable Subsidiary of the Company to, (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Affected Employees under any welfare benefit plans that such employees may be eligible to participate in after the Closing Date, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Closing Date under any welfare plan maintained for the Affected Employees immediately prior to the Closing Date and as if the transactions contemplated by this Agreement had not taken place and (ii) provide each Affected Employee with credit for any co-payments and deductibles paid prior to the Closing Date in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Closing Date in the plan year in which the Closing Date occurs.

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          (d) In the event that the Closing Date occurs prior to payment of all annual bonuses in respect of the 2005 fiscal year, Buyer agrees that it shall cause the Company (or the applicable Subsidiary of the Company, as the case may be) to pay any unpaid annual bonuses to the Affected Employees in respect of the 2005 fiscal year of the Company in accordance with the amounts that have been accrued on the Final Statement. Such payments shall be made at the time which is consistent with the past practice of the Company or the applicable Subsidiary of the Company, as the case may be.

          (e) Buyer shall, or shall cause the Company or the applicable Subsidiary of the Company, as the case maybe, to, provide severance benefits to such Affected Employees set forth in Section 5.7(e) of the Company Disclosure Schedule in accordance with the terms of each such Affected Employee’s employment contract. On and after the Closing Date, the Company or the applicable Subsidiary of the Company shall provide severance to other Affected Employees on a basis that is no less favorable than such policies as are applied to Buyer’s similarly situated employees, which Sellers acknowledge may be on a case-by-case basis pursuant to such policies, if any, as may be established by Buyer.

          (f) As of the Closing Date, Buyer shall assume and agree to perform, or cause the Company or the applicable Subsidiary of the Company to perform, in accordance with their terms, all employment, severance, retention and other compensation agreements and arrangements (the “Employee Agreements”) then existing between the Company or any Subsidiary of the Company with any director, officer or employee thereof.

          (g) The Company, Buyer and Sellers acknowledge and agree that the compensation deductions accruing as a result of the payments contemplated by this Agreement to the EAR holders and UAR holders shall belong to the Company and shall be for the benefit of Sellers. Neither Buyer or Sellers shall take, nor allow any other Person to take, a tax reporting position on any Tax Return or claim that is inconsistent with this Section 5.7(g) unless otherwise required pursuant to the final determination of a Governmental Authority. Nothing in this Section 5.7(g) shall preclude Buyer from treating the amounts of such payments to the EAR holders and UAR holders as amounts included in the Purchase Price.

          (h) The provisions of this Section 5.7 are for the sole benefit of the parties hereto and their permitted successors and assigns, and nothing herein, express or implied, shall give or be construed to give any Person, other than the parties hereto, and such permitted successors and assigns, any legal or equitable rights under this Section 5.7.

          (i) Prior to the Closing Date, the Company shall adopt, by action of its Board of Directors, a resolution providing that the 401(k) retirement plans maintained by the Company (the “40 l (k) Plans”) shall be terminated, effective as of immediately prior to the Closing, conditioned on the occurrence of the Closing. Buyer agrees that, following the Closing, it shall be responsible for (i) taking all administrative actions which are necessary and proper to wind up the operations of the 401(k) Plans, including,

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without limitation, providing all required notices the Internal Revenue Service, other Governmental Authorities, participants and vendors; submitting a termination request for favorable determination regarding the qualification of the 401(k) Plans with the Internal Revenue Service; and making all distributions under the 401(k) Plans in accordance with law and participant instructions, and (ii) the payment of all expenses associated therewith. Buyer agrees that it shall cause the 401(k) retirement plan maintained by Buyer to accept the rollover of participant accounts distributed from the 401(k) Plans. Buyer further agrees that the Affected Employees shall be enrolled in the 401(k) retirement plan maintained by Buyer as soon as practicable following the Closing Date, but in no event later than January 1, 2006.

     SECTION 5.8 Tax Matters.

          (a) Tax Indemnity. Each Seller shall pay, and shall, severally but not jointly (except that Tinicum shall be jointly and severally liable for the Persons on Schedule II-A hereto and Craig Capital shall be jointly and severally liable for the Persons on Schedule II-B hereto), indemnify, defend and hold harmless the Buyer, the Company and each of its Subsidiaries from and against (without duplication), any Taxes, but only if and to the extent such Taxes exceed the amount of Taxes included in the Company September 30 Balance Sheet and were included in the calculation of Working Capital reflected in the Closing Statement, or other Adverse Consequence attributable to (i) all Taxes (or the non-payment thereof) of the Company and its Subsidiaries for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date of any taxable period that includes (but does not end on) the Closing Date (the “Pre-Closing Tax Period”), (ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company or any of its Subsidiaries (or any predecessor of the foregoing) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation 1.1502-6 or any analogous or similar state, local or non-United States law or regulation, (iii) any Taxes of the Company or its Subsidiaries arising as a result of the Restructuring, and (iv) any and all Taxes of any person (other than the Company and its Subsidiaries) imposed on the Company or any of its Subsidiaries as a transferee or successor, by contract or pursuant to any law, rule or regulation, which Taxes relate to an event or transaction occurring on or before the Closing Date.

          (b) Straddle Period. In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts of the Company and its Subsidiaries or attributable to specific transactions for the Pre-Closing Tax Period shall be determined on an interim closing of the books as of the close of business on the Closing Date and the amount of other Taxes of the Company and its Subsidiaries for a Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period ending on and including the Closing Date and the denominator of which is the number of days in such Straddle Period.

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          (c) Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement (“Transfer Taxes”) shall be paid one half by the Buyer and one half by Sellers when due, and the Buyer andSellers, as applicable, will, at its own expense prepare and file all necessary Tax Returnsand other documentation with respect to all such Transfer Taxes and, if required byapplicable law, the Sellers who hold any Units will, and will cause their Affiliates to, joinin the execution of any such Tax Returns and other documentation.

          (d) FIRPTA Certificate. On or prior to the Closing, each Seller who holds any Units will furnish Buyer an affidavit certifying as to such Seller’s non-foreignstatus in accordance with the requirements of Section 1.1445-2(b) of the TreasuryRegulations.

          (e) Cooperation. Buyer and Sellers’ shall cooperate fully, as and to theextent reasonably requested by the other party, in connection with the filing of any TaxReturns and any audit, litigation or other proceeding with respect to Taxes of or related tothe Company or any of its Subsidiaries. Such cooperation shall include the retention and(upon the other party’s reasonable request) the provision of records and informationreasonably relevant to any such Tax Return, audit, litigation or other proceeding andmaking employees reasonably available on a mutually convenient basis to provideadditional information and explanation of any material provided hereunder. Each ofSellers and Buyer agrees to (i) retain or cause to be retained all books and records in itspossession on the Closing Date relating to Tax matters of or pertaining to the Companyor any of its Subsidiaries for any taxable period beginning before the Closing Date untilexpiration of the statute of limitations (including any extensions thereof) of the respectivetaxable periods, and to abide by all record retention agreements entered into with anyTaxing authority and (ii) give each other party reasonable written notice prior totransferring, destroying or discarding any such books and records and, if the other partyso requests, allow the requesting party to take possession of such books and records.

          (f) Tax Allocation Agreements. The Company shall cause any Taxsharing or allocation agreement and/or any similar arrangement with respect to Taxesinvolving the Company or any of its Subsidiaries to be terminated effective as of theClosing Date, such that neither the Company nor any of its Subsidiaries shall have anyliability thereunder to any Person after the Closing.

          (g) Asset Allocation.

          (i) Buyer shall propose to Sellers’ Representatives an allocation of the Purchase Price and the Company liabilities (the “Consideration”) to the assets of the Company pursuant to Section 1060 of the Code within 90 days after the Closing Date (the “Preliminary Allocation”). Within ten (10) business days following the receipt of the Preliminary Allocation, Sellers’ Representatives shall have the right to provide Buyer with a written notice objecting to the Preliminary Allocation, such notice to contain an explanation of the reasons for Sellers’

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Representatives’ objections. Within five (5) business days following receipt of Sellers’ Representatives’ objections, if any, to the Preliminary Allocation (the “Allocation Resolution Period”), Buyer and Sellers’ Representatives shall negotiate in good faith to resolve any differences regarding the Preliminary Allocation (as so resolved, the “Final Allocation”). If Sellers’ Representatives do not object to the Preliminary Allocation within the Allocation Resolution Period, the Preliminary Allocation shall be deemed to be the Final Allocation for purposes of this Agreement. The parties agree that for purposes of such Allocation the fair market value of the fixed assets of the Company and its Subsidiaries shall not exceed $545,776 and the fair market value of the work-in-process inventory of the Company and its Subsidiaries shall not exceed $10 million.

