<SUBMISSION>
<ACCESSION-NUMBER>0001047469-05-023072
<TYPE>DEFM14A
<PUBLIC-DOCUMENT-COUNT>2
<FILING-DATE>20050919
<DATE-OF-FILING-DATE-CHANGE>20050919
<EFFECTIVENESS-DATE>20050919
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>AEROGEN INC
<CIK>0001039160
<ASSIGNED-SIC>3841
<IRS-NUMBER>330488580
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEFM14A
<ACT>34
<FILE-NUMBER>000-31913
<FILM-NUMBER>051090593
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>2071 STIERLIN COURT
<CITY>MOUNTAIN VIEW
<STATE>CA
<ZIP>94043
<PHONE>650 864-7300
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>2071 STIERLIN COURT
<CITY>MOUNTAIN VIEW
<STATE>CA
<ZIP>94043
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEFM14A
<SEQUENCE>1
<FILENAME>a2163034zdefm14a.htm
<DESCRIPTION>DEFM14A
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05PAL1423_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="CENTER"><FONT SIZE=2><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B> SCHEDULE 14A INFORMATION</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Proxy
Statement Pursuant to Section&nbsp;14(a) of<BR>
the Securities Exchange Act of 1934<BR>
(Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) </FONT></P>




<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Filed by the Registrant <FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><FONT SIZE=2>Filed by a Party other than the Registrant <FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Check the appropriate box:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><BR><FONT SIZE=2><B>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Additional Materials</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Soliciting Material Pursuant to &sect;240.14a-12<BR></FONT>
</TD>
</TR>
</TABLE>

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<TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>AEROGEN,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Registrant as Specified In Its Charter)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Payment of Filing Fee (Check the appropriate box):</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
No fee required.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Title of each class of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common Stock, par value $0.001 per share, of Aerogen, Inc.</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Aggregate number of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,417,246 shares of Common Stock, which includes the anticipated issuance of 80,000 shares of Common Stock pursuant to the Aerogen 2000 Employee Stock Purchase Plan prior to the closing of the
transaction.</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The filing fee was determined based upon the sum of (A) 8,417,246 shares of Common Stock multiplied by $0.75 per share and (B) 887,061 shares of Series A-1 Preferred Stock multiplied by $29.0251. In
accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee was determined by multiplying $0.0001177 by the sum of the preceding sentence.</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Proposed maximum aggregate value of transaction:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$32,059,968.73</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Total fee paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$3,773.46</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2><BR>
Amount Previously Paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Form, Schedule or Registration Statement No.:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Filing Party:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Date Filed:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><BR><FONT SIZE=2><B>Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.</B></FONT></TD>
</TR>
</TABLE>

<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=13454,FOLIO='blank',FILE='DISK129:[05PAL3.05PAL1423]BA1423A.;11',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER">


<FONT SIZE=2><B>Aerogen,&nbsp;Inc.<BR>
2071 Stierlin Court, Suite 100<BR>
Mountain View, California 94043<BR>
(650)&nbsp;864-7300

  </B></FONT>

</P>

<P><FONT SIZE=2>Dear
Stockholder: </FONT></P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We invite you to attend a special meeting of stockholders of Aerogen,&nbsp;Inc. ("Aerogen") to be held at Aerogen's offices at 2071 Stierlin Court, Suite 100, Mountain View, California
94043, at 10:00&nbsp;a.m., local time, on October&nbsp;19, 2005 (the "Special Meeting"). Holders of record of Aerogen common stock and preferred stock at the close of business on
September&nbsp;16, 2005 will be entitled to vote at the Special Meeting or any adjournment or postponement of the Special Meeting.

 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Special Meeting, we will ask you to adopt the Agreement and Plan of Merger, dated as of August&nbsp;12, 2005, among Nektar Therapeutics. ("Nektar"), Oski Acquisition
Corporation, an indirect wholly-owned subsidiary of Nektar, and Aerogen (the "Merger Agreement"). As a result of the merger contemplated by the Merger Agreement (the "Merger"), Aerogen will become an
indirect wholly-owned subsidiary of Nektar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will also ask you to approve an amendment to Aerogen's Certificate of Designations, Preferences and Rights of the Series&nbsp;A-1 Preferred Stock, which will be effected
by filing with the Secretary of State of the State of Delaware a Certificate of Amendment to such Certificate of Designations (the "Certificate of Amendment") as contemplated by the Merger Agreement
prior to completing the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
we are asking you to expressly grant the authority to vote your shares to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies if there are
not sufficient votes at the time of the Special Meeting to adopt the Merger Agreement and/or approve the Certificate of Amendment. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Merger is completed, you will be entitled to receive $0.75 in cash, without interest, for each share of Aerogen common stock that you own, $29.0251 in cash, without interest, for
each share of Aerogen Series&nbsp;A-1 Preferred Stock you own, and you will have no ongoing ownership interest in the continuing business of Aerogen. We cannot complete the Merger unless
all of the conditions to closing are satisfied, including the adoption of the Merger Agreement and the approval of the Certificate of Amendment by the holders of a majority of the total combined
voting power of Aerogen common stock and Series&nbsp;A-1 Preferred Stock, with each share of
Series&nbsp;A-1 Preferred Stock entitled to ten votes and each share of common stock entitled to one vote, and the holders of a majority of the outstanding shares of
Series&nbsp;A-1 Preferred Stock, including Xmark Fund, L.P. and Xmark Fund, Ltd. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors has determined that the Merger, the Merger Agreement and the Certificate of Amendment are in the best interests of Aerogen and its stockholders, approved the
Merger, the Merger Agreement and the Certificate of Amendment and declared the Merger to be advisable. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"<BR>
THE ADOPTION OF THE MERGER AGREEMENT AND "FOR"<BR>
THE APPROVAL OF THE CERTIFICATE OF AMENDMENT.<BR>
YOUR VOTE IS IMPORTANT.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the materials accompanying this letter, you will find a Notice of Special Meeting of Stockholders, a proxy statement relating to the actions to be taken by our
stockholders at the Special Meeting and a proxy card. The proxy statement includes important information about the proposed Merger. We encourage you to read the entire proxy statement carefully. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of our stockholders are cordially invited to attend the Special Meeting in person. Whether or not you plan to attend the Special Meeting, however, please complete, sign, date and
return your proxy card in the enclosed envelope. It is important that your shares be represented and voted at the Special Meeting. If you attend the Special Meeting, you may vote in person as you
wish, even though you have previously returned your proxy card. </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=2,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=769420,FOLIO='blank',FILE='DISK129:[05PAL3.05PAL1423]BC1423A.;7',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
behalf of our board of directors, I thank you for your support and urge you to vote both "FOR" the adoption of the Merger Agreement and "FOR" the approval of the Certificate of
Amendment. </FONT></P>

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<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Sincerely,</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="50%"><BR><FONT SIZE=2><B>
<IMG SRC="g957429.jpg" ALT="SIGNATURE" WIDTH="151" HEIGHT="75">
 </B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Robert S. Breuil<BR></FONT> <FONT SIZE=2><I>Secretary</I></FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>


September&nbsp;19, 2005

 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=3,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=192573,FOLIO='blank',FILE='DISK129:[05PAL3.05PAL1423]BC1423A.;7',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<!-- TOC_END -->
<P ALIGN="CENTER">


<FONT SIZE=2><B>Aerogen,&nbsp;Inc.<BR>
2071 Stierlin Court, Suite 100<BR>
Mountain View, California 94043<BR>
(650)&nbsp;864-7300

 </B></FONT>

</P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="be1423_notice_of_special_meeting_of_s__not02470"> </A>
<A NAME="toc_be1423_1"> </A>
<BR>

  </FONT>

<FONT SIZE=2><B>NOTICE OF SPECIAL MEETING OF STOCKHOLDERS<BR>  TO BE HELD ON OCTOBER&nbsp;19, 2005</B></FONT><FONT SIZE=2>

    <BR></FONT>

</P>

<P><FONT SIZE=2>Dear
Stockholder: </FONT></P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cordially invited to attend the Special Meeting of Stockholders of Aerogen,&nbsp;Inc., a Delaware corporation ("Aerogen"), that will be held at Aerogen's offices at 2071
Stierlin Court, Suite 100, Mountain View, California 94043, at 10:00&nbsp;a.m., local time, on October&nbsp;19, 2005 (the "Special Meeting"), for the following purposes:

 </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>To
consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of August&nbsp;12, 2005, among Nektar Therapeutics. ("Nektar"), Oski Acquisition Corporation,
an indirect wholly-owned subsidiary of Nektar ("Merger Sub"), and Aerogen (the "Merger Agreement");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>To
vote upon a proposal to amend Aerogen's Certificate of Designations, Preferences and Rights of the Series A-1 Preferred Stock by filing with the Secretary of State of
Delaware a Certificate of Amendment to such Certificate of Designations (the "Certificate of Amendment");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>To
vote to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of adoption of the Merger Agreement and/or in favor of approval
of the Certificate of Amendment; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>4.</FONT></DT><DD><FONT SIZE=2>To
transact such other business that may properly come before the Special Meeting or any postponement or adjournment of the meeting. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors has determined that the merger contemplated by the Merger Agreement, (the "Merger") and the Certificate of Amendment are in the best interests of Aerogen and its
stockholders and declared the Merger to be advisable and recommends that you vote both to adopt the Merger Agreement and to approve the Certificate of Amendment. These items of business to be
submitted to a vote of the stockholders at the Special Meeting are more fully described in the attached proxy statement, which we urge you to read carefully. Our board of directors also recommends
that you expressly grant the authority to vote your shares to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the
Special Meeting both to adopt the Merger Agreement and to approve the Certificate of Amendment. We are not aware of any other business to come before the Special Meeting. </FONT></P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders of record at the close of business on September&nbsp;16, 2005 are entitled to notice of and to vote at the Special Meeting and any adjournment or postponement of the
meeting. All stockholders are cordially invited to attend the Special Meeting in person. Adoption of the Merger Agreement and approval of the Certificate of Amendment will require the affirmative
votes by holders of a majority of the total combined voting power of Aerogen common stock and Series&nbsp;A-1 Preferred Stock, with the holder of each share of
Series&nbsp;A-1 Preferred Stock entitled to ten votes and the holder of each share of common stock entitled to one vote. These items will also require the affirmative vote of a majority
of the outstanding shares of Series&nbsp;A-1 Preferred Stock, including Xmark Fund, L.P. and Xmark Fund,&nbsp;Ltd.

 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aerogen
stockholders will have the right to demand appraisal of their shares of stock and obtain payment in cash for the fair value of their shares of stock, but only if they submit a
written demand for an appraisal before the vote is taken on the Merger Agreement and comply with the applicable provisions of Delaware law. A copy of the Delaware statutory provisions relating to
appraisal rights is </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>included
as Annex C to the attached proxy statement, and a summary of these provisions can be found under "The Merger&#151;Appraisal Rights" in the attached proxy statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should not send any certificates representing shares of Aerogen stock with your proxy card. Upon closing of the Merger, you will be sent instructions regarding the procedure to
exchange your stock certificates for the cash merger consideration. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="be1423_the_board_of_directors_recomme__the06749"> </A>
<A NAME="toc_be1423_2"> </A>
<BR></FONT><FONT SIZE=2><B>THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND "FOR" THE APPROVAL OF THE CERTIFICATE OF AMENDMENT.<BR>  YOUR VOTE IS IMPORTANT.    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if you plan to attend the Special Meeting in person, we request that you complete, sign, date and return the enclosed proxy card to ensure that your shares
will be represented at the Special Meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote in
favor of both adoption of the Merger Agreement and the approval of the Certificate of Amendment. If you fail to return your proxy card, your shares will not be counted for purposes of determining
whether a quorum is present at the Special Meeting and will have the same effect as a vote against both adoption of the Merger Agreement and approval of the Certificate of Amendment. If you do attend
the Special Meeting and wish to vote in person, you may withdraw your proxy by voting in person. If your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy,
executed in your favor, from the holder of record to be able to vote in person at the Special Meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
person has been authorized to give any information or to make any representations other than those set forth in the proxy statement in connection with the solicitation of proxies made
hereby, and, if given or made, such information must not be relied upon as having been authorized by Aerogen or any other person. </FONT></P>

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<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>By Order of the Board of Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="50%"><BR><FONT SIZE=2><B>
<IMG SRC="g957429.jpg" ALT="SIGNATURE" WIDTH="151" HEIGHT="75">
 </B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Robert S. Breuil<BR></FONT> <FONT SIZE=2><I>Secretary</I></FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mountain
View, California </FONT></P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The proxy statement is dated September&nbsp;19, 2005, and is first being mailed to stockholders of Aerogen on or about September&nbsp;19, 2005.

 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Neither the United States Securities and Exchange Commission nor any state securities regulator has approved or disapproved the matters described in the proxy
statement or determined if the proxy statement is adequate or accurate. Any representation to the contrary is a criminal offense.</B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>    </B></FONT></P>




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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>SUMMARY</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Aerogen, Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Nektar Therapeutics and Oski Acquisition Corporation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>The Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Merger Consideration</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Effect on Stock Options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Effect on Aerogen Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Market Price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Reasons for the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Opinion of Financial Advisor</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Recommendation to Aerogen Stockholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Voting Agreements and Waiver and Consent</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Interests of Our Directors and Executive Officers in the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Appraisal Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Material United States Federal Income Tax Consequences</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>The Special Meeting of Aerogen Stockholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>The Merger Agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>The Certificate of Amendment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
QUESTIONS AND ANSWERS ABOUT THE MERGER</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
RISK FACTORS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
CAUTION REGARDING FORWARD-LOOKING STATEMENTS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
THE COMPANIES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Aerogen, Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Nektar Therapeutics</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Oski Acquisition Corporation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
THE SPECIAL MEETING</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Date, Time and Place</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Purpose of the Special Meeting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Record Date; Stock Entitled to Vote; Quorum</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Vote Required</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Voting of Proxies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Revocability of Proxies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Solicitation of Proxies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Delivery of this Proxy Statement to Multiple Stockholders with the Same Address</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
THE MERGER</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
13</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Background of the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Reasons for the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Opinion of the Financial Advisor</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Recommendation of the Board of Directors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Voting Agreements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Waiver of Notice and Consent to Acquisition</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Interests of Our Directors and Executive Officers in the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Appraisal Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>28</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Delisting and Deregistration of Our Common Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Material United States Federal Income Tax Consequences of the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>30</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Regulatory Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>33</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>

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<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
THE MERGER AGREEMENT</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Merger Consideration</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Conversion of Shares; Procedures for Exchange of Certificates</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Effect on Aerogen Stock Options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Effect on Aerogen Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Effective Time of the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Representations and Warranties</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Covenants</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Conditions to the Merger</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>41</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Termination of the Merger Agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>44</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
THE CERTIFICATE OF AMENDMENT</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
46</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Dividend Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Liquidation Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Recommendation of the Board of Directors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
47</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
MARKET FOR THE COMMON STOCK; DIVIDEND DATA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
56</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
OTHER MATTERS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
57</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Adjournments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Stockholder Proposals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="91%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
</TR>
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ANNEX A</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2><BR>
AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST&nbsp;12, 2005 BY AND AMONG NEKTAR THERAPEUTICS, OSKI ACQUISITION CORPORATION AND AEROGEN,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=2><BR>
ANNEX B</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2><BR>
OPINION OF AQUILO PARTNERS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=2><BR>
ANNEX C</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2><BR>
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="14%"><FONT SIZE=2><BR>
ANNEX D</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2><BR>
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES&nbsp;A-1 PREFERRED STOCK OF AEROGEN,&nbsp;INC.</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>ii</FONT></P>

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<BR></FONT><FONT SIZE=2><B>SUMMARY    <BR>    </B></FONT></P>

<P>


<FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To fully understand
the merger contemplated by the Merger Agreement, dated as of August&nbsp;12, 2005, among Nektar, Merger Sub and Aerogen,&nbsp;Inc. (the "Merger") and for a more complete description of the legal
terms of the Merger Agreement, you should read carefully this entire proxy statement and the documents to which we refer. See "Where You Can Find More Information" (page&nbsp;57). We have included
page references in parentheses to direct you to a more complete description of the topics presented in this summary. The Merger Agreement is attached as Annex&nbsp;A to this proxy statement. We
encourage you to read the Merger Agreement as it is the legal document that governs the Merger.

 </FONT>

</P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aerogen,&nbsp;Inc. (page&nbsp;9).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We are a specialty pharmaceutical company focusing on respiratory therapy in the acute
care setting. Our core technology is our proprietary OnQ&#153; Aerosol Generator. Using our technology, we are developing respiratory products for marketing by us, and products in collaboration
with, and for marketing by, pharmaceutical and biotechnology companies for both respiratory therapy and for the delivery of drugs through the lungs to the bloodstream. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar Therapeutics and Oski Acquisition Corporation (page&nbsp;9).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Nektar is in the business of improving therapeutics
through improved drug delivery. Nektar currently has three technology platforms each with the ability to transform therapeutics with differentiating properties based on the technology and the
particular application of the technology. Nektar's strategy is to enable Nektar's partners' drugs through partner-funded programs, and to selectively fund internal proprietary products. Oski
Acquisition Corporation, or Merger Sub, is an indirect wholly-owned subsidiary of Nektar and has not engaged in any business activity other than in connection with the Merger. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger (page&nbsp;13).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under the Merger Agreement, Merger Sub will merge with and into Aerogen. After the Merger,
another subsidiary of Nektar will own all of our outstanding stock. Our stockholders will receive cash in the Merger in exchange for their shares of Aerogen common stock and
Series&nbsp;A-1 Preferred Stock. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Merger Consideration (page&nbsp;34).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Merger is completed, you will receive $0.75 in cash, without interest and
subject to any applicable withholding taxes, in exchange for each share of Aerogen common stock that you own unless you dissent and seek appraisal of the fair value of your shares. Additionally, if
the Merger is completed, you will receive $29.0251 in cash, without interest and subject
to any applicable withholding taxes, in exchange for each share of Aerogen Series&nbsp;A-1 Preferred Stock that you own unless you dissent and seek appraisal of the fair value of your
shares. After the Merger is completed, you will have the right to receive the merger consideration, but you will no longer have any rights as an Aerogen stockholder. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect on Stock Options (page&nbsp;35).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each stock option to acquire Aerogen common stock outstanding at the effective time
of the Merger, whether or not then vested or exercisable, will become fully vested in accordance with the terms of our stock option plans and canceled. In consideration for cancellation, Aerogen will
pay to the holder of each such canceled stock option, as soon as practicable after the effective time of the Merger, a cash payment equal to the product of (1)&nbsp;the excess of $0.75 over the per
share exercise price of such stock option, if any, multiplied by (2)&nbsp;the aggregate number of shares of common stock then subject to such stock option, taking into account the vesting
acceleration provided for under the terms of our stock option plans. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effect on Aerogen Employee Stock Purchase Plan (page&nbsp;35).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our Employee Stock Purchase Plan will be terminated
immediately prior to the effective time of the Merger with the last day of the then current offering period being the last business day prior to the effective time of the Merger. Any purchase rights
outstanding at the time of termination of the purchase plan will be exercised on such </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<P><FONT SIZE=2>date,
and each share of Aerogen common stock acquired upon exercise of such purchase right will be converted in the Merger into the right to receive $0.75 in cash, without interest. </FONT></P>

<P>


<FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market Price (page&nbsp;56).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the Pink Sheets under the ticker symbol "AEGN.PK." On
August&nbsp;12, 2005, the last full trading day prior to the public announcement of the proposed Merger, Aerogen common stock closed at $0.30 per share. On September&nbsp;16, 2005, the last full
trading day prior to the date of this proxy statement, Aerogen common stock closed at $0.71 per share. Our stock price can fluctuate broadly even over short periods of time. It is impossible to
predict the actual price of our stock immediately prior to the effective time of the Merger.

</FONT>

</P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reasons for the Merger (page&nbsp;17).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the course of reaching its decision to approve the Merger and the Merger
Agreement and to recommend that you adopt the Merger Agreement and approve the Certificate of Amendment, the board of directors of Aerogen (the "Board") considered a number of factors in its
deliberations. Those factors are described below in this proxy statement. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Opinion of Financial Advisor (page&nbsp;18).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;12, 2005, Aquilo Partners,&nbsp;Inc., ("Aquilo Partners")
financial advisor to the Board, delivered its oral opinion, subsequently confirmed in writing, to the Board to the effect that, as of the date of its opinion and based upon and subject to the
qualifications, limitations and assumptions set forth therein, the merger consideration to be received by the holders of Aerogen common stock was fair, from a financial point of view, to the holders
of Aerogen common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
full text of the opinion, which sets forth the assumptions made, matters considered and limitations on the respective reviews undertaken by Aquilo Partners in connection with its
opinion, is attached as Annex&nbsp;B to this proxy statement. Aquilo Partners provided its opinion for the information and assistance of the Board in connection with its consideration of the Merger.
The opinion of Aquilo Partners is not a recommendation to any stockholder as to how such stockholder should vote or act with respect to any aspect of the Merger. We urge you to read the opinion
carefully and in its entirety. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recommendation to Aerogen Stockholders (page&nbsp;24).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board has determined that the Merger is in the best interests of
Aerogen and its stockholders and declared the Merger to be advisable. The Board recommends that you vote "FOR" both adoption of the Merger Agreement and approval of the Certificate of Amendment. </FONT></P>


<P>


<FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voting Agreements and Waiver and Consent (page&nbsp;25).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Concurrently with the execution of the Merger Agreement, Nektar
obtained voting agreements and irrevocable proxies to vote in favor of both the Merger and the Certificate of Amendment from one of our directors, two other senior executive officers of Aerogen and
certain Series&nbsp;A-1 investors, including Xmark Fund, L.P. and Xmark Fund,&nbsp;Ltd, collectively holding an aggregate of 709,755&nbsp;shares of our common stock, 488,654 shares
of our Series&nbsp;A-1 Preferred Stock (representing approximately 32.52% of the total combined voting power outstanding and approximately 55.1% of the Series&nbsp;A-1
Preferred Stock outstanding had the record date been August&nbsp;12, 2005), warrants to purchase 3,663,789 shares of our common stock and options to purchase 1,199,565 shares of our common stock. In
addition, we obtained a Waiver of Notice and Consent to Acquisition (the "Waiver and Consent") from certain Series&nbsp;A-1 investors holding 471,499 shares of
Series&nbsp;A-1 Preferred Stock, including Xmark Fund, L.P. and Xmark Fund,&nbsp;Ltd. The Waiver and Consent waived the rights of the holders of Series&nbsp;A-1 Preferred
Stock to prior notice of the Merger Agreement and consented to our entering the Merger Agreement with Nektar, as permitted by the Certificate of Designations.

 </FONT>

</P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interests of Our Directors and Executive Officers in the Merger (page&nbsp;26).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In considering the recommendation of the
Board in favor of the Merger, you should be aware that there are provisions of the Merger that will result in certain benefits to our directors and executive officers, including with respect to
continuation of certain indemnification and insurance arrangements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Appraisal Rights (page&nbsp;28).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If you do not wish to accept $0.75 per share of common stock and $29.0251 per share of
Series&nbsp;A-1 Preferred Stock cash consideration in the Merger, you have the right under Delaware law to have your shares appraised by the Delaware Chancery Court. This "right of
appraisal" is subject to a number of restrictions and technical requirements. Generally, in order to exercise appraisal rights, among other things, (1)&nbsp;you must NOT vote in favor of adoption of
the Merger Agreement, (2)&nbsp;you must make a written demand for appraisal in compliance with Delaware law
BEFORE the vote on adoption of the Merger Agreement and (3)&nbsp;you must hold shares of Aerogen common stock or Series&nbsp;A-1 Preferred Stock on the date of making the demand for
appraisal and continuously hold such shares through the effective time of the Merger. The fair value of your shares of Aerogen common stock or Series&nbsp;A-1 Preferred Stock as
determined in accordance with Delaware law may be more or less than, or the same as, the Merger consideration to be paid to non-dissenting stockholders in the Merger. Merely voting against
adoption of the Merger Agreement will not preserve your right of appraisal under Delaware law. Annex C to this proxy statement contains a copy of the Delaware statute relating to stockholders' right
of appraisal. Failure to follow all of the steps required by this statute will result in the loss of your appraisal rights. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Material United States Federal Income Tax Consequences (page&nbsp;30).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Merger will be taxable for U.S. federal income
tax purposes. This means that you will recognize taxable gain or loss equal to the difference between the cash you receive in the Merger and your adjusted tax basis in your shares. </FONT> <FONT SIZE=2><B><I>Tax matters can be complicated and the tax
consequences of the Merger to you will depend on the facts of your own situation. You should consult your own tax advisor to
understand fully the tax consequences of the Merger to you.</I></B></FONT></P>

<P><FONT SIZE=2><B>The Special Meeting of Aerogen Stockholders (page&nbsp;10).  </B></FONT></P>

<P>


<FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time, Date and Place.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Special Meeting will be held to consider and vote upon the proposal to adopt the Merger Agreement,
approve the Certificate of Amendment, and, if necessary, to vote to adjourn the Special Meeting for the purpose of soliciting additional proxies to vote in favor of adoption of the Merger Agreement
and/or approval of the Certificate of Amendment, at our offices at 2071 Stierlin Court, Suite 100, Mountain View, California 94043, at 10:00&nbsp;a.m., local time, on October&nbsp;19, 2005.

</FONT>

</P>

<P>


<FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record Date and Voting Power.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;You are entitled to vote at the Special Meeting if you owned shares of Aerogen stock at the
close of business on September&nbsp;16, 2005, the record date for the Special Meeting. You will have one vote at the Special Meeting for each share of Aerogen common stock you owned at the close of
business on the record date. Each holder of record of the Aerogen Series&nbsp;A-1 Preferred Stock (the "Series&nbsp;A-1 Preferred") on the record date will be entitled to
ten votes for each share of Series&nbsp;A-1 Preferred held. On the record date, there were 8,337,246 shares of common stock and 887,061 shares of Series&nbsp;A-1 Preferred
Stock outstanding and entitled to vote, for a total of 17,207,856 shares on an as-converted basis.

 </FONT>

</P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Procedure for Voting.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To vote, you can either complete, sign, date and return the enclosed proxy card, or attend the Special
Meeting and vote in person. If your shares are held in "street name" by your broker, bank or other nominee, you should instruct your broker to vote your shares by following the instructions provided
by your broker. Your broker will not vote your shares without instruction from
you. Failure to instruct your broker to vote your shares will have the same effect as a vote "against" both adoption of the Merger Agreement and approval of the Certificate of Amendment. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Required Vote.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The adoption of the Merger Agreement and the approval of the Certificate of Amendment each require the
affirmative vote of the holders of a majority of the total combined voting power of the Series&nbsp;A-1 Preferred Stock and common stock outstanding at the close of business on the
record date. The adoption of the Merger Agreement and the approval of the Certificate of Amendment also each require the affirmative vote of a majority of the shares of Series&nbsp;A-1
Preferred </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>Stock
outstanding on the record date, including Xmark Fund, L.P. and Xmark Fund,&nbsp;Ltd. The proposal to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies
to vote in favor of adoption of the Merger Agreement and/or approval of the Certificate of Amendment, requires the approval of a majority of the of the total combined voting power of the outstanding
Series&nbsp;A-1 Preferred Stock and common stock present, in person or by proxy, at the Special Meeting (excluding abstentions). </FONT></P>

<P><FONT SIZE=2><B>The Merger Agreement (page&nbsp;34).  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Limitation on Considering Other Takeover Proposals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have agreed not to solicit, initiate, knowingly facilitate, knowingly
encourage or knowingly induce any proposals that constitute or would reasonably be expected to lead to a takeover proposal while the Merger is pending, and not to enter into discussions or
negotiations with another party regarding a business combination or similar transaction while the Merger is pending, except under specified circumstances set forth in the Merger Agreement. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conditions to the Merger.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The obligations of both Nektar and Aerogen to complete the Merger are subject to the satisfaction
of specified conditions set forth in the Merger Agreement. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Termination of the Merger Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Nektar and Aerogen can terminate the Merger Agreement under specified circumstances set
forth in the Merger Agreement. </FONT></P>


<P><FONT SIZE=2><B>The Certificate of Amendment (page&nbsp;46).  </B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Suspension of Series&nbsp;A-1 Dividends.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Certificate of Amendment provides that dividends payable to the
holders of Series&nbsp;A-1 Preferred Stock, including the dividends for the quarters ended June&nbsp;30, 2005 and September&nbsp;30, 2005, shall not accrue or be payable so long as
the Merger Agreement is effective. Therefore, if the Certificate of Amendment is approved and the Merger closes as anticipated, no dividends would accrue or be paid on the
Series&nbsp;A-1 Preferred Stock for the quarter ended June&nbsp;30, 2005 or thereafter. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Waiver of Series&nbsp;A-1 Liquidation Preference.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Certificate of Amendment provides that the Merger shall
not constitute an event entitling the Series&nbsp;A-1 Preferred Stock to the $30 per share liquidation preference set forth in the Certificate of Designations or to participate beyond
that amount in distributions made to holders of Aerogen common stock. If the Certificate of Amendment is approved, and the Merger is consummated, the holders of Series&nbsp;A-1 Preferred
Stock will have rights only to the consideration specified in the Merger Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<BR></FONT><FONT SIZE=2><B>QUESTIONS AND ANSWERS ABOUT THE MERGER    <BR>    </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What will happen to Aerogen as a result of the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>If
the Merger is completed, we will become an indirect wholly-owned subsidiary of Nektar.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What will happen to my shares of Aerogen common stock after the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Upon
completion of the Merger, each outstanding share of Aerogen common stock will automatically be canceled and will be converted into the right to receive $0.75 in cash, without
interest, subject to any applicable withholding taxes.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What will happen to my shares of Aerogen Series&nbsp;A-1 Preferred Stock after the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Upon
completion of the Merger, each outstanding share of Aerogen Series&nbsp;A-1 Preferred Stock will automatically be canceled and will be converted into the right to
receive $29.0251 in cash, without interest, subject to any applicable withholding taxes.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Will I own any shares of Aerogen stock or Nektar stock after the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>No.
You will be paid cash for your shares of Aerogen common stock and Series&nbsp;A-1 Preferred Stock. Our stockholders will not have the option to receive Nektar stock
in exchange for their shares instead of cash.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What happens to Aerogen stock options in the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>All
stock options held by our then-current employees will vest in full upon completion of the Merger and each Aerogen stock option that is then outstanding will be
automatically converted into the right to receive an amount in cash equal to, for each share of common stock of Aerogen underlying such option, the excess (if any) of $0.75 over the exercise price per
share of such option, without interest and subject to any applicable withholding taxes.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Will the Merger be taxable to me?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
For U.S. federal income tax purposes, generally you will recognize a taxable gain or loss as a result of the Merger measured by the difference, if any, between the cash
consideration you receive for each share of common stock or Series&nbsp;A-1 Preferred Stock and your adjusted tax basis in that share. This gain or loss may be long-term
capital gain or loss if you have held your Aerogen shares as a capital asset more than one year as of the effective time of the Merger. You should read "The Merger&#151;Material U.S. Federal
Income Tax Consequences of the Merger" beginning on page&nbsp;30 for a more complete discussion of the federal income tax consequences of the Merger.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Why is the Certificate of Designations being amended?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2><B>Filing the Certificate of Amendment to the Certificate of Designations with the Secretary of State of Delaware is required to complete the
Merger.</B></FONT><FONT SIZE=2> The Certificate of Amendment changes certain of the rights of the Series&nbsp;A-1 Preferred Stock, including suspending dividend accrual by the
Series&nbsp;A-1 Preferred Stockholders while the Merger Agreement is effective and excluding the Merger from the definition of acquisitions for which the Series&nbsp;A-1
Preferred Stockholders have specified liquidation preference rights.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Does the Board recommend adoption of the Merger Agreement?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
The Board recommends that our stockholders adopt the Merger Agreement. The Board considered many factors in deciding to recommend the adoption of the Merger Agreement. These
factors are described below in this proxy statement. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Does the Board recommend approval of the Certificate of Amendment?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
The Board recommends that our stockholders approve the Certificate of Amendment. </FONT><FONT SIZE=2><B>Filing the Certificate of Amendment with the Secretary of State of
Delaware is necessary for the Merger to be completed.</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What vote of the stockholders is required to adopt the Merger agreement?</B></FONT><FONT SIZE=2>

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>To
adopt the Merger Agreement, stockholders of record as of September&nbsp;16, 2005 holding a majority of the total combined voting power of Aerogen common stock and
Series&nbsp;A-1 Preferred Stock, with a holder of each share of Series&nbsp;A-1 Preferred Stock entitled to ten votes and a holder of each share of common stock entitled to
one vote, must vote "for" the adoption of the Merger Agreement. In addition, a majority of the outstanding shares of Series&nbsp;A-1 Preferred Stock, including Xmark Fund, L.P. and Xmark
Fund,&nbsp;Ltd must vote "for" the adoption of the Merger Agreement. There are 17,207,856 votes held by holders of Aerogen common stock and Aerogen Series&nbsp;A-1 Preferred Stock
entitled to be voted at the Special Meeting. There are 887,061 shares of Aerogen Series&nbsp;A-1 Preferred Stock entitled to be voted at the Special Meeting. </FONT><FONT SIZE=2><B>In
addition, in order for the Merger to be completed, our stockholders must approve the Certificate of Amendment.</B></FONT><FONT SIZE=2>

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What vote of the stockholders is required to approve the Certificate of Amendment?</B></FONT><FONT SIZE=2>

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>To
approve the Certificate of Amendment, stockholders of record as of September&nbsp;16, 2005 holding a majority of the total combined voting power of Aerogen common stock and
Series&nbsp;A-1 Preferred Stock, with a holder of each share of Series&nbsp;A-1 Preferred Stock entitled to ten votes and a holder of each share of common stock entitled to
one vote, must vote "for" the approval of the Certificate of Amendment. In addition, a majority of the outstanding shares of Series&nbsp;A-1 Preferred Stock, including Xmark Fund, L.P.
and Xmark Fund,&nbsp;Ltd must vote "for" the approval of the Certificate of Amendment. There are 17,207,856 votes held by holders of Aerogen common stock and Aerogen Series&nbsp;A-1
Preferred Stock entitled to be voted at the Special Meeting. There are 887,061 shares of Aerogen Series&nbsp;A-1 Preferred Stock entitled to be voted at the Special Meeting.

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Am I entitled to appraisal rights with respect to the Merger?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
Under Delaware law, you have the right to seek appraisal of the fair value of your shares as determined by the Delaware Court of Chancery if the Merger is completed, but only if
you submit a written demand for an appraisal before the vote on the Merger Agreement, do not vote in favor of adopting the Merger Agreement and comply with the Delaware law procedures explained in
this proxy statement.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What do I need to do now?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>We
urge you to read this proxy statement carefully, including its annexes, and consider how the Merger affects you. Then mail your completed, dated and signed proxy card in the
enclosed return envelope as soon as possible so that your shares can be voted at the Special Meeting.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>What happens if I do not return a proxy card?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>The
failure to return your proxy card will have the same effect as voting against both adoption of the Merger Agreement and approval of the Certificate of Amendment.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>May I vote in person?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
You may vote in person at the meeting, rather than signing and returning your proxy card, if you own shares in your own name. However, we encourage you to return your signed proxy
card to ensure that your shares are voted. You may also vote in person at the Special Meeting if your </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<UL>

<P><FONT SIZE=2>shares
are held in "street name" through a broker or bank provided that you bring a legal proxy from your broker or bank and present it at the Special Meeting. You may also be asked to present photo
identification for admittance. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>May I change my vote after I have mailed my signed proxy card?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Yes.
You may change your vote at any time before the shares reflected on your proxy card are voted at the Special Meeting. You can do this in one of three ways. First, you can send a
written, dated notice to our corporate secretary stating that you would like to revoke your proxy. Second, you can complete, sign, date and submit a new proxy card. Third, you can attend the meeting
and vote in person. Your attendance alone will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow the directions received from your broker to change your
instructions.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>If my shares are held in "street name" by my broker, will my broker vote my shares for me?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Your
broker will </FONT><FONT SIZE=2><I>not </I></FONT><FONT SIZE=2>vote your shares without instructions from you. You should instruct your broker to vote your shares, following the
procedure provided by your broker. Without instructions, your shares will not be voted, which will have the same effect as voting against both adoption of the Merger Agreement and approval of the
Certificate of Amendment.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Should I send in my stock certificates now?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>No.
After the Merger is completed, you will receive written instructions for exchanging each of your shares of Aerogen common stock for the merger consideration of $0.75 in cash,
without interest, and each of your shares of Aerogen Series&nbsp;A-1 Preferred Stock for the merger consideration of $29.0251 in cash, without interest.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>When do you expect the Merger to be completed?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>We
are working toward completing the Merger as quickly as possible. In addition to obtaining stockholder approval for the Merger agreement and the Certificate of Amendment, all closing
conditions must be satisfied or waived. However, we cannot assure you that all conditions to the Merger will be satisfied or, if satisfied, the date by which they will be satisfied.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>When will I receive the cash consideration for my shares of Aerogen common stock?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>After
the Merger is completed, you will receive written instructions, including a letter of transmittal, that explain how to exchange your shares for the cash consideration paid in the
Merger. When you properly complete and return the required documentation described in the written instructions, you will promptly receive from the paying agent a payment of the cash consideration for
your shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>Q:</B></FONT></DT><DD><FONT SIZE=2><B>Who can help answer my questions?</B></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>If
you would like additional copies, without charge, of this proxy statement or if you have questions about the Merger, including the procedures for voting your shares, you should
contact us, as follows: </FONT></DD></DL>
<UL>
<UL>

<P><FONT SIZE=2>Aerogen,
Inc.<BR>
Investor Relations<BR>
2071 Stierlin Court<BR>
Suite 100<BR>
Mountain View, CA 94043<BR>
(650) 864-7300<BR>
investor<U>&nbsp;&nbsp;</U>relations@aerogen.com </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1423_risk_factors"> </A>
<A NAME="toc_di1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with Proposals 1 and 2, you should consider the following factors in conjunction with the other information included in this proxy statement, in
addition to the risk factors detailed in Aerogen's Quarterly Report on Form&nbsp;10-Q filed with the Securities and Exchange Commission on July&nbsp;27, 2005. </FONT></P>

<P><FONT SIZE=2><B><I>If the proposed Merger with Nektar is not completed, we may be unable to fund operations and continue as a going concern.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger is subject to certain closing conditions, including the approval of our stockholders and the filing of the Certificate of Amendment with the Secretary
of State of the State of Delaware. If the Merger were not to be completed, we may be unable to fund operations and continue as a going concern. Our business is not and has not been profitable. We
believe that our cash balance is insufficient to sustain operations through the first quarter of 2006. If the proposed Merger has not been completed by that time, we would be unable to continue as a
going concern without additional financing, which may not be available on acceptable terms, or at all. </FONT></P>

<P><FONT SIZE=2><B><I>The fact that there is a Merger pending could have an adverse effect on our business, revenue and results of operations.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the Merger is pending, it creates uncertainty about our future. As a result of this uncertainty, customers and other business partners may decide to delay,
defer, or cancel purchases of our products or other business with us pending completion of the Merger or termination of the Merger Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, while the Merger is pending, we are subject to a number of risks that may adversely affect our business, revenue and results of operations, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
diversion of management and employee attention and the unavoidable disruption to our relationships with customers and other partners may detract from our ability to grow
revenues and achieve our corporate objectives;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
have and will continue to incur significant expenses related to the Merger prior to its closing; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
may be unable to respond effectively to competitive pressures, industry developments and future opportunities. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1423_caution_regarding_forward-looking_statements"> </A>
<A NAME="toc_di1423_2"> </A>
<BR></FONT><FONT SIZE=2><B>CAUTION REGARDING FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The statements contained in this proxy statement relating to the closing of the Merger and other future events are forward-looking statements made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause actual results to differ materially, including risks
relating to receiving the affirmative vote of the holders of a majority of the total combined voting power of Aerogen common stock and Series&nbsp;A-1 Preferred Stock in favor of both
the Merger Agreement and the Certificate of Amendment and satisfying other conditions to the closing of the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a detailed discussion of these and other risk factors, please refer to our filings with the Securities and Exchange Commission (the "SEC"), on Forms 10-K,
10-Q and 8-K. You can obtain copies of our Forms 10-K, 10-Q and 8-K and other filings for free at the Investors section of our website at
www.aerogen.com, at the SEC website at www.sec.gov or from commercial document retrieval services. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1423_the_companies"> </A>
<A NAME="toc_di1423_3"> </A>
<BR></FONT><FONT SIZE=2><B>THE COMPANIES    <BR>    </B></FONT></P>


<P><FONT SIZE=2><B>Aerogen,&nbsp;Inc.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a specialty pharmaceutical company focusing on respiratory therapy in the acute care setting. Our core technology is our proprietary OnQ(&#153;)
Aerosol Generator. Using our technology, we are developing respiratory products for marketing by us, and products in collaboration with, and for marketing by, pharmaceutical and biotechnology
companies for both respiratory therapy and for the delivery of drugs through the lungs to the bloodstream. Our executive offices are located at 2071 Stierlin Court, Suite 100, Mountain View,
California 94043. Our telephone number is (650)&nbsp;864-7300. Our website is www.aerogen.com. Information contained on our website does not constitute a part of this proxy statement. </FONT></P>


<P><FONT SIZE=2><B>Nektar Therapeutics.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar is in the business of improving therapeutics through improved drug delivery. Nektar currently has three technology platforms each with the ability to
transform therapeutics with differentiating properties based on the technology and the particular application of the technology. Nektar's strategy is to enable Nektar's partners' drugs through
partner-funded programs, and to selectively fund internal proprietary products. Nektar's executive offices are located at 150 Industrial Road, San Carlos, California 94070. Nektar's phone number is
(650)&nbsp;631-3100. </FONT></P>

<P><FONT SIZE=2><B>Oski Acquisition Corporation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oski Acquisition Corporation, or Merger Sub, is an indirect wholly-owned subsidiary of Nektar and has not engaged in any business activity other than in
connection with the Merger. Merger Sub is incorporated under the laws of the state of Delaware. Merger Sub's executive offices are located at 150 Industrial Road, San Carlos, California 94070. Merger
Sub's telephone number is (650)&nbsp;631-3100. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
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<A NAME="toc_di1423_4"> </A>
<BR></FONT><FONT SIZE=2><B>THE SPECIAL MEETING    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are furnishing this proxy statement to you as part of the solicitation of proxies by the Board for use at the Special Meeting. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Date, Time and Place  </I></B></FONT></P>


</UL>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Special Meeting will be held at our offices at 2071 Stierlin Court, Suite 100, Mountain View, California 94043, at 10:00&nbsp;a.m., local time, on
October&nbsp;19, 2005.