          (ii) If Buyer and Sellers’ Representatives are unable to resolve any differences with regard to the Preliminary Allocation within the Allocation Resolution Period, then any disputed matters shall be finally and conclusively determined in accordance with Section 1060 of the Code by the Independent Accounting Firm. Promptly, but not later than fifteen (15) days after its acceptance of appointment hereunder, the Independent Accounting Firm shall determine only those matters in dispute and shall render a written report as to the disputed matters and the resulting allocation of the Consideration to the assets of the Company, and such report of the Independent Accounting Firm shall be final, conclusive and binding upon the parties hereto and deemed to be the Final Allocation. The Independent Accounting Firm’s fees and expenses shall be split equally between Buyer and Sellers.

          (iii) Buyer and the Sellers shall (A) be bound by the Adjusted Final Allocation (as defined in Section 5.8 (g)(iv) hereof) for all Tax purposes, (B) timely file all forms and Tax Returns required to be filed in connection with the Adjusted Final Allocation (including, to the extent required to be filed, IRS Form 8594 and any other forms or reports required to be filed pursuant to Section 1060 of the Code or any comparable provisions of United States local or state or foreign Law (the “Section 1060 Forms”)), (C) prepare and file all Section 1060 Forms and Tax Returns in a manner consistent with the Adjusted Final Allocation and (D) take no position inconsistent with the Adjusted Final Allocation in any Section 1060 Form or Tax Return, any audit or examination by, or any proceeding before, any taxing authority or otherwise, unless otherwise required by the final determination of a taxing authority. In the event that the Adjusted Final Allocation is disputed by any taxing authority, the party hereto receiving notice of such dispute promptly shall notify and consult with the other parties hereto and keep such other parties apprised of material developments concerning resolution of such dispute. Buyer shall control any examination, investigation, audit or other proceeding resulting from such dispute by any taxing authority regarding the Adjusted Final

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Allocation; provided that Sellers’ Representatives, on behalf of the Sellers, shall have the nonexclusive right to participate in, but not to control, such examination, investigation, audit or other proceeding at Sellers’ Representatives, on behalf of the Sellers, sole cost and expense.

          The Final Allocation and any Section 1060 Forms shall be appropriately adjusted to take into account any post closing payments among the parties hereto (the “Adjusted Final Allocation”), including, without limitation, any Purchase Price Increase or Purchase Price Decrease. All payments made pursuant to this Agreement subsequent to the Closing Date shall be treated as adjustments to the Purchase Price for all Tax purposes.

          (h) Buyer, Sellers and the Company agree to use the alternate procedure described in Internal Revenue Service Procedure 2004-53 with respect to wage reporting.

     SECTION 5.9 Restructuring. The parties hereto agree that, prior to the Closing, the Company and FWH shall effect the Restructuring, substantially in the form attached hereto as Exhibit A.

     SECTION 5.10 Sellers’ Representatives’ Agreement with Equityholders. Prior to the Closing, each Equityholder shall enter into one or more contribution agreements (the “Contribution Agreements”) with the Sellers’ Representatives, for the benefit of all Sellers, that will govern each EAR holder’s and UAR holder’s liability for or benefit from, as applicable, any Purchase Price Increase, Purchase Price Decrease, payment from the Escrow Amount, indemnification payments pursuant to Article IX hereof and fees pursuant to this Agreement.

     SECTION 5.11 Exclusivity. Each Equityholder and the Company and its Subsidiaries (and each of their respective owners, directors, officers, employees, advisors, Representatives, agents or Affiliates) (the “Company Group”) shall not, directly or indirectly, (i) engage in, solicit or initiate any discussions or negotiations with, or provide any information to (except to confirm that this Agreement exists or as may be required by law or court order), or negotiate or enter into any agreement or agreement in principle, whether written or oral, with, any other Person with respect to a sale of the Company or any of its Subsidiaries, the assets of the Company or any of its Subsidiaries, the Equity Securities of the Company or any of its Subsidiaries or any similar business combination transaction, except as permitted by Section 5.1, (the foregoing actions, each a “Third Party Acquisition”) and (ii) provide any non-public financial or other confidential or proprietary information regarding the Company or any Subsidiaries (including this Agreement and any other materials containing Buyer’s or its Affiliates’ proposal and any other financial information, projections or proposals regarding the Company) to any Person (other than Buyer or its representatives and agents and any other Person Buyer designates), or take any other action to facilitate any inquiries or the making of any proposal that constitute, or would reasonably be expected to result in, a Third Party Acquisition. Each Equityholder and the Company agrees to (i) immediately notify Buyer if it or any member of the Company Group receives after the date hereof

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any indications of interest, requests for information or offers in respect of a proposal for a Third Party Acquisition, (ii) communicate to Buyer in reasonable detail the terms of any such indication, request or proposal (including the identity of such third party) and (iii) provide Buyer with copies of all written communications related to any such indication, request or proposal.

     SECTION 5.12 Securities Purchase and Investor Rights Agreements. Management Agreements. Prior to the Closing, the applicable Sellers and the Company shall cause to be terminated effective as of the Closing the Securities Purchase and Investor Rights Agreement, dated October 26, 2000, as amended, between the Company and the signatories thereto, the Management Agreement by and among Tinicum Capital Partners, L.P. and FEI Products, Inc., dated October 26, 2000, and the Management Agreement by and among Craig Capital Corporation and FEI Products, Inc., dated October 26, 2000 and, pursuant to the Restructuring, the Securities Purchase and Investor Rights Agreement, dated January 3, 2003, as amended, between FWH and the Signatories thereto.

     SECTION 5.13 Update. Each party hereto will, not less than three (3) nor more than five (5) business days prior to the Closing, disclose to the other in writing (in the case of the Company and Sellers by delivering a supplement to or substitution for a Disclosure Schedule)
(a “Supplemental Disclosure”) (x) any material inaccuracies in any of such party’s representations or warranties made in this Agreement which it becomes aware of and (y) any event, matter or claim occurring, arising, failing to occur or arise, or being asserted by a third party after the date hereof, the occurrence or failure to occur of which would cause any representation or warranty made by such party in this Agreement or any Disclosure Schedule of such party to become untrue or inaccurate in any material respect as of the Closing Date. Such delivery of a Supplemental Disclosure shall not affect any rights of any party (i) to terminate for the other party’s failure to satisfy the conditions to Closing or (ii) for indemnification.

     SECTION 5.14 Release. As a material inducement to Buyer to enter into this Agreement, effective as of the Closing, each Equityholder, solely in the capacity as an Equityholder and on behalf of each of their respective directors, officers and employees who have served as a director, officer or employee of the Company or any of the Subsidiaries (the “Releasors”), each agree not to sue and fully release and discharge the Buyer, Company, the Subsidiaries and their respective directors, officers, assigns and successors, past and present (collectively, the “Releasees”), with respect to and from any and all claims, demands, rights, Liens, contracts, covenants, proceedings, causes of action, obligations, debts, and losses of whatever kind or nature in law, equity or otherwise, whether now known or unknown, and whether or not concealed or hidden, which any of the Releasors now owns or holds or has at any time owned or held against any of the Releasees with respect to each Equityholder’s UAR agreements, EAR agreements or Units, as applicable (each, a “Released Claim”); provided, however, that nothing in this Section 5.13 will be deemed to constitute a release by the Equityholders of any right to enforce its rights under this Agreement, the Contribution Agreements or the Escrow Agreement and nothing in this Section 5.13 will be deemed to constitute a release by the Sellers of any right to indemnification against Buyer pursuant to ARTICLE IX. It

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is the intention of the Sellers that such release be effective as a bar to each and every claim, demand and cause of action hereinabove specified. In furtherance of this intention, the Equityholders hereby expressly waive, effective as of the Closing, any and all rights and benefits conferred upon it or him by the Company’s charter or bylaws or the provisions of applicable Law or regulation (and any such right or benefit conferred upon any Releasors) (except those relating to indemnification of directors and officers) and expressly consents that this release will be given full force and effect according to each and all of its express terms and provisions, including those related to unknown and unsuspected claims, demands and causes of action, if any, as those relating to any other claims, demands and causes of action hereinabove specified, but only to the extent such section is applicable to releases such as this.

     SECTION 5.15 California Operations.