 </FONT></P>


<UL>

<P><FONT SIZE=2><B><I> Purpose of the Special Meeting  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You will be asked at the Special Meeting to adopt the Merger Agreement and to approve the Certificate of Amendment. The Board has determined that the Merger is in
the best interests of Aerogen and its stockholders, declared the Merger to be advisable and recommended that our stockholders vote both to adopt the Merger Agreement and to approve the Certificate of
Amendment. If necessary, you will also be asked to vote on a proposal to adjourn the Special Meeting for the purpose of soliciting proxies to vote in favor of adoption of the Merger Agreement and/or
approving the Certificate of Amendment. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Record Date; Stock Entitled to Vote; Quorum  </I></B></FONT></P>


</UL>

<P><FONT SIZE=2>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only holders of record of Aerogen common stock and Series&nbsp;A-1 Preferred Stock at the close of business on September&nbsp;16, 2005, the record
date, are entitled to notice of and to vote at the Special Meeting. On the record date, 8,337,246 shares of Aerogen common stock were issued and outstanding and held by approximately 118 holders of
record. On the record date, 887,061 shares of





Aerogen Series&nbsp;A-1 Preferred Stock were issued and outstanding and held by approximately 21 holders of record. A quorum will be present at the Special Meeting if the holders of a
majority of the total combined outstanding voting power held by Aerogen common stock and Series&nbsp;A-1 Preferred Stock holders entitled to vote on the record date are represented in
person or by proxy. In the event that a quorum is not present at the Special Meeting, or there are not sufficient votes at the time of the Special Meeting to adopt the Merger Agreement and/or approve
the Certificate of Amendment, it is expected that the meeting will be adjourned or postponed to solicit additional proxies if the holders of a majority of the shares of our common stock and
Series&nbsp;A-1 Preferred Stock present, in person or by proxy, and entitled to vote at the Special Meeting approve an adjournment (excluding abstentions). Holders of record of Aerogen
common stock on the record date are entitled to one vote per share at the Special Meeting on each proposal presented. Holders of record of Aerogen Series&nbsp;A-1 Preferred Stock on the
record date are entitled to ten votes per share at the Special Meeting on each proposal presented.

 </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Vote Required  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both the adoption of the Merger Agreement and approval of the Certificate of Amendment require the affirmative vote of the holders, on the record date, of a
majority of the total combined outstanding voting power of Aerogen common stock and Series&nbsp;A-1 Preferred Stock. Both the adoption of the Merger Agreement and approval of the
Certificate of Amendment also require the affirmative vote of a majority of the shares of Series&nbsp;A-1 Preferred Stock outstanding on the record date, including Xmark Fund, L.P. and
Xmark Fund,&nbsp;Ltd. If you abstain from voting or do not vote, either in person or by proxy, it will have the same effect as a vote against both the adoption of the Merger Agreement and the
approval of the Certificate of Amendment. The approval of the adjournment of the Special Meeting, if necessary, requires the affirmative vote of the holders, on the record date, of a majority of the
total combined outstanding voting power of Aerogen common stock and Series&nbsp;A-1 Preferred Stock (excluding abstentions). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<UL>

<P><FONT SIZE=2><B><I> Voting of Proxies  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All shares represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in the manner specified in the
proxies. Properly executed proxies that do not contain voting instructions will be voted "for" the adoption of the Merger Agreement, "for" the approval of the Certificate of Amendment and "for" the
approval of the proposal to adjourn the Special Meeting, if necessary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
vote, please complete, sign, date and return the enclosed proxy card. If you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person. If
your shares are held in the name of your broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Special Meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
of Aerogen common stock and Series&nbsp;A-1 Preferred Stock represented at the Special Meeting but not voted, including shares of Aerogen common stock and
Series&nbsp;A-1 Preferred Stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the Special Meeting for purposes of
determining the presence or absence of a quorum for the transaction of all business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
shares affirmatively voted for the adoption of the Merger Agreement, including properly executed proxies that do not contain specific voting instructions, will be counted for that
proposal. Only shares affirmatively voted for the approval of the Certificate of Amendment, including properly executed proxies that do not contain specific voting instructions, will be counted for
that proposal. If you abstain from voting on the adoption of the Merger Agreement or the approval of the Certificate of Amendment, it will have the same effect as a vote against the adoption of the
Merger Agreement or the approval of the Certificate of Amendment, but will have no effect on the proposal to adjourn the Special Meeting, if necessary. If you do not execute a proxy card, it will have
the same effect as a vote against the adoption of the Merger Agreement and against the approval of the Certificate of Amendment and will have no effect on the proposal to grant authority to adjourn
the Special Meeting. Brokers who hold shares in street name for customers have the authority to vote on "routine" proposals when they have not received instructions from beneficial owners. However,
brokers are precluded from exercising their voting discretion with respect to approval of non-routine matters, such as the adoption of the Merger Agreement and approval of the Certificate
of Amendment and, as a result, absent specific instructions from the beneficial owner of such shares, brokers are not empowered to vote those shares, referred to generally as "broker
non-votes." Broker non-votes will be treated as shares that are present at the Special Meeting for purposes of determining whether a quorum exists and will have the same effect
as votes "against" the adoption of the Merger Agreement and the approval of the Certificate of Amendment, and "for" the proposal to grant the persons named as proxies the authority to adjourn the
Special Meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not expect that any matter other than the proposal to adopt the Merger Agreement and the proposal to approve the Certificate of Amendment, and, if necessary, the proposal to
adjourn the Special Meeting will be brought before the Special Meeting. If, however, any other matters are properly presented at the Special Meeting, the persons named as proxies will vote in
accordance with their judgment as to matters that they believe to be in the best interests of our stockholders. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Revocability of Proxies  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The grant of a proxy on the enclosed proxy card does not preclude a stockholder from voting in person at the Special Meeting. You may revoke your proxy at any
time before the shares reflected on your proxy card are voted at the Special Meeting by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>filing
with our corporate secretary a properly executed and dated revocation of proxy; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>submitting
a properly completed, executed and dated proxy card to our corporate secretary bearing a later date; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>appearing
at the Special Meeting and voting in person. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
attendance at the Special Meeting will not in and of itself constitute the revocation of a proxy. If you have instructed your broker to vote your shares, you must follow the
directions received from your broker to change these instructions. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Solicitation of Proxies  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All proxy solicitation costs will be borne by us. In addition to solicitation by mail, our directors, officers, employees and agents may solicit proxies from
stockholders by telephone, facsimile or other electronic means or in person. We also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to
you and getting your voting instructions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should not send your stock certificates with your proxy. A letter of transmittal with instructions for the surrender of Aerogen common stock and Series&nbsp;A-1
Preferred Stock certificates will be mailed to our stockholders as soon as practicable after completion of the Merger. </FONT></P>

<UL>

<P><FONT SIZE=2><B><I> Delivery of this Proxy Statement to Multiple Stockholders with the Same Address  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC has adopted rules that permit companies and intermediaries (for example, brokers) to satisfy the delivery requirements for proxy statements with respect
to two or more stockholders sharing the same address if we believe the stockholders are members of the same family by delivering a single proxy statement addressed to those stockholders. Each
stockholder will continue to receive a separate proxy card or voting instruction card. This process, which is commonly referred to as "householding," potentially means extra convenience for
stockholders and cost savings for companies by reducing the volume of duplicate information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of brokers with account holders who are our stockholders will be "householding" our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing
an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they will be "householding" communications to your
address, "householding" will continue until you are notified otherwise or until you revoke your consent. If your household received a single proxy statement, but you would prefer to receive your own
copy, please notify your broker and direct your written request to Aerogen,&nbsp;Inc., Attention: Investor Relations, 2071 Stierlin Court, Suite 100 Mountain View, CA 94043, or contact us at
(650)&nbsp;864-7300. If you would like to receive your own set of our proxy materials in the future, please contact your broker and Aerogen,&nbsp;Inc., Investor Relations and inform
them of your request. Be sure to include your name, the name of your brokerage firm and your account number. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<A NAME="toc_dk1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROPOSAL ONE:<BR>  THE MERGER    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussion under the sections of this proxy statement entitled "The Merger" and "The Merger Agreement" summarizes the material terms of the Merger. Although
we believe that the description covers the material terms of the Merger, this summary may not contain all of the information that is important to you. We urge you to read this proxy statement, the
Merger Agreement and the other documents referred to herein carefully for a more complete understanding of the Merger. </FONT></P>

<P><FONT SIZE=2><B>Background of the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a regular part of Aerogen's business, from time to time Aerogen has considered opportunities to expand and strengthen its technology, products, research and
development capabilities and distribution channels, including opportunities through strategic acquisitions, business combinations, investments, licenses, development agreements and joint ventures.
This includes consideration of whether it would be in the best interests of Aerogen and its stockholders to continue as a separate company and expand through organic growth, acquisitions or a
combination of the two, or to combine with or be acquired by another company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
a meeting of Aerogen's board of directors (the "Board") on September&nbsp;14, 2004, after a review of Aerogen's business prospects and financial condition, the Board instructed
management to actively explore all viable strategic alternatives, including a potential merger or acquisition of Aerogen. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the September&nbsp;14, 2004 Board meeting through July&nbsp;2005, Aerogen and its advisors had initial contacts with numerous potential acquirers regarding a potential
acquisition of Aerogen and executed confidentiality agreements with 17 of those potential acquirers, including Nektar. Of those 17, eleven engaged in preliminary discussions with Aerogen regarding a
potential acquisition. Ultimately, Aerogen engaged in advanced negotiations with two of those eleven, including Nektar and a company referred to herein as "Company A." Each of Nektar and Company A
were informed that Aerogen was engaging in a process of soliciting and evaluating bids for the potential sale of Aerogen. Discussions with the remaining potential acquirers either did not result in
acquisition proposals or resulted in proposals that Aerogen deemed to be inadequate. Throughout this period, the Board was updated on the status of the various discussions during frequent Board
meetings and in discussions between individual directors and members of management. In these discussions, the Board and individual members reiterated the
Board's belief that Aerogen should continue to explore the possibility of being acquired. Board meetings that occurred during the period in which Aerogen was negotiating with Nektar and Company A are
discussed below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April&nbsp;21, 2005, Adrian Smith, Vice President, Corporate Planning, Pulmonary, of Nektar contacted Mr.&nbsp;Breuil to discuss the possibility of Nektar acquiring Aerogen. At
various times from April&nbsp;21, 2005 through the signing of the Merger Agreement, members of Nektar's management engaged in discussions regarding the potential acquisition with members of
Aerogen's management and representatives of Aquilo Partners, whom the Board had previously engaged as its financial advisor. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April&nbsp;29, 2005, the Board held a meeting at which Robert Breuil, Aerogen's Chief Financial Officer, representatives of Aquilo Partners and a representative of Cooley Godward
LLP ("Cooley Godward") were also present. Representatives of Aquilo Partners updated the Board as to the status of discussions with potential acquirers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;9, 2005, Nektar executed a confidentiality agreement with Aerogen. Also on May&nbsp;9, 2005, members of senior management of Aerogen, including Mr.&nbsp;Breuil, among
others, and Nektar, including, among others, Mr.&nbsp;Smith and Nevan Elam, Nektar's Senior VP Corporate Operations and General Counsel, and representatives of Aquilo Partners met to discuss the
respective businesses of Aerogen and Nektar and further explore a potential transaction. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board held a meeting on May&nbsp;10, 2005, at which Mr.&nbsp;Breuil, representatives of Aquilo Partners and a representative of Cooley Godward were also present. Representatives
of Aquilo Partners updated the Board as to the status of discussions with potential acquirers. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning
on May&nbsp;16, 2005 and continuing through June&nbsp;23, 2005, Nektar engaged in a due diligence review of Aerogen, including having calls and meetings with members of
Aerogen's management and touring Aerogen's facilities. During that period, Aerogen made certain members of its management team, as well as auditors and outside tax advisors, available to Nektar upon
request for further diligence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
May&nbsp;20, 2005, the Board held a meeting at which Mr.&nbsp;Breuil, representatives of Aquilo Partners and a representative of Cooley Godward were also present. Representatives
of Aquilo Partners and Mr.&nbsp;Breuil updated the Board as to the status of discussions with potential acquirers. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board held a meeting on June&nbsp;3, 2005, at which Mr.&nbsp;Breuil, representatives of Aquilo Partners and a representative of Cooley Godward were also present. Representatives
of Aquilo Partners updated the Board as to the status of discussions with potential acquirers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also
on June&nbsp;3, 2005 and subsequent to the meeting of the Board, Nektar submitted a non-binding, written expression of interest to acquire Aerogen at a price which
Aerogen deemed to be inadequate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
June&nbsp;6, 2005 though June&nbsp;22, 2005, representatives of Aquilo Partners engaged in discussions with Mr.&nbsp;Elam regarding Nektar's expression of interest and the
valuation of Aerogen. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June&nbsp;6, 2005, Company A executed a confidentiality agreement with Aerogen. During the period from June&nbsp;6, 2005 through July&nbsp;26, 2005, Company A engaged in a due
diligence review of Aerogen, including having calls and meetings with members of Aerogen's management and touring Aerogen's facilities. During that period, Aerogen made certain members of its
management team, as well as auditors and outside tax advisors, available to Company A upon request for further diligence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board held a meeting on June&nbsp;17, 2005, which was also attended by Mr.&nbsp;Breuil and John Hodgman, Aerogen's Chief Executive Officer, by representatives of Aquilo Partners
and a representative of Cooley Godward. A representative of Aquilo Partners and Mr.&nbsp;Breuil provided the Board with an update on the status of discussions with the various potential acquirers,
including Nektar, Company A and others. The Board considered the price range being proposed by Nektar to be inadequate and instructed Aquilo Partners and management to so inform Nektar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June&nbsp;22, 2005, a representative of Aquilo Partners discussed with Mr.&nbsp;Elam Nektar's flexibility to increase its proposed price. Following Mr.&nbsp;Elam's indication
that Nektar had limited flexibility with respect to price, the representative of Aquilo Partners suggested that given that the price range being discussed was not viewed by the Board as being
adequate, it might not be productive to continue diligence. Mr.&nbsp;Elam reiterated Nektar's unwillingness to significantly increase its proposed price and agreed that diligence should be
suspended. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June&nbsp;30, 2005, Company A submitted to Aerogen a non-binding, written proposal to acquire Aerogen for a cash purchase price of $32&nbsp;million. The offer was
based on a variety of assumptions and contingent upon a variety of conditions. Company A also requested that Aerogen agree to negotiate exclusively with Company A through August&nbsp;15, 2005. In
subsequent discussions regarding this proposal between representatives of Aquilo Partners and representatives of Company A, it was conveyed that Company A's assumption as to Aerogen's likely cash
balance at closing was incorrect and, as a result, Company A stated that the $32&nbsp;million price would be subject to a downward adjustment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also
on June&nbsp;30, 2005, the Board held a meeting at which Mr.&nbsp;Breuil, representatives of Aquilo Partners and a representative of Cooley Godward were present.
Mr.&nbsp;Hodgman was also present and was appointed to the Board at the meeting. Representatives of Aquilo Partners, Mr.&nbsp;Hodgman and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2>Mr.&nbsp;Breuil
updated the Board as to the status of discussions with the potential acquirers, including the terms of the proposal from Company A, which was received by representatives of Aquilo
Partners during the meeting. The Board instructed Aquilo Partners and management to continue discussions with Company A and instructed Cooley Godward to prepare a draft merger agreement to be provided
to Company A, but to inform Company A that Aerogen would not agree to exclusively negotiate with Company A. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;7, 2005, Mr.&nbsp;Elam of Nektar contacted a representative of Aquilo Partners and indicated that Nektar might be willing to increase its proposed price. The
representative of Aquilo Partners informed Mr.&nbsp;Elam that if Nektar wanted to reengage in the process, it should do so quickly as Aerogen was proceeding with negotiations with other bidders and
that to be competitive, Nektar's bid would need to be in the mid-$30&nbsp;million range. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;8, 2005, Aquilo provided Company A with a draft merger agreement prepared by Cooley Godward. Representatives of Cooley Godward engaged in negotiations, including
exchanging drafts of a merger agreement, with representatives of Company A through August&nbsp;2, 2005. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;9, 2005, Aquilo provided Nektar with the form of draft merger agreement that had been provided to Company A. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;14, 2005, Nektar informed a representative of Aquilo Partners that it would be willing to engage in discussions to acquire Aerogen for $32&nbsp;million, to be paid in a
combination of $8&nbsp;million of cash and $24&nbsp;million of Nektar stock. From July&nbsp;14, 2005 though the execution of the Merger Agreement on August&nbsp;12, 2005, representatives of
Aerogen, Aquilo Partners and Cooley Godward negotiated the terms of the acquisition (including by exchanging drafts of a merger agreement and related agreements and documents) with representatives of
Nektar and Wilson Sonsini Goodrich&nbsp;&amp; Rosati, Professional Corporation ("WSGR"), counsel to Nektar for the transaction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also
on July&nbsp;14, 2005, the Board held a meeting at which Mr.&nbsp;Breuil and other members of Aerogen's management and representatives of Aquilo Partners and Cooley Godward were
present. Representatives of Aquilo Partners, Mr.&nbsp;Hodgman and Mr.&nbsp;Breuil updated the Board as to the status of discussions with various potential acquirers, including the terms of the
proposal from Nektar. The Board determined that Aerogen should permit Nektar to resume due diligence and should continue negotiations with Nektar and Company A. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
a Board meeting on July&nbsp;22, 2005 attended by Mr.&nbsp;Breuil, representatives of Aquilo Partners and a representative of Cooley Godward, the Board discussed the status of
negotiations with Nektar and Company A, including certain key issues raised by the initial mark-ups of the draft merger agreements that had been received from each party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;26, 2005, Company A's financial advisors informed a representative of Aquilo Partners that it was significantly reducing its cash offer, which would be subject to further
reduction for transaction expenses and based on Aerogen's cash balance at the time of the closing of the proposed merger. The Aquilo Partners representative indicated that the reduced price would not
be competitive. Company A's financial advisors indicated that there may be some flexibility on price and it was agreed that it made sense for negotiations with Company A on the form of Merger
Agreement to continue. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
a Board meeting on July&nbsp;29, 2005 attended by members of Aerogen's management and representatives of Aquilo Partners and Cooley Godward, the Board discussed the status of
negotiations with Nektar and Company A, including Company A's price reduction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August&nbsp;3, 2005, Company A's financial advisors informed a representative of Aquilo Partners that Company A was not willing to continue negotiating the merger agreement if
Company A's offer was not competitive, but that Company A would be willing to continue to discuss its valuation of Aerogen. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
a Board meeting on August&nbsp;5, 2005 attended by members of Aerogen's management and representatives of Aquilo Partners and Cooley Godward, the Board discussed the status of
negotiations with Nektar and Company A and reviewed the terms of a draft proposed merger agreement with Nektar, which had been previously circulated to the Board. The Board also discussed providing
the Specified Series&nbsp;A-1 Holders (as defined below under "Waiver of Notice and Consent to Acquisition") a draft of the proposed merger agreement with Nektar and drafts of the voting
agreements and waivers of notice and consent (the terms of which are described under "Merger Agreement&#151;Voting Agreements and Waivers") that Nektar was requiring be obtained from those
Specified Series&nbsp;A-1 stockholders as a condition to the signing of the Merger Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August&nbsp;9, 2005, John Hodgman, Aerogen's Chief Executive Officer, contacted representatives of the Specified Series&nbsp;A-1 Holders to describe the terms of the
proposed transaction with Nektar. Later that day, those representatives were provided with the draft merger agreement as well as the voting agreement and other documents that they would be asked to
sign as a condition to Nektar entering into the Merger Agreement. From August&nbsp;9, 2005 through August&nbsp;12, 2005, representatives of Cooley Godward and Mr.&nbsp;Hodgman (who were also
communicating with representatives of WSGR and
Nektar) negotiated the terms of those agreements and other documents with, and provided revised drafts of the merger agreement as they were negotiated with Nektar to, the Specified
Series&nbsp;A-1 Holders and their counsel. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also
on August&nbsp;9, 2005, representatives of Company A's financial advisors informed a representative of Aquilo Partners that Company A's revised proposal would not be subject to
downward adjustments for transaction expenses or based on Aerogen's cash balance at the time of closing. After the Aquilo Partners representative informed Company A's financial advisors that its
revised proposal was still not competitive, Company A's financial advisors indicated that while it could increase its bid, the increased bid would still be less than its original $32&nbsp;million
proposal. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
August&nbsp;12, 2005, the Board met and received an update on the status of negotiations from members of management and representatives of Cooley Godward and Aquilo Partners.
Representatives of Cooley Godward discussed the terms of the proposed merger agreement with Nektar, a draft of which had been provided to the Board in advance of the meeting, including changes to the
terms of the draft merger agreement from the version that had been reviewed at the August&nbsp;5, 2005 Board meeting. Representatives of Cooley Godward also discussed the Certificate of Amendment,
the voting agreements and the other documents that would be executed and delivered in connection with the transaction. Representatives of Aquilo Partners then made a financial presentation regarding
the proposed acquisition by Nektar. At the conclusion of the financial presentation, Aquilo Partners provided the Board with its oral opinion (subsequently confirmed in writing) that, based upon and
subject to the various assumptions and limitations set forth in its opinion, as of August&nbsp;12, 2005, the consideration to be paid to the holders of Aerogen common stock in the Merger was fair,
from a financial point of view, to those stockholders. The Board, having deliberated regarding the terms of the proposed acquisition, then determined that the Merger Agreement, the Merger and the
Certificate of Amendment were in the best interests of Aerogen and its stockholders, approved the Merger Agreement, the Merger and the Certificate of Amendment, declared the Merger to be advisable and
recommended that Aerogen's stockholders adopt the Merger Agreement and approve the Certificate of Amendment. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Merger Agreement and related documents were executed and delivered later in the day on August&nbsp;12, 2005. Before the opening of the stock market on August&nbsp;15, 2005 (the
next trading day), the parties jointly announced the execution of the Merger Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Merger Agreement provided that Nektar had the option at any time prior to September&nbsp;15, 2005, to elect to pay the purchase price all in cash. On August&nbsp;16, 2005, Nektar
notified Aerogen that it was exercising its option to pay the entire purchase price in cash. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2><B>Reasons for the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In considering the Merger, the Board consulted with Aquilo Partners regarding the financial aspects of the Merger and sought and received Aquilo Partners' written
opinion as to the fairness, as of the date of such opinion, from a financial point of view, of the merger consideration to be received by the holders of Aerogen common stock, which opinion is
described below under "The Merger&#151;Opinion of Financial Advisor." The Board also consulted with representatives of Cooley Godward regarding the fiduciary duties of the Board and the terms
of the Merger Agreement and related agreements. Based in part on these consultations and opinions, and the factors discussed below, the Board determined that the Merger Agreement and the Merger were
in the best interests of Aerogen and its stockholders, approved the Merger Agreement and the Merger and recommended that Aerogen's stockholders adopt the Merger Agreement and approve the Certificate
of Amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the course of reaching that determination and recommendation, the Board considered a number of potentially positive factors in its deliberations, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
belief that, having engaged in a process involving multiple bidders, Aerogen obtained the highest price that Nektar is willing to pay and that was reasonably available
from any potential acquirer;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
fact that the merger consideration of $0.75 per share of Aerogen common stock is a premium of 140% to the amount that the holders of Aerogen common stock would have
received if the funds were distributed in accordance with the terms of Aerogen's current certificate of incorporation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
likelihood that the Merger would be consummated;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
business, market and execution risks associated with remaining independent and Aerogen's prospects if it remained independent, including the need to raise substantial
additional capital in the near term to continue to fund its business and the stated intention of its lead preferred stock investor to veto any such financing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
financial analyses of Aquilo Partners presented to the Board on August&nbsp;12, 2005, and the opinion of Aquilo Partners delivered to the Board to the effect that
based upon and subject to the qualifications, limitations and assumptions set forth in its opinion, as of August&nbsp;12, 2005, the merger
consideration to be received by the holders of Aerogen common stock was fair, from a financial point of view, to the holders of Aerogen common stock (the full text of the written opinion setting forth
the assumptions made, matters considered and limitations in connection with the opinion is attached to this proxy statement as Annex B, which stockholders are urged to read in its entirety);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
fact that, subject to specified conditions, Aerogen may provide information to and engage in negotiations with a third party following receipt of a bona fide written
unsolicited acquisition proposal that the Board determines in good faith is reasonably likely to result in a superior proposal in the manner provided in the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
fact that, subject to specified conditions, Aerogen can terminate the Merger Agreement following the determination by the Board to accept, or enter into a definitive
agreement with respect to, a superior proposal in the manner provided in the Merger Agreement, including the payment of a $1,120,000 termination fee; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
fact that the Merger Agreement is subject to the approval of Aerogen's stockholders. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board also considered a number of potentially countervailing factors in its deliberations concerning the Merger, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>that
Aerogen will no longer exist as an independent company and its stockholders will no longer participate in its growth or from any future increase in the value of Aerogen
or from any </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
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<UL>
<UL>

<P><FONT SIZE=2>synergies
that may be created by the Merger, unless, and to the extent that Nektar did not elect to pay the merger consideration all in cash; </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>that,
under the terms of the Merger Agreement, Aerogen cannot solicit other acquisition proposals and must pay or cause to be paid to Nektar a termination fee of $1,120,000,
if the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, including if Aerogen exercises its right to terminate the Merger Agreement, which may deter others
from proposing an alternative transaction that may be more advantageous to its stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>that,
under the terms of the Merger Agreement, Aerogen agreed that it will carry on its business in the ordinary course of business consistent with past practice and,
subject to specified exceptions, that Aerogen will not take a number of actions related to the conduct of its business without the prior consent of Nektar; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>that
if the Merger does not close, Aerogen's officers and other employees will have expended extensive efforts attempting to complete the transaction and will have
experienced significant distractions from their work during the pendency of the transaction and will have incurred substantial transaction costs in connection with the transaction. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board also considered the interests of Aerogen's executive officers in the Merger, which are described below under "The Merger&#151;Interests of Our Directors and Executive
Officers in the Merger." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
preceding discussion is not meant to be an exhaustive description of the information and factors considered by the Board but is believed to address the material information and
factors considered. In view of the wide variety of factors considered in connection with its evaluation of the Merger and the complexity of these matters, the Board did not find it practicable to, and
did not, quantify or otherwise attempt to assign relative weights to the various factors considered in reaching its determination. In considering the factors described above, individual members of the
Board may have given different weight to different factors. </FONT></P>

<P><FONT SIZE=2><B>Opinion of Financial Advisor  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners has acted as financial advisor to the Board with respect to the Merger. In connection with Aquilo Partners' engagement as financial advisor, the
Board requested that Aquilo Partners evaluate the fairness, from a financial point of view, of the merger consideration to be received by the holders of Aerogen common stock. On August&nbsp;12,
2005, Aquilo Partners delivered its oral opinion, subsequently confirmed in writing, to the Board to the effect that, as of the date of its opinion and based upon and subject to the qualifications,
limitations and assumptions set forth therein, the merger consideration to be received by the holders of Aerogen common stock was fair, from a financial point of view, to the holders of Aerogen common
stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>The summary of the written opinion of Aquilo Partners in this proxy statement is qualified in its entirety by reference to the full text of the written opinion of
Aquilo Partners, dated August&nbsp;12, 2005, attached to this proxy statement as Annex B. You are urged to, and should, read the written opinion of
Aquilo Partners carefully and in its entirety. The written opinion of Aquilo Partners addresses only the fairness, from a financial point of view, of the merger consideration to be received by the
holders of Aerogen common stock as of the date of the written opinion of Aquilo Partners, and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on
any matter relating to the Merger.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
arriving at its opinion, Aquilo Partners, among other things: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewed
the Merger Agreement and certain related agreements, each dated as of August&nbsp;12, 2005; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewed
certain publicly available business and financial information relating to Aerogen and Nektar;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewed
certain other information relating to Aerogen and Nektar, including financial forecasts relating to Aerogen, provided to or discussed with Aquilo Partners by
Aerogen and Nektar;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>discussed
with the managements of Aerogen and Nektar the business and prospects of Aerogen and Nektar, respectively;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>considered
certain financial and stock market data of Aerogen and Nektar, and compared that data with similar data for other publicly held companies in businesses Aquilo
Partners deemed similar to those of Aerogen and Nektar;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>considered,
to the extent publicly available, the financial terms of certain other business combinations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewed
the rights, preferences and privileges of the Aerogen Series&nbsp;A-1 Preferred Stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewed
Aerogen's projected cash burn rate and availability of capital, which was prepared and provided by Aerogen's management; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>considered
such other information, financial studies, analyses and investigations and financial, economic and market criteria which Aquilo Partners deemed relevant. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with its review, Aquilo Partners did not assume any responsibility for independent verification of any of the foregoing information and relied on such information being
complete and accurate in all material respects. With respect to the financial forecasts of Aerogen that Aquilo Partners reviewed, Aquilo Partners was advised by Aerogen's management, and Aquilo
Partners assumed, that such forecasts had been reasonably prepared on bases reflecting the best currently available estimates and judgments of Aerogen's management as to Aerogen's future financial
performance. In this regard, Aerogen's management advised Aquilo Partners that, absent the Merger, Aerogen may need additional financing that Aerogen may not be able to obtain on terms favorable to
Aerogen or its stockholders, if at all. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners also assumed, with Aerogen's consent, that in the course of obtaining any necessary regulatory or third party consents, approvals or agreements in connection with the
Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse effect on Aerogen or on the contemplated benefits of the Merger and that the Merger will be
consummated in accordance with the terms of the Merger Agreement, without waiver, modification or amendment of any material term, condition or agreement contained in the Merger Agreement. Aquilo
Partners was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Aerogen or Nektar, nor has Aquilo Partners been
furnished with any such evaluations or appraisals. Aquilo Partners' opinion addresses only the fairness, from a financial point of view, of the merger consideration to the holders of Aerogen common
stock and does not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding entered into in connection with the Merger or otherwise. Aquilo Partners'
opinion is necessarily based upon information made available to it as of the date of its opinion, and upon financial, economic, market and other conditions as they existed and could be evaluated on
the date of the Aquilo Partners' opinion. The Aquilo Partners' opinion does not address the relative merits of the Merger as compared to other business strategies that might be available to Aerogen,
nor does it address Aerogen's underlying business decision to proceed with the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
preparing its opinion, Aquilo Partners performed a number of financial and comparative analyses. The preparation of a fairness opinion is a complex process and is not necessarily
susceptible to partial analysis or summary description. Aquilo Partners believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all analyses and factors, could create a misleading view of the processes underlying the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>Aquilo
Partners' opinion. No company or transaction used in the analyses performed by Aquilo Partners as a comparison is identical to Aerogen or the contemplated Merger. In addition, Aquilo Partners
may have given some analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuation resulting
from any particular analysis described below should not be taken to be Aquilo Partners' view of the actual value of Aerogen. The analyses performed by Aquilo Partners are not necessarily indicative of
actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses or assets do not
purport to be appraisals or to necessarily reflect the prices at which businesses or assets may actually be sold. The analyses performed were prepared solely as part of Aquilo Partners' analysis of
the fairness, from a financial point of view, of the merger consideration to be received by the holders of Aerogen common stock and were provided to Aerogen in connection with the delivery of the
Aquilo Partners' opinion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary of material financial analyses performed by Aquilo Partners in connection with the preparation of its opinion, and reviewed with the Board at a meeting held on
August&nbsp;12, 2005. Certain of the following summaries of financial analyses that were performed by Aquilo Partners include information presented in tabular format. In order to understand fully
the material financial analyses that were performed by Aquilo Partners, the tables should be read together with the text of each summary. The tables alone do not constitute a complete description of
the material financial analyses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Implied Transactional Statistics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners calculated enterprise values, calculated as equity value minus cash and
short term investments plus debt, implied by the equity consideration of $32&nbsp;million as of different dates. As of June&nbsp;30, 2005, Aerogen had $8.9&nbsp;million in cash and no debt,
resulting in an implied enterprise value of $23.1&nbsp;million as of June&nbsp;30. Based on guidance from Aerogen's management, Aquilo Partners assumed that Aerogen will have $6.0&nbsp;million
in cash and no debt at October&nbsp;1, 2005, resulting in an implied enterprise value of $26.0&nbsp;million as of October&nbsp;1, and $2.5&nbsp;million in cash and no debt at
December&nbsp;1, 2005, resulting in an implied enterprise value of $29.5&nbsp;million as of December&nbsp;1. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comparable Public Company Analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners compared selected financial information about Aerogen with that of other
public companies in the delivery/formulation and healthcare equipment industries. The delivery/formulation companies that Aquilo Partners considered were: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Access
Pharmaceuticals,&nbsp;Inc.<BR>
Advancis Pharmaceutical Corporation<BR>
Antares Pharma,&nbsp;Inc.<BR>
A.P. Pharma,&nbsp;Inc.<BR>
Aradigm Corporation<BR>
Bioject Medical Technologies&nbsp;Inc.<BR>
Generex Biotechnology Corporation<BR>
SIGA Technologies,&nbsp;Inc.<BR>
Valentis,&nbsp;Inc. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
these companies, Aquilo Partners reviewed enterprise values and enterprise value revenue multiples, calculated as enterprise value divided by trailing twelve month revenue. Values
were based on closing stock prices on August&nbsp;11, 2005. Enterprise values for the delivery/formulation companies ranged from $14.2&nbsp;million to $73.7&nbsp;million. From the multiples
calculated for these selected comparable companies, Aquilo Partners applied a range of multiples to Aerogen's trailing twelve month revenue of 0.9x to 14.5x. This analysis implied a range of
enterprise values for Aerogen of $6.3&nbsp;million to $101.6&nbsp;million. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dm1423_1_21"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners also considered the following healthcare equipment companies: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>ResMed
Inc<BR>
Respironics,&nbsp;Inc.<BR>
Utah Medical Products,&nbsp;Inc.<BR>
Viasys Healthcare&nbsp;Inc.<BR>
Vital Signs,&nbsp;Inc. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
these companies, Aquilo Partners reviewed enterprise value revenue multiples based on the trailing twelve months revenue and the estimated revenue for 2005. Values were based on
closing stock prices on August&nbsp;11, 2005. Aerogen's estimated revenue for 2005 was based on an internal estimate prepared by Aerogen's management. From the multiples calculated for these
selected comparable companies, Aquilo Partners applied a range of 1.7x to 5.7x to Aerogen's trailing twelve month revenue and calculated a range of implied enterprise values for Aerogen of
$11.9&nbsp;million to $40.1&nbsp;million. Aquilo Partners also applied a range of 1.5x to 4.8x to Aerogen's estimated 2005 revenue and calculated a range of implied enterprise values for Aerogen
of $14.5&nbsp;million to $46.2&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
Aerogen was delisted from the NASDAQ SmallCap Market, effective July&nbsp;20, 2005, Aquilo Partners also conducted an analysis of the following six healthcare companies
delisted from NASDAQ: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Able
Laboratories,&nbsp;Inc.<BR>
Autoimmune&nbsp;Inc.<BR>
Cardima,&nbsp;Inc.<BR>
Cortech,&nbsp;Inc.<BR>
Icoria,&nbsp;Inc.<BR>
Impax Laboratories,&nbsp;Inc. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
each company, Aquilo Partners compared the average of the closing prices in the five days preceding the delisting announcement with the average of the closing prices in the five days
after the delisting announcement, except in the case of Impax Laboratories where a four-day average was used. The average decrease in closing price for the six companies was 26.4%. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
the comparable companies were used for comparison purposes, none of those companies is directly comparable to Aerogen. Accordingly, an analysis of the results of such a
comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the
comparable companies and other factors that could affect the public trading value of the comparable companies and Aerogen. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comparable Transaction Analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners reviewed several financial metrics from the following seven selected
transactions in the healthcare equipment industry since January&nbsp;1, 2001: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="CENTER"><FONT SIZE=1><B>Target</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="47%" ALIGN="CENTER"><FONT SIZE=1><B>Acquirer</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Viasys Healthcare Inc.-Cardio</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Huntleigh Technology PLC</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Physiometrix, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Hospira, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Mini-Mitter Company, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Respironics, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Cohesion Technologies Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Angiotech Pharmaceuticals, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Novametrix Medical Systems, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Respironics, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Focal, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Genzyme Corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; MAP Medizin-Technologie GmbH</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; ResMed Inc</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners calculated the enterprise value multiples for the selected precedent transactions based on trailing twelve month revenue. The derived multiple range of 0.5x to 10.0x
applied to Aerogen's trailing twelve month revenue implied a range of enterprise values for Aerogen of $3.3&nbsp;million to $70.4&nbsp;million. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners also considered the following twelve transactions in the biotechnology industry since January&nbsp;1, 2004: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="CENTER"><FONT SIZE=1><B>Target</B></FONT><HR NOSHADE></TH>
<TH WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="47%" ALIGN="CENTER"><FONT SIZE=1><B>Acquirer</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Targeted Molecules Corporation</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Chromos Molecular Systems Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; DELEX Therapeutics Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; YM Biosciences Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Epimmune Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; IDM S.A.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Anosys, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Chromos Molecular Systems Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Tarpan Therapeutics, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Manhattan Pharmaceuticals, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Opexa Pharmaceuticals, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; PharmaFrontiers Corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Biosyn, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Cellegy Pharmaceuticals, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; X-Ceptor Therapeutics, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Exelixis, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Zycos Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; MGI PHARMA, INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; Empire Pharmaceuticals, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Neurobiological Technologies, Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; ChemGenex Therapeutics, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; AGT Biosciences Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&#149; MitoKor, Inc.</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2>&#149; Micrologix Biotech Inc.</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Six
of these transactions involved target companies with a lead product in Phase II or Phase III testing. Of the six transactions in which the target company's lead product was in Phase
II or Phase III testing, the amount of the transactions ranged from $8.4&nbsp;million to $50.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
the transactions were used for comparison purposes, none of those transactions is directly comparable to the Merger, and none of the companies in those transactions is directly
comparable to Aerogen or Nektar. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning
differences in
historical financial and operating characteristics of the companies involved and other factors that could affect the acquisition value of such companies or the company to which they are being
compared. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discounted Cash Flow Analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Using a discounted cash flow analysis, Aquilo Partners calculated implied enterprise values of
Aerogen based on Aerogen's financial plans provided to Aquilo Partners by Aerogen's management. Aquilo Partners based its discounted cash flow analysis on various operating assumptions provided by
Aerogen's management, including assumptions relating to, among other items, revenue, operating costs, taxes, working capital, capital expenditures and depreciation. Aquilo Partners' analysis used
discount rates ranging from 30% to 50%. Aquilo Partners also used terminal values for 2011 taxed net income of $16.9&nbsp;million and for 2011 revenue of $219.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the taxed net income terminal value, Aquilo Partners applied multiples ranging from 22.5x to 27.5x. This range of multiples with a 40% discount rate implied a range of enterprise
values for Aerogen of $5.2&nbsp;million to $15.5&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the 2011 revenue terminal value, Aquilo Partners applied multiples ranging from 2.0x to 3.0x. This range of multiples with a 40% discount rate implied a range of enterprise values
for Aerogen of $12.4&nbsp;million to $39.1&nbsp;million. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners considered that, if the proposed Merger with Nektar were not consummated, the expected amount
of Aerogen's cash could fall to $3.0&nbsp;million by the end of 2005. The management of Aerogen further advised Aquilo Partners that, absent the Merger, Aerogen may need additional financing that
Aerogen may not be able to obtain on favorable terms to Aerogen or its stockholders, if at all. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Because the transaction could have involved Aerogen's stockholders receiving $24&nbsp;million of the
$32&nbsp;million purchase price in Nektar common stock, Aquilo Partners also considered Nektar, including its current value, its stock price performance over the last five years, its volume traded
over the last year, its stock performance relative to the NASDAQ composite index and the American Stock </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>Exchange
Biotechnology Index, its historical financial statements, analyst reports, comparable companies and upcoming milestones. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premium Analysis.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners also calculated the implied premium paid in the following selected transactions that
occurred between January&nbsp;1, 2001 and August&nbsp;11, 2005: (i)&nbsp;14 transactions involving biotechnology companies with values ranging from $10&nbsp;million to $200&nbsp;million;
(ii)&nbsp;13 transactions involving biotechnology and healthcare equipment companies with values ranging from $15&nbsp;million to $50&nbsp;million; (iii)&nbsp;four transactions involving
biotechnology companies with values ranging from $15&nbsp;million
to $50&nbsp;million; (iv)&nbsp;nine transactions involving healthcare equipment companies with values ranging from $15&nbsp;million to $50&nbsp;million; and (v)&nbsp;38 transactions
involving biotechnology and healthcare equipment companies with values ranging from $10&nbsp;million to $200&nbsp;million. Aquilo Partners derived the following information from data observed for
the selected transactions: </FONT></P>

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<TABLE WIDTH="82%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=1><B>Selected Transactions<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Premium Over<BR>
Target Share Price<BR>
One Day Prior to&nbsp;Announcement</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Premium Over<BR>
Target Share Price<BR>
One Week Prior to&nbsp;Announcement</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Premium Over<BR>
Target Share Price<BR>
Four Weeks Prior to&nbsp;Announcement</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Biotechnology<BR>
($10&nbsp;million&nbsp;&#150;&nbsp;$200&nbsp;million)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Biotechnology/healthcare equip.<BR>
($15&nbsp;million&nbsp;&#150;&nbsp;$50&nbsp;million)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>79</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Biotechnology<BR>
($15&nbsp;million&nbsp;&#150;&nbsp;$50&nbsp;million)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Healthcare equipment<BR>
($15&nbsp;million&nbsp;&#150;&nbsp;$50&nbsp;million)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>89</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="46%"><FONT SIZE=2>Biotechnology/healthcare equip.<BR>
($10&nbsp;million&nbsp;&#150;&nbsp;$200&nbsp;million)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
the premiums paid in the selected transactions were used for comparison purposes, none of those transactions is directly comparable to the Merger, and none of the companies in
those transactions is directly comparable to Aerogen or Nektar. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and
judgments concerning differences in historical financial and operating characteristics of the companies involved and other factors that could affect the acquisition value of such companies or the
company to which they are being compared. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consideration to Common Stockholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners conducted an analysis of the amount that the holders of Aerogen common
stock would receive if the $32&nbsp;million were distributed in accordance with the terms of Aerogen's current certificate of incorporation. On that basis, the amount that the holders of Aerogen
common stock would receive would be $0.313 per share. The $0.75 per share that is to be delivered to the holders of the Aerogen common stock represents a premium of 140% to the amount that the holders
of Aerogen common stock would have received if the funds were distributed in accordance with the terms of Aerogen's current certificate of incorporation. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners calculated the premium of the merger consideration of $0.75 per share for the Aerogen common stock over the closing trading price of the Aerogen common stock on
August&nbsp;11, 2005, one week prior to August&nbsp;11, 2005, and four weeks prior to August&nbsp;11, 2005. Aquilo Partners also calculated the premium over the average closing prices during the
one week prior to August&nbsp;11, 2005, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>four
weeks prior to August&nbsp;11, 2005, and three months prior to August&nbsp;11, 2005. The following table summarizes the results of this analysis: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=1><B>Closing Stock Price<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>Premium of Merger Consideration</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>August 11, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>159</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>One Week Prior</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Four Weeks Prior</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="100%"><FONT SIZE=2>&nbsp;&nbsp;<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="63%" ALIGN="LEFT"><FONT SIZE=1><B>Average Closing Stock Price<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>Premium of Merger Consideration</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>One Week Prior to August 11, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>157</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Four Weeks Prior</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="63%"><FONT SIZE=2>Three Months Prior</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners' opinion and presentation to the Board was one of many factors taken into consideration by the Board in deciding to enter into the Merger Agreement. Consequently, the
analyses described above should not be viewed as determinative of the opinion of Aerogen, or Aerogen's management with respect to whether the Board would have been willing to agree to a different
aggregate merger consideration to be received by holders of Aerogen common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aquilo
Partners was retained by the Board to act as its financial advisor in connection with exploring and evaluating opportunities for Aerogen to combine with or be acquired by another
company. Aquilo Partners was selected by Aerogen based on Aquilo Partners' qualifications, expertise and reputation. Aquilo Partners is a life sciences investment banking firm. Aquilo Partners, as
part of its investment banking business, is continuously engaged in the valuation of businesses and securities in connection with mergers and acquisitions, private placements and valuations for
corporate and other purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to an engagement letter dated as of April&nbsp;20, 2005, the Board engaged Aquilo Partners to provide financial advisory services to Aerogen in connection with the Merger,
including, among other things, rendering its opinion to the Board. Pursuant to the terms of the engagement letter, Aerogen has agreed to pay Aquilo Partners a customary fee in connection therewith, a
portion of which was payable upon delivery of the opinion and a significant portion of which is contingent upon consummation of the Merger. In addition, Aerogen has agreed to reimburse Aquilo Partners
for its out-of-pocket expenses, including attorney's fees, incurred in connection with its engagement and has agreed to indemnify Aquilo Partners for certain liabilities and
expenses arising out of or in conjunction with its rendering of services under its engagement, including liabilities arising under the federal securities laws. </FONT></P>

<P><FONT SIZE=2><B>Recommendation of the Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a meeting of the Board held on August&nbsp;12, 2005, the Board determined that the Merger Agreement and the Merger were in the best interests of Aerogen and
its stockholders, approved the Merger Agreement, the Merger and the Certificate of Amendment and recommended that Aerogen's stockholders approve the Merger Agreement and approve the Certificate of
Amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Aerogen's board of directors recommends that its stockholders vote "FOR" the merger proposal.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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<P><FONT SIZE=2><B>Voting Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the execution of the Merger Agreement, each of Jane E. Shaw, Yehuda and Zipora Ivri, John Power, Xmark Fund, L.P., Xmark Fund,&nbsp;Ltd.,
Caduceus Capital II, LP, Caduceus Capital Master Fund Limited, UBS Eucalyptus Fund LLC, Finsbury Worldwide Pharmaceutical Trust, HFC SHC Aggressive Master Fund, HealthCap IV Bis, L.P., HealthCap IV,
L.P. and HealthCap IV KB executed voting agreements with, and delivered irrevocable proxies to, Nektar relating to the shares of Aerogen common stock, preferred stock and options and warrants to
purchase such shares owned by them. These individuals and entities hold an aggregate of (i)&nbsp;709,755 shares of our common stock, representing approximately 8.51% of the outstanding shares of
common stock on August&nbsp;12, 2005, (ii)&nbsp;488,654 shares of Series&nbsp;A-1 Preferred Stock representing, together with the shares of common stock, approximately 32.52% of the
total combined voting power outstanding and approximately 55.1% of the outstanding Series&nbsp;A-1 Preferred Stock as of August&nbsp;12, 2005,
(iii)&nbsp;warrants to purchase 3,663,789 shares of our common stock and (iv)&nbsp;options to purchase 1,199,565 shares of our common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the voting agreements, these stockholders have agreed to vote their shares of Aerogen common stock and preferred stock or other securities and any newly acquired shares or other
securities of Aerogen: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
favor of the adoption of the Merger Agreement, each of the other transactions contemplated by the Merger Agreement and any action in furtherance of the foregoing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>against
the following actions (other than the Merger and the transactions contemplated by the Merger Agreement): (i)&nbsp;any merger, consolidation or other business
combination involving Aerogen or any subsidiary of Aerogen; (ii)&nbsp;any sale or other transfer of all or substantially all of the assets of Aerogen and its subsidiaries taken as a whole;
(iii)&nbsp;any sale, lease, license or transfer of any significant part of the assets of Aerogen or any subsidiary of Aerogen; (iv)&nbsp;any reorganization, recapitalization, dissolution,
liquidation or winding up of Aerogen or any subsidiary of Aerogen; or (v)&nbsp;any other action which is intended, or would reasonably be expected, to interfere with or delay in any material respect
the Merger or any of the other transactions contemplated by the Merger Agreement or voting agreement (including any action or agreement that would result in a breach of any representation, warranty,
covenant, agreement or other obligation of Aerogen in the Merger Agreement); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>in
favor of approving the Certificate of Amendment and any action in furtherance of the foregoing. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of these stockholders also agreed not to sell, encumber, grant an option with respect to or dispose of any of the securities or options of Aerogen owned by such stockholder other
than to Nektar, or enter into any agreement or commitment other than with Nektar contemplating any of the foregoing, except, subject to certain conditions, for transfers to affiliates of the
stockholder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
voting agreements terminate upon the earlier of the consummation of the Merger or the termination of the Merger Agreement. </FONT></P>

<P><FONT SIZE=2><B>Waiver of Notice and Consent to Acquisition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Merger Agreement, we obtained a Waiver of Notice and Consent to Acquisition (the "Waiver and Consent") from Xmark Fund, L.P., Xmark
Fund,&nbsp;Ltd., Caduceus Capital II, LP, Caduceus Capital Master Fund Limited, UBS Eucalyptus Fund LLC, Finsbury Worldwide Pharmaceutical Trust, HFC SHC Aggressive Master Fund, HealthCap IV Bis,
L.P., HealthCap IV, L.P., HealthCap IV KB, PW Eucalyptus Fund&nbsp;Ltd. and OFCO Club IV (the "Specified Series&nbsp;A-1 Holders"). These entities hold an aggregate of
(i)&nbsp;316,514 shares of our common stock (representing approximately 3.80% of the outstanding shares of common stock on August&nbsp;12, 2005), (ii)&nbsp;471,499 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>shares
of Series&nbsp;A-1 Preferred Stock representing approximately 29.2% of the total combined voting power outstanding and approximately 53.2% of the outstanding
Series&nbsp;A-1 Preferred Stock, and (iii)&nbsp;warrants to purchase 3,666,600 shares of our common stock. The Waiver and Consent waived the rights of the holders of
Series&nbsp;A-1 Preferred Stock to prior notice of an "acquisition" (as defined in the Certificate of Designations) and of the Merger, of the Merger Agreement and the transactions
contemplated by the Merger Agreement and consented to our entering into the Merger Agreement with Nektar, as permitted by the Certificate of Designations. However, the Specified
Series&nbsp;A-1 Holders did not waive any rights to notice with respect to any modification or amendment to the Merger Agreement. In addition, the foregoing waivers expire, and all
notice rights relating to an "acquisition" and the other transactions contemplated by the Merger Agreement are reinstated if the Merger Agreement is terminated in accordance with its terms. </FONT></P>


<P><FONT SIZE=2><B>Interests of Our Directors and Executive Officers in the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In considering the recommendation of the Board in favor of the Merger, you should be aware that there are provisions of the Merger Agreement and other
arrangements that will result in benefits to certain directors and executive officers, but not to stockholders generally. Stockholders should take these benefits into account in deciding whether to
vote for adoption of the Merger Agreement. No officers or directors will receive any monetary benefits from outstanding stock options held by them because the exercise price of all such options is
above $0.75 per share. A description of the benefits available to certain of our directors and executive officers resulting from the Merger follows below. </FONT></P>

<P><FONT SIZE=2><B><I>Management Incentive Plan  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The management incentive plan provides, among other things, that each participant is eligible for an incentive bonus of between approximately twenty and forty
percent of each such participant's current base annual salary to be paid upon earliest of (i)&nbsp;the closing of a strategic transaction of a type approved by the Board, (ii)&nbsp;a liquidation
of Aerogen, or (iii)&nbsp;March&nbsp;31, 2006. The Board has named the following participants and fixed the following incentive bonuses under the management incentive plan: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="81%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Title<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Bonus Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2>John Hodgman, Chief Executive Officer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>120,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Robert S. Breuil, Chief Financial Officer, Vice President Corporate Development</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
99,840</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Angela Strand, Vice President, Marketing</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Stacy Pryce, Vice President, Business Development</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Robert S. Fishman, M.D., Vice President, Scientific Affairs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
49,920</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Nancy Isaac, Vice President, Regulatory Affairs and Quality</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
46,051</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
Yehuda Ivri, Chief Technical Officer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
45,780</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="81%"><FONT SIZE=2><BR>
John S. Power, Managing Director Aerogen (Ireland) Limited and Senior Vice President, Sales</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
35,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="81%"><BR><FONT SIZE=2><B>Total</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><BR><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
496,591</B></FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B><I>Restated Executive Severance Plan  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The restated executive severance plan provides, among other things, that in the event that an eligible employee is involuntarily terminated without cause or
voluntarily terminated for good reason </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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<BR>

<P><FONT SIZE=2>(as
defined in the restated executive severance plan) during the period commencing one month prior to and ending thirteen months following a change of control of Aerogen, the employee would be
entitled to the following benefits: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>continued
base salary for twelve months following termination;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>continued
coverage under COBRA if the employee so chooses, for a period not to exceed twelve months following termination;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>full
acceleration of vesting of all unvested stock options to purchase shares of Aerogen common stock, with such options vesting in twelve equal monthly installments
beginning on the date of termination and allowing fifteen months from the date of termination within which to exercise such stock options;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>lapse
in any repurchase rights on any shares of Aerogen common stock, in favor of Aerogen in twelve equal monthly installments beginning on the date of termination;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>indemnification
for a period of no less than six years following the date or termination of employment for any act, or omission, taken while the participant was employed by
Aerogen (or any successor entity);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>insurance
coverage which is either at least equivalent to indemnification insurance coverage provided prior to termination, or if such equivalent coverage is not available
at a
commercially reasonable price, then at least equivalent to the indemnification coverage provided to the then current executive officers of Aerogen; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
additional benefits that the Board may, in its sole discretion, provide. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if any payment or benefit that an eligible employee would receive under the restated executive severance plan pursuant to a change in control or otherwise would constitute
"parachute payments" within the meaning of Section&nbsp;280G of the Internal Revenue Code of 1986, as amended, (the "Code"), and would be subject to the excise tax imposed by Section&nbsp;4999 of
the Code, or any comparable successor provision, then benefits shall be either provided to the employee in full, or provided to the employee as to such lesser extent which would result in no portion
of such benefits being subject to the excise tax. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John
Hodgman, Robert S. Breuil, Robert S. Fishman, Nancy Isaac, Yehuda Ivri, John S. Power, Angela Strand, Mauro Folena and Stacy Pryce are the eligible employees entitled to benefits
provided in the restated executive severance benefit plan. </FONT></P>


<P><FONT SIZE=2><B><I>Indemnification of Directors and Executive Officers and Insurance.  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger Agreement provides that from and after the effective time of the Merger, Nektar and Aerogen will indemnify, defend and hold harmless, and advance
expenses to, the individuals who at or prior to the effective time of the Merger were directors or officers of Aerogen with respect to all acts or omissions by them in their capacities as such at any
time prior to the effective time of the Merger, to the fullest extent required by Aerogen's certificate of incorporation, bylaws and any applicable indemnification agreement as in effect on the date
of the Merger Agreement, provided a copy of such indemnification agreement has been provided to Nektar. Nektar has further agreed that following the Merger or Aerogen will provide, for a period not
less than six years following the effective time of the Merger, directors' and officers' liability insurance covering those persons who were, as of the date of the Merger Agreement, covered by our
directors' and officers' liability insurance policy, on terms with respect to coverage and amounts no less favorable than those in effect on the date of the Merger Agreement or, if substantially
equivalent insurance coverage is unavailable, the best available coverage. Nektar will not be required to pay an annual premium for such insurance that exceeds 250% of the annual premium that we
currently pay for such insurance. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_do1423_1_28"> </A> </FONT> <FONT SIZE=2><B>Appraisal Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Merger is completed, holders of Aerogen common stock are entitled to appraisal rights under Section&nbsp;262 of the Delaware General Corporation Law
("Section&nbsp;262"), provided that they comply with the conditions established by Section&nbsp;262. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
discussion below is not a complete summary regarding your appraisal rights under Delaware law and is qualified in its entirety by reference to the text of the relevant provisions of
Delaware law, which are attached to this proxy statement as Annex C. Stockholders intending to exercise appraisal rights should carefully review Annex C. Failure to follow precisely any of the
statutory procedures set forth in Annex C may result in a termination or waiver of these rights. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
record holder of shares of Aerogen common stock who makes the demand described below with respect to such shares, who continuously is the record holder of such shares through the
effective time of the Merger, who otherwise complies with the statutory requirements of Section&nbsp;262 and who neither votes in favor of the Merger nor consents thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery (the "Delaware Court") of the fair value of his or her shares of Aerogen common stock in lieu of the consideration that such stockholder would
otherwise be entitled to receive pursuant to the Merger Agreement. All references in this summary of appraisal rights to a "stockholder" or "holders of shares of Aerogen common stock" are to the
record holder or holders of shares of Aerogen common stock. Except as set forth herein, stockholders of Aerogen will not be entitled to appraisal rights in connection with the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
Section&nbsp;262, where a merger is to be submitted for approval at a meeting of stockholders, such as the Special Meeting, not less than 20&nbsp;days prior to the meeting a
constituent corporation must notify each of the holders of its stock for whom appraisal rights are available that such appraisal rights are available and include in each such notice a copy of
Section&nbsp;262. This proxy statement shall constitute such notice to the record holders of Aerogen common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
who desire to exercise their appraisal rights must satisfy all of the conditions of Section&nbsp;262. Those conditions include the following: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Stockholders
electing to exercise appraisal rights must not vote "for" the adoption of the Merger Agreement. Also, because a submitted proxy not marked "against" or
"abstain" will be voted "for" the proposal to adopt the Merger Agreement, the submission of a proxy not marked "against" or "abstain" will result in the waiver of appraisal rights.

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
written demand for appraisal of shares must be filed with us before the taking of the vote on the Merger Agreement at the Special Meeting on October&nbsp;19, 2005. The
written demand for appraisal should specify the stockholder's name and mailing address, and that the stockholder is thereby demanding appraisal of his or her Aerogen common stock. The written demand
for appraisal of shares is in addition to and separate from a vote against the Merger Agreement or an abstention from such vote. That is, failure to return your proxy, voting against, or abstaining
from voting on, the Merger will not satisfy your obligation to make a written demand for appraisal.

<BR><BR></FONT></DD>

<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
demand for appraisal should be executed by or for the stockholder of record, fully and correctly, as such stockholder's name appears on the share certificate. If the
shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, this demand must be executed by or for the fiduciary. If the shares are owned by or for more than one
person, as in a joint tenancy or tenancy in common, such demand should be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute the
demand for appraisal for a stockholder of record. However, the agent must identify the record owner and expressly disclose the fact that, in exercising the demand, he is acting as agent for the record
owner. A person having a beneficial interest in Aerogen common stock held of record in the </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>name
of another person, such as a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below in a timely manner to perfect whatever appraisal rights the
beneficial owners may have. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
stockholder who elects to exercise appraisal rights should mail or deliver his, her or its written demand to Aerogen at 2071 Stierlin Court, Suite 100, California 94043,
Attention: Corporate Secretary. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
ten days after the effective time of the Merger, we must provide notice of the effective time of the Merger to all of our stockholders who have complied with Section&nbsp;262
and have not voted for the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
120&nbsp;days after the effective time of the Merger, either Aerogen or any stockholder who has complied with the required conditions of Section&nbsp;262 may file&nbsp;a
petition in the Delaware Court, with a copy served on Aerogen in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares of all dissenting
stockholders. There is no present intent on the part of Aerogen to file an appraisal petition and stockholders seeking to exercise appraisal rights should not assume that Aerogen will file such a
petition or that Aerogen will initiate any negotiations with respect to the fair value of such shares. Accordingly, holders of Aerogen common stock who desire to have their shares appraised should
initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section&nbsp;262. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
120&nbsp;days after the effective time of the Merger, any stockholder who has satisfied the requirements of Section&nbsp;262 will be entitled, upon written request, to receive
from Aerogen a statement setting forth the aggregate number of shares of Aerogen common stock not voting in favor of the Merger and with respect to which demands for appraisal were received by Aerogen
and the aggregate number of holders of such shares. Such statement must be mailed within 10&nbsp;days after the stockholders' request has been received by Aerogen or within 10&nbsp;days after the
expiration of the period for the delivery of demands as described above, whichever is later. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a petition for an appraisal is timely filed, at the hearing on such petition, the Delaware Court will determine which stockholders are entitled to appraisal rights. The Delaware Court
may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Delaware Court may dismiss the proceedings as to such stockholder. Where
proceedings are not dismissed, the Delaware Court will appraise the shares of Aerogen common stock owned by such stockholders, determining the fair value of such shares exclusive of any element of
value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we believe that the merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court and stockholders
should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the consideration they would receive pursuant to the Merger Agreement.
Moreover, we do not anticipate offering more than the Merger consideration to any stockholder exercising appraisal rights and reserve the right to assert, in any appraisal proceeding, that, for
purposes of Section&nbsp;262, the "fair value" of a share of Aerogen common stock is less than the Merger consideration. In determining "fair value", the Delaware Court is required to take into
account all relevant factors. The Delaware Supreme Court has stated that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered and that "fair price obviously requires consideration of all relevant factors involving the value of a company." The Delaware Supreme Court has stated that in
making this determination of fair value the court must consider market value, asset value, dividends, earnings prospects, the nature of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

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<P><FONT SIZE=2>enterprise
and any other facts which could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section&nbsp;262 provides that fair value
is to be exclusive of any element of value arising from the accomplishment or expectation of the Merger. The Delaware Supreme Court has stated that such exclusion is a narrow exclusion that does not
encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. The Delaware Supreme Court has construed
Section&nbsp;262 to mean that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of
speculation, may be considered. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
cost of the appraisal proceeding may be determined by the Delaware Court and taxed against the parties as the Delaware Court deems equitable in the circumstances. However, costs do
not include attorneys' and expert witness fees. Each dissenting stockholder is responsible for his or her attorneys' and expert witness expenses, although, upon application of a dissenting
stockholder, the Delaware Court may order that all or a portion of the expenses incurred by any dissenting stockholder in connection with the appraisal proceeding, including without limitation,
reasonable attorneys' fees and the fees and expenses of experts, be charged pro rata against the value of all shares of stock entitled to appraisal. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
stockholder who has duly demanded appraisal in compliance with Section&nbsp;262 will not, after the effective time of the Merger, be entitled to vote for any purpose any shares
subject to such demand or to receive payment of dividends or other distributions on such shares, except for dividends or distributions payable to stockholders of record at a date prior to the
effective time of the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
any time within 60&nbsp;days after the effective time of the Merger, any stockholder will have the right to withdraw his demand for appraisal and to accept the terms offered in the
Merger Agreement. After this period, a stockholder may withdraw his, her or its demand for appraisal and receive payment for his, her or its shares as provided in the Merger Agreement only with our
consent. If no petition for appraisal is filed with the court within 120&nbsp;days after the effective time of the Merger, stockholders'
rights to appraisal (if available) will cease. Inasmuch as we have no obligation to file such a petition, any stockholder who desires a petition to be filed is advised to file it on a timely basis.
Any stockholder may withdraw such stockholder's demand for appraisal by delivering to Aerogen a written withdrawal of his or her demand for appraisal and acceptance of the merger consideration, except
(i)&nbsp;that any such attempt to withdraw made more than 60&nbsp;days after the Effective Time will require written approval of Aerogen and (ii)&nbsp;that no appraisal proceeding in the
Delaware Court shall be dismissed as to any stockholder without the approval of the Delaware Court, and such approval may be conditioned upon such terms as the Delaware Court deems just. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure
by any Aerogen stockholder to comply fully with the procedures described above and set forth in Annex C to this proxy statement may result in termination of such stockholder's
appraisal rights. In view of the complexity of exercising your appraisal rights under Delaware law, if you are considering exercising these rights you should consult with your legal counsel. </FONT></P>


<P><FONT SIZE=2><B>Delisting and Deregistration of Our Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Merger is completed, Aerogen common stock will cease to be listed on the Pink Sheets and will be deregistered under the Securities Exchange Act of 1934. </FONT></P>

<P><FONT SIZE=2><B>Material United States Federal Income Tax Consequences of the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary is a general discussion of the material federal income tax consequences to our stockholders whose Aerogen common stock and
Series&nbsp;A-1 Preferred Stock ("Aerogen Capital Stock") is converted into cash in the Merger. This summary is based on the current provisions of the Internal Revenue Code of 1986, as
amended, or the Code, applicable Treasury Regulations, judicial </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

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<P><FONT SIZE=2>authority
and administrative rulings, all of which are subject to change, possibly with retroactive effect. Any such change could alter the tax consequences to our stockholders as described herein. No
ruling from the Internal Revenue Service has been or will be sought with respect to any aspect of the transactions described herein. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
discussion only applies to an Aerogen stockholder that is (1)&nbsp;a citizen or resident of the United States, (2)&nbsp;a corporation created or organized in or under the laws
of the United States, or any political subdivision thereof (including the District of Columbia), (3)&nbsp;an estate the income of which is subject to United States Federal income taxation regardless
of its source, (4)&nbsp;a trust if either (a)&nbsp;a court within the
United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust
or (b)&nbsp;the trust has a valid election in effect to be treated as a United States person for United States Federal income tax purposes or (5)&nbsp;any other person or entity that is treated
for United States Federal income tax purposes as if it were one of the foregoing. If a partnership holds Aerogen Capital Stock, the tax treatment of a partner will generally depend on the status of
the partner and the activities of the partnership. If you are a partner of a partnership holding Aerogen Capital Stock, you should consult your tax advisor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
summary is for the general information of our stockholders only and does not purport to be a complete analysis of all potential tax effects of the Merger. For example, it does not
consider the effect of any applicable state, local or foreign tax laws, or of any non-income tax laws. In addition, this discussion does not address the tax consequences of transactions
effectuated prior to or after the Merger (whether or not such transactions occur in connection with the Merger), including, without limitation, any exercise of an Aerogen option or the acquisition or
disposition of Aerogen shares other than pursuant to the Merger. In addition, it does not address all Federal income tax considerations that may be relevant to an Aerogen stockholder in light of such
Aerogen stockholder's particular circumstances, or to types of Aerogen stockholders that may be subject to special tax rules, including, without limitation: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
subject to special treatment under the federal income tax laws (for example, dealers in securities, financial institutions, mutual funds, life insurance
companies, tax-exempt organizations, foreign persons, or employees of Aerogen who will become employees of Nektar);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
that are financial institutions or broker-dealers;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
who hold their Aerogen Capital Stock as part of an integrated transaction such as a hedge, straddle, conversion, or other risk reduction transaction or
strategy;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
that hold common stock which constitutes either "qualified small business stock" for purposes of Section&nbsp;1202 of the Code or "section&nbsp;1244 stock"
for purposes of Section&nbsp;1244 of the Code;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
who are subject to the federal alternative minimum tax;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
who are partnerships;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
who acquired their Aerogen Capital Stock pursuant to the exercise of a warrant; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stockholders
who acquired their Aerogen Capital Stock pursuant to the exercise of a stock option, or pursuant to an employee stock purchase plan or other compensation
arrangement. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following summary also does not address holders of stock options. The following summary assumes that Aerogen stockholders hold their Aerogen Capital Stock as a "capital asset"
(generally, property held for investment). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

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<BR>
<UL>

<P><FONT SIZE=2><I> Treatment of Holders of Aerogen Capital Stock  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The conversion of Aerogen Capital Stock into the right to receive cash in the Merger will be a taxable transaction. Generally, this means that our stockholders
will recognize a capital gain or loss equal to the difference between (1)&nbsp;the amount of cash stockholders receive in the Merger and (2)&nbsp;their adjusted tax basis in the Aerogen Capital
Stock (which is usually a stockholder's original cost for the stock). For this purpose, Aerogen stockholders who acquired different blocks of Aerogen shares at different times for different prices
must calculate gain or loss separately for each identifiable block of Aerogen shares surrendered in the exchange. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
gain or loss will be long-term if the holder has held Aerogen Capital Stock for more than one year as of the date of the Merger. Under current law, long-term
capital gains of stockholders who are individuals, trusts and estates are subject to a maximum federal income tax rate of 15%, whereas the maximum federal income tax rate on ordinary income and
short-term capital gains (that is, gain on capital assets held for not more than one year) of an individual is currently 35% (not taking into account any phase-out of tax
benefits such as personal exemptions and certain itemized deductions). For corporations, capital gains and ordinary income are taxed at the same maximum rate of 35%. Capital losses are subject to
limitations on deductibility for both corporations and individuals. Capital losses not offset by capital gains may be
deducted against a non-corporate stockholder's ordinary income only up to a maximum annual amount of $3,000, and non-corporate stockholders may carry forward unused capital
losses. A corporate stockholder can deduct capital losses only to the extent of capital gains; unused capital losses may be carried back three years and forward five years. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Backup Withholding  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To prevent federal backup income tax withholding with respect to certain "reportable payments" including taxable proceeds received in exchange for the
stockholder's Aerogen shares in the Merger, an Aerogen stockholder must either (i)&nbsp;provide the paying agent with a correct taxpayer identification number and certify whether such stockholder is
subject to backup withholding of federal income tax by completing the substitute Form&nbsp;W-9 included in the letter of transmittal or (ii)&nbsp;establish a basis for exemption from
backup withholding, if any. Backup withholding will generally not apply, however, to an Aerogen stockholder who furnishes the paying agent with a correct taxpayer identification number on
Form&nbsp;W-9 (and who does not subsequently become subject to backup withholding) or who is otherwise exempt from backup withholding, such as a corporation. In addition, certain foreign
persons such as certain nonresident aliens may establish an exemption from, or a reduced rate of, backup withholding by delivering the proper version of Form&nbsp;W-8. Each Aerogen
stockholder and, if applicable, each other payee, should complete and sign the Form&nbsp;W-9 included with the letter of transmittal (or other applicable form such as a
Form&nbsp;W-8) in order to provide the information and certification necessary to avoid the imposition of backup withholding, unless an exemption applies and is established in a manner
satisfactory to the paying agent. Aerogen stockholders who fail to provide their correct taxpayer identification numbers and the appropriate certifications or to establish an exemption as described
above will be subject to backup withholding on taxable proceeds received in the Merger (at a current rate of 28%) and may be subject to a $50 penalty imposed by the IRS. Additional amounts may be
withheld as a result of state, local, and foreign taxes. Any amounts withheld from payments to an Aerogen stockholder under the backup withholding rules generally will be allowed as a credit against
the Aerogen stockholder's United States federal income tax liability. If the paying agent withholds on a payment to a stockholder and the withholding results in an overpayment of taxes, the
stockholder may request a refund from the IRS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>The foregoing discussion of the federal income tax consequences of the Merger is for our stockholders' general information only. Accordingly, our stockholders
should consult their own tax advisors with respect to the particular tax consequences to them of the Merger, including the applicable federal, state, local and foreign tax
consequences.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P><FONT SIZE=2><B>Regulatory Matters  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transaction is not subject to the requirements of the Hart-Scott-Rodino Act, which prevents transactions meeting certain size tests,
and not otherwise exempt, from being completed until required information and materials are furnished to the Antitrust Division of the Department of Justice and the Federal Trade Commission and the
related waiting period expires or is terminated early. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

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<A NAME="toc_dq1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>THE MERGER AGREEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following description summarizes the material provisions of the Merger Agreement and is qualified in its entirety by reference to the complete text of the
Merger Agreement. The Merger Agreement is included as Annex A to this proxy statement. We encourage you to read it carefully and in its entirety. The Merger Agreement has been included to provide you
with information regarding its terms. It is not intended to provide any other factual information about Aerogen. Such information can be found elsewhere in this proxy statement and in the other public
filings Aerogen makes with the SEC, which are available without charge at www.sec.gov. </FONT></P>

<P><FONT SIZE=2><B>Merger Consideration  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of the Merger, each outstanding share of Aerogen common stock, other than shares held by stockholders who perfect their appraisal rights, will be
converted into the right to receive $0.75 in cash, without interest and each outstanding share of Aerogen Series&nbsp;A-1 Preferred Stock, other than shares held by stockholders who
perfect their appraisal rights, will be converted into the right to receive $29.0251 in cash, without interest. Upon completion of the Merger, no shares of Aerogen Capital Stock will remain
outstanding and all shares will automatically be converted into the right to receive the applicable merger consideration and will cease to exist. </FONT></P>

<P><FONT SIZE=2><B>Conversion of Shares; Procedures for Exchange of Certificates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective automatically upon completion of the Merger, our common stockholders will have the right to receive $0.75 per share in cash and our
Series&nbsp;A-1 Preferred stockholders will have the right to receive $29.0251 per share in cash, in each case without interest. Prior to the effective time of the Merger, Nektar will
enter into an agreement with a bank, trust company or other institution to act as paying agent under the Merger Agreement. Promptly after the effective time of the Merger, the paying agent will mail
to each record holder of Aerogen shares a letter of transmittal and instructions for use in surrendering certificates in exchange for the merger consideration. </FONT><FONT SIZE=2><B>No stockholder
should surrender any certificates until the stockholder receives the letter of transmittal and other materials for such surrender.</B></FONT><FONT SIZE=2> Upon surrender of a stock certificate for
cancellation to the paying agent, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions, and such other customary documents as the paying agent
may reasonably require, the holder of such
certificate will be entitled to receive the merger consideration described above pursuant to the Merger Agreement, without any interest thereon. The certificates so surrendered will be canceled. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a transfer of ownership of shares of Aerogen Capital Stock which is not registered in our transfer records, payment of the merger consideration may be made with respect
to such shares to the transferee if the stock certificate representing such shares is presented to the paying agent, accompanied by all documents reasonably required by the paying agent to evidence
such transfer and to evidence that any applicable stock transfer taxes relating to such transfer have been paid. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
your stock certificate has been lost, stolen or destroyed, the paying agent will deliver to you the applicable merger consideration for the shares represented by that certificate if: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>you
make an affidavit claiming such certificate has been lost, stolen or destroyed; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
required by Nektar, you post a bond in such reasonable amount as Nektar may direct as indemnity against any claim that may be made with respect to that certificate
against Nektar. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>You should not send your certificates now and should send them only pursuant to instructions set forth in the letters of transmittal to be mailed to stockholders
promptly after the effective time of the Merger. In all cases, the merger consideration will be provided only in accordance with the procedures set forth in this proxy statement and such letters of
transmittal.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One
year after the effective time of the Merger, the paying agent will deliver to the surviving corporation any funds made available to the paying agent which have not been disbursed to
holders of Aerogen stock certificates. Any holders of certificates who have not complied with the above-described procedures to receive payment of the merger consideration during such one year period
may thereafter look only to the surviving corporation for payment of the merger consideration to which they are entitled. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
cash paid to you upon conversion of your shares of Aerogen Capital Stock will be issued in full satisfaction of all rights relating to the shares of Aerogen Capital Stock. </FONT></P>

<P><FONT SIZE=2><B>Effect on Aerogen Stock Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each stock option to acquire Aerogen common stock outstanding at the effective time of the Merger, whether or not then vested or exercisable, will be fully vested
in accordance with the terms of our stock option plans and canceled. In consideration of such cancellation, Aerogen will pay to the holder of each such canceled stock option, as soon as practicable
after the effective time, a cash payment equal to the product of (1)&nbsp;the excess of $0.75 over the per share exercise price of such stock option, if any, multiplied by (2)&nbsp;the aggregate
number of shares of common stock then subject to such stock option, taking into account the vesting acceleration provided for under the terms of our stock option plans. </FONT></P>

<P><FONT SIZE=2><B>Effect on Aerogen Employee Stock Purchase Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Employee Stock Purchase Plan will be terminated immediately prior to the effective time of the Merger with the last day of the then current offering period
being the last business day prior to the effective time. Any purchase rights outstanding at the time of termination of the purchase plan will be exercised, and each share of Aerogen common stock
acquired upon exercise of such purchase right will be converted in the Merger into the right to receive $0.75 in cash, without interest. </FONT></P>

<P><FONT SIZE=2><B>Effective Time of the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger will become effective upon the filing of a certificate of merger with the Delaware Secretary of State or at such later time as is agreed upon by Nektar
and Aerogen and specified in the certificate of merger. The filing of the certificate of merger will occur on the closing date. Subject to the terms and conditions of the Merger Agreement and in
accordance with Delaware law, at the effective time of the Merger, Merger Sub, an indirect wholly-owned subsidiary of Nektar and a party to the Merger Agreement, will merge with and into Aerogen.
Aerogen will survive the Merger as an indirect wholly-owned Delaware subsidiary of Nektar. </FONT></P>

<P><FONT SIZE=2><B>Representations and Warranties  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger Agreement contains representations and warranties of each party to the agreement. The representations and warranties in the Merger Agreement are
complicated and not easily summarized. You are urged to read carefully and in their entirety the sections of the Merger Agreement entitled "Representations and Warranties of the Company" and
"Representations and Warranties of Parent and Merger Sub" in Annex A to this proxy statement. However, the assertions embodied in these representations and warranties are qualified by information in a
confidential disclosure schedule that Aerogen provided to Nektar in connection with the signing of the Merger Agreement. While Aerogen does not believe that the confidential disclosure schedule
contains information that securities laws require it to publicly disclose, other than information that has already been so disclosed, the disclosure schedule does contain information that modifies,
qualifies and creates exceptions to the representations and warranties set forth in the attached Merger Agreement. Accordingly, you should not rely on the representations and warranties as
characterizations of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

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<BR>

<P><FONT SIZE=2>actual
state of facts, since they are modified in important part by the underlying disclosure schedule. The disclosure schedule contains information that has been included in Aerogen's general prior
public disclosures, as well as additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date
of the agreement, which subsequent information may or may not be fully reflected in Aerogen's public disclosures. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Merger Agreement contains customary representations and warranties of Aerogen as to, among other things: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
organization, good standing and corporate power;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
capitalization;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>authorization,
execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of our stockholders, third parties and
governmental authorities relating to, the Merger Agreement and the transactions contemplated by the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
SEC documents, undisclosed liabilities and internal controls;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>certain
changes or events since June&nbsp;30, 2005;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>legal
proceedings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>compliance
with applicable laws and permits;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
in this proxy statement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>tax
matters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>employee
benefits and labor matters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>environmental
matters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>contracts;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>real
property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>title
to properties;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>intellectual
property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>insurance;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>opinion
of our financial advisor;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>brokers
and other advisors; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>state
takeover statutes. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Merger Agreement contains representations and warranties by Nektar and Merger Sub as to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>organization,
good standing and corporate power;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>authorization,
execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of third parties and governmental
authorities relating to, the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>governmental
approvals;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>information
supplied in this proxy statement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>ownership
and operations of Merger Sub; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>36</FONT></P>

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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
sufficiency of cash resources to pay the merger consideration;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>brokers
and other advisors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>non-ownership
of capital stock of Aerogen; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Nektar's
SEC documents and undisclosed liabilities. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
representations and warranties of Aerogen, Nektar and Merger Sub will expire upon completion of the Merger or termination of the Merger Agreement. </FONT></P>

<P><FONT SIZE=2><B>Covenants  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Conduct of Aerogen Business  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed in the Merger Agreement that, except as permitted or contemplated by the Merger Agreement or required by law and except for certain actions set
forth on a schedule or otherwise consented to by Nektar in writing (which consent, if requested by Aerogen on or after November&nbsp;10, 2005, may not be unreasonably withheld or delayed), we will
carry on our business in the ordinary course, consistent with past practice, comply in all material respects with all applicable laws and the
requirements of all material contracts, and use commercially reasonable efforts to maintain and preserve intact our business organization and the goodwill of those having business relationships with
us and retain the services of our present officers and key employees. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we have agreed that until the effective time of the Merger, subject to specified exceptions, neither we nor any of our subsidiaries may, without Nektar's prior written
consent (which, if requested by Aerogen on or after November&nbsp;10, 2005 may not be unreasonably withheld or delayed): </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>issue,
sell, grant, dispose of, pledge or otherwise encumber any shares of our capital stock, voting securities or equity interests, or any securities or rights convertible
into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of our capital stock, voting securities or equity interests, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any shares of our capital stock, voting securities or equity interests or any securities or rights convertible into,
exchangeable or exercisable for, or evidencing the right to subscribe for, any shares of our capital stock, voting securities or equity interests;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>redeem,
purchase or otherwise acquire any of our outstanding shares of capital stock or any rights, warrants or options to acquire any shares of our capital stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>except
for the quarterly dividends to the holders of Aerogen's Series&nbsp;A-1 Preferred Stock, declare, set aside for payment or pay any dividend on, or make
any other distribution in respect of, any shares of our capital stock or otherwise make any payments to our stockholders in their capacity as such;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>split,
combine, subdivide or reclassify any shares of our capital stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>waive
any stock repurchase rights, accelerate, amend or change the period of exercisability of options or reprice any options or authorize cash payments in exchange for any
options;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>incur
any indebtedness for borrowed money or guarantee any indebtedness;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>sell,
transfer, lease, license, mortgage, encumber or otherwise dispose of (including pursuant to a sale-leaseback transaction or an asset securitization
transaction) any of our properties or assets (including securities of our subsidiaries) to any person; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>make
any capital expenditures, except in the ordinary course of business consistent with past practice and in an amount not in excess of $1,000,000 in the aggregate during
any three-consecutive month period;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>make
any acquisition (by purchase of securities or assets, merger or consolidation, or otherwise) of any other entity, business, division or assets;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>make
any investment (by contribution to capital, property transfers, purchase of securities or otherwise) in, or loan or advance to, any person;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>increase
in any manner the compensation of or the fringe benefits of, pay or grant any bonus, change of control, severance or termination pay to any of our directors,
officers or employees other than increases in salaries, wages and benefits of non-officer employees made in the ordinary course of business consistent with past practice;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, pension, retirement, severance, deferred compensation or other compensation or benefit plan or agreement with, for or in respect of, any stockholder, director,
officer, other employee or consultant;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>hire
officers or directors or non-officer employees other than pursuant to offer letters and agreements in the ordinary course of business consistent with past
practice and which are "at will";
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>make
or change any material election concerning taxes or tax returns, settle or compromise any tax liability or refund, file any amendment to a tax return, enter into any
closing agreement or consent to any extension or waiver of any limitation period with respect to taxes;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>make
any material changes in financial or tax accounting methods, principles or practices or change an annual accounting period, except insofar as may be required by a
change in generally accepted accounting principles or applicable law;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>except
for the charter amendment, amend our charter documents or the charter documents of our subsidiaries;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>adopt
a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into any binding agreement, agreement in principle, letter or intent, memorandum of understanding or similar agreement with respect to any material joint venture,
strategic partnership or alliance;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>commence
or settle any lawsuit, threat of any lawsuit or proceeding or other investigation by or against Aerogen or any subsidiary or relating to any of their businesses,
properties or assets;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>grant
any exclusive rights with respect to any of Aerogen's intellectual property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into or renew any contracts containing, or otherwise subject Aerogen or Nektar to, any non-competition, exclusivity, "most favored nations" or other
preferential pricing or other material restrictions on Aerogen or Nektar, or any of their respective businesses, following the closing of the Merger;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>modify
or amend in a manner adverse in any material respect to Aerogen, or terminate any material contract in effect as of the date of the Merger Agreement, or waive,
release or assign any material rights or claims thereunder, in each case, in a manner adverse in any material respect to Aerogen, other than any modification, amendment or termination of any such
material contract in the ordinary course of business, consistent with past practice; or </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>38</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>agree,
in writing or otherwise, to take any of the foregoing actions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
covenants in the Merger Agreement relating to the conduct of our business are complicated and not easily summarized. You are urged to read carefully and in its entirety the section
of the Merger Agreement entitled "Conduct of Business of the Company" in Annex A to this proxy statement. </FONT></P>

<UL>

<P><FONT SIZE=2><I> No Solicitation of Transactions by Aerogen  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed, prior to the Merger becoming effective or the Merger Agreement being terminated in accordance with its terms, to certain limitations on our
ability to take action with respect to other acquisition transactions. Except as set forth below, we have agreed not to (and to cause our subsidiaries' respective directors, officers and agents not
to): </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>solicit,
initiate, knowingly facilitate, knowingly encourage or knowingly induce any announcement of, or the initiation of any proposals that constitute, or any inquiry or
proposal from any third party that would reasonably be expected to lead to, any Takeover Proposal (as defined below);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>participate
in any discussions or negotiations regarding, or furnish any non-public information with respect to, any takeover proposal; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into any agreement, arrangement or understanding with respect to, or otherwise endorse, any Takeover Proposal; </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>and
have agreed that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>as
promptly as practicable after any member of our Board or any of our officers becomes aware of the receipt by Aerogen of any Takeover Proposal or any request for
non-public information or inquiry that could reasonably be expected to lead to a Takeover Proposal, we must provide Nektar with oral and written notice of the material terms and conditions
of the Takeover Proposal, request or inquiry; the identity of the party(ies) making the Takeover Proposal, request or inquiry and a copy of the Takeover Proposal, request for non-public
information or inquiry that is in writing, and keep Nektar currently and reasonably informed regarding the status and material details of the Takeover Proposal, request or inquiry;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>neither
the Board nor any committee thereof will withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Nektar, the Board's recommendation
that our stockholders adopt the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>neither
Aerogen nor any of its officers or members of the Board will recommend, and neither the Board nor any committee thereof will approve or recommend, or propose
publicly to approve or recommend, any Takeover Proposal; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>neither
the Board nor any committee thereof will authorize or cause Aerogen to enter into any letter of intent, agreement in principle, memorandum of understanding, merger,
acquisition, purchase or similar agreement related to any Takeover Proposal. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
these limitations: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we receive a bona fide written Takeover Proposal not solicited by Aerogen in violation of the non-solicitation provisions of the Merger Agreement that the
Board determines in good faith (after consultation with its financial advisor) is reasonably likely to result in a Superior Proposal (as defined below) and with respect to which the Board determines
in good faith, after consulting with outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties to our stockholders, then we may (but only prior to
obtaining stockholder approval of the Merger), in response to such Takeover Proposal (1)&nbsp;furnish information to the person making such Takeover Proposal, but only after such person enters into </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>39</FONT></P>