          The parties hereto acknowledge and agree that Buyer intends to close the operation of the business in California, it being understood that the failure of the Buyer to reach satisfactory terms with the landlord under the California Lease or the California Employees shall not be a condition to Closing. The Company agrees to use commercially reasonable efforts to assist Buyer, at Buyer’s sole cost and expense, in (i) terminating the California Lease and obtaining a full release of all tenant obligations under the California Lease, satisfactory in form and substance to Buyer, from the other parties to such lease, and (ii) terminating existing employment arrangements (if any) with the Company’s employees located in the State of California (the “California Employees”) and negotiating employment and/or independent contractor arrangements between such employees and the Buyer or an Affiliate of the Buyer. With respect to clause (ii) above, the Company shall provide Buyer with reasonable access, during reasonable business hours and upon reasonable notice, to the California Employees for purposes of determining the terms and conditions of the employment or consulting arrangement to be offered to the California Employees, which will become effective as of the Closing Date. Buyer agrees that it shall (x) notify the Company and the Sellers of its determinations with respect to the California Employees and (y) cause the California Employees to be provided with COBRA continuation coverage as required by applicable law, under either the group health plan maintained by the Company or the group health plan maintained by Buyer, as the case may be. The Company agrees to allow the Buyer to (i) participate in any discussions with the parties to the California Lease relating to the termination of such lease and the grant of a release thereunder, (ii) review and comment on any documents evidencing such termination and release, and (iii) elect, at Buyer’s sole discretion, to maintain the existing California Lease in lieu of such termination.

     SECTION 5.16 Certain Financial Matters.

          (a) Buyer shall have the right to request Ernst & Young (“E&Y”) to (i) prepare audited combined consolidated balance sheets of the Company as of December 31, 2004 and the audited combined consolidated statements of income and cash flows of the Company for the fiscal year ended December 31, 2004, in each case on a pro forma basis as if the Restructuring had been completed and FHW had been a Subsidiary of the Company on January 1, 2004 (such audited financial Statements, the “Audited Financial

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Statements”) and render an audit opinion on such statements and (ii) conduct an SAS 100 review of the September Pro-Forma Consolidated Financial Statements, including a comparison of the September Pro-Forma Consolidated Financial Statements to the combined consolidated balance sheets of the Company as of September 30, 2004 and the combined consolidated statements of income and cash flows of the Company for the nine month period then ended, in each case on a pro forma basis as if the Restructuring had been completed and FHW had been a Subsidiary of the Company on January 1, 2004 (such reviewed financial statements, the “Reviewed Financial Statements”). Sellers and the Company agree to reasonably cooperate in the conduct of such audit and Sellers and the Company shall use commercially reasonable efforts to cause E&Y to take such actions as Buyer may reasonably request in connection with the audit. Sellers and the Company shall request E&Y to complete such audit no later than 45 days following the Closing Date, and Sellers and the Company shall use commercially reasonable efforts to cause such audit to be completed within such time. All costs and expenses associated with such audit, including but not limited to audit fees charged by E&Y, but excluding the cost of employees of the Company until Closing, shall be the Buyer’s sole responsibility. Notwithstanding the above, if the Closing occurs following December 31, 2005, then this section shall be deemed amended to refer to “2005” in each place where “2004” is referenced.

          (b) Sellers and the Company will reasonably cooperate with Buyer andpromptly provide Buyer with all additional financial statements, financial informationand related documentation reasonably requested by Buyer from time to time in order forBuyer to comply with the requirements of the Securities Act of 1933, as amended, andthe Securities Exchange Act of 1934, as amended. Such cooperation will includeproviding E&Y access to financial information for the business for purposes ofcompleting an audit or review of the period beginning on January 1, 2005 and ending onthe Closing Date, and the provision of customary representation letters regarding suchfinancial information as reasonably requested by E&Y. The Buyer shall bear all costsand expenses associated with such cooperation.

          (c) Sellers and the Company shall use commercially reasonableefforts to cause E&Y to take such actions as Buyer may reasonably request in connectionwith Buyer’s compliance with requirements of the Securities Act of 1933, as amended,and the Securities Exchange Act of 1934, as amended, including, but not limited to: (i)requesting E&Y to prepare the consolidated Reviewed Financial Statements and theconsolidated Audited Financial Statements and related audit opinions and/or reviewletters in a form meeting the requirements of Regulation S-X under the Securities Act of1933, as amended, (ii) requesting E&Y to provide Buyer with copies of draft audits andthe related work papers prior to the issuance of such audits, (iii) requesting the consent ofE&Y to the use of its report on the Company Financial Statements, the Audited FinancialStatements and the Reviewed Financial Statements (iv) requesting E&Y to perform aSAS 100 review of any other interim unaudited financial statements, and (v) requestingE&Y to participate, at Buyer’s request, in the preparation of any registration statement,prospectus or offering memorandum that includes, or incorporates by reference, theCompany Financial Statements, the Reviewed Financial Statements or the Audited

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Financial Statements. The Buyer shall bear all costs and expenses associated with E&Y’s actions set forth in this Section.

          (d) The Company agrees to permit its officers and employees toprovide such assistance in connection with the preparation of the Audited FinancialStatements, the Reviewed Financial Statements and the preparation of additionalfinancial statements, financial information and related documentation reasonablyrequested by Buyer, including allowing such Persons to attend and participate inmeetings with E&Y and other preparations for the same. The Sellers who are officersand directors agree that they will not unreasonably withhold execution of customarymanagement representation letters required by E&Y in connection with the ReviewedFinancial Statements and the Audited Financial Statements.

          (e) The parties hereto agree and acknowledge that the refusal or failureof E&Y to perform any of the requested services or take any of the requested actionsreferred to in this Section 5.16 shall not be a condition to Closing or a basis for a claimfor indemnification under this Agreement.

ARTICLE VI

CONDITIONS TO BUYER’S OBLIGATION TO CLOSE

          The Buyer’s obligation to consummate the transactions contemplated herein shall be subject to the satisfaction or written waiver by Buyer on or prior to the Closing Date, of each of the following conditions:

     SECTION 6.1 Representations and Warranties; Covenants.

          (a) The representations and warranties of the Company, withoutgiving any effect to any materiality qualifications therein, shall be true and correct in allrespects on and as of the Closing Date as though made on and as of the Closing Date(except for representations and warranties made as of a specified date, which need be trueand correct only as of the specified date) except (i) as otherwise contemplated by thisAgreement and (ii) for such failures to be true and correct which in the aggregate wouldnot have a Material Adverse Effect. The Company and its Subsidiaries shall haveperformed in all material respects each of its respective agreements and covenantscontained in or contemplated by this Agreement that are required to be performed by it ator prior to the Closing pursuant to the terms hereof.

          (b) The representations and warranties of the Sellers, without givingeffect to any materiality qualifications therein, shall be true and correct in all respects onand as of the Closing Date as though made on and as of the Closing Date (except forrepresentations and warranties made as of a specified date, which need be true andcorrect only as of the specified date), except (i) as otherwise contemplated by thisAgreement and (ii) for such failures to be true and correct which in the aggregate wouldnot have a Material Adverse Effect on the ability of the Sellers to consummate thetransactions contemplated hereby. Each of the Sellers shall have performed in all

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material respects each of its respective agreements and covenants contained in or contemplated by this Agreement that are required to be performed by it at or prior to the Closing pursuant to the terms hereof.

     SECTION 6.2 Filings; Consents; Waiting Periods. All registrations, filings, applications, notices, consents, approvals, orders, qualifications and waivers set forth in Section 6.2 of the Company Disclosure Schedule shall have been filed, made or obtained and the Company shall have delivered evidence satisfactory to Buyer evidencing same, and all waiting periods applicable under the HSR Act and similar applicable foreign merger control laws shall have expired or been terminated.

     SECTION 6.3 No Injunction. At the Closing Date, there shall be no injunction, restraining order or decree of any nature of any court or governmental agency or body of competent jurisdiction that is in effect that, and there shall not have been filed, commenced or specifically threatened in a bona fide manner any lawsuit or proceeding by a Governmental Authority that (i) restrains or prohibits the consummation of the transactions contemplated herein, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (iii) could materially adversely effect the right of Buyer to own the Equity Securities and to operate the business of the Company and its Subsidiaries.

     SECTION 6.4 Other Deliveries. The items set forth in Section 1.2(b) shall have been delivered to the Buyer by the Company and the Sellers’ Representatives.

     SECTION 6.5 Restructuring. The Restructuring shall have been completed pursuant to the Restructuring Agreement, substantially in the form attached hereto as Exhibit A, or in such other form as reasonably acceptable to Buyer, and all documentation at the Restructuring shall have been delivered to the Buyer.

     SECTION 6.6 Opinion. The Company shall have delivered to the Buyer an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to the Company, dated as of the Closing Date, and addressed to the Buyer, in substantially the form attached hereto as Exhibit B.