<HR NOSHADE>
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<UL>
<UL>

<P><FONT SIZE=2>a
confidentiality agreement with us and provided that we concurrently with the delivery to such person, we deliver to Nektar written notice of our intent to furnish such information to such person and
furnish to Nektar all such information not previously provided to it, and (2)&nbsp;participate in discussions and negotiations with such person regarding such Takeover Proposal (provided that
Aerogen gives Nektar written notice of Aerogen's intent to enter into such discussions and negotiations); and </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prior
to obtaining stockholder approval of the Merger Agreement the Board may, in response to the receipt of a Superior Proposal (which has not been withdrawn), withdraw or
modify its recommendation that our stockholders adopt the Merger Agreement (a "Change in Recommendation"), and following any such Change in Recommendation, may approve or recommend (and propose
publicly to approve or recommend) such Superior Proposal, and may, contemporaneously with the termination of the Merger Agreement, cause Aerogen to enter into a letter of intent, agreement, in
principle, memorandum of understanding, merger, acquisition or purchase agreement or other agreement related to any superior Proposal if (1)&nbsp;Aerogen has delivered written notice that Aerogen
intends to effect a Change of Recommendation at least two business days (the "Match Period") prior to publicly effecting the Change of Recommendation, (2)&nbsp;Aerogen has provided to Nektar a copy
of all written information related to Aerogen that was delivered to the person making the Superior Proposal, (3)&nbsp;during the Match Period, Aerogen provides Nektar with a reasonable opportunity
to make such adjustments in the terms and conditions of the Merger Agreement, and negotiates in good faith with respect to any such adjustments proposed by Nektar, as would enable Aerogen to recommend
that the stockholders adopt the Merger Agreement and not make a Change of Recommendation; (4)&nbsp;the Board has concluded in good faith, after receipt of advice of its outside legal counsel, that,
in light of such Superior Proposal and after considering any binding written offer made by Nektar, the failure of the Board to effect a Change of Recommendation is reasonably likely to result in a
breach of its fiduciary obligations under applicable law; and (5)&nbsp;such Superior Proposal has not resulted from Aerogen willfully and materially breaching any of the non-solicitation
provisions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot submit to the vote of our stockholders any Takeaway Proposal, or publicly propose to do so, unless the Merger Agreement has been validly terminated in accordance with its
terms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Merger Agreement, "Takeover Proposal" means any proposal or offer from any person (other than Nektar and its affiliates) providing for any: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>acquisition
(whether in a single transaction or a series of related transactions) of our assets having a fair market value equal to 20% or more of our consolidated assets;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>direct
or indirect acquisition (whether in a single transaction or a series of related transactions) of 20% or more of the voting power of Aerogen;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>tender
offer or exchange offer that if consummated would result in any person beneficially owning 20% or more of the voting power of Aerogen;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>merger,
consolidation, share exchange, business combination, recapitalization or similar transaction involving us (other than mergers, consolidations, business combinations
or similar transactions involving solely us and/or one or more of our subsidiaries or that if consummated would result in a person beneficially owning not more than 20% of any class of our equity
securities, in each case excluding the Merger); or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
liquidation or dissolution of Aerogen. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However,
for purposes of the termination fee provisions of the Merger Agreement, as described below under "Fees and Expenses," the references to "20%" in the definition of Takeover
Proposal will instead refer to "50%". </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Merger Agreement, "Superior Proposal" means a bona fide written offer to acquire, for consideration consisting of cash and/or securities, all or substantially all of the assets
of Aerogen or a majority of the total outstanding voting securities of Aerogen, as a result of which our stockholders immediately preceding such transaction would hold less than 50% of the equity
interests in the surviving or resulting entity of such transaction and any direct or indirect parent or subsidiary of such
entity, which is on terms and conditions which our Board determines in its good faith judgment (after consultation with an its financial advisor), taking into account, among other things, all legal,
financial, regulatory and other aspects of the offer and the person making the offer, to be more favorable, from a financial point of view, to Aerogen's stockholders than the Merger and is reasonably
capable of being consummated. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Other Covenants  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger Agreement contains a number of other covenants, including covenants relating to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>preparation
of this proxy statement and holding of the stockholders meeting;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>recommendation
by our Board that our stockholders adopt the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>cooperate
and use commercially reasonable efforts to consummate the Merger;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>public
announcements;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>access
to information and confidentiality;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>notification
of breaches of representations and warranties, breaches of covenants and certain other matters;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>indemnification
and insurance;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>securityholder
litigation;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fees
and expenses; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>third
party consents. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Conditions to the Merger  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties' obligations to complete the Merger are subject to the following conditions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
adoption of the Merger Agreement and approval of the Certificate of Amendment by the requisite vote of Aerogen's stockholders; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>no
law, injunction, judgment or ruling by any governmental authority will have been enacted or will be in effect that enjoins, restrains, prevents or prohibits the
completion of the Merger or makes the completion of the Merger illegal. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar's
and Merger Sub's obligations to complete the Merger are also subject to the following conditions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
representations and warranties must be true and correct as of the date of the Merger Agreement and as of the closing date of the Merger (as though made on the closing
date), except as would not reasonably be expected to have, individually or in the aggregate, a material adverse effect (as defined below) on us;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>certain
capitalization representations and warranties must be true and correct in all material respects as of the closing date of the Merger as though made on the closing
date, except to the extent the failure to be so true and correct does not result in an increase of at least 5% of the </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>41</FONT></P>

<HR NOSHADE>
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<UL>
<UL>

<P><FONT SIZE=2>number
of shares of our common stock, determined on a fully-diluted, treasury-stock basis, or of the number of shares of our preferred stock; </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
must have performed in all material respects all of our obligations under the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Nektar
must receive a certificate signed on our behalf by our CEO or CFO certifying as to the matters described in the immediately preceding three bullet points;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>since
the date of the Merger Agreement through the closing date of the Merger, there must not have been any change, event, occurrence or circumstance that, individually or
in the aggregate, has had or would reasonably be expected to have a material adverse effect on us; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>there
must not be any legal, administrative, arbitral or other proceeding pending before any governmental entity in which a governmental entity is a party that would or
would reasonably be expected to restrain, enjoin, prevent, prohibit or make illegal the completion of the Merger or other transactions contemplated by the Merger Agreement or impose material
limitations on the ability of Nektar to effectively exercise full rights of ownership of Aerogen. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Merger Agreement provides that a "material adverse effect" on us means any change, event, occurrence, violation of any legal, contractual or similar obligation, inaccuracy, effect or
circumstance (any such item, an "Effect") which, individually, or when taken together with all other Effects that have occurred prior to the date of determination of the occurrence of a material
adverse effect: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>is
materially adverse to our business or assets (tangible or intangible), capitalization, results of operations or financial condition; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>materially
impedes our authority to consummate the Merger and other transactions contemplated by the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2> that none of the following will be deemed either alone or in combination to constitute, and none of the
following will be taken into account in determining whether there has been or will be, a material adverse effect on us: (A)&nbsp;any Effect to the extent resulting from changes to the U.S. or global
economy in general (except to the extent such changes have a materially disproportionate effect on us); (B)&nbsp;any Effect to the extent resulting from changes in the industries in which the
Company operates (except to the extent such changes have a materially disproportionate effect on us); (C)&nbsp;any Effect to the extent resulting from fluctuations in the value of currencies;
(D)&nbsp;any Effect to the extent resulting from acts of terrorism, war, national or international calamity or any other similar event (except to the extent such Effect has a materially
disproportionate effect on us); (E)&nbsp;any Effect to the extent resulting from the announcement or pendency of the Merger Agreement or any of the transactions contemplated by the Merger Agreement
(including any Effect to the extent resulting from any litigation, any loss of or delay in placing customer orders or any departure or loss of employees to the extent arising from such announcement or
pendency of the Merger Agreement, the Merger or any of the other transactions contemplated by the Merger Agreement); (F)&nbsp;any Effect to the extent resulting from our failure to meet internal or
analysts' expectations or projections (however, the underlying circumstances giving rise to such failure may be taken into account unless otherwise excluded pursuant to this paragraph); (G)&nbsp;any
Effect resulting from expenditures of up to $4.5&nbsp;million in cash in each successive 90&nbsp;day period beginning after August&nbsp;12, 2005 in the ordinary course of business; </FONT> <FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>,
that this clause "(G)" shall no longer qualify the definition of "material adverse effect" if all three of the following conditions
are met: (1)&nbsp;our available cash is less than $1.5&nbsp;million; (2)&nbsp;Nektar offers to provide us (and does provide if we accept such offer) with an unsecured loan at an interest rate of
the lower of (a)&nbsp;the maximum interest rate permissible by law and (b)&nbsp;15%, payable not earlier than the earlier to occur of (x)&nbsp;the date thirty days following the consummation of
a Takeover Proposal (for purposes of this </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>42</FONT></P>

<HR NOSHADE>
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<UL>
<UL>

<P><FONT SIZE=2>paragraph
all references to "20%" in the definition of "Takeover Proposal" shall be deemed to refer to "50%" instead) and (y)&nbsp;the first anniversary of the date of the loan, in an amount
sufficient to operate our business in the ordinary course of business from the date of such offer through February&nbsp;12, 2006, but in no event greater than $10&nbsp;million, that is not
convertible into equity and is otherwise on commercially reasonable terms (the "Loan"); and (3)&nbsp;we do not accept the Loan within five business days of receiving such offer from Nektar. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
obligation to complete the Merger is also subject to the following conditions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Nektar's
and Merger Sub's representations and warranties must be true and correct as of the date of the Merger Agreement and as of the closing date of the Merger (as though
made on the
closing date), except as would not reasonably be expected to prevent or materially delay or materially impair the ability of Nektar to consummate the Merger;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Nektar
and Merger Sub must have performed in all material respects all of their respective obligations under the Merger Agreement; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>We
must receive a certificate signed on behalf of Nektar's CEO or CFO certifying as to the matters described in the immediately preceding two bullet points. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Termination of the Merger Agreement  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Merger Agreement may be terminated at any time prior to the effective time of the Merger: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>by
mutual written consent of Aerogen and Nektar;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>by
either Aerogen or Nektar if:
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
Merger is not completed on or before February&nbsp;12, 2006; provided that a party may not so terminate the Merger Agreement if the failure of the Merger to be
completed on or before February&nbsp;12, 2006 was primarily due to the failure of such party or any affiliate of such party to perform any of its obligations under the Merger Agreement;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
law, injunction, judgment or ruling shall have been enacted and shall have become final and nonappealable that enjoins, restrains, prevents or prohibits the completion
of the Merger or makes the completion of the Merger illegal; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
required vote of our stockholders is not obtained to adopt the Merger Agreement and approve the Certificate of Amendment at a meeting of our stockholders duly convened
therefore or at any adjournment thereof;
<BR><BR></FONT></DD></DL>
</DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>by
Nektar:
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
we breach a representation, warranty, covenant or agreement in the Merger Agreement such that we do not perform in all material respects all obligations required to be
performed by us under the Merger Agreement prior to the closing date of the Merger, or any representation or warranty shall have become untrue, subject to specified materiality thresholds and our
ability to cure such breach; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
(a)&nbsp;the Board: withdraws or modifies in a manner adverse to Nektar its recommendation that our stockholders adopt the Merger Agreement; fails to reconfirm such
recommendation or fails to recommend against a Takeover Proposal under certain circumstances; or adopts resolutions approving or recommending any Takeover Proposal; or (b)&nbsp;we enter into any
letter of intent, agreement in principle, memorandum of understanding, merger, acquisition or purchase agreement related to any Takeover Proposal (except for certain confidentiality agreements); </FONT></DD></DL>
</DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>43</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dq1423_1_44"> </A>
<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>by
us:
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>if
Nektar breaches a representation, warranty, covenant or agreement in the Merger Agreement such that Nektar does not perform in all material respects all obligations
required to be performed by it under the Merger Agreement prior to the closing date of the Merger, or any representation or warranty shall have become untrue, subject to specified materiality
thresholds and the ability of Nektar to cure such breach; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>following
the Board's determination to accept, or enter into a definitive agreement with respect to, a Superior Proposal, provided that we have complied with certain of the
no-solicitation provisions described above and contemporaneously with such termination, we pay the termination fee discussed below. </FONT></DD></DL>
</DD></DL>
</UL>

<P><FONT SIZE=2><B>Fees and Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Merger Agreement, whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger Agreement shall be paid
by the party incurring such fees or expenses. However, we must pay to Nektar an amount equal to $1,120,000 under any of the following circumstances: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
terminate the Merger Agreement pursuant to the provision allowing for termination by us to accept a Superior Proposal as described above;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Nektar
terminates the Merger Agreement pursuant to the provision allowing for termination if the Board withdraws or modifies its recommendation, fails to reaffirm such
recommendation or fails to recommend against a Takeover Proposal under certain circumstances, or adopts resolutions approving or recommending any Takeover Proposal, or if we enter into any letter of
intent, agreement in principle, memorandum of understanding, merger, acquisition or purchase agreement related to any Takeover Proposal (except for certain confidentiality agreements);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>(1)
we or Nektar terminate the Merger Agreement pursuant to the provision allowing for termination for failure to obtain our stockholders' approval, (2)&nbsp;at the time
of our stockholder meeting a Takeover Proposal (for purposes of this paragraph, the references to "20%" in the definition of "Takeover Proposal" are deemed to refer to "50%") has been publicly
announced (and not withdrawn); and (3)&nbsp;within twelve months after the date of the termination of the Merger Agreement we and the person who had made such Takeover Proposal consummate an
Acquisition Transaction (as defined below); or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>(1)
we terminate the Merger Agreement pursuant to the provision allowing for termination if the Merger is not consummated on or by February&nbsp;12, 2006, (2)&nbsp;a
Takeover Proposal (for purposes of this paragraph, the references to "20%" in the definition of "Takeover Proposal" are deemed to refer to "50%") has been publicly announced (and not withdrawn); and
(3)&nbsp;within twelve months after the date of the termination of the Merger Agreement we and the person who had made such Takeover Proposal consummate an Acquisition Transaction (as defined
below). </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Merger Agreement, "Acquisition Transaction" means any transaction or series of transactions involving: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>an
acquisition (whether in a single transaction or a series of related transactions) of our assets having a fair market value equal to 50% or more of Aerogen's consolidated
assets;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>direct
or indirect acquisition (whether in a single transaction or a series of related transactions) of 50% or more of the voting power of Aerogen; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>44</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>tender
offer or exchange offer that if consummated would result in any person beneficially owning 50% or more of any class of the voting power of Aerogen; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>merger,
consolidation, share exchange, business combination, recapitalization or similar transaction (other than liquidation or dissolution of our wholly-owned subsidiaries)
or similar transaction involving us (other than mergers, consolidations, business combinations or similar transactions (1)&nbsp;involving solely us and/or one or more of our subsidiaries and
(2)&nbsp;that if consummated would result in a person beneficially owning not more than 50% of any class of our equity securities in each case excluding the Merger). </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>45</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<UL>
</UL>
</UL>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ds1423_1_46"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1423_proposal_2__the_certificate_of_amendment"> </A>
<A NAME="toc_ds1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROPOSAL 2:<BR>  THE CERTIFICATE OF AMENDMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following description summarizes the material provisions of the Certificate of Amendment and is qualified in its entirety by reference to the complete text of
the Certificate of Amendment. The Certificate of Amendment is included as Annex D to this proxy statement. We encourage you to read it carefully and in its entirety. The Certificate of Amendment has
been included to provide you with information regarding its terms. It is not intended to provide any other factual information about Aerogen. Such information can be found elsewhere in this proxy
statement and in the other public filings Aerogen makes with the SEC, which are available without charge at www.sec.gov. </FONT></P>

<P><FONT SIZE=2><B>Dividend Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3(a) of the Certificate of Designations provides for quarterly dividends payable to the holders of the Company's Series&nbsp;A-1
Preferred Stock. The Certificate of Amendment provides that such dividends, including the dividends for the quarters ended June&nbsp;30, 2005 and September&nbsp;30, 2005, shall not accrue or be
payable so long as the Merger Agreement is effective. Therefore, if the Certificate of Amendment is approved and the Merger closes as anticipated, no dividends will be paid to the holders of the
Series&nbsp;A-1 Preferred Stock for the quarter ended June&nbsp;30, 2005 or thereafter. If the Merger does not close, then upon termination of the Merger Agreement the dividends would
be reinstated and become due and payable in accordance with the Certificate of Designations and Certificate of Amendment. </FONT></P>

<P><FONT SIZE=2><B>Liquidation Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Section&nbsp;4(c) of the Certificate of Designations, the holders of a majority of the Series&nbsp;A-1 Preferred Stock, including Xmark
Fund, L.P. and Xmark Fund,&nbsp;Ltd., may elect to treat the Merger as a dissolution or winding up of the Company, which would entitle the holders of Series&nbsp;A-1 Preferred Stock to
receive out of the merger consideration thirty dollars ($30.00) per share of Preferred Stock held by them (the "Liquidation Preference Payment"), prior to any payment to the holders of Common Stock,
and also thereafter to participate on an as-converted basis in any distributions to holders of Aerogen common stock. The Certificate of Amendment provides that the Merger shall not
constitute such a dissolution or winding
up of the Company, and states that if the Merger is consummated, the holders of Series&nbsp;A-1 Preferred Stock will have rights only to the consideration specified in the Merger
Agreement. </FONT></P>

<P><FONT SIZE=2><B>Recommendation of the Board of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a meeting of the Board held on August&nbsp;12, 2005, the Board determined that the Merger Agreement and the Merger were in the best interests of Aerogen and
its stockholders, approved the Merger Agreement, the Merger and the Certificate of Amendment and recommended that Aerogen's stockholders adopt the Merger Agreement and approve the Merger Agreement and
the Certificate of Amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Aerogen's board of directors recommends that its stockholders vote "FOR" the Certificate of Amendment.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>46</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ds1423_1_47"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1423_security_ownership_of_certain___sec02525"> </A>
<A NAME="toc_ds1423_2"> </A>
<BR></FONT><FONT SIZE=2><B>SECURITY OWNERSHIP OF<BR>  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the beneficial ownership of Aerogen's common stock and preferred stock as of August&nbsp;12, 2005, except as otherwise noted,
(i)&nbsp;by each person, entity or "group" (within the meaning of Section&nbsp;13(d)(3) of the Securities Exchange Act of 1934, as amended) of persons or entities known by Aerogen to be beneficial
owners of more than 5% of Aerogen's common stock, (ii)&nbsp;by each director, the chief executive officer and each of the four other most highly compensated executive officers, and (iii)&nbsp;by
all executive officers and directors as a group. Percentage ownership is based on 8,337,246 shares of Aerogen common stock and 887,061 shares of Series&nbsp;A-1 Preferred outstanding on
August&nbsp;12, 2005, together with options or warrants for each stockholder that are currently exercisable or exercisable within 60&nbsp;days of August&nbsp;12, 2005. These shares are not
deemed outstanding for purposes of computing the percentage ownership of any other person. This table is based upon information supplied to us by officers, directors and principal stockholders and
filings made with the Securities and Exchange Commission. Except as described below, each person has sole voting and investment power with respect to the common stock and preferred stock described in
the table. Unless otherwise indicated, the address of each of the individuals named below is: c/o Aerogen,&nbsp;Inc., 2071 Stierlin Court, Suite 100, Mountain View, California 94043. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1><B>Beneficial Ownership<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Shares of<BR>
Common Stock<BR>
Beneficially<BR>
Owned(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Common Stock<BR>
Total(2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Shares of<BR>
Preferred Stock<BR>
Beneficially<BR>
Owned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Preferred Stock<BR>
Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><B>5% Holders</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Entities Affiliated with Xmark<BR>
Asset Management, LLC(3)<BR>
152 West 57<SUP>th</SUP>, 21<SUP>st</SUP> Floor<BR>
New York, NY 10019</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1,133,330</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>6.59</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>113,333</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>12.78</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Evan Sturza(4)<BR>
156 West 56<SUP>th</SUP> Street,<BR>
16<SUP>th</SUP> Floor<BR>
New York, NY 10019</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
35,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with OrbiMed<BR>
Advisors, LLC(5)<BR>
767 Third Avenue,<BR>
30<SUP>th</SUP> Floor<BR>
New York, NY 10017</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
200,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
22.55</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with HealthCap(6)<BR>
c/o HealthCap IV, GP SA<BR>
18 Avenue d'Ouchy<BR>
1006 Lausanne<BR>
Switzerland</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
166,666</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
18.78</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Perceptive Life Sciences Master<BR>
Fund,&nbsp;LLC(7)<BR>
c/o Perspective Advisors, LLC<BR>
5437 Connecticut Avenue NW,<BR>
Suite 100<BR>
Washington, DC 20015</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
118,333</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
13.34</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<BR>
<P ALIGN="CENTER"><FONT SIZE=2>47</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=54,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=137154,FOLIO='47',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with North<BR>
Sound Capital, LLC(8)<BR>
53 Forest Avenue, Suite 202<BR>
Old Greenwich, CT 06870</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with BVF<BR>
Partners LP(9)<BR>
227 West Monroe Street,<BR>
Suite 4800<BR>
Chicago, Illinois 60606</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
SF Capital Partners, Ltd.(10)<BR>
c/o Staro Asset<BR>
Management, LLC<BR>
3600 South Lake Drive<BR>
St. Francis, WI 53235</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
43,410</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.89</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with ProMed<BR>
Management, Inc.(11)<BR>
125 Cambridgepark Drive<BR>
Cambridge, MA 02140</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
8,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
Entities Affiliated with Pequot<BR>
Capital Management, Inc.(12)<BR>
500 Nyala Farm Rd.<BR>
Westport, CT 06880</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2><BR>
SDS Capital Group SPC, Ltd.(13)<BR>
c/o SDS Capital Group<BR>
53 Forest Avenue, Suite 203<BR>
Old Greenwich, CT 06870</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
859,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
4.99</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
45,000</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
5.07</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><BR><FONT SIZE=2><B>Directors and Executive Officers:</B></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Jane E. Shaw, Ph.D.(14)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>683,401</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>3.86</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>17,155</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1.93</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Yehuda lvri(15)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>227,708</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1.32</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>John S. Power(16)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>173,509</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Robert Roe</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Jean-Jacques Bienaim&eacute;(17)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>15,531</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>John Hodgman</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Robert S. Breuil(18)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>135,201</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Bernard Collins(19)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>17,116</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Robert S. Fishman(20)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>130,303</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Phyllis I. Gardner, M.D.(21)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>13,777</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Nancy Isaac, J.D.(22)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>96,158</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Angela Strand(23)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>99,110</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Mauro Folena</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>Stacy Pryce</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>31,116</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%" VALIGN="TOP"><FONT SIZE=2>All executive officers and directors as a group (14 persons)(24)</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,733,910</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14.77</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>17,155</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.93</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Percentages
are not shown if holdings total less than 1% of total outstanding shares. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>48</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=55,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=424206,FOLIO='48',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
<A NAME="page_ds1423_1_49"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
outstanding stock options that will be vested on or before August&nbsp;12, 2005, to purchase shares of Aerogen common stock, as described in the footnotes below. Nektar may
be deemed to beneficially own shares of Aerogen common stock and Series&nbsp;A-1 Preferred Stock as a result of the voting agreements and irrevocable proxies executed in favor of Nektar by one of
our directors, two other senior executive officers and certain Series&nbsp;A-1 investors, including Xmark Fund,&nbsp;L.P. and Xmark Fund,&nbsp;Ltd. as described under "The
Merger&#151;Voting Agreements."
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
conversion of Series&nbsp;A-1 Preferred Stock ("Preferred Stock") into common stock and the exercise of the Warrants covered in this table is limited so that no
holder of Preferred Stock or Warrants covered by this table may beneficially own (with such holder's affiliates) more that 4.99% of Aerogen's then-outstanding common stock (the "4.99%
limitation"). Each stockholder may waive the 4.99% limitation upon 61&nbsp;days' written notice to Aerogen. The shares numbers in this column represent the maximum number of shares of common stock
that each selling stockholder subject to the 4.99% limitation could hold upon conversion of its Preferred Stock or exercise of its Warrants, based on 8,337,246 shares of common stock outstanding as of
August&nbsp;12, 2005, and accounting for the shares resulting from the conversion or exercise.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Includes
503,370 shares issuable upon the conversion of Preferred Stock held by Xmark Fund, LP and 629,960 shares issuable upon the conversion of Preferred Stock held by Xmark
Fund,&nbsp;Ltd. that are or will be convertible within 60&nbsp;days of August&nbsp;12, 2005, for a total of 1,133,330 shares which would, in aggregate, represent 12.0% of Aerogen's outstanding
common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such
conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding Common Stock following such conversion or exercise
(as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. On November&nbsp;3, 2004, Xmark Fund, LP and Xmark Fund,&nbsp;Ltd., provided
a written waiver of this limitation to Aerogen. Accordingly, as of January&nbsp;3, 2005, this 4.99% limitation on conversion no longer applies to the shares of Preferred Stock held by these two
funds. Xmark Asset Management, LLC ("XAM"), serves as investment manager for each of Xmark Fund, LP and Xmark Fund,&nbsp;Ltd., as well as various other private investment funds. Mitchell D. Kaye is
the Manager of XAM, and as such, Mr.&nbsp;Kaye possesses the power to vote and direct the disposition of all securities held by Xmark Fund, LP and Xmark Fund,&nbsp;Ltd. The foregoing is based in
part on shareholding information provided by the holder in connection with the voting agreement executed in favor of Nektar.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Information
is as provided by the holder in a Schedule&nbsp;13G/A filed with the SEC on June&nbsp;23, 2005. Includes (i)&nbsp;317,500 shares of common stock; (ii)&nbsp;335,000
shares issuable upon conversion of preferred stock; and (iii)&nbsp;335,000 shares issuable upon exercise of a warrant. However, the terms of such Preferred Stock and Warrants preclude the holders
thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates
beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided that such stockholder may waive the provision upon
61&nbsp;days' written notice to Aerogen. Evan Sturza is the owner of two separate entities that are exempt from registration under the Investment Advisors Act of 1940 (Ursus Capital Management LLC
and Ursus Capital Management Corp.) and provide investment management services to two privately owned entities exempt from registration under the Investment Company Act of 1940 (Ursus Capital, L.P.
and Ursus Management LLC). Each of the entities, which have different beneficial owners, hold less than five percent of the common stock of Aerogen, but the aggregate holdings of the two entities
exceed five percent of the common stock of Aerogen. Ursus Capital, L.P. is managed by Ursus Capital Management LLC. Evan Sturza is the sole member of Ursus Capital Management LLC, and </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>49</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=56,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=856943,FOLIO='49',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
<A NAME="page_ds1423_1_50"> </A>
<UL>

<P><FONT SIZE=2>possesses
the power to vote and to direct the disposition of all securities held by Ursus Capital, L.P. Ursus Offshore,&nbsp;Ltd. is managed by Ursus Capital Management Corp. Evan Sturza is the
investment manager of Ursus Capital Management Corp. and possesses the power to vote and to direct the disposition of all securities held by Ursus Offshore&nbsp;Ltd. For the purposes of
Rule&nbsp;13d-3 of the Securities Exchange Act of 1934, Mr.&nbsp;Sturza may be deemed to be the beneficial owner of the common stock of the Issuer held by these two separate entities.
Mr.&nbsp;Sturza disclaims beneficial ownership of such shares common stock. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;6,543 shares of common stock held by Capital Master Fund&nbsp;Ltd.; (ii)&nbsp;44,185 shares of common stock held by UBS Eucalyptus Fund LLC;
(iii)&nbsp;500,000 shares issuable upon the conversion of Preferred Stock held by Caduceus Capital Master Fund&nbsp;Ltd.; (iv)&nbsp;215,000 shares issuable upon the conversion of Preferred Stock
held by Cadeceus Capital II, LP; (v)&nbsp;500,000 shares issuable upon the conversion of Preferred Stock held by UBS Eucalyptus Fund, LLC; (vi)&nbsp;60,000 shares issuable upon the conversion of
Preferred Stock held by PW Eucalyptus Fund,&nbsp;Ltd; (vii)&nbsp;650,000 shares issuable upon the conversion of Preferred Stock held by Finsbury Worldwide Pharmaceutical Trust;
(viii)&nbsp;75,000 shares issuable upon the conversion of Preferred Stock held by HFR SHC Aggressive Master Fund, that are or will be convertible within 60&nbsp;days of August&nbsp;12, 2005;
(ix)&nbsp;500,000 shares issuable upon the exercise of a warrant held by Caduceus Capital Master Fund&nbsp;Ltd.; (x)&nbsp;215,000 shares issuable upon the exercise of a warrant held by Caduceus
Capital II, LP; (xv)&nbsp;500,000 shares issuable upon the exercise of a warrant held by UBS Eucalyptus Fund, LLC; (xi)&nbsp;60,000 shares issuable upon the exercise of a warrant held by PW
Eucalyptus Fund,&nbsp;Ltd; (xii)&nbsp;650,000 shares issuable upon the exercise of a warrant held by Finsbury Worldwide Pharmaceutical Trust; (xiii)&nbsp;75,000 shares issuable upon the exercise
of a warrant held by HFR SHC Aggressive Master Fund, that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, (xiv)&nbsp;37,642 shares issued or issuable in lieu of the cash
payment of quarterly dividends on the Preferred Stock held by Capital Master Fund&nbsp;Ltd. for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and
March&nbsp;31, 2005; (xv)&nbsp;19,001 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Caduceus Capital II, LP for the quarters ended
March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; (xvi)&nbsp;5,303 shares issued or issuable in lieu of the cash payment of quarterly
dividends on the Preferred Stock held by PW Eucalyptus Fund,&nbsp;Ltd. for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31,
2005; (xvii)&nbsp;57,440 shares issued of issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Finsbury Worldwide Pharmaceutical Trust for the quarters ended
March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; and (xviii)&nbsp;6,629 shares issued or issuable in lieu of the cash payment of quarterly
dividends on the Preferred Stock held by HFR SHC Aggressive Master Fund for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005,
for a total of 4,176,743 shares which would, in aggregate, represent 33.9% of Aerogen's outstanding common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof
from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially
owning in excess of 4.99% of Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days'
written notice to Aerogen. OrbiMed Advisors LLC and OrbiMed Capital LLC act as investment advisers to certain collective investment funds. Samuel D. Isaly owns a controlling interest in OrbiMed
Advisors LLC and OrbiMed Capital LLC. OrbiMed Capital LLC is the investment adviser for Finsbury Worldwide Pharmaceutical Trust and HFR SHC Aggressive Master Fund. OrbiMed Advisors LLC is the
investment adviser for Winchester Global Trust Company. OrbiMed Advisors LLC is also the general partner of Capital II, which is the joint venture partner of UBS Eucalyptus Fund, LLC and of PW
Eucalyptus Fund,&nbsp;Ltd. As such, Mr.&nbsp;Isaly has the power to vote and to direct the disposition of all the securities held by Winchester Global Trust </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>50</FONT></P>

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<!-- ZEQ.=5,SEQ=57,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=809599,FOLIO='50',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
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<P><FONT SIZE=2>Company,
UBS Eucalyptus Fund, LLC, PW Eucalyptus Fund,&nbsp;Ltd., Finsbury Worldwide Pharmaceutical Trust and HFR SHC Aggressive Master Fund. The foregoing is based in part on shareholding
information provided by the holder in connection with the voting agreement executed in favor of Nektar. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;1,371 shares of common stock held by OFCO Club IV; (ii)&nbsp;660,650 shares issuable upon the conversion of Preferred Stock held by HealthCap IV Bis, LP;
(iii)&nbsp;914,300 shares issuable upon the conversion of Preferred Stock held by HealthCap IV, LP; (iv)&nbsp;66,710 shares issuable upon the conversion of Preferred Stock held by HealthCap IV KB;
(v)&nbsp;25,000 shares issuable upon the conversion of Preferred Stock held by OFCO Club IV that are or will be convertible within 60&nbsp;days of August&nbsp;12, 2005; (vi)&nbsp;660,651
shares issuable upon the exercise of a warrant held by HealthCap IV Bis, LP; (vii)&nbsp;914,300 shares issuable upon the exercise of a warrant held by HealthCap IV, LP; (viii)&nbsp;66,709 shares
issuable upon the exercise of a warrant held by HealthCap IV KB; (ix)&nbsp;and 25,000 shares issuable upon the exercise of a warrant held by OFCO Club IV that are or will be exercisable within
60&nbsp;days of August&nbsp;12, 2005; (x)&nbsp;58,381 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by HealthCap IV Bis, LP for the
quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; (xi)&nbsp;80,796 shares issued or issuable in lieu of the cash payment of
quarterly dividends on the Preferred Stock held by HealthCap IV, LP for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005;
(xii)&nbsp;5,897 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by HealthCap IV KB for the quarters ended March&nbsp;31, June&nbsp;30,
September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; and (xiii)&nbsp;2,211 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock
held by OFCO Club IV for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005, for a total of 3,481,976 shares which would, in
aggregate, represent 29.8% of Aerogen's outstanding common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its
Preferred Stock or Warrants (as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's
outstanding common stock following such conversion or exercise (as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. HealthCap IV GP
S.A. is the general partner of HealthCap IV, L.P. and HealthCap IV Bis, L.P. and possesses, through its board of directors, the power to vote and direct the disposition of all securities held by
HealthCap IV, L.P. and HealthCap IV Bis, L.P. The board of directors of HealthCap IV GP S.A., consists of Peder Fredrikson, a Swedish citizen and Francois Kaiser, a Swiss citizen. HealthCap IV GP AB
is the general partner of HealthCap IV KB and possesses, through its board of directors, the power to vote and direct the disposition of all securities held by HealthCap IV KB. The board of directors
of HealthCap IV GP AB consists of Johan Christenson, Anki Forsberg, Staffan Lindstrand, Magnus Persson, Bj&ouml;rn Odlander and Per Samuelsson, each of whom are Swedish citizens. Odlander
Fredrikson&nbsp;&amp; Co AB as a member of OFCO Club IV and acting on behalf of the other members of OFCO Club IV has the power to vote and direct the disposition of all securities held by OFCO Club IV.
Odlander Fredrikson&nbsp;&amp; Co. AB is in turn controlled by Mr.&nbsp;Fredrikson and Mr.&nbsp;Odlander. Each of HealthCap IV, L.P., HealthCap IV Bis, L.P., HealthCap IV KB and OFCO Club IV are
parties to a parallel investment agreement pursuant to which each of them has agreed to invest in parallel. The Odlander, Fredrikson Group acts as investment advisor to each of HealthCap IV, L.P.,
HealthCap IV Bis, L.P. and HealthCap IV KB. The foregoing is based in part on shareholding information provided by the holder in connection with the voting agreement executed in favor of Nektar.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;55,974 shares of common stock; (ii)&nbsp;1,183,330 shares issuable upon the conversion of Preferred Stock which are or will be convertible within 60&nbsp;days
of August&nbsp;12, 2005; (iii)&nbsp;1,333,330 shares issuable upon the exercise of a warrant that is or will be exercisable within 60&nbsp;days of </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>51</FONT></P>

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<!-- ZEQ.=6,SEQ=58,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=592812,FOLIO='51',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
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<P><FONT SIZE=2>August&nbsp;12,
2005; and (iv)&nbsp;109,342 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Perceptive Life Sciences Master
Fund,&nbsp;Ltd. ("Perceptive") for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005, for a total of 2,681,976 shares which,
in aggregate, would represent 24.7% of Aerogen's outstanding common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as
applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of
Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. Joseph
E. Edelman is the Managing Member of Perceptive Advisors, LLC, the Investment Manager of Perceptive. As such, Mr.&nbsp;Edelman has sole dispositive and voting authority for all Perceptive's shares. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;7,166 shares of common stock held by North Sound Legacy Fund LLC; (ii)&nbsp;218,853 shares of common stock held by North Sound Legacy International
Fund&nbsp;Ltd.; (iii)&nbsp;12,413 shares of common stock held by North Sound Legacy Institutional Fund LLC; (iv)&nbsp;40,000 shares issuable upon the exercise of a warrant held by North Sound
Legacy Fund, LLC; (v)&nbsp;975,000 shares issuable upon the exercise of a warrant held by North Sound Legacy International,&nbsp;Ltd.; (vi)&nbsp;485,000 shares issuable upon the exercise of a
warrant held by North Sound Legacy Institutional Fund, LLC that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005(vii)&nbsp;1,910 shares issued or issuable in lieu of the
cash payment of quarterly dividends on the Preferred Stock held by North Sound Legacy Fund, LLC for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004
and March&nbsp;31, 2005; (viii)&nbsp;40,789 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by North Sound Legacy
International,&nbsp;Ltd. for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; and (ix)&nbsp;20,998 shares issued or
issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by North Sound Legacy Institutional Fund, LLC for the quarters ended March&nbsp;31, June&nbsp;30,
September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005, for a total of 1,802,532 shares which, in aggregate, would represent 18.3% of Aerogen's outstanding common stock. However, the
terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as
applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided
that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. North Sound Capital LLC is the investment advisor of North Sound Legacy Fund LLC, North Sound Legacy
Institutional Fund LLC, and North Sound Legacy International&nbsp;Ltd. Thomas McAuley is the managing member of North Sound Capital LLC, and is the individual with the power to vote and to direct
the disposition of all securities held by North Sound Legacy Fund, LLC, North Sound Legacy International,&nbsp;Ltd. and North Sound Legacy Institutional Fund, LLC.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;500,000 shares issuable upon the exercise of a warrant held by Biotechnology Value Fund, L.P.; (ii)&nbsp;316,663 shares issuable upon the exercise of a warrant
held by Biotechnology Value Fund II, L.P.; (iii)&nbsp;766,664 shares issuable upon the exercise of a warrant held by BVF Investments, L.L.C.; and (iv)&nbsp;83,333 shares issuable upon the exercise
of a warrant held by Investment 10, L.L.C., that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, for a total of 1,666,660 shares which would, in aggregate, represent 16.7%
of Aerogen's outstanding common stock. However, the terms of such Preferred Stock and warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or
warrants (as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock
following such conversion or exercise (as applicable). </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>52</FONT></P>

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<!-- ZEQ.=7,SEQ=59,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=692890,FOLIO='52',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;29,707 shares of common stock; (ii)&nbsp;434,100 shares of common stock issuable upon the conversion of Preferred Stock which are or will be convertible within
60&nbsp;days of August&nbsp;12, 2005; (iii)&nbsp;1,119,785 shares issuable upon exercise of warrants that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005; and
(iv)&nbsp;59,203 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by SF Capital Partners,&nbsp;Ltd. ("SF Capital") for the quarters ended
March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005, for a total of 1,642,795 shares which would, in aggregate, represent 22.0% of Aerogen's
outstanding common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as
applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following such
conversion or exercise (as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. In addition, no warrant issued to SF Capital can be
exercised if it would result in SF Capital and/or its affiliates beneficially owning more than 9.999% of our outstanding common stock. This provision cannot be waived. Michael A. Roth and Brian J.
Stark have the power to vote and to direct the disposition of all securities owned by SF Capital Partners&nbsp;Ltd.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;449,480 shares of common stock ProMed Partners LP; (ii)&nbsp;82,336 shares of common stock ProMed Partners II LP; (iii)&nbsp;72,564 shares of common stock
held by ProMed Offshore Fund&nbsp;Ltd.; (iv)&nbsp;80,000 shares issuable upon conversion of Preferred Stock held by David B. Musket; (v)&nbsp;83,330 shares issuable upon the exercise of warrants
held by Paul Scharfer; (vi)&nbsp;80,000 shares issuable upon the exercise of warrants held by David B. Musket; (vii)&nbsp;120,942 shares of common stock held by David B. Musket;
(viii)&nbsp;222,900 shares issuable upon the exercise of a warrant held by ProMed Partners LP; (ix)&nbsp;41,100 shares issuable upon the exercise of a warrant held by ProMed Partners II, LP.;
(x)&nbsp;36,000 shares issuable upon the exercise of a warrant held by ProMed Offshore Fund,&nbsp;Ltd. that are exercisable within 60&nbsp;days of August&nbsp;12, 2005; (xi)&nbsp;12,213
shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by ProMed Partners, LP for the quarters ended March&nbsp;31, June&nbsp;30,
September&nbsp;30, and December&nbsp;31, 2004; (xii)&nbsp;2,254 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by ProMed Partners II, LP
for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, and December&nbsp;31, 2004; (xiii)&nbsp;1,973 shares issued or issuable in lieu of the cash payment of quarterly
dividends on the Preferred Stock held by ProMed Offshore Fund,&nbsp;Ltd. for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, and December&nbsp;31, 2004; (xiv)&nbsp;2,653
shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Paul Scharfer for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30,
2004; (xv)&nbsp;7,071 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by David B. Musket for the quarters ended March&nbsp;31,
June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; (xvi)&nbsp;1,533 shares of common stock held by Barry Kurokawa and (xvii)&nbsp;124,579 shares of common
stock held by ProMed Offshore Fund II,&nbsp;Ltd., for a total of 1,420,928 shares which would, in aggregate, represent 16.0% of Aerogen's outstanding common stock. However, the terms of such
Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as applicable)
would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided that such
stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. ProMed Partners, L.P., ProMed Partners II, L.P. and ProMed Offshore Fund,&nbsp;Ltd. are managed by ProMed
Management,&nbsp;Inc. Barry Kurokawa and David B. Musket are the investment managers of ProMed Management,&nbsp;Inc. and as such, Mr.&nbsp;Kurokawa and Mr.&nbsp;Musket possess the power to
vote and to direct the disposition of all </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>53</FONT></P>

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<!-- ZEQ.=8,SEQ=60,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=3434,FOLIO='53',FILE='DISK129:[05PAL3.05PAL1423]DS1423A.;21',USER='SPALMERA',CD='16-SEP-2005;17:43' -->
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<UL>

<P><FONT SIZE=2>securities
held by ProMed Partners, L.P., ProMed Partners II, L.P., and ProMed Offshore Fund,&nbsp;Ltd. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(12)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;149,840 shares of common stock held by Pequot Scout Fund LP; (ii)&nbsp;69,170 shares of common stock held by Pequot Navigator Offshore Fund&nbsp;Inc.;
(iii)&nbsp;37,150 shares of common stock held by Pequot Mariner Master Fund; (iv)&nbsp;93,980 shares issuable upon the conversion of Preferred Stock held by Pequot Scout Fund, LP;
(v)&nbsp;43,990 shares issuable upon the conversion of Preferred Stock held by Pequot Navigator Offshore Fund,&nbsp;Inc.; (vi)&nbsp;22,870 shares issuable upon the conversion of Preferred Stock
held by Pequot Mariner Master Fund that are or will be convertible within 60&nbsp;days of August&nbsp;12, 2005; (vii)&nbsp;390,000 shares issuable upon the exercise of a warrant held by Pequot
Scout Fund, LP; (viii)&nbsp;181,000 shares issuable upon the exercise of a warrant held by Pequot Navigator Offshore Fund,&nbsp;Inc.; (ix)&nbsp;96,000 shares issuable upon the exercise of a
warrant held by Pequot Mariner Master Fund that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005; (x)&nbsp;21,367 shares issued or issuable in lieu of the cash payment of
quarterly dividends on the Preferred Stock held by Pequot Scout Fund for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, and December&nbsp;31, 2004; (xi)&nbsp;9,917 shares
issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Pequot Navigator Offshore Fund,&nbsp;Inc. for the quarters ended March&nbsp;31, June&nbsp;30,
September&nbsp;30, and December&nbsp;31, 2004; and (xii)&nbsp;5,261 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by Pequot Mariner
Master Fund for the quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30 and December&nbsp;31, 2004, for a total of 1,120,545 shares which would, in aggregate, represent 12.2% of
Aerogen's outstanding common stock. However, the terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants
(as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following
such conversion or exercise (as applicable), provided that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. Arthur J. Samberg is the sole owner of Pequot
Capital Management,&nbsp;Inc., which is the investment manager/advisor to the Pequot Funds, and as such, possesses the sole power to vote and to direct the disposition of all the securities held by
Pequot Scout Fund, LP, Pequot Navigator Offshore Fund,&nbsp;Inc. and Pequot Navigator Onshore Fund, LP. Mr.&nbsp;Samberg disclaims beneficial ownership of any of these securities, except to the
extent of his pecuniary interest.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(13)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;29,600 shares of common stock; (ii)&nbsp;450,000 shares issuable upon the conversion of Preferred Stock which are or will be convertible within 60&nbsp;days
of August&nbsp;12, 2005; (iii)&nbsp;500,000 shares issuable upon the exercise of a warrant that is or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005; and (iv)&nbsp;42,505
shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock held by SDS Capital Group SPC&nbsp;Ltd. for the quarters ended March&nbsp;31, June&nbsp;30,
September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005, for a total of 1,022,105 shares which, in aggregate, would represent 11.0% of Aerogen's outstanding common stock. However, the
terms of such Preferred Stock and Warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or Warrants (as applicable) if such conversion or exercise (as
applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following such conversion or exercise (as applicable), provided
that such stockholder may waive the provision upon 61&nbsp;days' written notice to Aerogen. SDS Management, LLC is the investment advisor to SDS Capital Group SPC,&nbsp;Ltd. Steve Derby is the
sole managing member of SDS Management, LLC, and as such, is the individual with the power to vote and to direct the disposition of all securities owned by SDS Capital Group SPC,&nbsp;Ltd.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(14)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;254,998 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005; (ii)&nbsp;171,550 shares
issuable upon the conversion of Preferred </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>54</FONT></P>

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<P><FONT SIZE=2>Stock
that are convertible within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price above $0.75; (iii)&nbsp;82,129 shares issuable upon the exercise of a warrant that is
or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005; (iv)&nbsp;14,550 shares issued or issuable in lieu of the cash payment of quarterly dividends on the Preferred Stock for the
quarters ended March&nbsp;31, June&nbsp;30, September&nbsp;30, December&nbsp;31, 2004 and March&nbsp;31, 2005; (v)&nbsp;12,485 shares of common stock held by the Carpenter Family Trust, in
which Dr.&nbsp;Shaw has an economic interest and (vi)&nbsp;147,689 shares of common stock owned by Dr.&nbsp;Shaw, for a total of 683,401 shares which would, in aggregate, represent 7.9% of
Aerogen's outstanding common stock. However, the terms of such Preferred Stock and warrants preclude the holders thereof from converting or exercising (as applicable) its Preferred Stock or warrants
(as applicable) if such conversion or exercise (as applicable) would result in such holder and its affiliates beneficially owning in excess of 4.99% of Aerogen's outstanding common stock following
such conversion or exercise (as applicable). </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(15)</FONT></DT><DD><FONT SIZE=2>Includes
(i)&nbsp;87,875 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise
price above $0.75; (ii)&nbsp;106,500 shares held by the Yehuda&nbsp;&amp; Zipora Ivri Revocable Trust, in which Mr.&nbsp;Ivri has an economic interest and (iii)&nbsp;33,333 shares of common stock
owned by Yehuda Ivri, for a total of 227,708 shares which would, in aggregate, represented 2.7% of Aerogen's outstanding common stock.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(16)</FONT></DT><DD><FONT SIZE=2>Includes
94,825 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(17)</FONT></DT><DD><FONT SIZE=2>Includes
13,111 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(18)</FONT></DT><DD><FONT SIZE=2>Includes
127,000 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(19)</FONT></DT><DD><FONT SIZE=2>Consists
of 14,695 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(20)</FONT></DT><DD><FONT SIZE=2>Includes
124,398 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(21)</FONT></DT><DD><FONT SIZE=2>Includes
13,111 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 200, all of which have an exercise price above
$0.755.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(22)</FONT></DT><DD><FONT SIZE=2>Consists
of 96,158 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(23)</FONT></DT><DD><FONT SIZE=2>Consists
of 97,992 shares issuable upon the exercise of options that are or will be exercisable within 60&nbsp;days of August&nbsp;12, 2005, all of which have an exercise price
above $0.75.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(24)</FONT></DT><DD><FONT SIZE=2>Includes
shares described in the notes above as applicable to directors and current executive officers. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>55</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ds1423_1_56"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1423_market_for_the_common_stock;_dividend_data"> </A>
<A NAME="toc_ds1423_3"> </A>
<BR></FONT><FONT SIZE=2><B>MARKET FOR THE COMMON STOCK; DIVIDEND DATA    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the Pink Sheets under the ticker symbol "AEGN.PK." Our common stock traded on the NASDAQ SmallCap Market from December&nbsp;26,
2002 until July&nbsp;20, 2005. This table shows, for the periods indicated, the high and low sales price per share for our common stock as reported on the NASDAQ SmallCap Market and the Pink Sheets,
as adjusted for the October&nbsp;31, 2003 one-for-five reverse stock split: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Aerogen Common Stock</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2><B><I>Year ending December&nbsp;31, 2005</I></B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Third Quarter (through August 31, 2005)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.97</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.33</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.36</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.62</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><BR><FONT SIZE=2><B><I>Year ended December&nbsp;31, 2004</I></B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.53</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3.22</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.79</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3.80</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.41</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>4.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.16</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><BR><FONT SIZE=2><B><I>Year ended December&nbsp;31, 2003</I></B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Fourth Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.30</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.65</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Third Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6.40</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1.55</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Second Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.75</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>First Quarter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2.50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0.25</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The high and low sales price per share for our common stock as listed on the Pink Sheets on September&nbsp;16, 2005, the latest practicable trading day before the filing of this proxy
statement was $0.71.