     SECTION 6.7 Absence of Material Adverse Effect. Since December 31, 2004, there shall have been no change, event or condition that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

     SECTION 6.8 Termination of Management Agreements and Securities Purchase and Investor Rights Agreements.

          The Management Agreement by and among Tinicum Capital Partners, L.P. and FEI Products, Inc., dated October 26, 2000, the Management Agreement by and among Craig Capital Corporation and FEI Products, Inc., dated October 26, 2000, the Securities Purchase and Investor Rights Agreement, dated October 26, 2000, as amended, between the Company and the signatories thereto and the Securities Purchase and Investor Rights Agreement, dated January 3, 2003, as amended, between FWH and the Signatories thereto shall have been terminated.

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ARTICLE VII

CONDITIONS TO SELLERS’ AND THE COMPANY’S OBLIGATIONS TO CLOSE

          Sellers’ and the Company’s obligations to consummate the transactions contemplated herein shall be subject to the satisfaction or written waiver, by Sellers’ Representatives and the Company on or prior to the Closing Date, of each of the following conditions:

     SECTION 7.1 Representations and Warranties; Covenants. The representations and warranties of Buyer, without giving any effect to any materiality qualifications or limitations therein shall be true and correct in all respects on and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties made as of a specified date, which need be true and correct only as of the specified date), except (i) as otherwise contemplated by this Agreement and (ii) for such failures to be true and correct which would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated by this Agreement. Buyer shall have performed in all material respects each of its respective agreements and covenants contained in or contemplated by this Agreement that are required to be performed by it at or prior to the Closing pursuant to the terms hereof.

     SECTION 7.2 Filings; Consents; Waiting Periods. All registrations, filings, applications, notices, consents, approvals, orders, qualifications and waivers set forth in Section 7.2 of the Buyer Disclosure Schedule shall have been filed, made or obtained and Buyer shall have delivered evidence satisfactory to the Company and Sellers’ Representatives evidencing same, and all waiting periods applicable under the HSR Act and similar applicable foreign merger control laws shall have expired or been terminated.

     SECTION 7.3 No Injunction. At the Closing Date, there shall be no injunction, restraining order or decree of any nature of any court or governmental agency or body of competent jurisdiction that is in effect that (i) restrains or prohibits the consummation of the transactions contemplated herein or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation.

     SECTION 7.4 Other Deliveries. The items set forth in Section 1.2(c) shall have been delivered by the Buyer to the Company and the Sellers’ Representatives.

ARTICLE VIII

TERMINATION

     SECTION 8.1 Termination. Notwithstanding anything herein to the contrary, this Agreement may be terminated at any time prior to the Closing by:

          (a) the mutual written consent of the Company, the Sellers’ Representatives and Buyer;

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           (b) Buyer in the event that any condition set forth in Article VI hereofshall not be satisfied and shall not be reasonably capable of being remedied by January31, 2006, provided however that if by such date all conditions are satisfied other than theexpiration or termination of the applicable waiting period under the HSR Act, such dateshall be extended until April 30, 2006;

          (c) the Company or the Sellers’ Representatives in the event than anycondition set forth in Article VII hereof shall not be satisfied and shall not be reasonablycapable of being remedied by January 31, 2006, provided however that if by such date allconditions are satisfied other than the expiration or termination of the applicable waitingperiod under the HSR Act, such date shall be extended until April 30, 2006;

          (d) Notwithstanding anything to the contrary herein, no party mayterminate this Agreement pursuant to clause (b) or (c) above if the failure of theapplicable condition in Article VI or VII, as the case may be, to be satisfied or the failureof the Closing to occur on or before the date required in this Section 8.1(b) or (c), as thecase may be, results from the material breach of any covenant in this Agreement orfailure to comply with any material obligation under the terms of this Agreement (i) bythe Sellers or the Company in the case of a termination by the Sellers’ Representatives orthe Company or (ii) by Buyer in the case of a termination by Buyer.

     SECTION 8.2 Procedure and Effect of Termination. Except as set forth in Section 8.2(c) below, in the event of termination of this Agreement and abandonment of the transactions contemplated hereby by the parties hereto pursuant to Section 8.1 hereof, written notice thereof shall be given by a party so terminating to the other parties and this Agreement shall forthwith terminate and shall become null and void and of no further effect, and the transactions contemplated hereby shall be abandoned without further action by the Company, the Sellers, Buyer or, if applicable, FWH. If this Agreement is terminated pursuant to Section 8.1 hereof:

          (a) each party shall redeliver all documents, work papers and othermaterials of the other parties relating to the transactions contemplated hereby, whether soobtained before or after the execution hereof, to the party furnishing the same, and allconfidential information received by Buyer with respect to the Company and itsSubsidiaries shall be treated in accordance with the Confidentiality Agreement pursuantto Section 5.2(b) hereof;

          (b) all filings, applications and other submissions made pursuanthereto shall, at the option of the Sellers, and to the extent practicable, be withdrawn fromthe agency or other Person to which made; and

          (c) there shall be no liability or obligation hereunder on the part of theCompany, the Sellers, Buyer or, if applicable, FWH or any of their respective directors,officers, employees, Affiliates, controlling Persons, agents, advisors or Representatives,except with respect to a breach of Section 4.6 hereof and except that the Company,Sellers or Buyer, as the case may be, may have liability to the other party if the basis oftermination is a willful, a material breach by the Company, the Sellers or Buyer, as the

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case may be, of one or more of the provisions of this Agreement, and except that the obligations provided for in Sections 5.2(b), 8.2 and 10.5 hereof shall survive any such termination.

ARTICLE IX

INDEMNIFICATION

     SECTION 9.1 Survival. The representations and warranties made herein shall survive the Closing and continue in full force and effect for a period of one year thereafter, it being the intention of the parties to shorten the statute of limitations with respect to any claim relating to a breach or inaccuracy of such representations and warranties; provided that the representations and warranties contained in (a) Section 2.9 (Employee Benefit Plans) and 2.10 (Environmental Matters) shall survive until the third anniversary of the Closing Date, (b) Sections 2.2 (Capitalization), 2.3 (Subsidiaries), 2.8 (Taxes ), 2.19 (Certain Fees), 2.21 (Indebtedness), 3.2 (Unit Ownership), and 3.4 (Certain Fees), (all such representations and warranties listed under this Section 9.1(b) hereof, the “Fundamental Representations”), Excluded Claims and California Claims shall survive until 60 days following the expiration of the applicable statute of limitations and (c) the ENIC Fund Representation shall survive until the earlier of December 31, 2008 and the receipt by the Company of 25% of the proceeds from dividends, or the dissolution, liquidation or winding down of, the ENIC Fund (which may be by means of dividend). Notwithstanding the preceding sentence, any representation or warranty in respect of which indemnification may be sought under Section 9.2 or Section 9.3 hereof and the indemnity with respect thereto, shall survive the time at which it would otherwise terminate pursuant to this Section 9.1 if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity is sought prior to such time. Any agreements and covenants of the parties requiring performance under this Agreement shall survive the Closing in accordance with the terms of such agreements.

     SECTION 9.2 Indemnification Provisions for Benefit of Buyer.

          (a) In the event Company or the Sellers breach any of their (i) representations or warranties or (ii) covenants or other agreements contained herein (each such breach, a “Seller Breach”), or there is a claim under any Excluded Claim, and the Company or the Sellers receive a written claim for indemnification from Buyer within the survival period set forth in Section 9.1 hereof, then the Sellers agree to severally but not jointly (except that Tinicum shall be jointly and severally liable for the Persons on Schedule II-A hereto and Craig Capital shall be jointly and severally liable for the Persons on Schedule II-B hereto) indemnify Buyer and its Subsidiaries (including the Company after Closing), its respective officers, agents, directors and representatives (the “Buyer Indemnified Persons”) from and against such Sellers’ pro-rata share of any Adverse Consequences (as defined below) caused by the Seller Breach or Excluded Claim that such Buyer Indemnified Person shall suffer; provided, however, that the Sellers shall not have any obligation to indemnify such Buyer Indemnified Person from and against any Adverse Consequences caused by arising from, based on or resulting

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from breaches of the items set forth in Section 9.2(a)(i) (X) until Buyer Indemnified Persons have suffered aggregate Adverse Consequences by reason of all such breaches of the items set forth in Section 9.2(a) in excess of $2 million (such amount, the “Indemnification Basket”) (it being understood that such amount is a “true deductible” for the first $1,000,000 of Adverse Consequences and Sellers shall indemnify the Buyer Indemnified Persons for Adverse Consequences in excess of $1,000,000 after such Indemnification Basket is reached)¹ and until after such amount is reached or (Y) to the extent the Adverse Consequences Buyer Indemnified Persons have suffered by reason of (a) all such breaches, excluding breaches of Fundamental Representations, of the items set forth in Section 9.2(a)(i) exceeds $30 million (such amount, the “Indemnification Cap”) (after which point the Sellers shall have no obligation to indemnify the Buyer Indemnified Persons from and against any such further Adverse Consequences resulting from any Seller Breach) and (b) all such breaches of Fundamental Representations exceeds $50 million (such amount, the “Fundamental Representations Indemnification Cap”), it being understood that the Indemnification Cap and the Fundamental Representations Indemnification Cap shall not be additive and in no event shall the aggregate amount of indemnification for Adverse Consequences for breaches of representations (including Fundamental Representations) exceed $50 million (after which point the Sellers shall have no obligation to indemnify the Buyer Indemnified Persons from and against any such further Adverse Consequences resulting from any breach of Fundamental Representations); provided, further that any Adverse Consequences shall be reduced by any insurance proceeds actually received by Buyer or the Company and its Subsidiaries in connection with such Adverse Consequences. If and to the extent that any such or insurance proceeds are realized in a year following the year in which the Sellers make an indemnification payment to Buyer, Buyer shall pay such amounts to Sellers’ Representative at such time. Notwithstanding anything to the contrary contained herein, the aggregate amount of indemnification for Adverse Consequences for a breach of the ENIC Fund Representation shall be $1,500,000. Notwithstanding anything herein to the contrary, the Indemnification Basket shall not apply to any Adverse Consequences that arise as a result of a breach of the Fundamental Representations or ENIC Fund Representation, and neither the Indemnification Basket nor the Indemnification Cap shall apply to Adverse Consequences that arise as a result of a breach of a representation, warranty, covenant or other agreement in respect of Taxes or Excluded Claims (as defined in Section 10.1). For purposes of this Agreement, “Adverse Consequences” shall mean all demands, charges, judgments, orders, decrees, rulings, damages, dues, penalties, Taxes, fines, costs, liabilities, losses, liabilities, fees and expenses (including legal fees and expenses); provided, that Adverse Consequences will not include lost profits or consequential, punitive, treble or similar damages. Notwithstanding anything in this Section 9.1 (a), no Adverse Consequences resulting from a breach of any representation or warranty (excluding breaches of Fundamental Representations or Excluded Claims) shall be subject to indemnification until the Adverse Consequences resulting from such breach exceeds $25,000, after which amount Buyer shall be entitled to indemnification for such

¹ For example, if Adverse Consequences for which the Sellers are required to indemnify were $2.5 million, Sellers’ indemnification obligations would be for $1.5 million of such Adverse Consequences.

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breach in accordance with the terms and subject to the limitations of this Section 9.1(a) from the first dollar of such Adverse Consequence without regard to such $25,000 limitation.

          (b) In light of the Indemnification Basket and FundamentalRepresentations Indemnification Basket, for purposes of determining the AdverseConsequences resulting from any Seller Breach, any representations or warrantycontaining a materiality or Material Adverse Effect qualifier shall be read as if suchmaterial or Material Adverse Effect qualifier were eliminated for the purposes ofcalculating damages and for purposes of determining whether a Seller Breach hasoccurred.

          (c) Any indemnification obligations of the Sellers in respect of thisArticle IX shall be paid within 10 Business Days after the determination thereof by wiretransfer of immediately available funds to an account designated in writing by theapplicable Buyer Indemnified Person.

     SECTION 9.3 Indemnification Provisions for Benefit of the Sellers.

          (a) In the event (i) Buyer breaches any of its representations,warranties, covenants or other agreements contained herein (each such breach, a “BuyerBreach”) or (ii) any California Claims arise, and Buyer receives a written claim forindemnification from the Sellers within the survival period set forth in Section 9.1 hereof,then Buyer agrees to indemnify the Sellers against any Adverse Consequences caused bythe Buyer Breach that the Sellers and their respective officers, agents, directors andrepresentatives (the “Seller Indemnified Persons”) shall suffer through the date of theclaim for indemnification; provided, however, that Buyer shall not have any obligation toindemnify the Seller Indemnified Persons from and against any Adverse Consequencescaused by a Buyer Breach (i) until the Seller Indemnified Persons together or individuallyhave suffered aggregate Adverse Consequences by reason of all such breaches in excessof the Indemnification Basket (it being understood that such amount is a “truedeductible”) and until after such amount is reached or (ii) to the extent the AdverseConsequences the Seller Indemnified Persons together or individually have suffered byreason of all such Buyer Breaches exceed the Indemnification Cap (after which pointBuyer shall have no obligation to indemnify the Seller Indemnified Persons from andagainst any such further Adverse Consequences resulting from any Buyer Breach);provided, further that all such obligations of Buyer to indemnify the Sellers shall bereduced by any insurance proceeds actually received by the Sellers in connection withsuch Adverse Consequences. If and to the extent that any such insurance proceeds arerealized in a year following the year in which Buyer makes an indemnification paymentto the Sellers, the Sellers’ Representatives shall pay such amounts to Buyer at such time.Notwithstanding anything herein to the contrary, neither the Indemnification Basket northe Indemnification Cap shall apply to Adverse Consequences that arise as a result ofCalifornia Claims.

          (b) Buyer shall make any payments in connection with Section 9.3(a)within 10 Business Days to an account designated by the Sellers’ Representatives by wire

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transfer of immediately available funds to a bank account designated in writing by the Sellers’ Representatives.

     SECTION 9.4 Exclusive Remedy. Buyer, the Company and the Sellers acknowledge and agree that, in the absence of fraud, the foregoing indemnification provisions in this Article IX shall be the exclusive remedy of Buyer Indemnified Persons and the Seller Indemnified Persons with respect to the transactions contemplated by this Agreement. Notwithstanding the foregoing, this Section 9.4 shall not (i) operate to interfere with or impede the operation of the provisions of Section 1.4 providing for the resolution of certain disputes relating to the Purchase Price between the parties and/or by the Independent Accounting Firm and (ii) limit the rights of the parties to seek equitable remedies (including specific performance or injunctive relief).

     SECTION 9.5 Indemnification Procedures.

          (a) In the event of any claim, demand, suit, action, arbitration,investigation, inquiry or proceeding brought by a third party against any Indemnitee (ineach such case, a “Third-Party Claim”), the Indemnitee shall promptly cause writtennotice of the assertion of such Third Party Claim of which it has knowledge which iscovered by this indemnity to be forwarded to the Indemnitor (a “Notice of Claim”). Thefailure of the Indemnitee to give a prompt Notice of Claim of any Third Party Claim shallnot release, waive or otherwise affect the Indemnitor’s obligations with respect theretoexcept to the extent that the Indemnitee is actually prejudiced as a result of such failure.Subject to Section 9.5(b), the Indemnitor on behalf of the Indemnitee shall have the rightto elect to assume control of the defense of any a Third Party Claim, and, as provided inSection 9.6, the costs and expenses incurred by the Indemnitor in connection with suchdefense (including attorneys’ fees, other professionals’ and experts’ fees and court orarbitration costs) shall be paid by the Indemnitor. The Indemnitee may participate,through counsel of its own choice and at its own expense, in the defense of any Third-Party Claim.

          (b) With respect to the defense of any Third-Party Claim:

          (i) the Indemnitor shall not be entitled to assume or continue control of such defense and shall pay the costs and expenses incurred by the Indemnitee in connection with such defense if (A) the claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment or investigation; (B) the claim seeks an injunction or equitable relief against the Indemnitee (or against Buyer, the Company or any of its Subsidiaries, if the Indemnitee is an Buyer Indemnified Person), and such injunction or equitable relief, if granted, would be materially detrimental to or materially injure Buyer’s or the Company’s future business prospects (C) a conflict of interest exists between the Indemnitor and the Indemnitee; or (D) the Indemnitor has materially failed or is failing to defend such claim, and

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          (ii) if the claim for indemnification relates to Taxes, the Indemnitor’s rights to control the defense of such matter shall extend only to the specific issue for which indemnification is claimed (and not the entire return or taxable period).