 </FONT></P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;16, 2005, our common stock was held of record by 118 stockholders.

 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
holder of our preferred stock is entitled to receive cumulative dividends in preference to any dividend on the common stock at the rate of $1.80 per share per annum, paid quarterly
in arrears on the first day of January, April, July and October in each year. In accordance with the terms of the preferred stock, we have issued quarterly dividends in the form of Aerogen common
stock to the holders of our preferred stock, commencing with the quarter ended March 31, 2004 through the quarter ended March&nbsp;31, 2005. The total number of shares of Aerogen common stock issued
pursuant to these dividends was 934,274 shares. For the three months ended June&nbsp;30, 2005, cumulative dividends of $410,434 have been accrued on our preferred stock. The Certificate of Amendment
provides that if the Merger closes as anticipated, no dividends would be paid on the Preferred Stock for the quarter ended June&nbsp;30, 2005 or thereafter. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have not otherwise declared or paid any cash dividends on our capital stock previously. Historically, we have retained earnings, if any, to support the development of our business.
Payment of future dividends, if any, will be at the discretion of our Board after taking into account various factors, including our financial condition, operating results and current and anticipated
cash needs. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>56</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ds1423_1_57"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ds1423_other_matters"> </A>
<A NAME="toc_ds1423_4"> </A>
<BR></FONT><FONT SIZE=2><B>OTHER MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this proxy statement, the Board is not aware of any matter to be presented for action at the Special Meeting, other than the matters set forth
in this proxy statement. Should any other matter requiring a vote of stockholders arise, the proxies in the enclosed form of proxy confer upon the person or persons entitled to vote the shares
represented by such proxies discretionary authority to vote the same in accordance with their best judgment. </FONT></P>

<P><FONT SIZE=2><B>Adjournments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Special Meeting may be adjourned without notice, other than by the announcement made at the Special Meeting, by approval of the holders of a majority of the
shares of our common stock present, in person or by proxy, and entitled to vote at the Special Meeting. We are soliciting proxies to grant the authority to vote in favor of adjournment of the Special
Meeting. In particular, authority is expected to be exercised if the purpose of the adjournment is to provide additional time to solicit votes in favor of adoption of the Merger Agreement. The Board
recommends that you vote in favor of the proposal to grant the authority to vote your shares to adjourn the meeting. </FONT></P>

<P><FONT SIZE=2><B>Stockholder Proposals  </B></FONT></P>

<P>


<FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will hold an Annual Meeting of Stockholders in 2006 (the "2006 Annual Meeting") only if the Merger is not completed. Proposals of stockholders that are
intended to be included in the proxy statement for the 2006 Annual Meeting (if it is held), in accordance with Rule&nbsp;14a-8(e) under the Securities Exchange Act of 1934, as amended,
must be received at our executive offices in Mountain View, California no later than February&nbsp;7, 2006. If you wish to bring a matter before the stockholders at next year's annual meeting and
you do not notify us before September&nbsp;4, 2006, the proposal will not be presented at the 2006 Annual Meeting.

 </FONT>

</P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders
are also advised to review our Bylaws, which contain additional requirements with respect to advance notice of stockholder proposals and director nominations. </FONT></P>


<P><FONT SIZE=2><B>Where You Can Find More Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other
information that we file with the SEC at the SEC public reference room at the following location: Public Reference Room, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference room. These SEC filings are also available to the public from commercial document retrieval
services and at the website maintained by the SEC at www.sec.gov. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nektar
has supplied all information contained in this proxy statement relating to Nektar and Merger Sub and we have supplied all information relating to us. </FONT></P>


<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information contained in this proxy statement. We have not authorized anyone to provide you with information that is different from what is contained in this
proxy statement. This proxy statement is dated September&nbsp;19, 2005. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date.
Neither the mailing of this proxy statement to stockholders nor the issuance of cash in the Merger creates any implication to the contrary.

 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>57</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>
<hr noshade width=100% align=left size=4>
<hr noshade width=100% align=left size=1> </FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=2><B>ANNEX A  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>AGREEMENT AND PLAN OF MERGER  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Dated as of August&nbsp;12, 2005  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> among  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>NEKTAR THERAPEUTICS  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B> OSKI ACQUISITION CORPORATION  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>and  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>AEROGEN,&nbsp;INC.  </B></FONT></P>

<P><FONT SIZE=5><B> <HR NOSHADE WIDTH=100% ALIGN=LEFT SIZE=1>
<HR NOSHADE WIDTH=100% ALIGN=LEFT SIZE=4>  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_lc1423_1_1"> </A> </FONT> <FONT SIZE=2><B>TABLE OF CONTENTS</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="69%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>PAGE</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 1&nbsp;&nbsp;&nbsp;&nbsp;THE MERGER</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
The Merger</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Closing</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Effective Time</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Effects of the Merger</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%"><BR><FONT SIZE=2> SECTION 1.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2><BR>
Certificate of Incorporation and Bylaws of the Surviving Corporation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Directors of the Surviving Corporation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 1.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Officers of the Surviving Corporation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 2&nbsp;&nbsp;&nbsp;&nbsp;EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES; COMPANY STOCK OPTIONS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Effect on Capital Stock</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Appraisal Rights</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Surrender of Certificates</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Company Stock Options; ESPP; Warrants</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.5</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Withholding Taxes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 2.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Adjustments</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 3&nbsp;&nbsp;&nbsp;&nbsp;REPRESENTATIONS AND WARRANTIES OF THE COMPANY</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Organization, Standing and Corporate Power</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Capitalization</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-9</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Authority; Noncontravention; Voting Requirements</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Governmental Approvals</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%"><BR><FONT SIZE=2> SECTION 3.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2><BR>
Company SEC Documents; Undisclosed Liabilities; Internal Controls</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-11</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Absence of Certain Changes or Events</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-13</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Legal Proceedings</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-14</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.8</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Compliance With Laws; Permits</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%"><BR><FONT SIZE=2> SECTION 3.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2><BR>
Information in Proxy Statement and S-4 Registration Statement</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-15</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.10</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Tax Matters</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-16</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.11</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Employee Benefits and Labor Matters</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.12</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Environmental Matters</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-19</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.13</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Contracts</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2>A-i</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=66,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=211725,FOLIO='A-i',FILE='DISK129:[05PAL3.05PAL1423]LC1423A.;17',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<A NAME="page_lc1423_1_2"> </A>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.14</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Real Property</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.15</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Title to Properties</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-21</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.16</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Intellectual Property</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-22</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.17</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Insurance</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-23</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.18</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Opinion of Financial Advisor</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-23</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.19</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Brokers and Other Advisors</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 3.20</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
State Takeover Statutes</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 4&nbsp;&nbsp;&nbsp;&nbsp;REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Organization, Standing and Corporate Power</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Authority; Noncontravention</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Governmental Approvals</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Information Supplied</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.5</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Ownership and Operations of Merger Sub</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Financing</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Brokers and Other Advisors</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.8</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Ownership of Company Capital Stock</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 4.9</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Parent SEC Documents; Undisclosed Liabilities</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 5&nbsp;&nbsp;&nbsp;&nbsp;COVENANTS AND AGREEMENTS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-26</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%"><BR><FONT SIZE=2> SECTION 5.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2><BR>
Preparation of the Proxy Statement and S-4 Registration Statement; Stockholder Meeting; Board Recommendation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2><BR>
A-26</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Conduct of Business of the Company</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-27</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
No Solicitation by the Company; Etc</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-29</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Further Action; Efforts</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-32</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.5</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Public Announcements</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Access to Information; Confidentiality</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-33</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Notification of Certain Matters</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-33</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.8</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Indemnification and Insurance</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-33</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.9</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Securityholder Litigation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.10</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Fees and Expenses</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 5.11</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Third Party Consents</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 6&nbsp;&nbsp;&nbsp;&nbsp;CONDITIONS PRECEDENT</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-34</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%"><BR><FONT SIZE=2> SECTION 6.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%"><FONT SIZE=2><BR>
Conditions to Each Party's Obligation to Effect the Merger</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-34</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>A-ii</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=67,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=972528,FOLIO='A-ii',FILE='DISK129:[05PAL3.05PAL1423]LC1423A.;17',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<A NAME="page_lc1423_1_3"> </A>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 6.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Conditions to Obligations of Parent and Merger Sub</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-35</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 6.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Conditions to Obligation of the Company</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-36</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 7&nbsp;&nbsp;&nbsp;&nbsp;TERMINATION</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-36</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 7.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Termination</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-36</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 7.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Effect of Termination</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-38</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 7.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Termination Fee</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-38</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 VALIGN="TOP"><FONT SIZE=2><BR>
ARTICLE 8&nbsp;&nbsp;&nbsp;&nbsp;MISCELLANEOUS</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.1</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Nonsurvival of Representations and Warranties</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-39</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.2</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Amendment or Supplement</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.3</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Extension of Time, Waiver, Etc</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-39</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.4</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Assignment</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.5</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Counterparts; Facsimile; Electronic Transmission</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Entire Agreement; No Third-Party Beneficiaries</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.7</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Governing Law; Waiver of Jury Trial</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.8</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Specific Enforcement</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.9</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Consent to Jurisdiction</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.10</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Notices</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-40</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.11</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Severability</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-41</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.12</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Definitions</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-41</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="17%" VALIGN="TOP"><BR><FONT SIZE=2> SECTION 8.13</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="69%" VALIGN="TOP"><FONT SIZE=2><BR>
Interpretation</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2><BR>
A-43</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>A-iii</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=68,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=224033,FOLIO='A-iii',FILE='DISK129:[05PAL3.05PAL1423]LC1423A.;17',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_le1423_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="le1423_agreement_and_plan_of_merger"> </A>
<A NAME="toc_le1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>AGREEMENT AND PLAN OF MERGER    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT AND PLAN OF MERGER, dated as of August&nbsp;12, 2005 (this "</FONT><FONT SIZE=2><I>Agreement</I></FONT><FONT SIZE=2>"), is among </FONT> <FONT SIZE=2>NEKTAR
THERAPEUTICS</FONT><FONT SIZE=2>, a Delaware corporation ("</FONT><FONT SIZE=2><I>Parent</I></FONT><FONT SIZE=2>"), </FONT><FONT SIZE=2>OSKI ACQUISITION
CORPORATION</FONT><FONT SIZE=2>, a Delaware corporation and an indirect, wholly owned Subsidiary of Parent ("</FONT><FONT SIZE=2><I>Merger Sub</I></FONT><FONT SIZE=2>"), and </FONT> <FONT SIZE=2>AEROGEN,&nbsp;INC</FONT><FONT SIZE=2>. a Delaware
corporation (the "</FONT><FONT SIZE=2><I>Company</I></FONT><FONT SIZE=2>"). Certain terms used in this Agreement are
used as defined in Section&nbsp;8.12. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the respective Boards of Directors of the Company and Merger Sub have approved and declared advisable, and the Board of Directors of Parent has approved, this Agreement and the
merger of Merger Sub with and into the Company (the "</FONT><FONT SIZE=2><I>Merger</I></FONT><FONT SIZE=2>"), on the terms and subject to the conditions provided for in this Agreement; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
concurrently with the execution of this Agreement, and as a condition and inducement to Parent's willingness to enter into this Agreement, certain stockholders of the Company
are contemporaneously with the execution and delivery hereof entering into voting agreements and irrevocable proxies (the "</FONT><FONT SIZE=2><I>Voting Agreements</I></FONT><FONT SIZE=2>"); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various
conditions to the Merger; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub
and the Company hereby agree as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;1  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I>The Merger</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;The Merger.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon the terms and subject to the conditions set forth in this Agreement, and in
accordance with the General Corporation Law of the State of Delaware (the "</FONT><FONT SIZE=2><I>DGCL</I></FONT><FONT SIZE=2>"), at the Effective Time, Merger Sub shall be merged with and into the
Company and the separate corporate existence of Merger Sub shall thereupon cease, and the Company shall be the surviving corporation in the Merger (the "</FONT><FONT SIZE=2><I>Surviving
Corporation</I></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Closing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The closing of the Merger (the "</FONT><FONT SIZE=2><I>Closing</I></FONT><FONT SIZE=2>")
shall take place at 10:00&nbsp;a.m. (California time) on a date to be specified by the parties, which date shall be no later than the second business day after satisfaction or waiver of the
conditions set forth in Article&nbsp;6 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless
another time or date, or both, are agreed to in writing by the parties hereto. The date on which the Closing is held is herein referred to as the "</FONT><FONT SIZE=2><I>Closing
Date</I></FONT><FONT SIZE=2>." The Closing will be held at the offices of Cooley Godward LLP, 3175 Hanover Street, Palo Alto, California 94304, unless another place is agreed to in writing by the
parties hereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effective Time.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of this Agreement, on the Closing Date (a)&nbsp;the
Company shall file with the Secretary of State of the State of Delaware the Charter Amendment and (b)&nbsp;following the filing of the Charter Amendment, the parties shall file with the Secretary of
State of the State of Delaware a certificate of merger (the "</FONT><FONT SIZE=2><I>Certificate of Merger</I></FONT><FONT SIZE=2>"), executed in accordance with the relevant provisions of the DGCL.
The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as is agreed to by the parties hereto and
specified in the Certificate of Merger but in no event any earlier than the time the Charter Amendment is accepted for filing by the Secretary of State of the State of Delaware (the time at which the
Merger becomes effective is herein referred to as the "</FONT><FONT SIZE=2><I>Effective Time</I></FONT><FONT SIZE=2>"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=69,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=1042954,FOLIO='A-1',FILE='DISK129:[05PAL3.05PAL1423]LE1423A.;7',USER='LHOUSE',CD='16-SEP-2005;00:06' -->
<A NAME="page_le1423_1_2"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effects of the Merger.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;From and after the Effective Time, the Merger shall have the effects set
forth in this Agreement and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Certificate of Incorporation and Bylaws of the Surviving Corporation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended in the Merger to be in the form of </FONT> <FONT SIZE=2><I>Exhibit&nbsp;A</I></FONT><FONT SIZE=2> hereto and, as so amended, such
certificate of incorporation shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided therein or by applicable Laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Parent
shall take all necessary actions to cause the bylaws of Merger Sub, in the form attached as </FONT><FONT SIZE=2><I>Exhibit&nbsp;B</I></FONT><FONT SIZE=2>
hereto, to be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable Laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Directors of the Surviving Corporation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Parent shall take all necessary actions to cause the
directors of Merger Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation immediately following the Effective Time, until the earlier of their resignation or
removal or until their respective successors are duly elected and qualified, as the case may be. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
1.7</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Officers of the Surviving Corporation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The officers of Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation until their respective successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;2<BR>  </B></FONT><FONT SIZE=2><I>Effect of the Merger on the Capital Stock of the<BR>
Constituent Corporations; Exchange of Certificates; Company Stock Options  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effect on Capital Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;At
the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Capital Stock or any shares of capital stock of
Merger Sub: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Capital Stock of Merger Sub.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each issued and outstanding share of capital stock of Merger Sub shall be
converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cancellation of Treasury Stock and Parent-Owned Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any shares of Company Capital Stock that are owned
by the Company as treasury stock, and any shares of Company Capital Stock owned by Parent or Merger Sub or any other wholly owned Subsidiary of Parent, shall be automatically canceled and shall cease
to exist and no consideration shall be delivered in exchange therefor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conversion of Company Series&nbsp;A-1 Preferred Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each issued and outstanding share of
Company Series&nbsp;A-1 Preferred Stock (other than shares to be canceled in accordance with Section&nbsp;2.1(a)(ii)&nbsp;and Appraisal Shares) shall be converted into the right to
receive (A)&nbsp;cash in an amount equal to the Preferred Stock Per Share Cash Amount and (B)&nbsp;the number of shares of Parent Common Stock equal to the Preferred Stock Per Share Stock Amount.
Notwithstanding clause "(B)" of this Section&nbsp;2.1(a)(iii), on or before September&nbsp;15, 2005, Parent may elect (in Parent's sole discretion) by giving notice thereof to the Company in
accordance with Section&nbsp;8.10, to pay with respect to each share of Series&nbsp;A-1 Preferred Stock, cash in an amount of $21.7688 in </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

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<P><FONT SIZE=2>lieu
of the number of shares of Parent Common Stock that would otherwise be issuable with respect to such share of Series&nbsp;A-1 Preferred Stock pursuant to such clause "(B)" of this
Section&nbsp;2.1(a)(iii)&nbsp;(such election, the "</FONT><FONT SIZE=2><I>Preferred Stock Cash Election</I></FONT><FONT SIZE=2>"). The per share cash amount payable by Parent pursuant to the
Preferred Stock Cash Election is herein referred to as the "</FONT><FONT SIZE=2><I>Preferred Stock Per Share Cash Election Amount</I></FONT><FONT SIZE=2>." If Parent makes the Preferred Stock Cash
Election, Parent shall also make the Common Stock Cash Election (as defined in Section&nbsp;2.1(a)(iv)). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conversion of Company Common Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each issued and outstanding share of Company Common Stock (other than
shares to be canceled in accordance with Section&nbsp;2.1(a)(ii)&nbsp;and Appraisal Shares) shall be converted into the right to receive (A)&nbsp;cash in an amount equal to the Common Stock Per
Share Cash Amount and (B)&nbsp;the number of shares of Parent Common Stock equal to the Common Stock Per Share Stock Amount. Notwithstanding clause "(B)" of this Section&nbsp;2.1(a)(iv), on or
before September&nbsp;15, 2005, Parent may elect (in Parent's sole discretion) by giving notice thereof to the Company in accordance with Section&nbsp;8.10, to pay with respect to each share of
Company Common Stock, cash in an amount of $0.5625 in lieu of the number of shares of Parent Common Stock that would otherwise be issuable with respect to such share of Company Common Stock pursuant
to such clause "(B)" of this Section&nbsp;2.1(a)(iv)&nbsp;(such election, the "</FONT><FONT SIZE=2><I>Common Stock Cash Election</I></FONT><FONT SIZE=2>" and, together with the Preferred Stock
Cash Election, the "</FONT><FONT SIZE=2><I>Parent Election</I></FONT><FONT SIZE=2>"). The per share cash amount payable by Parent pursuant to the Common Stock Cash Election is herein referred to as
the "</FONT><FONT SIZE=2><I>Common Stock Per Share Cash Election Amount</I></FONT><FONT SIZE=2>." If Parent makes the Common Stock Cash Election, Parent shall also make the Preferred Stock Cash
Election. Notwithstanding anything in this Agreement to the contrary, if the shares of Parent Common Stock to be issued in the Merger pursuant to Sections&nbsp;2.1(a)(iii)&nbsp;and
2.1(a)(iv)&nbsp;shall, as of the Effective Time, equal or exceed 20% of the then outstanding shares of Parent Common Stock, Parent shall be deemed to have timely made the Parent Election for all
purposes hereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Merger Consideration.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the term "</FONT><FONT SIZE=2><I>Merger
Consideration</I></FONT><FONT SIZE=2>" means the cash payable, and shares of Parent Common Stock issuable, to former stockholders of the Company pursuant to Sections 2.1(a)(iii)&nbsp;and
2.1(a)(iv)&nbsp;above. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fractional Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No fraction of a share of Parent Common Stock will be issued by virtue of the Merger, but
in lieu thereof each holder of shares of Company Capital Stock who would otherwise be entitled to a fraction of a share of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock that otherwise would be received by such holder) shall, upon surrender of such holder's Certificate(s) (as defined in Section&nbsp;2.3(a)), or as otherwise provided in Section&nbsp;2.3(d),
receive from Parent an amount of cash (rounded to the nearest whole cent), without interest, equal to the product of: (i)&nbsp;such fraction, multiplied by (ii)&nbsp;the Parent Trading Price. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Appraisal Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything in this Agreement to the contrary, shares of Company
Capital Stock issued and outstanding immediately prior to the Effective Time that are held by any holder who is entitled to demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, the provisions of Section&nbsp;262 of the DGCL ("</FONT><FONT SIZE=2><I>Section&nbsp;262</I></FONT><FONT SIZE=2>") shall not be converted into the right to receive
the Merger Consideration as provided in Sections 2.1(a)(iii)&nbsp;and 2.1(a)(iv), but instead such holder shall be entitled to payment of the fair value of such shares (the
"</FONT><FONT SIZE=2><I>Appraisal Shares</I></FONT><FONT SIZE=2>") in accordance with the provisions of Section&nbsp;262. At the Effective Time, all Appraisal Shares shall no longer be outstanding
and shall automatically be canceled and shall cease to exist, and each holder of Appraisal Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of
such Appraisal Shares in accordance with the provisions of Section&nbsp;262. Notwithstanding the foregoing, if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the
right to appraisal under Section&nbsp;262 or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

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<P><FONT SIZE=2>Section&nbsp;262,
then the right of such holder to be paid the fair value of such holder's Appraisal Shares under Section&nbsp;262 shall cease and each of such Appraisal Shares shall be deemed to
have been converted at the Effective Time into, and shall have become, the right to receive the Merger Consideration as provided in Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv). The
Company shall (i)&nbsp;deliver prompt notice to Parent of any demands for appraisal of any shares of Company Capital Stock and (ii)&nbsp;the opportunity to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree
to do any of the foregoing. Any communication to be made by the Company to any holder of Company Capital Stock with respect to such demands shall be submitted to Parent in advance and shall not be
presented to any holder of Company Capital Stock prior to the Company receiving Parent's consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Surrender of Certificates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Exchange Agent; Parent to Provide Cash and Parent Common Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Prior to the Effective Time, Parent shall
designate a bank, trust company or other institution reasonably acceptable to the Company to act as exchange agent (the "</FONT><FONT SIZE=2><I>Exchange Agent</I></FONT><FONT SIZE=2>") for payment of
the Merger Consideration upon surrender of the certificates that immediately prior to the Effective Time represented shares of Company Capital Stock (each such certificate, a
"</FONT><FONT SIZE=2><I>Certificate</I></FONT><FONT SIZE=2>"). Promptly following the Effective Time, Parent shall make available, or cause to be made available, to the Exchange Agent for exchange in
accordance with this Article&nbsp;2 cash and shares of Parent Common Stock, as applicable, sufficient to pay the aggregate Merger Consideration payable pursuant to
Section&nbsp;2.1(a)(iii)&nbsp;and Section&nbsp;2.1(a)(iv)&nbsp;upon surrender of Certificates representing outstanding shares of Company Capital Stock. In addition, Parent shall make available
as necessary from time to time after the Effective Time as needed, cash in an amount sufficient for payment in lieu of fractional shares pursuant to Section&nbsp;2.1(c) and any dividends or
distributions which holders of shares of Company Capital Stock may be entitled pursuant to Section&nbsp;2.3(e). The funds and shares of Parent Common Stock, as applicable, provided to the Exchange
Agent under this Section&nbsp;2.3(a) are referred to herein as the "</FONT><FONT SIZE=2><I>Exchange Fund.</I></FONT><FONT SIZE=2>" </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Payment Procedures.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Promptly after the Effective Time, the Exchange Agent shall mail to each holder of
record of a Certificate: (i)&nbsp;a letter of transmittal (which shall specify that delivery of the Certificates shall be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent); and (ii)&nbsp;instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration payable and
issuable, as applicable, pursuant to Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv), any cash in lieu of any fractional shares pursuant to Section&nbsp;2.1(c) and any dividends or
other distributions pursuant to Section&nbsp;2.3(e) with respect to each share of Company Preferred Stock or Company Common Stock evidenced by such Certificate. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with such instructions (and such other customary documents as may
reasonably be required by the Exchange Agent), the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration to which such holder is entitled pursuant to
Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv), any payment in lieu of fractional shares which such holder has the right to receive pursuant to Section&nbsp;2.1(c) and any dividends
or distributions payable pursuant to Section&nbsp;2.3(e) with respect to each share of Company Preferred Stock or Company Common Stock evidenced by such Certificate, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership of shares of Company Capital Stock that is not registered in the transfer records of the Company, the proper amount of
Merger Consideration may be paid in exchange therefor to a Person other than the Person in whose name the Certificate so surrendered is registered if such Certificate shall be properly endorsed or
shall otherwise be in proper form for transfer and the Person requesting such payment shall pay any transfer and other Taxes required by reason of the payment to a Person other than the registered
holder of such Certificate or establish to the reasonable satisfaction of the Surviving Corporation that such Tax either has been paid </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

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<P><FONT SIZE=2>or
is not applicable. Until surrendered as contemplated by this Section&nbsp;2.3(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration pursuant to Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv)&nbsp;and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section&nbsp;2.1(c) and any dividends or distributions payable pursuant to Section&nbsp;2.3(e) with respect to each share of Company Preferred Stock or Company
Common Stock evidenced by such Certificate. No interest will be paid or will accrue to the benefit of former Company stockholders on the cash portion of the Merger Consideration payable upon surrender
of any Certificate. Any certificates representing shares of Parent Common Stock issued pursuant to Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv)&nbsp;may at the option of Parent be
in uncertificated book entry form unless a physical certificate is requested or is otherwise required by applicable law or regulation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Transfer Books; No Further Ownership Rights in Company Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At the Effective Time: (i)&nbsp;all shares
of Company Capital Stock outstanding immediately prior to the Effective Time shall automatically be converted into the right to receive the Merger Consideration or canceled and retired in each case as
specified in Section&nbsp;2.1 and shall cease to exist, and all holders of Certificates representing shares of Company Capital Stock that were outstanding immediately prior to the Effective Time
shall cease to have any rights as stockholders of the Company, except the right to receive the Merger Consideration pursuant to Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv), any
payment in lieu of fractional shares pursuant to Section&nbsp;2.1(c) and any dividends or distributions payable pursuant to Section&nbsp;2.3(e) with respect to each share of Company Preferred
Stock or Company Common Stock evidenced by such Certificate upon surrender thereof in accordance with Section&nbsp;2.3(b); and (ii)&nbsp;the stock transfer books of the Company shall be closed and
there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Capital Stock that were outstanding immediately prior to the
Effective Time. All cash paid, and any shares of Parent Common Stock issued, upon the surrender of Certificates in accordance with the terms of this Article&nbsp;2 shall be deemed to have been paid
and issued in full satisfaction of all rights pertaining to the shares of Company Capital Stock previously represented by such Certificates. Subject to Section&nbsp;2.3(f), if, at any time after the
Effective Time, Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this Article&nbsp;2. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Lost, Stolen or Destroyed Certificates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable
amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will pay and issue, as applicable, to such Person the
Merger Consideration to be paid or issued pursuant to Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv), any payment in lieu of fractional shares pursuant to Section&nbsp;2.1(c) and any
dividends or distributions payable pursuant to Section&nbsp;2.3(e) for each share of Company Preferred Stock or Company Common Stock evidenced by such lost, stolen or destroyed Certificate. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Distributions With Respect to Unexchanged Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No dividends or other distributions declared or made after
the date of this Agreement with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holders of any unsurrendered Certificates with respect to any shares of
Parent Common Stock represented thereby until the holders of record of such Certificates shall surrender such Certificates, except as provided in Section&nbsp;2.3(d). Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver to the record holders thereof, without interest, (i)&nbsp;promptly after such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time and theretofore paid with respect to any such whole shares of Parent Common Stock and (ii)&nbsp;at the appropriate
payment date, the amount of dividends or other distributions with a record date after the Effective Time and a payment date subsequent to such surrender payable with respect to any such whole shares
of Parent Common Stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-5</FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination of Fund.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any portion of the Exchange Fund (including the proceeds of any investments thereof)
that remains undistributed to the former holders of the Certificates one year after the Effective Time shall be delivered by the Exchange Agent to the Surviving Corporation upon demand. Any former
holders of Certificates who have not theretofore complied with this Article&nbsp;2 shall thereafter look only to the Surviving Corporation for payment of any Merger Consideration pursuant to
Section&nbsp;2.1(a)(iii)&nbsp;or Section&nbsp;2.1(a)(iv), any cash in lieu of any fractional shares pursuant to Section&nbsp;2.1(c) and any dividends or other distributions pursuant to
Section&nbsp;2.3(e) with respect to the shares of Company Capital Stock formerly represented by such Certificates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Liability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding any provision of this Agreement to the contrary, none of Parent, the Surviving
Corporation or the Exchange Agent shall be liable to any Person for any amount properly paid from the Exchange Fund or delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Investment of Exchange Fund.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Parent shall cause the Exchange Agent to invest any cash included in the
Exchange Fund in a money market fund registered under the Investment Company Act of 1940, the principal of which is invested solely in obligations issued or guaranteed by the United States Government
and repurchase agreements in respect of such obligations. Any interest and other income resulting from such investment shall be the property of, and shall be paid promptly to, Parent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Company Stock Options; ESPP; Warrants.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Prior
to the Effective Time, the Company shall use commercially reasonable efforts to cause each option granted pursuant to a Company Stock Plan that is outstanding
immediately prior to the Effective Time (whether or not then vested or exercisable) and that represents the right to acquire shares of Company Common Stock (each, an
"</FONT><FONT SIZE=2><I>Option</I></FONT><FONT SIZE=2>") to be canceled and terminated and converted at the Effective Time into the right to receive a cash amount equal to the Option Consideration
(as hereinafter defined) for each share of Company Common Stock then subject to the Option. Prior to the Effective Time, the Company shall take all actions necessary to terminate the Company Stock
Plans, such termination to be effective at or before the Effective Time. Prior to the Effective Time, Parent shall deposit in a bank account an amount of cash equal to the sum of the aggregate Option
Consideration for each Option then outstanding (subject to any applicable withholding tax), together with instructions that such cash be promptly distributed following the Effective Time to the
holders of such Options in accordance with this Section&nbsp;2.4(a). For purposes of this Agreement, "</FONT><FONT SIZE=2><I>Option Consideration</I></FONT><FONT SIZE=2>" means, with respect to any
share of Company Common Stock issuable under a particular Option, an amount equal to the excess, if any, of: (1)&nbsp;$0.75 over (2)&nbsp;the exercise price payable in respect of such share of
Company Common Stock issuable under such Option (it being understood that if the exercise price payable in respect of such share of Company Common Stock issuable under such Option exceeds the Common
Stock Per Share Amount, the Option Consideration shall be zero). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
rights of participants in the ESPP with respect to any offering period underway immediately prior to the Effective Time under the ESPP shall be determined by
treating the last business day prior to the Effective Time as the last day of such offering period and by making such other pro-rata adjustments as may be necessary to reflect the
shortened offering period but otherwise treating such shortened offering period as a fully effective and completed offering period for all purposes under the ESPP. Prior to the Effective Time, the
Company shall take all actions (including, if appropriate, amending the terms of the ESPP) that are necessary to give effect to the transactions contemplated by this Section&nbsp;2.4(b). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Prior
to the Effective Time, the Company shall use commercially reasonable efforts to cause each warrant to purchase shares of Company Common Stock that is outstanding
as of the Effective Time (a "</FONT><FONT SIZE=2><I>Warrant</I></FONT><FONT SIZE=2>") to be canceled and terminated and converted at the Effective Time into the right to receive a cash amount equal
to the Warrant Consideration (as hereinafter defined) for each share of Company Common Stock then subject to the Warrant. Prior to the Effective Time, Parent shall deposit </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-6</FONT></P>

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<P><FONT SIZE=2>in
a bank account an amount of cash equal to the sum of the aggregate Warrant Consideration for each Warrant then outstanding (subject to any applicable withholding tax), together with instructions
that such cash be promptly distributed following the Effective Time to the holders of such Warrants in accordance with this Section&nbsp;2.4(c). For purposes of this Agreement,
"</FONT><FONT SIZE=2><I>Warrant Consideration</I></FONT><FONT SIZE=2>" means, with respect to any share of Company Common Stock issuable under a particular Warrant, an amount equal to the excess, if
any, of: (1)&nbsp;$0.75; over (2)&nbsp;the exercise price payable in respect of such share of Company Common Stock issuable under such Warrant (it being understood that if the exercise price
payable in respect of such share of Company Common Stock issuable under such Warrant exceeds the Common Stock Per Share Amount, the Warrant Consideration shall be zero). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
Company and Parent shall take such steps as may be reasonably requested by any party hereto to cause dispositions of Company equity securities (including derivative
securities) pursuant to the transactions contemplated by this Agreement by each individual who is a director or officer of the Company to be exempt under Rule&nbsp;16b-3 promulgated
under the Exchange Act in accordance with that certain No-Action Letter dated January&nbsp;12, 1999 issued by the Securities and Exchange Commission (the
"</FONT><FONT SIZE=2><I>SEC</I></FONT><FONT SIZE=2>") regarding such matters. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Withholding Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Parent, the Surviving Corporation and the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable to a former holder of shares of Company Capital Stock, Options or Warrants pursuant to this Agreement such amounts as may be
required to be deducted or withheld with respect to the making of such payment under the Code, or under any provision of state, local or foreign Tax Law. To the extent that amounts are so deducted and
withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
2.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If during the period from the date of this Agreement through the Effective Time, any
change in the outstanding shares of Parent Common Stock or Company Capital Stock or securities convertible or exchangeable into or exercisable for shares of Parent Common Stock or Company Capital
Stock, shall occur by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares of Parent Common Stock or Company Capital Stock, or any similar
transaction, or any stock dividend thereon with a record date during such period, the Preferred Stock Per Share Cash Amount, Preferred Stock Per Share Stock Amount, Common Stock Per Share Cash Amount,
Common Stock Per Share Stock Amount, Preferred Stock Per Share Cash Election Amount and Common Stock Per Share Cash Election Amount, as applicable, shall be appropriately adjusted to reflect such
change. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;3<BR>  </B></FONT><FONT SIZE=2><I>Representations and Warranties of the Company</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as set forth in the disclosure schedule (each section of which qualifies the correspondingly numbered representation and warranty to the extent specified therein and such other
representations and warranties to the extent the relevance of a matter in such section of the disclosure schedule to the information called for by such other representation and warranty is reasonably
apparent) delivered by the Company to Parent simultaneously with the execution of this Agreement (the "</FONT><FONT SIZE=2><I>Company Disclosure Schedule</I></FONT><FONT SIZE=2>"), the Company
represents and warrants to Parent and Merger Sub as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Organization, Standing and Corporate Power.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction in which it is
incorporated and has all requisite corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. The Company and
each of its Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of
the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-7</FONT></P>

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<P><FONT SIZE=2>standing,
individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. For purposes of this Agreement, the term
"</FONT><FONT SIZE=2><I>Company Material Adverse Effect</I></FONT><FONT SIZE=2>" shall mean any change, event, occurrence, violation of any legal, contractual or similar obligation, inaccuracy,
effect or circumstance (any such item, an "</FONT><FONT SIZE=2><I>Effect</I></FONT><FONT SIZE=2>") which individually, or when taken together with all other Effects that have occurred prior to the
date of determination of the occurrence of a Company Material Adverse Effect, (i)&nbsp;is materially adverse to the business or assets (tangible or intangible), capitalization, results of operations
or financial condition of the Company and its Subsidiaries taken as a whole, or (ii)&nbsp;materially impedes the authority of the Company or any of its Subsidiaries, to consummate the Transactions
in accordance with the terms hereof and applicable Laws; </FONT><FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2> that none of the following shall be deemed either alone or in combination to
constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Company Material Adverse Effect: (A)&nbsp;any Effect to the extent resulting
from changes to the U.S. or global economy in general (except to the extent such changes have a materially disproportionate effect on the Company and its Subsidiaries taken as a whole); (B)&nbsp;any
Effect to the extent resulting from changes in the industries in which the Company operates (except to the extent such changes have a materially disproportionate effect on the Company and its
Subsidiaries taken as a whole); (C)&nbsp;any Effect to the extent resulting from fluctuations in the value of currencies; (D)&nbsp;any Effect to the extent resulting from acts of terrorism, war,
national or international calamity or any other similar event (except to the extent such Effect has a materially disproportionate effect on the Company and its Subsidiaries taken as a whole);
(E)&nbsp;any Effect to the extent resulting from the announcement or pendency of this Agreement or any of the Transactions (including any Effect to the extent resulting from any litigation, any loss
of or delay in placing customer orders or any departure or loss of employees to the extent arising from such announcement or pendency of this Agreement or any of the Transactions); (F)&nbsp;any
Effect to the extent resulting from the failure of the Company to meet internal or analysts' expectations or projections (it being understood, however, that the underlying circumstances giving rise to
such failure may be taken into account unless otherwise excluded pursuant to this paragraph); (G)&nbsp;any Effect resulting from expenditures of up to $4.5&nbsp;million in cash in each successive
90&nbsp;day period beginning after the date of this Agreement (it being understood that the first such period begins on the day after the date of this Agreement and ends on the 90<SUP>th</SUP>
day after the date of this Agreement, the second such period begins on the date 91&nbsp;days after the date this Agreement and ends on the 180<SUP>th</SUP> day after the date of this Agreement,
etc.) in the ordinary course of business by the Company and its Subsidiaries taken as a whole; </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that this clause "(G)" shall no longer
qualify the definition of "Company Material Adverse Effect" if at any time after the date of this Agreement all three of the following conditions are met: (1)&nbsp;the Company's available cash is
less than $1.5&nbsp;million; (2)&nbsp;Parent offers to provide the Company (and does provide, if such offer is accepted by the Company) with an unsecured loan at an interest rate of the lower of
(a)&nbsp;the maximum interest rate permissible by law and (b)&nbsp;15%, payable not earlier than the earlier to occur of (x)&nbsp;the date thirty days following the consummation of a Takeover
Proposal (for purposes of this Section&nbsp;3.1(a) all references to "20%" in the definition of "Takeover Proposal" shall be deemed to refer to "50%" instead) and (y)&nbsp;the first anniversary of
the date of the loan, in an amount sufficient to operate the business of the Company and its Subsidiaries in the ordinary course of business from the date of such offer through the Outside Date, but
in no event greater than $10&nbsp;million, that is not convertible into equity and is
otherwise on commercially reasonable terms (the "Loan"); and (3)&nbsp;the Company does not accept the Loan within five business days of receiving such offer from Parent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Section&nbsp;3.1(b)
of the Company Disclosure Schedule lists all Subsidiaries of the Company, together with the jurisdiction of organization of each such Subsidiary.
All the outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are owned
directly or indirectly by the Company free and clear of all liens, pledges, charges, mortgages, encumbrances, adverse rights or claims and security interests of any kind or nature whatsoever (except
for such transfer restrictions of general applicability as may be provided under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the
"</FONT><FONT SIZE=2><I>Securities Act</I></FONT><FONT SIZE=2>"), and the "blue sky" laws of the various States of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-8</FONT></P>