          (c) If the Indemnitor has the right to and does elect to defend anyThird-Party Claim, the Indemnitor shall: (i) conduct the defense of such Third-PartyClaim actively and diligently and keep the Indemnitee fully informed of materialdevelopments in the Third-Party Claim at all stages thereof; (ii) promptly submit to theIndemnitee copies of all pleadings, responsive pleadings, motions and other similar legaldocuments and papers received or filed in connection therewith; (iii) to the extentpracticable permit the Indemnitee and its counsel to confer with the Indemnitor regardingthe conduct of the defense thereof; and (iv) permit the Indemnitee and its counsel anopportunity to review all legal papers to be submitted by or behalf of the Indemnitor priorto their submission. Buyer and the Sellers’ Representatives will make available to eachother and each other’s counsel and accountants, without charge, all of its or their booksand records relating to the Third-Party Claim, and each party (at its own expense) willrender to the other party such assistance as may be reasonably required in order to insurethe proper and adequate defense thereof and shall furnish such records, information andtestimony and attend such conferences, discovery proceedings, hearings, trials andappeals as may be reasonably requested by the other party in connection therewith.

          (d) If the Indemnitor has the right to and does elect to defend anyThird-Party Claim, the Indemnitor shall have the right to enter into any settlement of aThird-Party Claim without the consent of the Indemnitee provided that (i) if theIndemnitee is an Buyer Indemnified Person, then either (A) no amount in excess of theIndemnification Basket is payable by such Indemnitee in connection with such settlementor (B) the amount that is payable in connection with such settlement does not exceed theIndemnification Cap or the Fundamental Representations Indemnification Cap, as and ifapplicable, (ii) if the Indemnitee is a Seller Indemnified Person, then no amount ispayable by such Indemnitee in connection with such settlement, (iii) such settlement doesnot involve any injunctive or other equitable relief or the contractual equivalent thereofbinding upon such Indemnitee, and (iv) such settlement expressly and unconditionallyreleases such Indemnitee from all liabilities and obligations with respect to such claim,with prejudice; provided, further, that no settlement by the Indemnitor of a Third-PartyClaim shall limit or reduce the right of the Indemnitee to indemnity hereunder for allDamages they may incur arising out of or resulting from the Third-Party Claim to theextent indemnified in this Article IX.

     SECTION 9.6 Resolution of Notice of Claim. Each Notice of Claim given by Indemnitee shall be resolved as follows:

          (a) If, within 20 Business Days after a Notice of Claim is delivered to the Indemnitor, the Indemnitor agrees in writing that liability for such Claim is indemnified under Section 9.2 or Section 9.3, as applicable, the full amount of the Adverse Consequences specified in the Notice of Claim is agreed to, and that such Notice of Claim is timely, the Indemnitor (on behalf of the Sellers, if the Indemnitee is a Buyer

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Indemnified Person) shall be conclusively deemed to have consented to the recovery by the Indemnitee of the full amount of Adverse Consequences specified in the Notice of Claim in accordance with this Article IX.

          (b) If the Indemnitor does not agree in writing to such Notice of Claim or gives the Indemnitee written notice contesting all or any portion of a Notice of Claim (a “Contested Claim”) within the 20 Business Day period specified in Section 9.6(a), then such Contested Claim shall be resolved by either (i) a written settlement agreement executed by the Buyer and the Sellers’ Representatives or (ii) in the absence of such a written settlement agreement by a court of competent jurisdiction.

     SECTION 9.7 Tax Treatment of Indemnification Payments

          Any indemnification payments made pursuant to this Article 9 shall be treated as an adjustment to the Purchase Price for Tax purposes.

ARTICLE X

MISCELLANEOUS

     SECTION 10.1 Certain Definitions. For purposes of this Agreement:

          “Business Day” shall mean any day other than a day on which banks in the State of New York are authorized or obligated to be closed.

          “California Claim” shall mean any claim, costs, expenses or liability arising from, based on or resulting from (i) termination of the Company’s employees in the State of California and the engagement of such employees by the Buyer or an Affiliate of the Buyer as employees, consultants or independent contractors and (ii) the termination of the California Lease provided that any default or liability arising under the California Lease prior to termination is not a California Claim.

          “California Lease” shall mean the lease Suite No. 1750, 222 N. Sepulveda Blvd., El Segundo, California.

          “Closing Time” shall mean 12:01 a.m., Eastern Daylight Time, on the Closing Date.

          “Confidential Information” shall mean the information and data of the Company or any of its Subsidiaries concerning the business or affairs of the Company or any of its Subsidiaries (including the Company’s technology, computer programs, know-how, designs, inventions, methods of doing business and supplier and customer information) (i) which is material nonpublic information, (ii) which is proprietary to the Company or any of its Subsidiaries, (iii) the disclosure of which could reasonably be expected to be detrimental or adverse to the Company or any of its Subsidiaries, (iv) with respect to which the continued success of the Company and its Subsidiaries depends on keeping this information from becoming known to competitors of the Company and its

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Subsidiaries, and (v) is or relates to the identity of any present, former or prospective distributors of any of the Company’s or any of its Subsidiaries’ products or services.

          “Equityholder” shall mean a holder of any Equity Securities of the Company or its Subsidiaries, including the holders of any Unit, UAR, or EAR.

          “Equity Securities” of any Person shall mean, as applicable, (a) any capital stock, membership interests or other share capital, (b) any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests or other share capital or containing any profit participation features, (c) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, membership interests, other share capital or securities containing any profit participation features, or to subscribe for or to purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, membership interests, other share capital or securities containing any profit participation features, (d) any share appreciation rights, phantom share rights or other similar rights, or (e) any Equity Securities issued or issuable with respect to the securities referred to in clauses (a) through (d) above in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization.

          “Escrow Agent” shall mean a mutually agreed upon nationally recognized bank or trust company.

          “Escrow Amount” shall mean $10,000,000.

          “Excluded Claims” shall mean any claim arising from, based on or resulting from (i) an Equityholder for consideration in respect of any Equity Securities of the Company or its Subsidiaries (including as a result of the consideration received in the Restructuring) or (ii) any Taxes arising from or attributable to the Restructuring.

          “Indemnitee” shall mean any Person making a claim for indemnification under Article IX hereof.

          “Indemnitor” shall mean any Person required receiving notice of a claim for indemnification under Article IX hereof.

          “Intercompany Indebtedness” shall mean Indebtedness of the Company or any of its Subsidiaries with respect to which the obligee is any of the Company and or its Subsidiaries.

          “Law” shall mean any constitution, law (including common law), statute, code, ordinance, by-law, rule or regulation or other restriction of any Governmental Authority.

          “Lien” shall mean any lien, security interest, option, right of first refusal, claim, easement, mortgage, charge, indenture, deed of trust, right of way, or other encumbrances.

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           “Material Adverse Effect” shall mean a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, excluding for such purposes, (i) any change resulting from general economic, financial or market conditions in any of the geographic areas in which the Company or any of its Subsidiaries operates; (ii) conditions caused by acts of terrorism or war (whether or not declared); (iii) any change resulting from conditions or circumstances generally affecting the businesses, industries or competitive environment, as a whole, in which the Company or any of its Subsidiaries operate; (iv) any change resulting from the entering into of this Agreement with Buyer; and (v) any change resulting from any changes in GAAP.

          “Order” shall mean any written order, injunction, judgment, decree, ruling, writ, charge, plan or arbitration award of a Governmental Body.

          “Ordinary Course of Business” shall mean the ordinary and usual course of business consistent with past custom and practice.

          “Studier Employment Agreement” shall mean the Employment Agreement, effective as of June 9, 2003, by and between the Company and Frederick Studier.

          “Studier Payment” shall mean the amount payable as severance or in connection with the termination of the employment of Frederick Studier under the Studier Employment Agreement and any other arrangements between the Company and Frederick Studier.

          “Target Working Capital” shall mean negative Five Million, Eight Hundred and Eighty Two Thousand, Six Hundred dollars ($(5,882,600.00)).

     SECTION 10.2 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement to any party hereunder shall be in writing and deemed given on the date of receipt via (i) personal delivery; (ii) facsimile transmission with confirmation; (iii) overnight courier; or (iv) certified or registered mail, in each case, with delivery fees prepaid, addressed to the following addresses (or at such other address for a party as shall be specified by notice given hereunder).

If to Buyer, to:

Duramed Pharmaceuticals, Inc.
c/o Barr Pharmaceuticals, Inc.
400 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07677
Attn: General Counsel
Telecopy: (888) 843-0563

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with copies to:

Kirkland & Ellis LLP
153 East 53^rd Street
Citigroup Center
Attn: Frederick Tanne, Esq. & Heidi Matterfis, Esq.
Telecopy: (212) 446-4900

If to the Company, and prior to the Restructuring, to FWH, to:

Copper 380T LLC or FEI Women’s Health, LLC

c/o
Tinicum Capital Partners, L.P.
800 Third Avenue
New York, New York 10022
Attn: Robert J. Kelly
Telecopy: (212) 750-9358

Craig Capital Corporation
25 Perryridge Road,
Greenwich, CT 06830
Attention: Charles S. Craig
Telecopy: (203) 869-8594

               If to any Sellers to the address set forth below such Seller’s name on Exhibit A attached hereto.

with copies, in the case of notice to the Company or any Sellers, to:

Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attn: Richard J. Grossman, Esq.
Telecopy: (917) 777-2116

     SECTION 10.3 Interpretation.

             (a) When a reference is made to an Article, Section or Schedule, such reference shall be to an Article, Section or Schedule of or to this Agreement unless otherwise indicated. The definitions in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The “Knowledge of the Company” shall mean the actual knowledge of the individuals set forth in Section 10.3 of the Company Disclosure Schedule. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or

55

burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

          (b) Notwithstanding anything to the contrary herein, the Sellers and the Company shall be liable to the Buyer and the Buyer shall be entitled to claim that any representation or warranty of the Company or the Sellers has been breached on account of (i) any fact, matter or circumstance which the Buyer was aware of on or before the date hereof or (ii) any fact, matter or circumstance which the Buyer becomes aware of between the date of this Agreement and the Closing Date.

     SECTION 10.4 Amendments, Modification and Waiver.

          (a) This Agreement, and the terms and provisions hereof, may not bemodified, waived or amended except by an instrument or instruments in writing signedby the party against whom enforcement of any such modification or amendment is sought(or, in the case of a waiver, by the intended beneficiary of the waived term or provision);provided, however, that the Sellers hereby agree that an amendment, waiver ormodification may be enforced against all Sellers if the Sellers’ Representatives has signedsuch amendment, waiver or modification and such amendment, waiver or modificationaffects all Sellers in the same manner.

          (b) No failure or delay by any party in exercising any right, power orprivilege hereunder shall operate as a waiver thereof nor shall any single or partialexercise thereof preclude any other or further exercise thereof or the exercise of any otherright, power or privilege. The rights and remedies herein provided shall be cumulativeand not exclusive of any rights or remedies provided by law.

     SECTION 10.5 Expenses. Except as otherwise provided herein, each party shall pay its own costs and expenses incurred in connection with this Agreement. Notwithstanding the foregoing, Buyer shall be responsible for paying all fees, costs and expenses relating to filings under the HSR Act or any other competition or antitrust law in relevant jurisdictions. The Buyer and the Equityholders (including the Sellers’ Representatives) agree and acknowledge that the Sellers’ Representatives shall, to the extent not previously paid by the Company, direct the Buyer to pay a portion of the Purchase Price at Closing to certain third parties (e.g., the Company’s counsel, financial advisor (including the fees payable to Lehman Brothers and Skadden, Arps, Slate, Meagher & Flom LLP), accountant, etc.) for purposes of paying the costs and expenses incurred by the Company in connection with this Agreement and the sale process conducted by Lehman Brothers; any fees not so paid shall be accrued as a liability on the Working Capital included in the Closing Statement.

     SECTION 10.6 Sellers’ Representatives. Each Seller, EAR holder and UAR holder hereby authorizes, directs and appoints Tinicum and Craig Capital, acting in concert, to act as sole and exclusive agent, attorney-in-fact and representative (the “Sellers’Representatives”) and authorizes and directs the Sellers’ Representatives to (i) take any and all actions (including, without limitation, making representations and warranties, executing and delivering any documents, incurring any costs and expenses on

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behalf of the Sellers, EAR holders and UAR holders, and making any and all determinations, including, without limitation, determinations with respect to the Working Capital adjustment) which may be required or permitted by this Agreement to be taken by the Sellers, EAR holders and UAR holders; (ii) exercise such other rights, power and authority, as are authorized, delegated and granted to the Sellers’ Representatives pursuant to this Agreement; (iii) exercise such rights, power and authority as are incidental to the foregoing; and (iv) enter into Contribution Agreements (as defined in Section 5.10 hereof) and exercise such rights, power and authority as are authorized, delegated and granted to the Sellers’ Representatives pursuant to the Contribution Agreements. Any such actions taken, exercises of rights, power or authority, and any decision or determination made by the Sellers’ Representatives consistent therewith, shall be absolutely and irrevocably binding on each Seller, EAR holder and UAR holder as if such Persons personally had taken such action, exercised such rights, power or authority or made such decision or determination in such Seller’s capacity. Each Seller, EAR holder and UAR holder hereby releases and forever discharges Sellers’ Representatives of (i) any liability resulting from any and all actions of the Sellers’ Representatives, other than liability resulting from Sellers’ Representatives willful misconduct, and (ii) any other obligations of whatever kind, known or unknown, arising from or related to actions taken by Sellers’ Representatives on behalf of such Seller, EAR holder or UAR holder pursuant to this Agreement. Notwithstanding anything to the contrary in this Section 10.6, nothing in this Section 10.6 shall obligate Tinicum or Craig Capital to act, collectively or individually, as sole and exclusive agent, attorney-in-fact and representative on behalf of the Sellers, EAR and UAR holders. In the event that Tinicum or Craig Capital chooses not to act as Sellers’ Representatives as to any issue relating to the transactions contemplated by this Agreement, Tinicum or Craig Capital shall provide written notice to all Sellers, and each other, of such decision. Tinicum’s or Craig Capital’s decision to refrain from acting as Sellers’ Representatives as to any issue shall in no way affect its authority to act as Sellers’ Representatives as to any other matter within the grant of authority set forth in this Section 10.6 Each Seller, EAR holder and UAR holder shall be responsible for his, her and its share of the Sellers’ Representatives’ expenses in its capacity as such. Buyer may assume and treat every notice, payment or any other action direct to the Sellers’ Representatives as if such notice, payment or other action had been directed to each Seller, EAR holder and UAR holder.

     SECTION 10.7 Successors and Assigns; Binding Effect. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, directly or indirectly, including, without limitation, by operation of law, by any party hereto without the prior written consent of the other parties hereto; provided that Buyer may assign this Agreement and its rights and obligations hereunder (a) prior to the Closing to any Affiliate of Buyer (provided that no such assignment shall relieve Buyer from its obligations hereunder) and (b) following the Closing to any Person or Persons without the consent of the other parties hereto (provided that no such assignment shall relieve Buyer from its obligations hereunder); provided that, prior to Closing, in no event shall Buyer be permitted to assign this Agreement and its rights and obligations hereunder if such assignment would violate or jeopardize any consent to this transaction obtained by the Population Council or the terms of any guarantee given by Barr, Buyer or any other entity regarding the Population Council Agreement. Subject to the preceding

57

sentence and notwithstanding anything to the contrary, this Agreement and all of the provisions hereof shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

     SECTION 10.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (regardless of the laws that might otherwise govern under applicable principles of choice of laws or conflicts of laws of the State of Delaware or any other jurisdiction) as to all matters, including, but not limited to, matters of validity, construction, effect, performance and remedies.

     SECTION 10.9 Jurisdiction: Forum.

          (a) By the execution and delivery of this Agreement, the Buyer, theSellers, the Company and, prior to the Restructuring, FWH submit to the personaljurisdiction of any state or federal court in the State of Delaware in any suit or proceedingarising out of or relating to this Agreement.

          (b) The parties hereto agree that the appropriate and exclusive forumfor any disputes between any of the parties hereto arising out of this Agreement or thetransactions contemplated hereby shall be in any state or federal court in the State ofDelaware. The parties hereto further agree that the parties will not bring suit with respectto any disputes arising out of this Agreement or the transactions contemplated hereby inany court or jurisdiction other than the above specified courts; provided, however, thatthe foregoing shall not limit the rights of the parties to obtain execution of judgment inany other jurisdiction. The parties hereto further agree, to the extent permitted by law,that final and unappealable judgment against a party in any action or proceedingcontemplated above shall be conclusive and may be enforced in any other jurisdictionwithin or outside the United States by suit on the judgment, a certified or exemplifiedcopy of which shall be conclusive evidence of the fact and amount of such judgment.

     SECTION 10.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provision of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein is not affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner.

     SECTION 10.11 Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended or shall be construed to create any third party beneficiaries, except for the provisions of Section 5.3 hereof which may be enforced by the beneficiaries thereof.

     SECTION 10.12 Schedules.

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          (a) Disclosure of any fact or item in any section of the CompanyDisclosure Schedule, the Sellers Disclosure Schedule or the Buyer Disclosure Schedulehereto referenced by a particular paragraph or section in this Agreement shall, should theexistence of the fact or item or its contents be readily apparent to be relevant to any otherparagraph or section, be deemed to be disclosed with respect to that other paragraph orsection whether or not an explicit cross-reference appears.