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<P><FONT SIZE=2>United
States) (collectively, "</FONT><FONT SIZE=2><I>Liens</I></FONT><FONT SIZE=2>"). Except as set forth in Section&nbsp;3.1(b) of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock, voting securities or equity interests in any Person. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Company has delivered or made available to Parent copies of its certificate of incorporation and bylaws (the "</FONT><FONT SIZE=2><I>Company Charter
Documents</I></FONT><FONT SIZE=2>") and copies of the certificates of incorporation and bylaws (or comparable organizational documents) of each of its Subsidiaries listed on Section&nbsp;3.1(a) of
the Company Disclosure Schedule (the "</FONT><FONT SIZE=2><I>Subsidiary Documents</I></FONT><FONT SIZE=2>"), in each case as amended to the date of this Agreement. All such Company Charter Documents
and Subsidiary Documents are in full force and effect and neither the Company nor any of its Subsidiaries is in violation of any of their respective provisions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Capitalization.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
authorized capital stock of the Company consists of 95,000,000 shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock, of which 1,572,685
shares have been designated as Series&nbsp;A-1 Preferred Stock. At the close of business on August&nbsp;12, 2005: (i)&nbsp;8,337,246 shares of Company Common Stock were issued and
outstanding (none of which were held by the Company in its treasury); (ii)&nbsp;5,482,406 shares of Company Common Stock were reserved for issuance under the Aerogen 2000 Equity Incentive Plan (of
which 4,003,337 shares of Company Common Stock were subject to outstanding options granted thereunder); (iii)&nbsp;12,000 shares of Company Common Stock were reserved for issuance under the Aerogen
2000 Non-Employee Directors' Stock Option Plan (of which 8,000 shares of Company Common Stock were subject to outstanding options granted thereunder); (iv)&nbsp;391,922 shares of Company
Common Stock were reserved for issuance under the Aerogen 1996 Stock Option Plan (of which 174,006 shares of Company Common Stock were subject to outstanding options granted thereunder);
(v)&nbsp;1,591,364 shares of Company Common Stock were reserved for issuance under the 2000 ESPP; (vi)&nbsp;warrants to purchase 11,767,204 shares of Company Common Stock were outstanding; and
(vii)&nbsp;887,061 shares of Company Series&nbsp;A-1 Preferred Stock were issued and outstanding. All outstanding shares of Company Capital Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights. Section&nbsp;3.2(a) of the Company Disclosure Schedule sets forth a list, as of the close of business on August&nbsp;12,
2005, of all outstanding options and warrants to purchase shares of Company Common Stock, and, for each such option or warrant: (A)&nbsp;the particular Company Stock Plan (if any) pursuant to which
any such option was granted; (B)&nbsp;the number of shares of Company Common Stock subject to such option or warrant; (C)&nbsp;the date of grant of such option or warrant; (D)&nbsp;the
expiration date of such option or warrant; (E)&nbsp;the exercise price of such option or warrant; (F)&nbsp;the name of the holder of such option or warrant; and (G)&nbsp;the extent to which
such option or warrant is vested and exercisable as of the date of this Agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar
rights with respect to the Company. Except as set forth above in this Section&nbsp;3.2(a) or in Section&nbsp;3.2(a) of the Company Disclosure Schedule, as of the date of this Agreement, there are
not any shares of Company Capital Stock issued and outstanding or any subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments or agreements of any
character providing for the issuance of any shares of Company Capital Stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;None
of the Subsidiaries of the Company is bound by any outstanding subscriptions, options, warrants, calls, convertible or exchangeable securities, rights, commitments
or agreements of any character providing for the issuance or disposition of any shares of capital stock, voting securities or equity interests of any Subsidiary. There are no outstanding obligations
or Contracts of the Company or any of its Subsidiaries to (i)&nbsp;repurchase, redeem or otherwise acquire any shares of capital stock, voting securities or equity interests (or any options,
warrants or other rights to acquire any shares of capital stock, voting securities or equity interests) of the Company or any of its Subsidiaries, or (ii)&nbsp;dispose of any shares of the capital
stock of, or other equity or voting interest in, any of its Subsidiaries. The Company is not a party to any voting agreement, irrevocable proxy, voting agreement, voting trust, rights plan,
anti-takeover plan or registration rights agreement with respect to any shares </FONT></P>

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<P><FONT SIZE=2>of
the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries and, to the Knowledge of the Company, other than the Voting Agreements and the irrevocable
proxies granted pursuant to the Voting Agreements, as of the date of this Agreement, there are no irrevocable proxies and no voting agreements, voting trusts, rights plans, anti-takeover
plans or registration rights agreements with respect to any shares of the capital stock of, or other equity or voting interests in, the Company or any of its Subsidiaries. The Rights Agreement dated
as of June&nbsp;5, 2001, by and between the Company and Mellon Investor Services LLC, as amended, has terminated and such Rights Agreement is of no further force and effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Authority; Noncontravention; Voting Requirements.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company has all necessary corporate power and authority to execute and deliver this Agreement and, subject to obtaining the Company Stockholder Approval, to perform
its obligations hereunder and to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the Transactions, have been duly
authorized and approved by its Board of Directors, and except for obtaining the Company Stockholder Approval for the adoption of this Agreement, no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation by it of the Transactions. This Agreement has been duly executed and delivered by
the Company and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except that such enforceability: (i)&nbsp;may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of
general application affecting or relating to the enforcement of creditors' rights generally; and (ii)&nbsp;is subject to general principles of equity, whether considered in a proceeding at law or in
equity (collectively, the "</FONT><FONT SIZE=2><I>Bankruptcy and Equity Exception</I></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company's Board of Directors, at a meeting duly called and held, has: (i)&nbsp;approved this Agreement and the Merger and, subject to the receipt of the Company
Stockholder Approval (as defined below), the Transactions; (ii)&nbsp;determined that the Merger is in the best interests of the Company and its stockholders and declared the Merger to be advisable;
and (iii)&nbsp;resolved to recommend that the stockholders of the Company adopt this Agreement and approve the Transactions (such recommendation being referred as the
"</FONT><FONT SIZE=2><I>Company Board Recommendation</I></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Neither
the execution and delivery of this Agreement by the Company nor the consummation by the Company of the Transactions, nor compliance by the Company with any of
the terms or provisions hereof, will: (i)&nbsp;conflict with or violate any provision of the Company Charter Documents or any of the Subsidiary Documents; or (ii)&nbsp;assuming that the
authorizations, consents and approvals referred to in Section&nbsp;3.4 and the Company Stockholder Approval are obtained and the filings referred to in Section&nbsp;3.4 are made:
(A)&nbsp;violate any Law, judgment, writ or injunction of any Governmental Authority applicable to the Company or any of its Subsidiaries or any of their respective properties or assets; or
(B)&nbsp;violate, constitute a material default (or an event which, with notice or lapse of time, or both, would constitute a material default) under, result in the termination of or a right of
termination or cancellation under, impair the Company's rights or alter the rights or obligations of any third party under, accelerate the performance required by, or result in the creation of any
Lien upon any of the respective properties, Intellectual Property or other assets of, the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any loan or credit
agreement, debenture, note, bond, mortgage, indenture, deed of trust, license, lease, contract or other agreement, instrument or obligation (each, a
"</FONT><FONT SIZE=2><I>Contract</I></FONT><FONT SIZE=2>") or Permit that is listed in Section&nbsp;3.13(a) of the Company Disclosure Schedule or that is otherwise material to the business of the
Company and its Subsidiaries taken as a whole, except in the case of clause&nbsp;(ii) of this Section&nbsp;3.3(c) for any such violations, defaults, terminations, impairments, accelerations, liens
or other events which would not reasonably be expected to have a material effect on the business, operations or condition of the Company and its Subsidiaries, taken as a whole. Section&nbsp;3.3(c)
of the Company Disclosure Schedule lists all necessary notices, </FONT></P>

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<P><FONT SIZE=2>consents,
waivers and approvals under any of the Company's or any of its Subsidiary's Contracts required to be obtained in connection with the consummation of the Transactions, which, if not obtained,
would result in a material liability or loss of rights or benefits to the Company (or the Surviving Corporation) and its Subsidiaries, taken as a whole, as a result of the Merger. Following the
Effective Time, the Surviving Corporation shall be permitted to exercise all of its rights under each of the Contracts listed in Schedule&nbsp;3.13(a) of the Company Disclosure Schedule without the
payment of any additional amounts or consideration required by the terms of such Contract other than ongoing fees, royalties or payments which the Company or any of its Subsidiaries, as the case may
be, would otherwise be required to pay pursuant to the terms of such Contracts had the transactions contemplated by this Agreement not occurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Assuming
the accuracy of the representations made in Section&nbsp;4.8, the affirmative vote (in person or by proxy) of (i)&nbsp;the holders of a majority of the then
outstanding shares of Company Series&nbsp;A-1 Preferred Stock and each of Xmark Fund, L.P. and Xmark Fund,&nbsp;Ltd; and (ii)&nbsp;of the holders of a majority of the outstanding
shares of Company Series&nbsp;A-1 Preferred Stock and the Company's Common Stock (voting together as a single class on an as-converted-to-Common Stock
basis) at the Company Stockholders Meeting or any adjournment or postponement thereof in favor of (x)&nbsp;the adoption of this Agreement and (y)&nbsp;approval of the Charter Amendment (the
"</FONT><FONT SIZE=2><I>Company Stockholder Approval</I></FONT><FONT SIZE=2>") is the only vote or approval of the holders of any class or series of capital stock of the Company or any of its
Subsidiaries which is necessary to adopt this Agreement and approve the Transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governmental Approvals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for: (a)&nbsp;the filing with the SEC of a proxy statement relating
to the Company Stockholders Meeting (as amended or supplemented from time to time, the
"</FONT><FONT SIZE=2><I>Proxy Statement</I></FONT><FONT SIZE=2>") in accordance with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "</FONT><FONT SIZE=2><I>Exchange Act</I></FONT><FONT SIZE=2>"), the effectiveness of the registration statement on Form&nbsp;S-4 under the Securities Act to
be filed with the SEC by Parent in connection with the issuance of shares of Parent Common Stock in the Merger (as amended or supplemented from time to time, the
"</FONT><FONT SIZE=2><I>S-4 Registration Statement</I></FONT><FONT SIZE=2>"); and (b)&nbsp;the filing of the Charter Amendment and the Certificate of Merger with the Secretary of State
of the State of Delaware pursuant to the DGCL, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution and delivery of
this Agreement by the Company and the consummation by the Company of the Transactions, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or
given, would not, individually or in the aggregate, have a material effect on the business, operations or condition of the Company and its Subsidiaries, taken as a whole, or reasonably be expected to
have a material adverse effect on the Company's ability to consummate the Transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Company SEC Documents; Undisclosed Liabilities; Internal Controls.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company has filed and furnished all required reports, schedules, forms, prospectuses and registration, proxy and other statements required to be filed or furnished
by it with or to the SEC since January&nbsp;1, 2003 (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the
"</FONT><FONT SIZE=2><I>Company SEC Documents</I></FONT><FONT SIZE=2>"). None of the Company's Subsidiaries is required to file periodic reports with the SEC pursuant to the Exchange Act. As of their
respective effective dates (in the case of Company SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective filing dates (in
the case of all other Company SEC Documents), the Company SEC Documents complied in all material respects with the requirements of the Exchange Act and the Securities Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder, each as in effect on the applicable date referred to above, applicable to such Company SEC Documents, and none of the Company SEC Documents as
of such respective dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. </FONT></P>

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NAME="page_li1423_1_12"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The consolidated financial statements (including, in each case, any related notes thereto) of the Company included in the Company SEC Documents (the
"</FONT><FONT SIZE=2><I>Company Financials</I></FONT><FONT SIZE=2>") comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited quarterly statements, as indicated in the notes thereto) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as
of the dates thereof and the consolidated results of their operations and cash flows for the periods indicated (subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments, none of which has been or will be, individually or in the aggregate, material to the Company and its Subsidiaries, taken as a whole). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Company has established and maintains disclosure controls and procedures (as such term is defined in Rule&nbsp;13a-15 and
Rule&nbsp;15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated
Subsidiaries, required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's principal executive officer and
its principal financial officer to allow timely decisions regarding required disclosure; and, except as may be disclosed in reports filed by the Company with the SEC after the date of this Agreement
in accordance with applicable SEC requirements, such disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. With respect to each Annual
Report on Form&nbsp;10-K, each Quarterly Report on Form&nbsp;10-Q and each amendment of any such report included in the Company SEC Documents filed since January&nbsp;1,
2003, the principal executive officer and the principal financial officer of Company have made all certifications required by the Sarbanes-Oxley Act of 2002 and any related rules and regulations
promulgated by the SEC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries has established and maintains, adheres to and enforces a process to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including those policies and procedures that: (i)&nbsp;pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company and its Subsidiaries; (ii)&nbsp;provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company and its Subsidiaries are made only in
accordance with appropriate authorizations of management and the board of directors of the Company or its Subsidiaries, as applicable; and (iii)&nbsp;provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of the assets of the Company and its Subsidiaries that could have a material effect on the Company's financial
statements. Neither the Company nor any of the Company's independent auditors has identified or been made aware of (i)&nbsp;any significant deficiency or material weakness in the system of internal
accounting controls utilized by the Company and its Subsidiaries, (ii)&nbsp;any fraud, whether or not material, that involves the Company's management or any other current or former employee,
consultant, or director of the Company or any of its Subsidiaries who has a role in the preparation of financial statements or the internal accounting controls utilized by the Company and
Subsidiaries, or (iii)&nbsp;any claim or allegation regarding any of the foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any director, officer, agent, employee or other Person acting on behalf of the
Company or any of its Subsidiaries, has: (i)&nbsp;used any corporate or other funds for unlawful contributions, payments or gifts, or made any unlawful expenditures relating to political activity to
government officials or others or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-12</FONT></P>

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<P><FONT SIZE=2>established
or maintained any unlawful or unrecorded funds, in any case in violation of Section&nbsp;30A of the Exchange Act; or (ii)&nbsp;accepted or received any unlawful contributions,
payments, gifts or expenditures. Except as set forth in the Company SEC Documents filed by the Company and publicly available prior to the date of this Agreement (the "</FONT><FONT SIZE=2><I>Filed
Company SEC Documents</I></FONT><FONT SIZE=2>"), between the Company's proxy statement dated April&nbsp;19, 2004 and the date of this Agreement, no event has occurred that would be required to be
reported as a "Certain Relationship or Related Transaction" pursuant to Item 404 of Regulation&nbsp;S-K promulgated by the SEC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) of the type and
magnitude required to be reflected or reserved against on a consolidated balance sheet of the Company prepared in accordance with GAAP or the notes thereto, except liabilities: (i)&nbsp;as and to
the extent set forth on the unaudited consolidated balance sheet of the Company and its Subsidiaries as of June&nbsp;30, 2005 (the "</FONT><FONT SIZE=2><I>Balance Sheet
Date</I></FONT><FONT SIZE=2>") (including the notes thereto) included in the Filed Company SEC Documents); or (ii)&nbsp;incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Absence of Certain Changes or Events.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed in the Filed Company SEC Documents,
between the Balance Sheet Date and the date of this Agreement, the Company and its
Subsidiaries carried on and operated their respective businesses in all material respects in the ordinary course of business consistent with past practice. Between the Balance Sheet Date and the date
of this Agreement, there has not been, accrued or arisen: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;any
changes, events, occurrences or circumstances that, individually or in the aggregate, had or would reasonably be expected to have a Company Material Adverse Effect; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;any
acquisition by the Company or any Subsidiary of, or agreement by the Company or any Subsidiary to acquire by merging or consolidating with, or by purchasing any
assets or equity securities of, or by any other manner, any business or corporation, partnership, association or other business organization or division thereof, or other acquisition or agreement to
acquire any assets or any equity securities that are material, individually or in the aggregate, to the business of the Company or its Subsidiaries; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;any
declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company's or any of
its Subsidiaries' capital stock, or any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any of the Company's capital stock or any other securities of the Company
or its Subsidiaries or any options, warrants, calls or rights to acquire any such shares or other securities except for repurchases from Employees following their termination pursuant to the terms of
their stock option or purchase agreements; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;any
split, combination or reclassification of any of the Company's or any of its Subsidiaries' capital stock; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;any
granting by the Company or any of its Subsidiaries of any increase in compensation or fringe benefits or any payment by the Company or any of its Subsidiaries of any
bonus or any payment (whether in cash or equity) or increase by the Company or any of its Subsidiaries of severance payment, termination payments or bonus payment or any entry by the Company or any of
its Subsidiaries into any effective (as of the date of this Agreement) employment, severance, termination or indemnification agreement or any agreement the benefits of which are contingent or the
terms of which are materially altered upon the occurrence of a transaction involving the Company of the nature contemplated hereby (either alone or upon the occurrence of additional or subsequent
events); </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-13</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;any
material change by the Company in its accounting methods, principles or practices, except as required by concurrent changes in GAAP; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;any
debt, capital lease or other debt or equity financing transaction by the Company or any of its Subsidiaries or entry into any agreement by the Company or any of
its Subsidiaries in connection with any such transaction; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii)&nbsp;&nbsp;any
termination of any Material Contract to which the Company or any of its Subsidiaries was a party or by which it was bound which was in effect as of the Balance
Sheet Date; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;any
material restructuring activities by the Company or any of its Subsidiaries, including any material reductions in force, lease terminations, restructuring of
contracts or similar actions; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;any
sale, lease, license, encumbrance or other disposition of any properties or assets except the sale, lease or disposition (other than through licensing) of property
or assets which are not material, individually or in the aggregate, to the business of Company and its Subsidiaries, taken as a whole, or the license of Company products, in each case, in the ordinary
course of business and in a manner consistent with past practice; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)&nbsp;&nbsp;any
material revaluation by the Company of any of its assets, including, without limitation, writing down the value of capitalized inventory or writing off notes or
accounts receivable other than in the ordinary course of business consistent with past practice. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.7</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Legal Proceedings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other than any legal, administrative, arbitral or other proceedings related to
patent prosecutions in the ordinary course of business, and other than as described in Section&nbsp;3.7 of the Company Disclosure Schedule, there is no pending or, to the Knowledge of the Company,
threatened in writing, action, suit, claim or legal, administrative, arbitral or other proceeding against, or, to the Knowledge of the Company, governmental or regulatory investigation of, the Company
or any of its Subsidiaries, nor is there any injunction, order, judgment, ruling or decree imposed (or, to the Knowledge of the Company, threatened in writing to be imposed) upon the Company, any of
its Subsidiaries or the assets of the Company or any of its Subsidiaries (including their respective rights in any Intellectual Property) by or before any Governmental Authority. There has not been
since January&nbsp;1, 2003, nor are there currently any internal investigations or inquiries being conducted by the Company, the Company's Board of Directors (or any committee thereof) or, to the
Company's Knowledge, any third party at the request of any of the foregoing concerning any financial, accounting, tax, conflict of interest, illegal activity, fraudulent or deceptive conduct or other
misfeasance or malfeasance issues. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.8</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Compliance With Laws; Permits.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company and its Subsidiaries are in compliance in all material respects with all laws (including common law), statutes, ordinances, codes, rules, regulations,
decrees and orders of Governmental Authorities (collectively, "</FONT><FONT SIZE=2><I>Laws</I></FONT><FONT SIZE=2>") applicable to the Company or any of its Subsidiaries, any of their properties or
other assets or any of their businesses or operations. Since January&nbsp;1, 2002, neither the Company nor any of its Subsidiaries has received written notice to the effect that a Governmental
Authority claimed or alleged that the Company or any of its Subsidiaries was not in compliance in a material respect with any Law applicable to the Company or any of its Subsidiaries, any of their
material properties or other assets or any of their businesses or operations. As of the date of this Agreement, there is no judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries holds all material licenses, franchises, permits, certificates, approvals and authorizations from Governmental Authorities, or
required by Governmental Authorities to be obtained, in each case necessary for the conduct of their respective businesses (collectively, "</FONT><FONT SIZE=2><I>Permits</I></FONT><FONT SIZE=2>").
The Company and each of its Subsidiaries is in compliance in all material </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-14</FONT></P>

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<P><FONT SIZE=2>respects
with the terms of all Permits. Since January&nbsp;1, 2002, neither the Company nor any of its Subsidiaries has received written notice to the effect that a Governmental Authority was
considering the amendment, termination, revocation or cancellation of any Permit. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Company is not in receipt of any pending notice of, and not subject to, any pending adverse inspection, finding of deficiency, finding of non-compliance,
compelled or voluntary recall, investigation, penalty for corrective or remedial action or other compliance or enforcement action (including any of the foregoing indicating that any of the Company's
Products are misbranded or adulterated as defined in 21 U.S.C. &sect;321, </FONT><FONT SIZE=2><I>et seq</I></FONT><FONT SIZE=2>., as amended, and the rules and regulations promulgated
thereunder), in each case relating to any of its products or to the Company's Knowledge, to the facilities in which such products are manufactured, collected or handled, by the Food and Drug
Administration (the "</FONT><FONT SIZE=2><I>FDA</I></FONT><FONT SIZE=2>") or applicable equivalent foreign regulatory authorities. The Company is in compliance with all applicable registration and
listing requirements set forth at 21 U.S.C. &sect;360 and all similar applicable laws and regulations. To the Knowledge of the Company, the Company has not made any false statements on, or
omissions from, the applications, approvals, reports and other submissions to the FDA or applicable equivalent foreign regulatory authorities or in or from any other records and documentation prepared
or maintained to comply with the requirements of the FDA or applicable equivalent foreign regulatory authorities relating to the Company's products that would, individually or in the aggregate,
reasonably be expected to have a material effect on the business, operation or condition of the Company and its Subsidiaries, taken as a whole. No Company product has been recalled, suspended or
discontinued as a result of any action by the FDA or any applicable equivalent foreign regulatory authorities, by the Company or, to the Knowledge of the Company, any licensee or distributor of any of
the Company's products. Neither the Company, nor to the Knowledge of the Company any officer, key employee or agent of the Company, has been convicted of any crime or engaged in any conduct that would
reasonably be expected to result in debarment under 21 U.S.C. Section&nbsp;335a or any similar state law or regulation. The clinical, preclinical, safety and other studies or tests conducted by or
on behalf of or sponsored, by the Company or in which the Company's products or product candidates under development have participated, were and, if still pending, are being conducted in material
compliance with standard medical and scientific procedures. The Company has operated within, and currently is in material compliance with, all applicable rules, regulations and policies of the FDA and
applicable equivalent foreign regulatory authorities for such studies. The Company has not received any notices or other correspondence from the FDA or applicable equivalent foreign regulatory
authorities requiring the termination, suspension, or modifications of any clinical, preclinical, safety or other studies or tests. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.9</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Information in Proxy Statement and S-4 Registration Statement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Proxy Statement and
any other document filed with the SEC by the Company in connection with the Merger (taking into account any amendment thereof or supplement thereto), at the date first mailed to the stockholders of
the Company, at the time of the Company Stockholders Meeting and at the time filed with the SEC, as the case may be, will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, and the Proxy Statement and
such other documents filed with the SEC by the Company will comply in all material respects with the provisions of the Exchange Act; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>,
that no representation is made by the Company with respect to statements made therein based on information supplied by Parent or Merger Sub for
inclusion in such documents. All information supplied or to be supplied by the Company for inclusion or incorporation by reference in the S-4 Registration Statement, shall not, at the time
the S-4 Registration Statement, if applicable, is filed with the SEC and at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-15</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.10</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Tax Matters.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries has timely filed, or has caused to be timely filed on its behalf (taking into account an extension of time within which to
file), all Tax Returns required to be filed by it for which the last day for timely filing has past, and all such Tax Returns and elections are accurate and complete in all material respects. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries has timely paid all Taxes it is required to pay (whether or not shown to be due on such Tax Returns) and timely paid or withheld
with respect to its employees and other third parties (and timely paid over any withheld amounts to the appropriate Taxing authority) all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be withheld or paid by it. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
most recent financial statements contained in the Filed Company SEC Documents reflect an adequate reserve for all Taxes payable by the Company and its Subsidiaries
for all taxable periods and portion thereof through the date of such financial statements. Since the date of such financial statements, neither the Company nor any of its Subsidiaries has incurred any
liability for Taxes other than in the ordinary course of business. No deficiency with respect to Taxes has been asserted or assessed against the Company or any of its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of
Section&nbsp;355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section&nbsp;355 of the Code since January&nbsp;1, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;To
the Knowledge of the Company, no audit or other administrative or court proceedings are pending with any Governmental Authority with respect to Taxes of the Company
or any of its Subsidiaries and no written notice thereof has been received and is outstanding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries is a party to any contract, agreement, plan or other arrangement that, individually or collectively, would give rise to
the payment of any amount which would not be deductible by reason of Section&nbsp;280G of the Code or would give rise to an excise Tax pursuant to Section&nbsp;4999 of the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;The
Company has made available to Parent copies of: (i)&nbsp;all income and franchise Tax Returns of the Company and its Subsidiaries for the preceding three taxable
years; and (ii)&nbsp;any audit report issued within the last three years (or otherwise with respect to any audit or proceeding in progress) relating to income and franchise Taxes of the Company or
any of its Subsidiaries. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;The
Company is not and has not been at any time during the 5-year period ending on the Closing Date a "United States real property holding corporation"
within the meaning of Section&nbsp;897 of the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Neither
the Company nor any of its Subsidiaries has engaged in a "reportable transaction," as set forth in Treas. Reg. &sect; 1.6011-4(b), or any
transaction that is the same as or substantially similar to one of the types of transactions that the Internal Revenue Service has determined to be a tax avoidance transaction and identified by
notice, regulation, or other form of published guidance as a "listed transaction," as set forth in Treas. Reg. &sect; 1.6011-4(b)(2). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of this Agreement: (i)&nbsp;"</FONT><FONT SIZE=2><I>Taxes</I></FONT><FONT SIZE=2>" shall mean: (A)&nbsp;all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments or liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, (B)&nbsp;any
liability for the payment of any amounts of the type described in clause&nbsp;(A) of this Section&nbsp;3.10(j)(i)&nbsp;as a result of being a member of an affiliated, consolidated, combined or
unitary group for any period, and (C)&nbsp;any </FONT></P>

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<P><FONT SIZE=2>liability
for the payment of any amounts of the type described in clauses (A)&nbsp;or (B)&nbsp;of this Section&nbsp;3.10(j)(i)&nbsp;as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations under any agreements or arrangements with any other Person with respect to such amounts and including any liability for taxes of a
predecessor or transferor entity; and (ii)&nbsp;"</FONT><FONT SIZE=2><I>Tax Returns</I></FONT><FONT SIZE=2>" shall mean any return, report, claim for refund, estimate, information return or
statement, tax election or other similar document relating to or required to be filed with any Governmental Authority with respect to Taxes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.11</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Employee Benefits and Labor Matters.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Section&nbsp;3.11(a)
of the Company Disclosure Schedule sets forth an accurate and complete list as of the date of this Agreement, separately with respect to each
country in which the Company or any of its Subsidiaries has employees, of all Company Plans (as defined below). "</FONT><FONT SIZE=2><I>Company Plans</I></FONT><FONT SIZE=2>" shall mean the following
as of the date of this Agreement: (i)&nbsp;all "employee benefit plans" (as defined in Section&nbsp;3(3) of the Employee Retirement Income Security Act of 1974, as amended
("</FONT><FONT SIZE=2><I>ERISA</I></FONT><FONT SIZE=2>")); and (ii)&nbsp;all other employee benefit plans, agreements or arrangements, whether written, unwritten or otherwise, or funded or
unfunded, that in the case of either clause "(i)" or clause "(ii)" of this sentence: (A)&nbsp;providing for bonus or other incentive compensation, equity or equity-based compensation, retirement
benefit, deferred compensation, change in control rights or benefits, termination or severance benefits, stock purchase, sick leave, vacation pay, salary continuation, hospitalization, medical
insurance, life insurance, fringe benefits or other compensation; and (B)&nbsp;to which the Company or any of its Subsidiaries has any obligation or liability (contingent or otherwise) thereunder
for current or former directors, consultants or employees of the Company or any of its Subsidiaries (the "</FONT><FONT SIZE=2><I>Employees</I></FONT><FONT SIZE=2>"); </FONT><FONT SIZE=2><I>provided,
however</I></FONT><FONT SIZE=2>, that any plan, agreement or arrangement providing for "at will" employment which can be terminated without liability in excess of $50,000 shall not constitute a
Company Plan. Section&nbsp;3.11(a) of the Company Disclosure Schedule separately sets forth as of the date of this Agreement each Company Plan which is a "multiemployer plan," as defined in
Section&nbsp;3(37) of ERISA (a "</FONT><FONT SIZE=2><I>Multiemployer Plan</I></FONT><FONT SIZE=2>"), or is or has been subject to Sections 4063 or 4064 of ERISA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;True,
current and complete copies of the following documents, with respect to each of the Company Plans (other than a Multiemployer Plan), have been delivered or made
available to Parent by the Company, to the extent applicable: (i)&nbsp;any plans (including all amendments thereto) and any related trust documents, insurance contracts, administrative service
agreements or other funding arrangements (including amendments thereto); (ii)&nbsp;the most recent Forms 5500 and all schedules thereto and the most recent actuarial report, if any; (iii)&nbsp;the
most recent IRS determination letter; (iv)&nbsp;all material correspondence to or from any governmental agency relating to any Company Plans; and (v)&nbsp;summary plan descriptions, together with
the summary(ies) of material modifications, if any. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Company Plans are being maintained, in all material respects, in accordance with their terms and with all applicable provisions of ERISA, the Code and other
applicable Laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Each
Company Plan that is intended to meet the requirements for country specific tax-favored treatment under Subchapter D of Chapter 1 of Subtitle A of the
Code (in the case of tax-favored treatment for US federal income tax purposes) or other applicable Laws (other than the Laws of the United States or jurisdictions located within the United
States and its territories) meets such requirements, including: (i)&nbsp;any Company Plans intended to qualify under Section&nbsp;401 of the Code are so qualified; and (ii)&nbsp;any trusts
intended to be exempt from federal income taxation under Section&nbsp;501 of the Code are so exempt. Nothing has occurred with respect to the operation of the Company Plans that, notwithstanding the
taking of corrective action by the Company, would reasonably be expected to cause the loss of such tax favored treatment, qualification or exemption, or the imposition of any liability, penalty or tax
under ERISA, the Code or other applicable Law. </FONT></P>

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<P><FONT SIZE=2><A
NAME="page_lk1423_1_18"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Neither the Company, nor any of its Subsidiaries nor any other Person who is treated as a single employer together with the Company or any of its Subsidiaries pursuant
to Section&nbsp;414(b), (c), (m)&nbsp;(o) of ERISA (all of the foregoing, "</FONT><FONT SIZE=2><I>ERISA Affiliates</I></FONT><FONT SIZE=2>") has any unsatisfied liability with respect to any
complete or partial withdrawal from any Multiemployer Plan, or the termination or reorganization of any Multiemployer Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;All
contributions (including all employer contributions and employee salary reduction contributions) required to have been made under any of the Company Plans (including
workers compensation) or by Law (without regard to any waivers granted under Section&nbsp;412 of the Code) to any funds or trusts established thereunder or in connection therewith have been made by
the due date thereof (including any valid extension) or the failure to have timely made such contribution has been corrected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;None
of the Company Plans provide for post-employment life or health insurance, or other welfare benefits coverage for any participant or any beneficiary of
a participant, except as may be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("</FONT><FONT SIZE=2><I>COBRA</I></FONT><FONT SIZE=2>") or other applicable
Laws. Each of the Company and any ERISA Affiliate which maintains a "group health plan" within the meaning Section&nbsp;5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section&nbsp;4980B of the Code, COBRA, Part&nbsp;6 of Subtitle&nbsp;B of Title&nbsp;I of ERISA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;Except
as provided in any Company Plans or in any employment agreement delivered or made available by the Company to Parent prior to the date of this Agreement, neither
the execution and delivery of this Agreement nor the consummation of the Transactions will: (i)&nbsp;result in any payment becoming due to any Employee; (ii)&nbsp;increase any benefits otherwise
payable under any Company Plan; or (iii)&nbsp;result in the acceleration of the time of payment or vesting of any such benefits under any such plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;No
stock or other security issued by the Company or any of its Subsidiaries forms a material part of the assets of any Company Plan. For purposes of this
Section&nbsp;3.11(i), a Company Stock Plan shall not be deemed to be a Company Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;None
of the current Employees is represented in his or her capacity as an employee of the Company or any of its Subsidiaries by any labor organization or works council
or similar representative. Neither the Company nor any of its Subsidiaries has recognized any labor organization, nor has any labor organization been elected as the collective bargaining agent of any
Employees, nor is the Company or any of its Subsidiaries a party to any collective bargaining agreement or union contract recognizing any labor organization as the bargaining agent of any Employees.
There is no union organization activity involving any of the Employees, pending or, to the Knowledge of the Company, threatened in writing. There is no picketing, pending or, to the Knowledge of the
Company, threatened in writing, and there are no strikes, slowdowns, work stoppages, lockouts, arbitrations or other similar labor disputes involving any of the Employees pending or, to the Knowledge
of the Company, threatened in writing. There has been no "mass layoff" or "plant closing" (as defined by the Worker Adjustment and Retraining Notification Act and any similar state or local "mass
layoff" or "plant closing" law) with respect to the Company or any of its Subsidiaries since January&nbsp;1, 2003. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;There
is no agreement, plan, arrangement or other contract covering any Employee that, considered individually or considered collectively with any other such agreements,
plans, arrangements or other contracts, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would be characterized as a "parachute payment"
within the meaning of Section&nbsp;280G(b)(1) of the Code. There is no agreement, plan, arrangement or other contract by which the Company or any of its Subsidiaries is bound to compensate any
Employee for excise taxes paid pursuant to Section&nbsp;4999 of the Code. Section&nbsp;3.11(k) of the Company Disclosure Schedule lists as of the date of this Agreement all Persons who the Company
reasonably believes are "disqualified </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-18</FONT></P>

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<P><FONT SIZE=2>individuals"
(within the meaning of Section&nbsp;280G of the Code and the regulations promulgated thereunder) as determined as of the date of this Agreement. No compensation shall be includable in
the gross income of any Employee as a result of the operation of Section&nbsp;409A of the Code with respect to any applicable arrangements or agreements in effect prior to the Effective Time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.12</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Environmental Matters.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company and each of its Subsidiaries is in compliance in all material respects with all applicable Environmental Laws. Neither the Company nor any of its
Subsidiaries has received any notice of any obligation, liability, order, settlement, judgment, injunction or decree relating to or arising under Environmental Laws. No facts, circumstances or
conditions exist with respect to the Company or any of its Subsidiaries that would reasonably be expected to give rise to Environmental Liabilities to the Company or its Subsidiaries in excess of
$100,000 in any individual instance or $250,000 in the aggregate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company has made available to Parent copies of all environmentally related audits, studies, reports, analyses and results of investigations that are in the Company's
possession and have been performed with respect to currently or previously owned, leased or operated properties of the Company or any of its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;To
the Knowledge of the Company, there is not now, nor has there been in the past, on, in or under any real property owned, leased or operated by the Company or any of
its Subsidiaries: (i)&nbsp;any underground storage tanks, above-ground storage tanks, dikes or impoundments; (ii)&nbsp;any asbestos-containing materials; (iii)&nbsp;any polychlorinated
biphenyls; or (iv)&nbsp;any radioactive substances. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
Hazardous Materials Activities of the Company and its Subsidiaries prior to the Closing have not resulted in the exposure of any Person to a Hazardous Material in a
manner which has caused or could reasonably be expected to cause an adverse health effect to any such Person. Neither the Company nor any of its Subsidiaries has entered into any agreement that may
require it to guarantee, reimburse, pledge, defend, hold harmless or indemnify any other party with respect to liabilities arising out of Environmental Laws or the Hazardous Materials Activities of
the Company or any of its Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;For
purposes of this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Environmental Laws</I></FONT><FONT SIZE=2>" means all Laws relating in any way to the environment, preservation or reclamation of natural
resources, the presence, management or Release of, or exposure to, Hazardous Materials, or to human health and safety, including the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. &sect; 9601 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), the Hazardous Materials Transportation Act (49 U.S.C. App. &sect; 1801 </FONT><FONT SIZE=2><I>et
seq.</I></FONT><FONT SIZE=2>), the Resource Conservation and Recovery Act (42 U.S.C. &sect; 6901 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), the Clean Water Act (33 U.S.C.
&sect; 1251 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), the Clean Air Act (42 U.S.C. &sect;&nbsp;7401 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), the Toxic
Substances Control Act (15 U.S.C. &sect;&nbsp;2601 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
&sect;&nbsp;136 </FONT><FONT SIZE=2><I>et seq.</I></FONT><FONT SIZE=2>), and the Occupational Safety and Health Act (29 U.S.C. &sect;&nbsp;651 </FONT><FONT SIZE=2><I>et
seq.</I></FONT><FONT SIZE=2>), as each has been amended and the regulations promulgated pursuant thereto and all analogous state, local or foreign laws and regulations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Environmental Liabilities</I></FONT><FONT SIZE=2>" means, with respect to any Person, all liabilities, obligations, responsibilities, remedial
actions, losses, damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by any other Person or arising under any Environmental Law, in any case to the extent based upon or arising under any
Environmental Law, environmental Permit or order or agreement with any Governmental Authority or other Person under Environmental Laws. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-19</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Hazardous Materials</I></FONT><FONT SIZE=2>" means any material, substance of waste that is regulated, classified, or otherwise characterized
under or pursuant to any Environmental Law as "hazardous," "toxic,"
"pollutant," "contaminant," "radioactive" or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, urea formaldehyde
insulation, chlorofluorocarbons and all other ozone-depleting substances. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Hazardous Materials Activities</I></FONT><FONT SIZE=2>" means the transportation, transfer, recycling, storage, use, treatment, manufacture,
removal, remediation, release, exposure of others to, sale, or distribution of any Hazardous Material or any product or waste containing a Hazardous Material, or product manufactured with Ozone
depleting substances, including, without limitation, any required labeling, payment of waste fees or charges (including so-called e-waste fees) and compliance with any product
take-back or product content requirements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Release</I></FONT><FONT SIZE=2>" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing or migrating into or through the environment or any natural or man-made structure. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.13</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Contracts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Set
forth in Section&nbsp;3.13(a) of the Company Disclosure Schedule is a list as of the date of this Agreement of each of the following Contracts to which the Company
or any of its Subsidiaries is a party or by which any of their assets are bound and under which the Company or any of its Subsidiaries has any rights or obligations: (i)&nbsp;each Contract that
would be required to be filed as an exhibit to a Registration Statement on Form&nbsp;S-1 under the Securities Act or an Annual Report on Form&nbsp;10-K under the Exchange
Act if such registration statement or report was filed by the Company with the SEC on the date of this Agreement; (ii)&nbsp;each Contract that limits, curtails or restricts in any material respect
the ability of the Company or any of its Subsidiaries to compete in any geographic area or line of business; (iii)&nbsp;each joint venture agreement; (iv)&nbsp;each indemnification, employment or
other Contract with any director, officer or other Affiliate of the Company or its Subsidiaries; (v)&nbsp;each loan or credit agreement, mortgage, indenture, note or other Contract or instrument
evidencing indebtedness for borrowed money by the Company or any of its Subsidiaries or any Contract or instrument pursuant to which indebtedness for borrowed money is guaranteed by the Company or any
of its Subsidiaries; (vi)&nbsp;each joint development, customer or supply Contract of the Company or any Subsidiary of the Company that involved payments to or from the Company or any Subsidiary of
the Company in fiscal year 2004 in excess of $300,000; (vii)&nbsp;each "single source" supply Contract of the Company or any Subsidiary of the Company; (viii)&nbsp;each exclusive sales
representative or distribution Contract; (ix)&nbsp;each collective bargaining agreement; (x)&nbsp;each lease, rental or other occupancy Contract involving real property; (xi)&nbsp;each lease or
rental Contract involving personal property and payments in excess of $250,000 per year; (xii)&nbsp;each consulting Contract that is not terminable by the Company or its Subsidiaries on notice of
31&nbsp;days or less without liability or financial obligation to the Company; (xiii)&nbsp;each Contract or plan, any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the Transactions (either alone or upon the occurrence of additional or subsequent events) or the value of any of the benefits of which will be
calculated on the basis of any of the Transactions (either alone or upon the occurrence of additional or subsequent events); (xiv)&nbsp;each material agreement related to the settlement of
litigation or claims against the Company or any of its Subsidiaries entered into within five years prior to the date of this Agreement and with any continuing obligations; (xv)&nbsp;each Contract,
or group of Contracts with a Person (or group of affiliated Persons), the termination or breach of which would reasonably be expected to have a Company Material Adverse Effect, and (xvii)&nbsp;each
commitment or agreement to enter into any of the foregoing (each Contract and other document listed on Section&nbsp;3.13(a) of the Company Disclosure Schedule being referred to as a
"</FONT><FONT SIZE=2><I>Material Contract</I></FONT><FONT SIZE=2>"). The Company has made available to Parent copies of each Material Contract in existence as of the date of this Agreement, together
with all amendments and supplements thereto. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-20</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Each
of the Material Contracts is valid, binding and in full force and effect and is enforceable in accordance with its terms by the Company and its Subsidiaries party
thereto, subject to the Bankruptcy and Equity Exception. Neither the Company nor any of its Subsidiaries is in violation or default in any material respect under any Material Contract, nor, to the
Knowledge of the Company, does any condition exist that, with notice or lapse of time or both, would constitute a violation or default in any material respect thereunder by the Company or its
Subsidiaries party thereto. To the Knowledge of the Company, no other party to any Material Contract is in violation or default in any material respect thereunder, nor does any condition exist that
with notice or lapse of time or both would constitute a violation or default in any material respect by any such other party thereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.14</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Real Property.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;None
of the Company or its Subsidiaries own any real property. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Section&nbsp;3.14(b)
of the Company Disclosure Schedule identifies each Contract pursuant to which the Company or any of its Subsidiaries leases real property from any
other Person as of the date of this Agreement. All real property leased to the Company or any of its Subsidiaries, including all buildings, structures, fixtures and other improvements leased to the
Company or any of its Subsidiaries, are referred to as the "</FONT><FONT SIZE=2><I>Company Real Property</I></FONT><FONT SIZE=2>." The present use and operation of the Company Real Property is
authorized by, and is in compliance in all material respects with, all applicable zoning, land use, building, fire, health, labor, safety and other Laws. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;There
are no parties other than the Company or any of its Subsidiaries occupying, or with a right to occupy, the Company Real Property. Neither the Company nor any of
its Subsidiaries owes brokerage commissions or finders fees with respect to any such Company Real Property or would owe any such fees if any existing Contract relating to any Company Real Property
were renewed pursuant to any renewal options contained in such Contract. The Company Real Property is in good operating condition and repair, free from structural, physical and mechanical defects, is
maintained in a manner consistent with standards generally followed with respect to similar properties, and is structurally sufficient and otherwise suitable for the conduct of the business as
presently conducted. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.15</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Title to Properties.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company and each of its Subsidiaries: (a)&nbsp;has good title to all
properties and other assets which are reflected on the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September&nbsp;30, 2004 as being owned by the Company or one of
its Subsidiaries (or acquired after the Balance Sheet Date) which are, individually or in the aggregate, material to the business of the Company and its Subsidiaries taken as a whole (except
properties sold or otherwise disposed of since the Balance Sheet Date in the ordinary course of business consistent with past practice and not in violation of this Agreement), free and clear of all
Liens except: (i)&nbsp;statutory liens securing payments not yet due; (ii)&nbsp;security interests, mortgages and pledges that are disclosed in the Filed Company SEC Documents that secure
indebtedness that is reflected in the unaudited consolidated financial statements of the Company and its Subsidiaries as of September&nbsp;30, 2004; and (iii)&nbsp;such other imperfections or
irregularities of title or other Liens that, individually or in the aggregate, do not and would not reasonably be expected to materially affect the use of the properties or assets subject thereto or
otherwise materially impair the business operations of the Company or its Subsidiaries as currently conducted; and (b)&nbsp;is the lessee or sublessee of all leasehold estates and leasehold
interests reflected in the Filed Company SEC Documents (or acquired after the Balance Sheet Date) which are, individually or in the aggregate, material to the business of the Company and its
Subsidiaries taken as a whole (other than any such leaseholds whose scheduled terms have expired subsequent to the date of such Filed Company SEC Documents). The Company and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all such leases in all material respects. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-21</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.16</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Intellectual Property.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Section&nbsp;3.16(a)
of the Company Disclosure Schedule lists, as of the date of this Agreement, all Registered Intellectual Property Rights owned by, filed in the
name of, or applied for, by the Company (the "</FONT><FONT SIZE=2><I>Company Registered Intellectual Property</I></FONT><FONT SIZE=2>") and lists, as of the date of this Agreement, any actions that
must be taken by the Company within ninety (90)&nbsp;days of the date of this Agreement, including the payment of any registration, maintenance or renewal fees or the filing of any responses to PTO
office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Registered Intellectual Property Rights.
"</FONT><FONT SIZE=2><I>Registered Intellectual Property Rights</I></FONT><FONT SIZE=2>" as used herein shall mean all United States, international and foreign: (i)&nbsp;patents, including
applications therefor; (ii)&nbsp;registered trademarks, applications to register trademarks, including intent-to-use applications, or other registrations or applications
related to trademarks; (iii)&nbsp;copyright registrations and applications to register copyrights; (iv)&nbsp;registered mask works and applications to register mask works; and (v)&nbsp;any other
Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any private, state, government or other public
or quasi-public legal authority at any time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company and its Subsidiaries are the sole and exclusive owners of, or have a valid right to use, sell or license, as the case may be, all Intellectual Property used,
sold or licensed by the Company and its Subsidiaries, as applicable, in the business of the Company and its Subsidiaries as conducted as of the date of this Agreement or as contemplated by the Company
as of the date of this Agreement to be conducted. In each case in which the Company has acquired any Intellectual Property from any person, the Company has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in and to such Intellectual Property (including the right to seek past and future damages with respect thereto) to the Company. All Intellectual Property
used in or necessary to the conduct of Company's business as conducted as of the date of this Agreement or as contemplated by the Company as of the date of this Agreement to be conducted was written
and created solely by either (i)&nbsp;employees of the Company acting within the scope of their employment who have validly and irrevocably assigned all of their rights, including all Intellectual
Property rights therein, to the Company or (ii)&nbsp;by third parties who have validly and irrevocably assigned all of their rights, including all Intellectual Property rights therein, to the
Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;No
person who has licensed any Intellectual Property to the Company has ownership rights or license rights to improvements made by or for the Company in such
Intellectual Property. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;No
government funding, facilities of a university, college, other educational institution or research center or funding from third parties was used in the development of
any Intellectual Property owned by or exclusively licensed to the Company. No current or former employee, consultant or independent contractor of Company, who was involved in, or who contributed to,
the creation or development of any Intellectual Property owned by or exclusively licensed to the Company, has performed services for the government, university, college, or other educational
institution or research center during a period of time during which such employee, consultant or independent contractor was also performing services for Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;The
products and operation of the business of the Company and its Subsidiaries and the use of the Intellectual Property owned by the Company and its Subsidiaries in
connection therewith do not infringe, misappropriate or constitute an unauthorized use of or violate any Intellectual Property right (including any right to privacy or publicity) of any third party or
constitute unfair competition or trade practices under the laws of any jurisdiction. As of the date of this Agreement, the Company has not received notice from any person claiming that such operation
or any act, product, technology or service (including products, technology or services currently under development) of the Company infringes or misappropriates any Intellectual Property of any person
or constitutes unfair competition or trade practices under the laws of any jurisdiction (nor does the Company have Knowledge of any basis therefor). The Intellectual Property owned by or licensed to
the Company and each of its Subsidiaries includes all of the Intellectual Property used in and/or necessary to enable the Company and its </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-22</FONT></P>

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<BR>

<P><FONT SIZE=2>Subsidiaries
to conduct their business in the manner in which such businesses are being conducted as of the date of this Agreement and as contemplated by the Company as of the date of this Agreement
to be conducted, including the design, development, manufacture, use, import and sale of the products of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;As
of the date of this Agreement, neither the Company nor any of its Subsidiaries has licensed any of its Intellectual Property to any Person on an exclusive basis or
has joint ownership of any of its Intellectual Property, nor has the Company or any of its Subsidiaries entered into any Contract limiting its ability to exploit fully any of its Intellectual Property
(excluding Intellectual Property licensed on a nonexclusive basis to customers in the ordinary course of business consistent with past practice). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;No
non-public, proprietary Intellectual Property material to the business of the Company and its Subsidiaries taken as a whole as conducted as of the date of
this Agreement have been authorized to be disclosed or actually disclosed by the Company or any of its Subsidiaries to any employee or third party other than pursuant to a non-disclosure
agreement or that are subject to other confidentiality obligations that protects the proprietary interests of the Company and its Subsidiaries in and to such Intellectual Property. The Company and its
Subsidiaries have taken reasonable security measures to protect the confidentiality of confidential Intellectual Property of the Company and its Subsidiaries. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;To
the Knowledge of the Company, all material Intellectual Property owned by the Company or any of its Subsidiaries are valid and enforceable (except with respect to
items for which applications are pending). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;To
the Knowledge of the Company, no third party is infringing, violating, misusing or misappropriating any material Intellectual Property of the Company or any of its
Subsidiaries, and no such claims have been made against a third party by the Company or any of its Subsidiaries since January&nbsp;1, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;Neither
this Agreement nor the transactions contemplated by this Agreement, including the assignment to Parent or Surviving Corporation, by operation of law or
otherwise, pursuant to this Agreement, of any contracts or agreement to which the Company is a party, will result in (i)&nbsp;either Parent's or the Surviving Corporation's granting, pursuant to any
contract to which the Company is a party, to any third party any right to or with respect to any Intellectual Property owned by, or licensed to, either of them, (ii)&nbsp;either the Parent's or the
Surviving Corporation's being bound by, or subject to, any non-compete or other restriction on the operation or scope of their respective businesses pursuant to any contract to which the
Company is a party, or (iii)&nbsp;either the Parent's or the Surviving Corporation's being obligated, pursuant to any contract to which the Company is a party, to pay any royalties or other amounts
to any third party in excess of those payable by the Company prior to the Closing. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.17</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Insurance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All material insurance policies of the Company and its Subsidiaries as of the date of
this Agreement (the "</FONT><FONT SIZE=2><I>Policies</I></FONT><FONT SIZE=2>") are in full force and effect. Neither the Company nor any of its Subsidiaries is in material breach or default, and
neither the Company nor any of its Subsidiaries have taken any action or failed to take any action which, with notice or the lapse of time, would constitute such a breach or default, or permit
termination or modification of any of the Policies. No notice of cancellation or termination has been received by the Company with respect to any such Policy (except with respect to Policies that have
been replaced with similar policies). The Company has provided or made available to Parent accurate and complete copies of all Policies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.18</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Opinion of Financial Advisor.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Aquilo Partners
("</FONT><FONT SIZE=2><I>Aquilo</I></FONT><FONT SIZE=2>") has delivered its opinion, dated as of the date of this Agreement, to the effect that, as of such date, and subject to the various
assumptions and qualifications set forth therein, the Merger Consideration to be paid to the holders of Common Stock of the Company is fair from a financial point of view to such holders (the
"</FONT><FONT SIZE=2><I>Fairness Opinion</I></FONT><FONT SIZE=2>"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-23</FONT></P>

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NAME="page_lm1423_1_24"> </A> </FONT></P>

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<P><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.19</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Brokers and Other Advisors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for Aquilo, the fees and expenses of which will be paid by
the
Company, no broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission, or the reimbursement of
expenses, in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. The Company has delivered or made available to Parent a copy of
the Company's engagement letter with Aquilo, which letter describes all fees payable to Aquilo in connection with the Transactions, all agreements under which any such fees or any expenses are payable
and all indemnification and other agreements related to the engagement of Aquilo by the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
3.20</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;State Takeover Statutes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No "fair price," "moratorium," "control share acquisition," "business
combination" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States (with the exception of Section&nbsp;203 of the DGCL
("</FONT><FONT SIZE=2><I>Section&nbsp;203</I></FONT><FONT SIZE=2>")) applicable to the Company is applicable to the Merger or the other Transactions. Assuming the accuracy of the representations
made in Section&nbsp;4.8, the action of the Board of Directors of the Company in approving this Agreement (and the Transactions) and the Voting Agreements (and the transactions contemplated thereby)
is sufficient to render inapplicable to this Agreement (and the Transactions) and the Voting Agreements (and the transactions contemplated thereby) the restrictions on "business combinations" (as
defined in Section&nbsp;203) as set forth in Section&nbsp;203. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="lm1423_article_4_representations_and___art02597"> </A>
<A NAME="toc_lm1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE&nbsp;4    <BR>    <BR>    </B></FONT><FONT SIZE=2><I>Representations and Warranties of Parent and Merger Sub</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Parent
and Merger Sub jointly and severally represent and warrant to the Company as follows (provided that the representations and warranties contained in Section&nbsp;4.9 shall be of
no force and effect and deemed stricken from this Agreement if Parent makes the Parent Election): </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Organization, Standing and Corporate Power.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the Laws of the jurisdiction in which it is incorporated. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Authority; Noncontravention.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Each
of Parent and Merger Sub has all necessary corporate power and authority to execute and deliver this Agreement and to perform their respective obligations hereunder
and to consummate the Transactions. The execution, delivery and performance by Parent and Merger Sub of this Agreement, and the consummation by Parent and Merger Sub of the Transactions, have been
duly authorized and approved by their respective Boards of Directors (and promptly following the execution hereof will be adopted by Parent as the sole stockholder of Merger Sub) and no other
corporate action on the part of Parent and Merger Sub is necessary to authorize the execution, delivery and performance by Parent and Merger Sub of this Agreement and the consummation by them of the
Transactions, subject only to the filing of the Certificate of Merger pursuant to the DGCL. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of them in accordance with its
terms, subject to the Bankruptcy and Equity Exception. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Neither
the execution and delivery of this Agreement by Parent and Merger Sub, nor the consummation by Parent or Merger Sub of the Transactions, nor compliance by Parent
or Merger Sub with any of the terms or provisions hereof, will: (i)&nbsp;conflict with or violate any provision of the certificate of incorporation or bylaws of Parent or Merger Sub; or
(ii)&nbsp;assuming that the authorizations, consents and approvals referred to in Section&nbsp;4.3 are obtained and the filings referred to in Section&nbsp;4.3 are made: (A)&nbsp;violate any
Law, judgment, writ or injunction of any Governmental Authority applicable to Parent or any of its Subsidiaries or any of their respective properties or assets; or (B)&nbsp;violate, conflict with,
result in the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-24</FONT></P>

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<P><FONT SIZE=2>termination
or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of, Parent or Merger Sub or any of
their respective Subsidiaries under, any of the terms, conditions or provisions of any Contract to which Parent, Merger Sub or any of their respective Subsidiaries is a party, or by which they or any
of their respective properties or assets may be bound or affected except, in the case of clause "(ii)" of this sentence, for such violations, conflicts, losses, defaults, terminations, cancellations,
accelerations or Liens as, individually or in the aggregate, would not reasonably be expected to prevent or materially delay or materially impair the ability of Parent or Merger Sub to consummate the
Transactions (a "</FONT><FONT SIZE=2><I>Parent Material Adverse Effect</I></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governmental Approvals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for: (a)&nbsp;filings required under, and compliance with
applicable requirements of, the Securities Act, the Exchange Act and the rules of The Nasdaq Stock Market; and (b)&nbsp;the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware pursuant to the DGCL, no consents or approvals of, or filings, declarations or registrations with, any Governmental Authority are necessary for the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub of the Transactions, other than such other consents, approvals, filings, declarations or registrations that, if not
obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Information Supplied.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The information furnished or to be furnished by Parent or Merger Sub for
inclusion in (i)&nbsp;the S-4 Registration Statement, if applicable, will not, at the time the S-4 Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading, (ii)&nbsp;Proxy Statement will not, at the time the Proxy Statement is first mailed to the stockholders of the
Company and at the time of the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading. The S-4 Registration Statement, if applicable, will comply in all material respects with the
provisions of the Securities Act and the Exchange Act; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that no representation is made
by Parent or Merger Sub with respect to statements made in the S-4 Registration Statement based on information supplied by the Company for inclusion in the S-4 Registration
Statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Ownership and Operations of Merger Sub.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Parent owns beneficially and of record all of the
outstanding capital stock of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the Transactions, has engaged in no other business activities and has conducted its operations only
as contemplated hereby. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Financing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Parent has, and will have at the Effective Time, sufficient cash resources available to
pay the cash portion of the Merger Consideration pursuant to the Merger. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.7</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Brokers and Other Advisors.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent or any of its
Subsidiaries. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.8</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Ownership of Company Capital Stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Neither Parent nor Merger Sub "own" (within the meaning of
Section&nbsp;203) or have, within the last three years, "owned" any shares of Company Capital Stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
4.9</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Parent SEC Documents; Undisclosed Liabilities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Parent
has filed and furnished all required reports, schedules, forms, prospectuses and registration, proxy and other statements required to be filed or furnished by it
with or to the SEC since January&nbsp;1, 2003 (collectively, and in each case including all exhibits and schedules thereto and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-25</FONT></P>

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<P><FONT SIZE=2>documents
incorporated by reference therein, the "</FONT><FONT SIZE=2><I>Parent SEC Documents</I></FONT><FONT SIZE=2>"). None of Parent's Subsidiaries is required to file periodic reports with the
SEC pursuant to the Exchange Act. As of their respective effective dates (in the case of Parent SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act)
and as of their respective filing dates (in the case of all other Parent SEC Documents), Parent SEC Documents complied in all material respects with the requirements of the Exchange Act and the
Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder, each as in effect on the applicable date referred to above, applicable to such Parent SEC
Documents, and none of Parent SEC Documents as of such respective dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under which they were made, not misleading. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
consolidated financial statements (including, in each case, any related notes thereto) of Parent included in Parent SEC Documents (the
"</FONT><FONT SIZE=2><I>Parent Financials</I></FONT><FONT SIZE=2>") comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with GAAP (except, in the case of unaudited quarterly statements, as indicated in the notes thereto) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows for the periods indicated (subject, in the case of unaudited quarterly statements, to normal year-end audit
adjustments, none of which has been or will be, individually or in the aggregate, material to Parent and its Subsidiaries, taken as a whole). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="lm1423_article_5_covenants_and_agreements"> </A>
<A NAME="toc_lm1423_2"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE&nbsp;5    <BR>    <BR>    </B></FONT><FONT SIZE=2><I>Covenants and Agreements</I></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Preparation of the Proxy Statement and S-4 Registration Statement; Stockholder Meeting; Board
Recommendation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;As
promptly as reasonably practicable following the date of this Agreement, the Company, in consultation with Parent, shall prepare and file the Proxy Statement with the
SEC and Parent shall promptly prepare and file with the SEC the S-4 Registration Statement in which the Proxy Statement will be included; </FONT><FONT SIZE=2><I>provided,
however</I></FONT><FONT SIZE=2>, that if Parent makes the Parent Election, then after Parent has made the Parent Election, it shall no longer be obligated to prepare or file with the SEC the
S-4 Registration Statement. Each of the parties shall cause the Proxy Statement and S-4 Registration Statement, if applicable, to comply as to form in all material respects
with the applicable provisions of the Securities Act and Exchange Act. The parties hereto shall use commercially reasonable efforts to: (i)&nbsp;respond to any comments on the Proxy Statement or
S-4 Registration Statement, if applicable, or requests for additional information from the SEC with respect thereto as soon as practicable after receipt of any such comments or requests;
(ii)&nbsp;cause the Proxy Statement to be mailed to the stockholders of the Company as promptly as practicable following clearance by the SEC, and (iii)&nbsp;cause the S-4 Registration
Statement, if applicable, to be declared effective as promptly as practicable after its filing with the SEC and to be kept effective as long as is necessary to consummate the Merger and other
Transactions. The Company shall promptly: (A)&nbsp;notify Parent upon the receipt of any such comments or requests; and (B)&nbsp;provide Parent with copies of correspondence between the Company
and its Representatives, on the one hand, and the SEC and its staff, on the other hand, with respect to the Proxy Statement. Prior to responding to such comments or requests or the filing or mailing
of the Proxy Statement: (1)&nbsp;the Company shall provide Parent with a reasonable opportunity to review and comment on any drafts of the Proxy Statement and related correspondence and filings; and
(2)&nbsp;to the extent practicable, the Company and its outside counsel shall permit Parent and its outside counsel to participate in communications with the SEC and its staff (including all
meetings and telephone conferences) relating to the Proxy Statement, this Agreement or any of the Transactions. Subject to Section&nbsp;5.3(c), the Proxy Statement shall include the Company Board
Recommendation and a copy of the written opinion of Aquilo referred to in Section&nbsp;3.18. If at any time prior to the Company </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-26</FONT></P>

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<P><FONT SIZE=2>Stockholders
Meeting any event shall occur, or fact or information shall be discovered by the Company, that is required to be set forth in an amendment of or a supplement to the Proxy Statement, the
Company shall, in accordance with the procedures set forth in this Section&nbsp;5.1(a), prepare and file with the SEC such amendment or supplement as soon thereafter as is reasonably practicable and
cause such amendment or supplement to be distributed to the stockholders of the Company if and to the extent required by applicable Law. Parent or Company, as the case may be, agrees to furnish all
information concerning Parent or the Company and its Subsidiaries, as applicable, as the other party may reasonably request in connection with the preparation and filing of the Proxy Statement and
S-4 Registration Statement, if applicable, or any of the foregoing matters described in this Section&nbsp;5.1(a). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Company shall, as soon as practicable, following the clearance of the Proxy Statement by the SEC, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the "</FONT><FONT SIZE=2><I>Company Stockholders Meeting</I></FONT><FONT SIZE=2>") for the purpose of obtaining the Company Stockholder Approval. Subject to
Section&nbsp;5.3(c), the Company shall, through its Board of Directors, make the Company Board Recommendation. The Company shall cause the Company Stockholders Meeting to be called, noticed,
convened, held and conducted, and all proxies solicited by it in connection with the Company Stockholders Meeting to be solicited in compliance with the DGCL, the Company Charter Documents and all
other applicable Laws. The Company shall use commercially reasonable efforts to solicit from its stockholders proxies in favor of the adoption of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conduct of Business of the Company.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as permitted or contemplated by this Agreement, as set
forth on Schedule&nbsp;5.2 or as required by applicable Law, during the period from the date of this Agreement until the Effective Time, unless Parent otherwise consents in writing (which consent,
if requested by the Company on or after the 90<SUP>th</SUP> day after the date of this Agreement, will not be unreasonably withheld or delayed), the Company shall, and shall cause each of its
Subsidiaries to: (x)&nbsp;conduct its business in the ordinary course consistent with past practice; (y)&nbsp;comply in all material respects with all applicable Laws and the requirements of all
Material Contracts; and (z)&nbsp;use commercially reasonable efforts to: (i)&nbsp;maintain and preserve intact its business organization and the goodwill of those having business relationships
with it; and (ii)&nbsp;retain the services of its present officers and key employees. Without limiting the generality of the foregoing, except as permitted or contemplated by this Agreement, as set
forth on Schedule&nbsp;5.2 or as required by applicable Law, during the period from the date of this Agreement until the Effective Time, the Company shall not, and shall not permit any of its
Subsidiaries to, unless Parent otherwise consents in writing (which consent, if requested by the Company on or after the 90<SUP>th</SUP> day after the date of this Agreement, will not be
unreasonably withheld or delayed): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;(i)&nbsp;issue,
sell, grant, dispose of, pledge or otherwise encumber any shares of its capital stock, voting securities, equity interests or any securities or rights
convertible into, exchangeable or exercisable for or evidencing the right to subscribe for any shares of its capital stock, voting securities or equity interests, or any rights, warrants, options,
calls, commitments or any other agreements of any character to purchase or acquire any shares of its capital stock, voting securities, equity interests or any securities or rights convertible into,
exchangeable or exercisable for or evidencing the right to subscribe for, any shares of its capital stock, voting securities or equity interests; </FONT><FONT SIZE=2><I>provided,
however</I></FONT><FONT SIZE=2>, that the Company may issue shares of Company Common Stock to participants in the ESPP in accordance with the terms thereof, or upon the exercise of options to purchase
shares of Company Common Stock, in each case that are outstanding on the date of this Agreement (or that are granted or issued after the date of this Agreement in compliance with this Agreement) and
in accordance with the terms thereof; (ii)&nbsp;redeem, purchase or otherwise acquire any outstanding shares of Company Capital Stock, or any rights, warrants or options to acquire any shares of
Company Capital Stock, other than pursuant to any restricted stock purchase agreement or any similar Contract in existence as of the date of this Agreement and disclosed to Parent; (iii)&nbsp;except
for the quarterly dividends to the holders of the Company Series&nbsp;A-1 Preferred Stock, declare, set aside for payment or pay any dividend on, or make any other distribution in
respect of, any shares of Company Capital Stock or otherwise make any payments to its stockholders in their capacity as such (other than dividends by a direct or indirect wholly owned Subsidiary of
the </FONT></P>

</UL>
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<P><FONT SIZE=2>Company
to its parent); (iv)&nbsp;split, combine, subdivide or reclassify any shares of Company Capital Stock; or (v)&nbsp;waive any stock repurchase rights, accelerate, amend or change the period
of exercisability of Options, or reprice any Options or authorize cash payments in exchange for any Options; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;incur
any indebtedness for borrowed money or guarantee any indebtedness, other than borrowings from the Company by a direct or indirect wholly owned Subsidiary of the
Company or under the Company's and its Subsidiaries' existing credit facilities, in any case in the ordinary course of business consistent with past practice; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;sell,
transfer, lease, license, mortgage, encumber or otherwise dispose of (including pursuant to a sale-leaseback transaction or an asset securitization
transaction) any of its properties or assets (including securities of Subsidiaries) to any Person, except: (i)&nbsp;for the sale of inventory in the ordinary course of business consistent with past
practice; (ii)&nbsp;pursuant to Contracts in force at the date of this Agreement and disclosed to Parent; or (iii)&nbsp;dispositions of obsolete assets; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;make
any capital expenditures, except in the ordinary course of business consistent with past practice and in an amount not in excess of $1,000,000 in the aggregate for
the Company and its Subsidiaries taken as a whole during any three-consecutive month period; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;make
any acquisition (by purchase of securities or assets, merger, consolidation or otherwise) of any other Person, business or division; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;make
any investment (by contribution to capital, property transfers, purchase of securities or otherwise) in, or loan or advance (other than advances to its employees in
the ordinary course of business consistent with past practice) to, any Person other than in the ordinary course of business consistent with past practice; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;(1)
increase in any manner the compensation of or the fringe benefits of, pay or grant any bonus, change of control, severance or termination pay to any of its
directors, officers or employees or enter into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation,
profit sharing, health or other welfare, pension, retirement, severance, deferred compensation or other compensation or benefit plan with, for or in respect of any stockholder, director, officer,
other employee or consultant, other than: (i)&nbsp;as required pursuant to applicable Law or the terms of agreements in effect as of the date of this Agreement; and (ii)&nbsp;increases in
salaries, wages and benefits of employees (other than officers) made in the ordinary course of business consistent with past practice; or (2)&nbsp;hire officers or directors, or hire any
non-officer Employee (other than pursuant to offer letters and letter agreements entered into in the ordinary course of business consistent with past practice with employees who are
terminable "at will") or enter into any collectively bargained agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;make
or change any material election concerning Taxes or Tax Returns (other than elections made in the ordinary course of business), settle or compromise any Tax
liability or refund, file any amendment to a Tax Return, enter into any closing agreement or consent to any extension or waiver of any limitation period with respect to Taxes; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;make
any material changes in financial or tax accounting methods, principles or practices or change an annual accounting period, except insofar as may be required by a
change in GAAP or applicable Law; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;except
for the Charter Amendment, amend the Company Charter Documents or the Subsidiary Documents; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;adopt
a plan or agreement of complete or partial liquidation, dissolution, restructuring, recapitalization, merger, consolidation or other reorganization; </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-28</FONT></P>

<HR NOSHADE>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;enter
into any binding agreement, agreement in principle, letter of intent, memorandum of understanding or similar agreement with respect to any material joint venture,
strategic partnership or alliance; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;commence
or settle any lawsuit, threat of any lawsuit or proceeding or other investigation by or against the Company or any Subsidiary or relating to any of their
businesses, properties or assets; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;grant
any exclusive rights with respect to any Company Intellectual Property; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;enter
into or renew any Contracts containing, or otherwise subject the Surviving Corporation or Parent to, any non-competition, exclusivity, "most favored
nations" or other preferential pricing or other material restrictions on the Company or the Surviving Corporation or Parent, or any of their respective businesses, following the Closing; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;modify
or amend in a manner adverse in any material respect to the Company, or terminate any Material Contract in effect as of the date of this Agreement, or waive,
release or assign any material rights or claims thereunder, in each case, in a manner adverse in any material respect to the Company, other than any modification, amendment or termination of any such
Material Contract in the ordinary course of business, consistent with past practice; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;agree,
in writing or otherwise, to take any of the actions described in clauses "(a)" through "(p)" of this sentence. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Solicitation by the Company; Etc.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Upon
the execution of this Agreement, the Company shall cause its and its Subsidiaries' respective directors, officers, financial advisors, attorneys, accountants and
agents to (and the Company shall use commercially reasonable efforts to cause its and its Subsidiaries' employees to) immediately cease any existing discussions or negotiations with any Person other
than Parent and its Subsidiaries and their respective Representatives (any such Person, a "Third Party") with respect to a Takeover Proposal (as defined below). The Company shall cause its and its
Subsidiaries' respective directors, officers, financial advisors, attorneys, accountants and agents not to (and the Company shall use commercially reasonable efforts to cause its and its Subsidiaries'
employees not to): (i)&nbsp;solicit, initiate, knowingly facilitate, knowingly encourage or knowingly induce any announcement of, or the initiation of any proposals that constitute, or any inquiry
or proposal from any Third Party that would reasonably be expected to lead to, any Takeover Proposal; or (ii)&nbsp;participate in any discussions or negotiations with any Third Party regarding, or
furnish to any Third Party any non-public information with respect to, any Takeover Proposal; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that notwithstanding anything to the
contrary contained in this Section&nbsp;5.3 or elsewhere in this Agreement, if the Company receives a
bona fide written Takeover Proposal not solicited by the Company in violation of this Section&nbsp;5.3 that the Board of Directors of the Company determines in good faith (after consultation with
its financial advisor) is reasonably likely to result in a Superior Proposal and with respect to which the Board of Directors of the Company determines in good faith, after consulting with outside
legal counsel, that the failure to take the following actions would be inconsistent with its fiduciary duties to the Company's stockholders, then the Company and its Subsidiaries and their respective
directors, officers and Representatives may (but only prior to obtaining the Company Stockholder Approval), in response to such Takeover Proposal: (A)&nbsp;furnish information with respect to the
Company and its Subsidiaries to the Person making such Takeover Proposal (and to such Person's Representatives), but only after: (1)&nbsp;such Person enters into a confidentiality agreement with the
Company, the terms of which are at least as restrictive on the recipient's use and disclosure of confidential information as the restrictions imposed on Parent contained in the
Non-Disclosure Agreement; and (2)&nbsp;prior to or concurrently with the delivery to such Person, the Company delivers to Parent written notice of its intention to furnish such
information and furnishes to Parent all such information not previously provided to Parent; and (B)&nbsp;participate in discussions and negotiations with such Person (and with such Person's
Representatives) regarding such Takeover Proposal, provided that prior to or concurrently with entering into discussions and negotiations with such Person, the Company gives Parent written notice of
the Company's intention to enter into discussions and negotiations with such Person. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-29</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_lo1423_1_30"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In addition to the other obligations of the Company set forth in this Section&nbsp;5.3, as promptly as practicable after any member of the Company's Board of Directors
or any of the Company's officers becomes aware of the receipt by the Company of any Takeover Proposal or any request for non-public information or inquiry that could reasonably be expected
to lead to a Takeover Proposal, the Company shall provide Parent with oral and written notice of the material terms and conditions of such Takeover Proposal, request or inquiry; the identity of the
Person or group making any such Takeover Proposal, request or inquiry and a copy of any such Takeover Proposal, request for non-public information or inquiry that is in writing. After any
member of the Company's Board of Directors or any of the Company's officers becomes aware of the receipt by the Company of any Takeover Proposal or any request for non-public information
or inquiry that could reasonably be expected to lead to a Takeover Proposal, the Company shall keep Parent currently and reasonably informed regarding the status and material details of any such
Takeover Proposal, request or inquiry and shall promptly provide Parent a copy of any such Takeover Proposal, request for non-public information or inquiry that is in writing. The Company
shall provide Parent with 48&nbsp;hours prior notice (or such lesser prior notice as is provided to the members of the Board of Directors) of any meeting of its Board of Directors at which its Board
of Directors is expected, as of the time such notice is given, to consider any Takeover Proposal. If, at any later time, it becomes expected that the Board of Directors will consider a particular
Takeover Proposal or if the Board of Directors considers a particular Takeover Proposal at any meeting of the Board of Directors, then the Company shall promptly inform Parent of such expectation or
consideration. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Except
as permitted by this Section&nbsp;5.3(c): (i)&nbsp;neither the Board of Directors of the Company nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to Parent, the Company Board Recommendation; (ii)&nbsp;neither the Company nor any of its officers or member of the Board of Directors
shall recommend, and neither the Board of Directors of the Company nor any committee thereof shall approve or recommend (or propose publicly to approve or recommend), any Takeover Proposal (provided
that it shall not constitute a breach of this clause "(ii)" of this Section&nbsp;5.3(c) if an officer or member of the Board of Directors of the Company, without the prior knowledge or consent of
the Company's Board of Directors, directly contravenes the instructions of the Company's Board of Directors to comply with the terms of this clause "(ii)" of this Section&nbsp;5.3(c) and recommends
a Takeover Proposal, if, within three business days of receiving a written request to do so from Parent, the Company's Board of Directors, issues a widely disseminated press release reaffirming the
Company Board Recommendation and explicitly rejecting such Takeover Proposal (it being understood that if Parent does not make such a request with respect to such recommendation by an officer or
member of the Board of Directors of the Company, then the recommendation by such officer or member of the Board of Directors of the Company shall not be deemed to constitute a breach of the terms of
this clause "(ii)" of this Section&nbsp;5.3(c))); and (iii)&nbsp;neither the Board of Directors of the Company nor any committee thereof shall authorize or cause the Company or any of its
Subsidiaries to enter into any letter of intent, agreement in principle, memorandum of understanding, merger, acquisition, purchase or similar agreement related to any Takeover Proposal (except for
confidentiality agreements in accordance with Section&nbsp;5.3(a)). Notwithstanding the foregoing or any other provision of this Agreement, prior to obtaining Stockholder Approval, the Board of
Directors of the Company may, in response to the receipt of a Superior Proposal (which has not been withdrawn), withdraw or modify the Company Board Recommendation (each such case, a
"</FONT><FONT SIZE=2><I>Change of Recommendation</I></FONT><FONT SIZE=2>") with respect to the Merger, and, following any such withdrawal or modification of the Company Board Recommendation, may
approve or recommend, and may propose publicly to approve or recommend, such Superior Proposal and may, contemporaneously with the termination of this Agreement pursuant to Section&nbsp;7.1(e)(iii),
cause the Company to enter into a letter of intent, agreement in principle, memorandum of understanding, merger, acquisition or purchase agreement or other agreement related to any Superior Proposal,
if all of the following conditions in clauses (1)&nbsp;through (5)&nbsp;are met: (1)&nbsp;the Company shall have delivered to Parent written </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-30</FONT></P>

<HR NOSHADE>
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<!-- ZEQ.=1,SEQ=98,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=89351,FOLIO='A-30',FILE='DISK129:[05PAL3.05PAL1423]LO1423A.;7',USER='LHOUSE',CD='16-SEP-2005;00:07' -->
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<P><FONT SIZE=2>notice
(the "</FONT><FONT SIZE=2><I>Change of Recommendation Notice</I></FONT><FONT SIZE=2>") at least two business days prior to publicly effecting such Change of Recommendation (the "Matching
Period"), which notice shall state expressly (x)&nbsp;that the Company has received a Superior Proposal, (y)&nbsp;the material terms and conditions of the Superior Proposal and the identity of the
Person or group making the Superior Proposal (including any written summaries or draft agreements exchanged between the Company and such Person or group in connection with such Superior Proposal), and
(z)&nbsp;that the Company intends to effect a Change of Recommendation and the manner in which it intends to do so; (2)&nbsp;the Company shall have provided to Parent a copy of all written
information related to the Company delivered to the Person or group making the Superior Proposal in connection with such Superior Proposal (to the extent not previously provided to Parent) and shall
have made available to Parent all materials and information relating to the Company that was made available to the Person or group making the Superior Proposal in connection with such Superior
Proposal; (3)&nbsp;during the Matching Period, the Company shall provide Parent with a reasonable opportunity to make such adjustments in the terms and conditions of this Agreement, and negotiate in
good faith with respect to any such adjustments proposed by Parent to the Company, as would enable the Company to make the Company Board Recommendation and not make a Change of Recommendation;
(4)&nbsp;the Board of Directors of the Company shall have concluded in good faith, after receipt of advice of its outside legal counsel, that, in light of such Superior Proposal and after
considering any binding written offer made by Parent, the failure of the Board of Directors to effect a Change of Recommendation is reasonably likely to result in a breach of its fiduciary obligations
to the stockholders of the Company under applicable law; and (5)&nbsp;such Superior Proposal shall not have resulted, directly or indirectly, from the Company willfully and materially breaching any
of the provisions set forth in Section&nbsp;5.3(a). The Company further agrees that it will deliver to Parent a new Change of Recommendation Notice with respect to each material change in the terms,
including any increase in the consideration, contemplated by a Superior Proposal that was the subject of a previous Change of Recommendation Notice and that the delivery of such notice shall extend
the Matching Period by two business days from the date of such notice. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company shall not submit to the vote of its stockholders any Takeover Proposal, or publicly propose to do so unless this Agreement has been validly terminated in accordance with
Article&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;For
purposes of this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Takeover Proposal</I></FONT><FONT SIZE=2>" means any proposal or offer from any Person (or "group" as defined under Section&nbsp;13(d) of the
Exchange Act) (other than Parent and its Affiliates) providing for any: (A)&nbsp;acquisition (whether in a single transaction or a series of related transactions) of assets of the Company and its
Subsidiaries having a fair market value equal to 20% or more of the Company's consolidated assets; (B)&nbsp;direct or indirect acquisition (whether in a single transaction or a series of related
transactions) of 20% or more of the voting power of the Company; (C)&nbsp;tender offer or exchange offer that if consummated would result in any Person beneficially owning 20% or more of the voting
power of the Company; (D)&nbsp;merger, consolidation, share exchange, business combination, recapitalization or similar transaction involving the Company or involving any Subsidiary (or
Subsidiaries) (other than: (1)&nbsp;mergers, consolidations, business combinations or similar transactions involving solely the Company and/or one or more Subsidiaries of the Company; and
(2)&nbsp;mergers, consolidations, business combinations or similar transactions that if consummated would result in a Person beneficially owning not more than 20% of any class of equity securities
of the Company or any of its Subsidiaries); or (E)&nbsp;any liquidation or dissolution of the Company; in each case, other than the Transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Superior Proposal</I></FONT><FONT SIZE=2>" means a bona fide written offer to acquire, for consideration consisting of cash and/or securities,
all or substantially all of the assets of the Company or a majority of the total outstanding voting securities of the Company as a result of which the stockholders of the Company immediately preceding
such transaction would hold less than 50% of the equity interests in the surviving or resulting entity of such transaction and any direct or indirect </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-31</FONT></P>

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<UL>
<BR>

<P><FONT SIZE=2>parent
or subsidiary thereof, which is on terms and conditions which the Board of Directors of the Company determines in its good faith judgment (after consultation with its financial advisor), taking
into account, among other things, all legal, financial, regulatory and other aspects of the offer and the Third Party making the offer, to be more favorable, from a financial point of view, to the
Company's stockholders than the Merger and is reasonably capable of being consummated. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Nothing
in this Section&nbsp;5.3 shall prohibit the Board of Directors of the Company (or any committee thereof) from complying with Rules&nbsp;14d-9 and
14e-2(a) or Item 1012(a) of Regulation&nbsp;M-A promulgated under the Exchange Act or from including in the Proxy Statement or any amendment or supplement thereto any
information that the Board of Directors of the Company shall have concluded in good faith, after receipt of advice of its outside legal counsel, is required to be disclosed pursuant to applicable
securities laws or by the Board of Directors' fiduciary duties, provided that, a Change of Recommendation shall not be effected except in accordance with Section&nbsp;5.3(c). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Further Action; Efforts</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Upon
the terms and subject to the conditions set forth in this Agreement, each of the parties hereto shall, and shall cause their respective Subsidiaries to, use
commercially reasonable efforts to take, or cause to be taken, all actions, and to use commercially reasonable efforts to do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper and advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other Transactions, including commercially reasonable
efforts to take such acts necessary to cause the conditions precedent set forth in Article&nbsp;6 to be satisfied. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
furtherance and not in limitation of the covenants of the parties contained in Section&nbsp;5.4(a), in the event that any legal, administrative, arbitral or other
proceeding is instituted (or threatened to be instituted) by a Governmental Authority or private party challenging any of the Transactions or in the event that any Governmental Authority shall
otherwise object to any of the Transactions, each of Parent, Merger Sub and the Company shall cooperate with each other and use its respective reasonable efforts: (i)&nbsp;to vigorously defend,
contest and resist any such proceeding; (ii)&nbsp;to have vacated, lifted, reversed or overturned any injunction, order, judgment, ruling or decree, whether temporary, preliminary or permanent, that
is in effect and that prohibits, prevents or restricts consummation of the Transactions; and (iii)&nbsp;to resolve objections. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Notwithstanding
anything in this Agreement to the contrary, nothing contained in this Agreement shall be deemed to require Parent or the Company or any Subsidiary or
Affiliate thereof to agree to any Action of Divestiture. The Company shall not take or agree to take any Action of Divestiture without the prior written consent of Parent. For purposes of this
agreement, an "</FONT><FONT SIZE=2><I>Action of Divestiture</I></FONT><FONT SIZE=2>" shall mean (x)&nbsp;any license, sale or other disposition or holding separate (through establishment of a trust
or otherwise) of any shares of capital stock or of any business, assets or properties of Parent, its subsidiaries or Affiliates or of the Company or its Subsidiaries, (y)&nbsp;the imposition of any
limitation on the ability of Parent, its subsidiaries or Affiliates or the Company or its Subsidiaries to conduct their respective businesses or own any capital stock or assets or to acquire, hold or
exercise full rights of ownership of their respective businesses and, in the case of Parent, the businesses of the Company and its Subsidiaries, or (z)&nbsp;the imposition of any impediment on
Parent, its subsidiaries or Affiliates or the Company or its Subsidiaries under any statute, rule, regulation, executive order, decree, order or other legal restraint governing competition, monopolies
or restrictive trade practices. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Public Announcements</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The initial press release with respect to the execution of this Agreement
shall be a joint press release to be reasonably agreed upon by Parent and the Company. Thereafter, neither the Company nor Parent shall issue or cause the publication of any press release or other
public announcement (to the extent not previously issued or made in accordance with this Agreement) with respect to the Merger, this Agreement or the other Transactions without the prior consent of
the other party (which consent shall not be unreasonably withheld or delayed), except: (a)&nbsp;as </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-32</FONT></P>