          (b) Certain of the representations and warranties set forth in thisAgreement contemplate that there will be included in the Company Disclosure Schedule,the Sellers Disclosure Schedule or the Buyer Disclosure Schedule information that mightbe “material” or have a “material adverse effect.” The Company, Sellers or Buyer may,at their option, include in such schedules items that are not material or are not likely tohave a material adverse effect, and, in order to avoid any misunderstanding, any suchinclusion shall not be deemed to be an acknowledgment or representation that such itemsare material or would have a material effect, to establish any standard of materiality ormaterial adverse effect, or to define further the meaning of such terms for purposes of thisAgreement.

     SECTION 10.13 Entire Agreement. This Agreement and the Confidentiality Agreement, including any exhibits or schedules to this Agreement or the Confidentiality Agreement, constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all other prior agreements or understandings, both written and oral, between the parties or any of them with respect to the subject matter hereof. The only representations and warranties made by the parties hereto with respect to the subject matter hereof are the representations and warranties contained in or made pursuant to this Agreement.

     SECTION 10.14 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be deemed an original, with the same effect as if the signatures were upon the same instrument.

     SECTION 10.15 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date and year first above written.

COPPER 380T, LLC
By:	/s/ C.S CRAIG Name: C.S. Craig
	Title:  CO-CHAIRMAN
FEI WOMEN’S HEALTH. L.L.C
By:	/s/ C.S CRAIG Name: C.S. Craig
	Title:  CO-CHAIRMAN

DURAMED PHARMACEUTICALS, INC.
By:	/s/ Paul M. Bismo Name: Paul M. Bismo
	Title: President

SELLERS:
TINICUM CAPITAL PARTNERS, LP
By:	/s/ ROBERT J. KELLY Name: Robert J. Kelly
	Title: Co-Chairman
TINICUM CAPITAL PARTNERS PARALLEL FUND, LP
By:	/s/ ROBERT J. KELLY Name: Robert J. Kelly
	Title: Co-Chairman
TINICUM CAPITAL PARTNERS EXECUTIVE FUND I, LLC
By:	/s/ ROBERT J. KELLY
	Name: Robert J. Kelly
	Title: Co-Chairman

CHARLES S. CRAIGROLLOVER IRA
By:	/s/ C.S. CRAIG
	Name: C.S. Craig
	Title: Trustee
CHARLES S. CRAIG SEP IRA
By:	/s/ C.S. CRAIG
	Name: C.S. Craig
	Title: Trustee
C.S. CRAIG FAMILY LIMITED PARTNERSHIP CRAIG FAMILY HOLDINGS LLC AS GENERAL PARTNER
By:	/s/ C.S. CRAIG
	Name: C.S. Craig
	Title: MANAGER
C.S. CRAIG FAMILY FOUNDATION
By:	/s/ C.S. CRAIG
	Name: C.S. Craig
	Title: CHAIRMAN

CHARLES S. CRAIG SEP IRA
By:
	Name: Title:
C.S. CRAIG FAMILY LIMITED PARTNERSHIP
By:
	Name:
	Title:
C.S. CRAIG FAMILY FOUNDATION
By:
	Name:
	Title:
11/24/87 TRUST FBO KERWELYN C. CRAIG
By:	/s/ Cynthia C. Harwood
	Name:	Cynthia C. Harwood
	Title:	Trustee
12/17/86 TRUST FBO NEDENIA H. CRAIG
By:	/s/ Cynthia C. Harwood
	Name:	Cynthia C. Harwood
	Title:	Trustee
CCC INVESTMENT PARTNERS I, LP
By:
	Name:
	Title:
TANTALLON INVESTORS, LLC
By:
	Name:
	Title:

CHARLES S. CRAIG SEP IRA
By:
	Name: Title:
C.S. CRAIG FAMILY LIMITED PARTNERSHIP
By:
	Name:
	Title:
C.S. CRAIG FAMILY FOUNDATION
By:
	Name:
	Title:
11/24/87 TRUST FBO KERWELYN C. CRAIG
By:	/s/ Paul L. Maddock, Jr.
	Name:	Paul L. Maddock. Jr.
	Title:	Trustee
12/17/86 TRUST FBO NEDENIA H. CRAIG
By:	/s/ Paul L. Maddock, Jr.
	Name:	Paul L. Maddock, Jr.
	Title:	Trustee
CCC INVESTMENT PARTNERS I, LP
By:
	Name:
	Title:
TANTALLON INVESTORS, LLC
By:
	Name:
	Title:

11/24/87 TRUST FBO KERWELYN C. CRAIG
By:
	Name:
	Title:
By:
	Name:
	Title:
12/17/86 TRUST FBO NEDENIA H. CRAIG
By:
	Name:
	Title:
By:
	Name:
	Title:
CCC INVESTMENT PARTNERS I, LP CRAIG CAPITAL CORPORATION AS GENERAL PARTNER
By:	/s/ C.S CRAIG
	Name: C.S. Craig
	Title: CHAIRMAN
CCC INVESTMENT PARTNERS II, LP CRAIG CAPITAL CORPORATION AS GENERAL PARTNER
By:	/s/ C.S CRAIG
	Name: C.S. Craig
	Title: CHAIRMAN
TANTALLON INVESTORS, LLC
By:
	Name:
	Title:

CHARLES S. CRAIG SEP IRA
By:
	Name:
	Title:
C.S, CRAIG FAMILY LIMITED PARTNERSHIP
By:
	Name:
	Title:
C.S. CRAIG FAMILY FOUNDATION
By:
	Name:
	Title:
11/24/87 TRUST FBO KERWELYN C. CRAIG
By:
	Name:
	Title:
12/17/86 TRUST FBO NEDENIA H. CRAIG
By:
	Name:
	Title:
CCC INVESTMENT PARTNERS I, LP
By:
	Name:
	Title:
TANTALLON INVESTORS, LLC
By:	/s/ [DAVID D. COLBUAN]
	Name: DAVID D. COLBUAN
	Title: MANAGER

ABN AMRO	CCC PRIVATE EQUITY INVESTMENTS, INC.
	By:	/s/ Kent A. Hammerstrom
		Name: Kent A. Hammerstrom
		Title:    Vice President

/s/ Michael G. Manasse

Michael G. Manasse

/s/ Alfred C. Zedlitz, III

Alfred C. Zedlitz, III

/s/ Stanley M. Rumbough

Stanley M. Rumbough

SELLERS and UAR Holders:

/s/ Cynthia Ambres

Cynthia Ambres

/s/ Brian Geiger

Brian Geiger

/s/ Jennifer M. Gates

Jennifer M. Gates

/s/ Bruce M. Bronnenkant

Bruce M. Bronnenkant

SELLERS and EAR Holders

/s/ Frederick Studier

Frederick Studier

/s/ James Bloom

James Bloom

EAR Holders

/s/ Scott Coleridge

Scott Coleridge

/s/ Laura MacIssac

Laura MacIssac

/s/ Colleen McKenna

Colleen McKenna

/s/ Dixie Newman

Dixie Newman

UAR Holders

/s/ Marc McDermott

Marc McDermott

/s/ Tom Mehs

Tom Mehs

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF BRUCE L. DOWNEY PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bruce L. Downey, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 quarterly report;
4.	The registrant’s other certifying officer 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 Rule 13a15(f) and 15(d)-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 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 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer 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 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.

Date: February 8, 2006

/s/ Bruce L. Downey

Bruce L. Downey

Chairman of the Board and Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

CERTIFICATION OF WILLIAM T. MCKEE PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a), AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William T. McKee, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Barr Pharmaceuticals, Inc.;
2.	Based on my knowledge, this 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 report;
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 quarterly report;
4.	The registrant’s other certifying officer 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 Rule 13a15(f) and 15(d)-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 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 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer 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 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.

Date: February 8, 2006

/s/ William T. McKee

William T. McKee

Vice President, Chief Financial Officer, and Treasurer

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EX-32

EXHIBIT 32.0

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his capacity as an officer of Barr Pharmaceuticals, Inc. (the “Company”), for the purposes of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Quarterly Report of the Company on Form 10-Q for the period ended December 31, 2005 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.

Dated: February 8, 2006

/s/Bruce L. Downey Bruce L. Downey

Chairman of the Board and Chief Executive Officer

/s/William T. McKee William T. McKee

Vice President, Chief Financial Officer, and Treasurer

A signed original of this written statement required by Section 906 has been provided to Barr Pharmaceuticals, Inc. and will be retained by Barr Pharmaceuticals, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

34