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<BR>

<P><FONT SIZE=2>may
be required by Law or by any applicable listing agreement with a national securities exchange or Nasdaq as determined in the good faith judgment of the party proposing to make such release, in
which case neither the Company nor Parent shall issue or cause the publication of such press release or other public announcement without prior consultation with the other party, to the extent
practicable; and (b)&nbsp;as may be consistent with actions taken by the Company or its Board of Directors pursuant to Section&nbsp;5.3(c). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Access to Information; Confidentiality</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to applicable Laws relating to access to and the
exchange of information: (a)&nbsp;the Company shall, and shall cause each of its Subsidiaries to, afford to Parent and Parent's Representatives reasonable access during normal business hours and on
reasonable advance notice to the Company's and its Subsidiaries' properties, books, records and Representatives; and (b)&nbsp;the Company shall furnish (or otherwise make available, including
through the SEC EDGAR system) promptly to Parent: (i)&nbsp;a copy of each report, schedule and other document filed, furnished or received by it or any of its Subsidiaries pursuant to the
requirements of Federal or state securities Laws; and (ii)&nbsp;all other information concerning its and its Subsidiaries' business, properties and personnel as Parent may reasonably request. Except
for disclosures permitted by the terms of the Non-Disclosure Agreement, dated as of May&nbsp;9, 2005 between Parent and the Company (as it may be amended from time to time, the
"</FONT><FONT SIZE=2><I>Non-Disclosure Agreement</I></FONT><FONT SIZE=2>"), Parent shall hold information received from the Company pursuant to this Section&nbsp;5.6 in confidence in
accordance with the terms of the Non-Disclosure Agreement. No investigation, or information received, pursuant to this Section&nbsp;5.6 will affect or modify any of the representations
and warranties of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.7</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notification of Certain Matters</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company shall use reasonable efforts to give prompt notice to
Parent, and Parent shall use reasonable efforts to give prompt notice to the Company, of: (a)&nbsp;any notice or other communication received by such party from any Governmental Authority in
connection with the Transactions, if the subject matter of such communication would reasonably be expected to be material to the Company, the Surviving Corporation or Parent; (b)&nbsp;any
investigation or legal, administrative, arbitral or other proceeding, to such party's Knowledge, commenced or threatened against such party or any of its Subsidiaries which relate to the Transactions;
(c)&nbsp;the discovery of any fact or circumstance that, or the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, would cause any
representation or warranty made by such party contained in this Agreement: (i)&nbsp;that is qualified as to materiality or Material Adverse Effect to be untrue; and (ii)&nbsp;that is not so
qualified to be untrue in any material respect; and (d)&nbsp;any material failure of such party to comply with or satisfy any covenant or agreement to be complied with or satisfied by it hereunder; </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT
SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that the delivery of any notice pursuant to this Section&nbsp;5.7 shall not (nor
shall any information provided pursuant to Section&nbsp;5.6)): (A)&nbsp;be considered in determining whether any representation or warranty is true for purposes of Article&nbsp;6 or
Article&nbsp;7; (B)&nbsp;cure any breach or non-compliance with any other provision of this Agreement; or
(C)&nbsp;limit the remedies available to the party receiving such notice; </FONT><FONT SIZE=2><I>provided, further,</I></FONT><FONT SIZE=2> that the failure to deliver any notice pursuant to this
Section&nbsp;5.7 shall not be considered in determining whether the condition set forth in Section&nbsp;6.2(b) or Section&nbsp;6.3(b) has been satisfied or the related termination right in
Article&nbsp;7 is available. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.8</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Indemnification and Insurance</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;From
and after the Effective Time, Parent and the Surviving Corporation shall (and Parent shall cause the Surviving Corporation to) indemnify, defend and hold harmless,
and advance expenses to, the individuals who at or prior to the Effective Time were directors or officers of the Company or any of its Subsidiaries (collectively, the
"</FONT><FONT SIZE=2><I>Indemnitees</I></FONT><FONT SIZE=2>") with respect to all acts or omissions by them in their capacities as such at any time prior to the Effective Time, to the fullest extent
required by: (i)&nbsp;the Company Charter Documents as in effect on the date of this Agreement; and (ii)&nbsp;any applicable indemnification contract as in effect on the date of this Agreement
(provided that the Company has provided an accurate and complete copy of such indemnification contract to Parent or its representatives prior to the date of this Agreement). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-33</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_lq1423_1_34"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Parent will provide, or cause the Surviving Corporation to provide, for a period of not less than six years after the Effective Time, the Indemnitees who are insured
under the Company's directors' and officers' insurance and indemnification policy with an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective
Time (the "</FONT><FONT SIZE=2><I>D&amp;O Insurance</I></FONT><FONT SIZE=2>") that is no less favorable than the existing policy of the Company or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; </FONT><FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2> that Parent and the Surviving Corporation shall not be required to pay an annual premium
for the D&amp;O Insurance in excess of 250% of the annual premium currently paid by the Company for such insurance; </FONT><FONT SIZE=2><I>provided, further,</I></FONT><FONT SIZE=2> that if the annual
premiums of such insurance coverage exceed such amount, Parent or the Surviving Corporation shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such
amount; and </FONT><FONT SIZE=2><I>provided, further, howeve</I></FONT><FONT SIZE=2>r, that, notwithstanding anything to the contrary in this Agreement, the Company may obtain a prepaid tail policy
(the "Tail Policy") prior to the Effective Time, which policy provides the Indemnitees with directors' and officers' liability insurance for a period ending no earlier than the sixth anniversary of
the Effective Time, provided that the aggregate premium for the Tail Policy shall not exceed 250% of the annual premium currently paid by the Company for such insurance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Indemnitees to whom this Section&nbsp;5.8 applies shall be third party beneficiaries of this Section&nbsp;5.8. The provisions of this Section&nbsp;5.8 are
intended to be for the benefit of each Indemnitee, his or her heirs and his or her representatives. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;In
the event that the Surviving Corporation or any of its successors or assigns consolidates with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or transfers or conveys all or a majority of its properties and assets to any Person, then, and in each such case, proper provision
shall be made so that the successors and assigns of the Surviving Corporation shall succeed to the obligations set forth in this Section&nbsp;5.8. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.9</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Securityholder Litigation</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company shall give Parent the opportunity to participate in the
defense or settlement of any securityholder litigation against the Company and/or its directors relating to the Transactions, and no settlement of any such litigation shall be agreed to without
Parent's prior consent (which consent shall not be unreasonably withheld or delayed). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.10</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fees and Expenses</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Whether or not the Merger is consummated, subject to Section&nbsp;7.3, all
fees and expenses incurred in connection with this Agreement, the Merger and the Transactions shall be paid by the party incurring such fees or expenses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
5.11</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Third Party Consents</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;As soon as practicable following the date of this Agreement, the Company will
use commercially reasonable efforts to obtain any material consents, waivers and approvals under any of its or its Subsidiaries' respective Contracts required to be obtained in connection with the
consummation of the transactions contemplated hereby. In connection with seeking such consents, waivers and approvals, the Company shall keep Parent informed of all material developments and shall, at
Parent's request, include Parent in any discussions or communications with any parties whose consent, waiver or approval is sought hereunder. Such consents, waivers and approvals shall be in a form
reasonably acceptable to Parent. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;6  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I>Conditions Precedent</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
6.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conditions to Each Party's Obligation to Effect the Merger</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The respective obligations of each party
hereto to effect the Merger shall be subject to the satisfaction (or waiver, if permissible under applicable Law) on or prior to the Closing Date of the following conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stockholder Approval</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company Stockholder Approval shall have been obtained in accordance with
applicable Law and the Company Charter Documents. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-34</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=102,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=274071,FOLIO='A-34',FILE='DISK129:[05PAL3.05PAL1423]LQ1423A.;8',USER='LHOUSE',CD='16-SEP-2005;00:07' -->
<A NAME="page_lq1423_1_35"> </A>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Injunctions or Restraints</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;No Law, injunction, judgment or ruling enacted, promulgated, issued, entered,
amended or enforced by any Governmental Authority (collectively, "</FONT><FONT SIZE=2><I>Restraints</I></FONT><FONT SIZE=2>") shall be in effect enjoining, restraining, preventing or prohibiting
consummation of the Merger or making the consummation of the Merger illegal. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;S-4 Registration Statement Effective; Proxy Statement</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;If Parent has not made the Parent
Election, the SEC shall have declared the S-4 Registration Statement effective and no stop order suspending the effectiveness of the S-4 Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened in writing by the SEC. No similar proceeding in respect of the Proxy Statement shall have been
initiated or threatened in writing by the SEC. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
6.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conditions to Obligations of Parent and Merger Sub</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Parent and Merger Sub to
effect the Merger are further subject to the satisfaction (or waiver exclusively by Parent and Merger Sub, if permissible under applicable Law) on or prior to the Closing Date of the following
conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Representations and Warranties</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;The
representations and warranties of the Company contained in this Agreement (A)&nbsp;shall be true and correct as of the date of this Agreement (except to the extent
such representations and warranties relate to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date) and (B)&nbsp;shall be true and
correct as of the Closing Date as though made on the Closing Date (except to the extent such representations and warranties relate to an earlier date, in which case such representations and warranties
shall be true and correct as of such earlier date), except, in the case of both clauses "(A)" and "(B)" of this sentence, as would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;the
representations and warranties of the Company contained in the first, second and sixth sentences of Section&nbsp;3.2(a) shall be true and correct in all material
respects as of the Closing Date as though made on the Closing Date (except to the extent such representations and warranties relate to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date), except to the extent the failure to be so true and correct does not result in an increase of at least 5% of the number of shares of
Company Common Stock, determined on a fully-diluted, treasury-stock basis, or of the number of shares of Company Preferred Stock; </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Performance of Obligations of the Company</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement on or prior to the Closing Date; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Officer's Certificate</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Parent shall have received a certificate, signed on behalf of the Company by the
chief executive officer or chief financial officer of the Company, certifying as to the matters set forth in Sections 6.2(a) and 6.2(b); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Company Material Adverse Effect</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Since the date of this Agreement through the Closing Date, there shall have
been no change, event, occurrence or circumstance that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Governmental Litigation</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;There shall not be any legal, administrative, arbitral or other proceeding
pending before any Governmental Authority in which a Governmental Authority is a party that would or would reasonably be expected to: (i)&nbsp;restrain, enjoin, prevent, prohibit or make illegal the
consummation of the Merger or the other Transactions; or (ii)&nbsp;impose material </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-35</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lq1423_1_36"> </A>
<UL>
<BR>

<P><FONT SIZE=2>limitations
on the ability of Parent effectively to exercise full rights of ownership of all shares of the Surviving Corporation. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
6.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conditions to Obligation of the Company</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The obligation of the Company to effect the Merger is
further subject to the satisfaction (or waiver exclusively by the Company, if permissible under applicable Law) on or prior to the Closing Date of the following conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Representations and Warranties</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The representations and warranties of Parent and Merger Sub contained in
this Agreement shall be true and correct as of the date of this Agreement (except to the extent such representations and warranties relate to an earlier date, in which case as of such earlier date)
and shall be true and correct as of the Closing Date as though made on the Closing Date (except to the extent such representations and warranties relate to an earlier date, in which case as of such
earlier date), except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Performance of Obligations of Parent and Merger Sub</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Parent and Merger Sub shall have performed in all
material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Officer's Certificate</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company shall have received a certificate, signed on behalf of Parent by the
chief executive officer or chief financial officer of Parent, certifying as to the matters set forth in Sections 6.3(a) and 6.3(b). </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;7  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I>Termination</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be terminated and the Transactions abandoned at any time prior to
the Effective Time: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;by
the mutual written consent of the Company and Parent duly authorized by each of their respective Boards of Directors; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;by
either of the Company or Parent if: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the
Merger shall not have been consummated on or before February&nbsp;12, 2006 (the "</FONT><FONT SIZE=2><I>Outside Date</I></FONT><FONT SIZE=2>"); </FONT> <FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2> that the right to terminate this
Agreement under this Section&nbsp;7.1(b)(i)&nbsp;shall not be available to a party if the
failure of the Merger to have been consummated on or before the Outside Date was primarily due to the failure of such party or any Affiliate of such party to perform any of its obligations under this
Agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;any
Restraint having the effect set forth in Section&nbsp;6.1(b) shall be in effect and shall have become final and nonappealable; or </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;the
Company Stockholder Approval shall not have been obtained at the Company Stockholders Meeting duly convened therefor or at any adjournment or postponement thereof;
or </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;by
Parent if: (i)&nbsp;there is an inaccuracy in any of the representations or warranties of the Company in this Agreement such that the condition set forth in
Section&nbsp;6.2(a) would not be satisfied; or (ii)&nbsp;there has been a breach by the Company of any of its covenants in this Agreement such that the condition set forth in Section&nbsp;6.2(b)
would not be satisfied (the events described in clauses "(i)" and "(ii)" of this Section&nbsp;7.1(c) being referred to as a "</FONT><FONT SIZE=2><I>Terminating Company
Breach</I></FONT><FONT SIZE=2>"); </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that if such Terminating Company Breach is curable
and can reasonably be expected to be cured by the Company by the Outside Date through the exercise of reasonable efforts, then Parent may not terminate this Agreement under this Section&nbsp;7.1(c)
prior to 30&nbsp;days following delivery of written notice from Parent to the Company of such Terminating </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-36</FONT></P>

<HR NOSHADE>
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<UL>

<P><FONT SIZE=2>Company
Breach provided that the Company continues to exercise commercially reasonable efforts to cure such Terminating Company Breach through such 30&nbsp;day period (it being understood that
Parent may not terminate this Agreement pursuant to this paragraph if it shall have materially breached this Agreement or if such Terminating Company Breach by the Company is cured within such
30&nbsp;day period); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;by
Parent if, at any time prior to the adoption of this Agreement by the Company Stockholder Approval: (i)&nbsp;the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent, the Company Board Recommendation; (ii)&nbsp;the Board of Directors of the Company shall have failed to include the Company
Board Recommendation in the Proxy Statement; (iii)&nbsp;the Company's Board of Directors shall have failed to reconfirm (publicly if so requested) the Company Board Recommendation within ten
business days after the Company receives a written request from Parent to do so following the public announcement by a Third Party of an Takeover Proposal (provided that (x)&nbsp;Parent may not make
such a request on more than three occasions with respect to any particular Takeover Proposal where the price and other material terms of such Takeover Proposal remain unchanged and (y)&nbsp;any
reconfirmation of the Company Board Recommendation by the Company's Board of Directors following the public announcement by a Third Party of a Takeover Proposal shall not limit the rights of the
Company's Board of Directors under Section&nbsp;5.3 with respect to Takeover Proposals, or amended versions of Takeover Proposals); (iv)&nbsp;the Board of Directors of the Company or any committee
thereof shall have adopted resolutions approving or recommending any Takeover Proposal; (v)&nbsp;the Company has entered into any letter of intent, agreement in principle, memorandum of
understanding, merger, acquisition or purchase agreement related to any Takeover Proposal (except for confidentiality agreements in accordance with Section&nbsp;5.3(a)); (vi)&nbsp;the Company's
Board of Directors shall have failed to recommend against acceptance of a publicly announced tender offer that constitutes a Takeover Proposal (and that remains pending) within ten business days after
such tender offer is "commenced" (as defined in Rule 14d-2 of the Exchange Act) (provided that any recommendation by the Company's Board of Directors against acceptance of such tender
offer shall not limit the rights of the Company's Board of Directors under Section&nbsp;5.3 with respect to subsequent Takeover Proposals, or amended versions of Takeover Proposals); and
(vii)&nbsp;the Company's Board of Directors shall have failed to reconfirm (publicly if so requested) the Company Board Recommendation within ten business days after the Company receives a written
request from Parent to do so following any event that causes uncertainty among the Company's stockholders regarding the Company's intent to consummate the Merger; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;by
the Company if: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;subject
to clause&nbsp;(ii) below, there is an inaccuracy in any of the representations or warranties of Parent or Merger Sub in this Agreement such that the condition
set forth in Section&nbsp;6.3(a) would not be satisfied; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;there
has been a breach by Parent or Merger Sub of any of their respective covenants in this Agreement such that the condition set forth in Section&nbsp;6.3(b) would
not be satisfied (the events described in clauses "(i)" and "(ii)" of this paragraph being referred to as a "</FONT><FONT SIZE=2><I>Terminating Parent Breach</I></FONT><FONT SIZE=2>"); </FONT> <FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>,
</FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that if such Terminating Parent Breach is curable and can reasonably be expected to
be cured by Parent or Merger Sub by the Outside Date through the exercise of reasonable efforts, then the Company may not terminate this Agreement under this Section&nbsp;7.1(e)(ii)&nbsp;prior to
30&nbsp;days following receipt of written notice from the Company to Parent of such Terminating Parent Breach; </FONT><FONT SIZE=2><I>provided, further,</I></FONT><FONT SIZE=2> that Parent and
Merger Sub continue to exercise commercially reasonable efforts to cure such Terminating Parent Breach through such 30&nbsp;day period (it being understood that the Company may not terminate this
Agreement pursuant to this paragraph if it shall have materially breached this </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-37</FONT></P>

<HR NOSHADE>
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<A NAME="page_lq1423_1_38"> </A>
<UL>
<UL>
<BR>

<P><FONT SIZE=2>Agreement
or if such Terminating Parent Breach by Parent or Merger Sub is cured within such 30&nbsp;day period); or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;following
the determination of the Company's Board of Directors to accept, or enter into a definitive agreement with respect to, a Superior Proposal, </FONT> <FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that: (A)&nbsp;prior to such termination,
the Company has complied with its obligations contained in Section&nbsp;5.3(c) and
(B)&nbsp;contemporaneously with such termination, the Company pays Parent the fee required by Section&nbsp;7.3(a)(i). </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effect of Termination</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;In the event of the termination of this Agreement as provided in
Section&nbsp;7.1, written notice thereof shall be given to the other party or parties, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith
become null and void (other than the provisions of the penultimate sentence of Section&nbsp;5.6, Sections&nbsp;5.10, 7.2 and 7.3 and Article&nbsp;8, all of which shall survive termination of
this Agreement), and there shall be no liability on the part of Parent, Merger Sub or the Company or their respective directors, officers and Affiliates, except: (a)&nbsp;the Company may have
liability as provided in Section&nbsp;7.3; and (b)&nbsp;nothing shall relieve any party hereto from liability for any willful, material breach of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
7.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination Fee</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;In
the event that this Agreement is terminated by: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the
Company pursuant to Section&nbsp;7.1(e)(iii), or by Parent pursuant to Section&nbsp;7.1(d); </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;by
Parent or the Company pursuant to Section&nbsp;7.1(b)(iii)&nbsp;and at the time of the Company Stockholders Meeting, a Takeover Proposal (for purposes of this
Section&nbsp;7.3(a)(ii), all references to "20%" in the definition of "Takeover Proposal" shall be deemed to refer to "50%" instead) has been publicly announced (and not withdrawn) and within twelve
months after the date of the termination of this Agreement, an Acquisition Transaction is consummated with the Third Party making such Takeover Proposal; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;by
the Company pursuant to Section&nbsp;7.1(b)(i)&nbsp;and at the Outside Date, a Takeover Proposal (for purposes of this Section&nbsp;7.3(a)(iii), all
references to "20%" in the definition of "Takeover Proposal" shall be deemed to refer to "50%" instead) has been publicly announced (and not withdrawn) and within twelve months after the date of the
termination of this Agreement, an Acquisition Transaction is consummated with the Third Party making such Takeover Proposal; </FONT></P>

</UL>

<P><FONT SIZE=2>then
the Company shall pay to Parent a fee of $1,120,000 in cash. Such payment shall be made, in the case of a fee to be paid pursuant to Section&nbsp;7.3(a)(i), within two business days following
the termination of this Agreement by Parent or concurrently with the termination of this Agreement by the Company, or, in the case of a fee to be paid pursuant to Section&nbsp;7.3(a)(ii)&nbsp;or
Section&nbsp;7.3(a)(iii), within two business days following the consummation of such Acquisition Transaction, by wire transfer of immediately available funds to an account to be designated by
Parent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;For
purposes of this Agreement, an "</FONT><FONT SIZE=2><I>Acquisition Transaction</I></FONT><FONT SIZE=2>" means any proposal or offer from any Person (other than
Parent and its Affiliates) providing for any: (A)&nbsp;acquisition (whether in a single transaction or a series of related transactions) of assets of the Company and its Subsidiaries having a fair
market value equal to 50% or more of the consolidated assets of the Company and its Subsidiaries, taken as a whole; (B)&nbsp;direct or indirect acquisition (whether in a single transaction or a
series of related transactions) of 50% or more of the voting power of the Company; (C)&nbsp;tender offer or exchange offer that if consummated would result in any Person beneficially owning 50% or
more of the voting power of the Company; or (D)&nbsp;merger, consolidation, share exchange, business combination, recapitalization or similar transaction involving the Company or involving any
Subsidiary (or Subsidiaries) (other than: (1)&nbsp;mergers, consolidations, business combinations or similar transactions </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-38</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>involving
solely the Company and/or one or more Subsidiaries of the Company; and (2)&nbsp;mergers, consolidations, business combinations or similar transactions that if consummated would result in a
Person beneficially owning not more than 50% of any class of equity securities of the Company or any of its Subsidiaries); in each case, other than the Transactions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Company and Parent acknowledge that the fee and the other provisions of this Section&nbsp;7.3 are an integral part of the Transactions and that, without these
agreements, Parent and the Company would not enter into this Agreement. Accordingly, if the Company fails to pay in a timely manner the amounts due pursuant to this Section&nbsp;7.3, and, in order
to obtain such payment, Parent makes a claim that results in a judgment against the Company for the amounts set forth in this Section&nbsp;7.3, the Company shall pay to Parent the reasonable costs
and expenses of Parent (including reasonable attorneys' fees and expenses) in connection with such suit, together with interest on the amounts set forth in this Section&nbsp;7.3 at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made. Payment of the fees described in this Section&nbsp;7.3 shall not be in lieu of damages incurred in the event of breach of
this Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE&nbsp;8  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I>Miscellaneous</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.1</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nonsurvival of Representations and Warranties</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or, except as otherwise provided in Section&nbsp;7.2, upon the termination of this Agreement pursuant to Section&nbsp;7.1, as the case may be,
except that the agreements set forth in Article&nbsp;2 and Sections 5.8, 5.9, and 5.10 and any other agreement in this Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely and those set forth in Sections 5.10, 7.2 and 7.3 and this Article&nbsp;8 shall survive termination indefinitely. The Non-Disclosure Agreement shall:
(a)&nbsp;survive termination of this Agreement in accordance with its terms; and (b)&nbsp;terminate as of the Effective Time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Amendment or Supplement</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;At any time prior to the Effective Time, this Agreement may be amended or
supplemented in any and all respects, whether before or after receipt of the Company Stockholder Approval, by written agreement of the parties hereto, by action taken by their respective Boards of
Directors; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, that following approval of the Transactions by the stockholders of the
Company and Merger Sub, there shall be no amendment or change to the provisions hereof which by Law would require further approval by the stockholders of the Company or Merger Sub without such
approval. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.3</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Extension of Time, Waiver, Etc</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;At any time prior to the Effective Time, any party hereto may,
subject to applicable Law: (a)&nbsp;waive any inaccuracies in the representations and warranties of any other party hereto; (b)&nbsp;extend the time for the performance of any of the obligations
or acts of any other party hereto; or (c)&nbsp;waive compliance by the other party with any of the agreements contained herein or, except as otherwise provided herein, waive any of such party's
conditions. Notwithstanding the foregoing, no failure or delay by the Company, Parent or Merger Sub in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise of any other right hereunder. Any agreement on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.4</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Assignment</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Neither this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned or delegated, in whole or in part, by operation of Law or otherwise, by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto and their respective successors and permitted assigns. Any purported assignment or delegation not
permitted under this Section shall be null and void. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-39</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_ls1423_1_40"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 8.5</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Counterparts; Facsimile; Electronic Transmission</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be executed in counterparts
(each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement) and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties. The exchange of copies of this Agreement and of signature pages by facsimile or electronic transmission shall constitute effective execution
and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or electronic transmission shall
be deemed to be their original signatures for all purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.6</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Entire Agreement; No Third-Party Beneficiaries</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;This Agreement, the Voting Agreements, the Company
Disclosure Schedule and the Non-Disclosure Agreement: (a)&nbsp;constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof and thereof; and (b)&nbsp;except for the provisions of Section&nbsp;5.8, are not intended to and shall not confer upon any
Person other than the parties hereto any rights or remedies hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.7</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governing Law; Waiver of Jury Trial</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;This
Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of laws thereof. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.8</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Specific Enforcement</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The parties agree that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, without bond or other security being required, this being in addition to any
other remedy to which they are entitled at law or in equity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.9</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Consent to Jurisdiction</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Each of the parties hereto: (a)&nbsp;consents to submit itself to the
personal jurisdiction of the Court of Chancery of the State of Delaware, in the event any dispute arises out of this Agreement or any of the Transactions; (b)&nbsp;agrees that it will not attempt to
deny or defeat
such personal jurisdiction by motion or other request for leave from any such court; and (c)&nbsp;agrees that it will not bring any action relating to this Agreement or any of the Transactions in
any court other than the Court of Chancery of the State of Delaware. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.10</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notices</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;All notices, requests and other communications to any party hereunder shall be in writing
and shall be deemed properly delivered, given and received: (a)&nbsp;when delivered by hand; (b)&nbsp;on the day sent by facsimile provided that the sender has received confirmation of
transmission as of or prior to 5:00&nbsp;p.m. local time of the recipient on such day; (c)&nbsp;the first business day after sent by facsimile (to the extent that the sender has received
confirmation of transmission after 5:00&nbsp;p.m. local time of the recipient on the day sent by facsimile); or (d)&nbsp;the third business day after sent by registered mail or by courier or
express delivery service, in any case to the address or facsimile telephone number set forth beneath the name of such party below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
to Parent or Merger Sub, to: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Nektar
Therapeutics<BR>
150 Industrial Road<BR>
San Carlos, CA 94070<BR>
Attention: Nevan Elam<BR>
Facsimile: (650)&nbsp;631-3150 </FONT></P>

</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-40</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with
a copy (which shall not constitute notice) to: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Wilson
Sonsini Goodrich&nbsp;&amp; Rosati<BR>
Professional Corporation<BR>
650 Page Mill Road<BR>
Palo Alto, CA 94304-1050<BR>
Attention: Martin W. Korman<BR>
Facsimile: (650)&nbsp;493-6811 </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
to the Company, to: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Aerogen,&nbsp;Inc.<BR>
2071 Stierlin Court, Suite 100<BR>
Mountain View, CA 94043<BR>
Attention: Chief Financial Officer<BR>
Facsimile: (650)&nbsp;864-7433 </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with
a copy (which shall not constitute notice) to: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Cooley
Godward LLP<BR>
Five Palo Alto Square<BR>
3000 El Camino Real<BR>
Palo Alto, CA 94306<BR>
Attention: Robert J. Brigham, Esq.<BR>
Facsimile: (650)&nbsp;849-7400 </FONT></P>

</UL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.11</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Severability</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;If any term or other provision of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms, provisions and conditions of this Agreement shall nevertheless remain
in full force and effect. 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 to the fullest extent permitted by applicable Law in an acceptable manner to the end that the Transactions are
fulfilled to the extent possible. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.12</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Definitions</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;As
used in this Agreement, the following terms have the meanings ascribed thereto below: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Affiliate</I></FONT><FONT SIZE=2>" shall mean, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common
control with, such Person. For this purpose, "</FONT><FONT SIZE=2><I>control</I></FONT><FONT SIZE=2>" (including, with its correlative meanings, "</FONT><FONT SIZE=2><I>controlled
by</I></FONT><FONT SIZE=2>" and "</FONT><FONT SIZE=2><I>under common control with</I></FONT><FONT SIZE=2>") shall mean the possession, directly or indirectly, of the power to direct or cause the
direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>business day</I></FONT><FONT SIZE=2>" shall mean a day except a Saturday, a Sunday or other day on which the SEC or banks in the City of New York are authorized
or required by Law to be closed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Charter Amendment</I></FONT><FONT SIZE=2>" shall mean the amendment to the Company's Certificate of the Powers, Designations, Preferences and Rights of the
Company Series&nbsp;A-1 Preferred Stock in substantially the form attached hereto as </FONT><FONT SIZE=2><I>Exhibit&nbsp;C</I></FONT><FONT SIZE=2>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Code</I></FONT><FONT SIZE=2>" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Common Stock Per Share Cash Amount</I></FONT><FONT SIZE=2>" shall mean $0.1875. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-41</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Common Stock Per Share Stock Amount</I></FONT><FONT SIZE=2>" shall mean the quotient obtained by </FONT><FONT SIZE=2><I>dividing</I></FONT><FONT SIZE=2> $0.5625
by the Parent Trading Price. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company Capital Stock</I></FONT><FONT SIZE=2>" shall mean the Company Common Stock and the Company Preferred Stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company Common Stock</I></FONT><FONT SIZE=2>" shall mean the common stock, par value $0.001 per share, of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company Preferred Stock</I></FONT><FONT SIZE=2>" shall mean the Preferred Stock, par value $0.001 per share, of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company Series&nbsp;A-1 Preferred Stock</I></FONT><FONT SIZE=2>" shall mean the Series&nbsp;A-1 Preferred Stock, par value $0.001 per
share, of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Company Stock Plans</I></FONT><FONT SIZE=2>" shall mean the Aerogen 2000 Equity Incentive Plan, the Aerogen 2000 Non-Employee Directors' Stock Option
Plan and the ESPP. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>ESPP</I></FONT><FONT SIZE=2>" shall mean the Aerogen 2000 Employee Stock Purchase Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>GAAP</I></FONT><FONT SIZE=2>" shall mean generally accepted accounting principles in the United States. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Governmental Authority</I></FONT><FONT SIZE=2>" shall mean any government, court, arbitrator, regulatory or administrative agency, commission or authority or
other governmental instrumentality, federal, state or local, domestic, foreign or multinational. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Intellectual Property</I></FONT><FONT SIZE=2>" of any Person shall mean all intellectual property rights throughout the world arising from or in respect of the
following: (i)&nbsp;all patents and applications therefor, including continuations, divisionals, continuations-in-part, renewals, extensions, provisionals, or reissues of
patent applications and patents issuing thereon; (ii)&nbsp;trademarks, service marks, trade names, common law trademarks and service marks, service names, brand names, trade dress rights, logos,
Internet domain names and corporate names, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof; (iii)&nbsp;all copyrights and
registrations and applications therefor, works of authorship and mask work rights; (iv)&nbsp;all proprietary discoveries, concepts, ideas, research and development, know-how, formulae,
algorithms, subroutines, inventions, compositions, manufacturing and production processes and techniques, technical data, industrial designs, procedures, designs, drawings, specifications, moral and
economic rights of authors and inventors (however denominated), databases and other proprietary and confidential information, including customer lists, supplier lists, pricing and cost information,
and business and marketing plans and proposals, and with respect to the foregoing, all registrations, applications, and rights therein, throughout the world; and (v)&nbsp;all Software. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Knowledge</I></FONT><FONT SIZE=2>" of any Person that is not an individual shall mean, with respect to any matter in question, the actual knowledge of such
Person's executive officers and directors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Parent Common Stock</I></FONT><FONT SIZE=2>" shall mean shares of the common stock, par value $0.0001 per share, of Parent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Parent Trading Price</I></FONT><FONT SIZE=2>" shall mean the volume weighted average price per share of Parent Common Stock, as reported by the Nasdaq National
Market, for the 20 trading day period ending on the second trading day preceding the Effective Date. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Person</I></FONT><FONT SIZE=2>" shall mean an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity,
including a Governmental Authority. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Preferred Stock Per Share Cash Amount</I></FONT><FONT SIZE=2>" shall mean $7.2563. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-42</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Preferred Stock Per Share Stock Amount</I></FONT><FONT SIZE=2>" shall mean the quotient obtained by </FONT><FONT SIZE=2><I>dividing</I></FONT><FONT SIZE=2>
$21.7688 by the Parent Trading Price. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Representatives</I></FONT><FONT SIZE=2>" of any Person shall mean its directors, officers, employees, financial advisors, attorneys, accountants, agents and
other representatives. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Software</I></FONT><FONT SIZE=2>" means all: (i)&nbsp;computer programs, including all software implementations of algorithms, models and methodologies,
whether in source code or object code; (ii)&nbsp;databases and compilations, including all data and collections of data, whether machine readable or otherwise; (iii)&nbsp;descriptions,
flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus,
buttons and icons; and (iv)&nbsp;documentation including user manuals and other training documentation related to any of the foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Subsidiary</I></FONT><FONT SIZE=2>" when used with respect to any party hereto, shall mean any corporation, limited liability company, partnership, association,
trust or other entity the accounts of which would be consolidated with those of such party in such party's consolidated financial statements if such financial statements were prepared in accordance
with GAAP, as well as any other corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership interests representing more than 50% of
the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned by such party or one or more
Subsidiaries of such party or by such party and one or more Subsidiaries of such party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Transactions</I></FONT><FONT SIZE=2>" refers to the transactions contemplated hereby, including the Merger and the Charter Amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION
8.13</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interpretation</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;When
a reference is made in this Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or
Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "</FONT><FONT SIZE=2><I>include</I></FONT><FONT SIZE=2>," "</FONT><FONT SIZE=2><I>includes</I></FONT><FONT SIZE=2>" or
"</FONT><FONT SIZE=2><I>including</I></FONT><FONT SIZE=2>" are used in this Agreement, they shall be deemed to be followed by the words "</FONT><FONT SIZE=2><I>without
limitation</I></FONT><FONT SIZE=2>." The words "</FONT><FONT SIZE=2><I>hereof</I></FONT><FONT SIZE=2>," "</FONT><FONT SIZE=2><I>herein</I></FONT><FONT SIZE=2>" and
"</FONT><FONT SIZE=2><I>hereunder</I></FONT><FONT SIZE=2>" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of
any provision of this Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[s</FONT><FONT
SIZE=2><I>ignature page follows</I></FONT><FONT SIZE=2>] </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-43</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. </FONT></P>

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<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>NEKTAR THERAPEUTICS</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>NEVAN ELAM</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name: Nevan Elam<BR>
Title: Senior VP Corporate Operations</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><BR><FONT SIZE=2>OSKI ACQUISITION CORPORATION</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>NEVAN ELAM</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name: Nevan Elam<BR>
Title: Senior Vice President</FONT></TD>
</TR>
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<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><BR><FONT SIZE=2>AEROGEN,&nbsp;INC.</FONT></TD>
</TR>
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<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN C HODGMAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name: John C. Hodgman<BR>
Title: President&nbsp;&amp; CEO</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>A-44</FONT></P>

<HR NOSHADE>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_lu1423_1_1"> </A> </FONT> <FONT SIZE=2><B>Annex B  </B></FONT></P>

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<TD WIDTH="67%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%"><FONT SIZE=2>[LOGO]<BR>
One Maritime Plaza, 15th Floor<BR>
San Francisco, CA 94111<BR></FONT>
</TD>
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<P><FONT SIZE=2>August&nbsp;12, 2005 </FONT></P>

<P><FONT SIZE=2>Board
of Directors<BR>
Aerogen,&nbsp;Inc.<BR>
2071 Stierlin Court, Suite 100<BR>
Mountain View, CA 94043 </FONT></P>

<P><FONT SIZE=2>Members
of the Board: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
have asked us to advise you with respect to the fairness, from a financial point of view, to the holders of common stock, par value $0.001 per share ("Company Common Stock"), of
Aerogen,&nbsp;Inc. (the "Company") of the Consideration (as defined below) set forth in the Agreement and Plan of Merger, dated as of August&nbsp;12, 2005 (the "Merger Agreement"), among the
Company, Nektar Therapeutics (the "Acquiror"), and an indirect, wholly owned subsidiary of the Acquiror ("Sub"). The Merger Agreement provides for, among other things, the merger (the "Merger") of Sub
with and into the Company pursuant to which the Company will become a wholly owned subsidiary of the Acquiror and each outstanding share of Company Common Stock will be converted into the right to
receive, at
the sole option of the Acquiror, (a)&nbsp;a combination of (i)&nbsp;the number of shares of the Acquiror obtained from dividing $0.5625 by the Parent Trading Price (as defined in the Merger
Agreement) ("Acquiror Common Stock"), and (ii)&nbsp;$0.1875 in cash, or (b)&nbsp;$0.75 in cash (in the case of either (a)&nbsp;or (b)&nbsp;above, the "Consideration"). The Merger Agreement
also provides that each outstanding share of Series&nbsp;A-1 Preferred Stock, par value $0.001 per share ("Company Preferred Stock"), of the Company will be converted into the right to
receive, at the sole option of the Acquiror, (a)&nbsp;a combination of (i)&nbsp;the number of shares of the Acquiror obtained from dividing $21.7688 by the Parent Trading Price (as defined in the
Merger Agreement) ("Acquiror Common Stock"), and (ii)&nbsp;$7.2563 in cash, or (b)&nbsp;$29.0251 in cash. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
arriving at our opinion, we have reviewed the Merger Agreement and certain related agreements each dated as of August&nbsp;12, 2005 and certain publicly available business and
financial information relating to the Company and the Acquiror. We have also reviewed certain other information relating to the Company and the Acquiror, including financial forecasts relating to the
Company, provided to or discussed with us by the Company and the Acquiror, and have discussed with the managements of the Company and the Acquiror the business and prospects of the Company and the
Acquiror, respectively. We note that we were not provided any financial forecasts or non-public information relating to the Acquiror. We have also considered certain financial and stock
market data of the Company and the Acquiror, and we have compared that data with similar data for other publicly held companies in businesses we deemed similar to those of the Company and the Acquiror
and we have considered, to the extent publicly available, the financial terms of certain other similar business combinations. In addition, we have reviewed the rights, preferences and privileges of
the Company Preferred Stock. We have also reviewed the Company's projected cash burn rate and availability of capital, which was prepared and provided to us by the Company's management. We also
considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with our review, we have not assumed any responsibility for independent verification of any of the foregoing information and have relied on its being complete and accurate
in all material respects. With respect to the financial forecasts for the Company that we have reviewed, the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>management
of the Company has advised us, and we have assumed, that such forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company. In this regard, the management of the Company has further advised us that, absent the Merger, the Company may need
additional financing that the Company may not be able to obtain on favorable terms to the Company or its stockholders, if at all. We also have assumed, with your consent, that, in the course of
obtaining any regulatory or third party consents, approvals or agreements in connection with the Merger, no delay, limitation, restriction or condition will be imposed that would have an adverse
effect on the Company, the Acquiror or the contemplated benefits of the Merger and that the Merger will be consummated in accordance with the terms of the Merger Agreement without waiver, modification
or amendment of any material term, condition or agreement thereof. In addition, we have not been requested to make, and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or the Acquiror, nor have we been furnished with any such evaluations or appraisals. Our opinion addresses only the fairness, from a financial
point of view, to the holders of Company Common Stock of the Consideration and does not address any other aspect or implication of the Merger or any other agreement, arrangement or understanding
entered into in connection with the Merger or otherwise. Our opinion is necessarily based upon information made available to us as of the date hereof and financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have acted as financial advisor to the Company in connection with the Merger. We will receive a fee for our services, a portion of which is payable upon delivery of this opinion and a
significant portion of which is contingent upon the consummation of the Merger. In addition, the Company has agreed to indemnify us for certain liabilities and other items arising out of our
engagement. You have not asked us to address, and this opinion does not address, the fairness to, or any other consideration of, the holders of Company Preferred Stock or any other class of
securities, creditors or other constituencies of the Company, other than the holders of Company Common Stock. Assuming that shares of the Acquiror Common Stock are issued as part of the Consideration
to the holders of Company Common Stock, we are not expressing any opinion as to what the value of shares of Acquiror Common Stock actually will be when issued to the holders of Company Common Stock
pursuant to the Merger or the prices at which shares of Acquiror Common Stock or Company Common Stock will trade at any time. Our opinion does not address the relative merits of the Merger as compared
to alternative transactions or strategies that might be available to the Company, nor does it address the underlying business decision of the Company to proceed with the Merger. In addition, our
opinion does not address the allocation of the transaction consideration to be received by holders of different classes or series of the Company's capital stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is understood that this letter is for the information of the Board of Directors of the Company in connection with its consideration of the Merger and does not constitute a
recommendation to any stockholder as to how such stockholder should vote or act on any matter relating to the proposed Merger. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Consideration is fair, from a financial point of view, to the holders of Company Common Stock. </FONT></P>

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<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Very truly yours,</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><BR><FONT SIZE=2>AQUILO PARTNERS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="54%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN RUMSEY</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> John Rumsey<BR>
Managing Partner<BR></FONT>
</TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>B-3</FONT></P>

<HR NOSHADE>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_lw1423_1_1"> </A> </FONT> <FONT SIZE=2><B>Annex C  </B></FONT></P>

<UL>

<P><FONT SIZE=2><B><I> &sect; 262. Appraisal rights.  </I></B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Any
stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d)&nbsp;of this section with
respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d)&nbsp;of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to &sect; 228 of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances described in subsections (b)&nbsp;and (c)&nbsp;of this section. As used in this section, the word "stockholder" means a
holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Appraisal
rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to
&sect; 251 (other than a merger effected pursuant to &sect; 251(g) of this title), &sect; 252, &sect; 254, &sect; 257, &sect; 258, &sect; 263 or
&sect; 264 of this title: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;Provided,
however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in
respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i)&nbsp;listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities
Dealers,&nbsp;Inc. or (ii)&nbsp;held of record by more than 2,000 holders; and
further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f)&nbsp;of &sect; 251 of this title. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;Notwithstanding
paragraph&nbsp;(1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to &sect;&sect; 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares
of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository
receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers,&nbsp;Inc. or held of record by more than 2,000 holders; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash
in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing
subparagraphs a., b. and c. of this paragraph. </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>C-1</FONT></P>

<HR NOSHADE>
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<UL>
<BR>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;In
the event all of the stock of a subsidiary Delaware corporation party to a merger effected under &sect; 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Any
corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its
stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d)&nbsp;and (e)&nbsp;of this
section, shall apply as nearly as is practicable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Appraisal
rights shall be perfected as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;If
a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the
corporation, not less than 20&nbsp;days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsection (b)&nbsp;or (c)&nbsp;hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10&nbsp;days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder
of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become
effective; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;If
the merger or consolidation was approved pursuant to &sect; 228 or &sect; 253 of this title, then either a constituent corporation before the effective
date of the merger or consolidation or the surviving or resulting corporation within 10&nbsp;days thereafter shall notify each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20&nbsp;days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i)&nbsp;each
such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii)&nbsp;the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10&nbsp;days after such effective date; provided, however, that if such second notice is sent more than 20&nbsp;days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation that is required to give </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>C-2</FONT></P>

<HR NOSHADE>
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<A NAME="page_lw1423_1_3"> </A>
<UL>
<BR>

<P><FONT SIZE=2>either
notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10&nbsp;days prior to the date the notice is given, provided, that if the notice is given
on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record
date shall be the close of business on the day next preceding the day on which the notice is given. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Within
120&nbsp;days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a)&nbsp;and (d)&nbsp;hereof and who is otherwise entitled to appraisal rights, may file&nbsp;a petition in the Court of Chancery demanding a determination of the value of the stock
of all such stockholders. Notwithstanding the foregoing, at any time within 60&nbsp;days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw
such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120&nbsp;days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a)&nbsp;and (d)&nbsp;hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10&nbsp;days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10&nbsp;days after expiration of the period for delivery of demands for appraisal under subsection (d)&nbsp;hereof,
whichever is later. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Upon
the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within
20&nbsp;days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have
demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed
for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall
also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the
Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;At
the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The
Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;After
determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lw1423_1_4"> </A>
<BR>

<P><FONT SIZE=2>Court
may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal.
Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f)&nbsp;of this section and who has submitted such stockholder's certificates
of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this
section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;The
Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders
entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case
of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;The
costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a
stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;From
and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d)&nbsp;of this section
shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection
(e)&nbsp;of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the
merger or consolidation, either within 60&nbsp;days after the effective date of the merger or consolidation as provided in subsection (e)&nbsp;of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;The
shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or
consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_lz1423_1_1"> </A> </FONT></P>

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<P ALIGN="RIGHT"><FONT SIZE=2><B>ANNEX D  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="lz1423_certificate_of_amendment_to_ce__cer04879"> </A>
<A NAME="toc_lz1423_1"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATE OF AMENDMENT TO<BR>  CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS<BR>  OF THE SERIES A-1 PREFERRED STOCK<BR>  OF<BR>  AEROGEN,&nbsp;INC.    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AEROGEN,&nbsp;INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "<U>DGCL</U>"),
DOES HEREBY CERTIFY THAT: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>FIRST:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The name of the corporation is AEROGEN,&nbsp;INC. (the "<U>Corporation</U>") </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>SECOND:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Certificate of Amendment (this "<U>Certificate of Amendment</U>") to Certificate of the
Powers, Designations, Preferences and Rights of the Series&nbsp;A-1 Preferred Stock of the Corporation (the "<U>Certificate of Designations</U>") has been duly
approved by the Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the DGCL. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>THIRD:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The holders of at least a majority of the outstanding shares of the Corporation's Series&nbsp;A-1
Preferred Stock, par value $0.001 per share, duly approved this Certificate of Amendment at the Corporation's special meeting held on
[<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>] in accordance with Sections 211 and 242 of the DGCL. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>FOURTH:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3(a) of the Certificate of Designations of the Corporation is hereby amended and restated in its
entirety to read: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Each
holder of Series&nbsp;A-1 Preferred Stock, in preference and priority to the holders of all other classes of stock, shall be entitled to receive, with respect to
each share of Series&nbsp;A-1 Preferred Stock then outstanding and held by such holder of Series&nbsp;A-1 Preferred Stock, dividends, commencing from the date of issuance
of such share of Series&nbsp;A-1 Preferred Stock, at the rate of six percent (6%) per annum of the Series&nbsp;A-1 Stated Value (the
"</FONT><FONT SIZE=2><I><U>Series&nbsp;A-1 Preferred Dividends</U></I></FONT><FONT SIZE=2>"); </FONT><FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2>
that notwithstanding anything to the contrary in this Section&nbsp;3(a), holders of Series&nbsp;A-1 Preferred Stock shall not be entitled to any dividend, and no dividend shall be
accrued or paid for any quarter, including for the quarters ended June&nbsp;30, 2005 and September&nbsp;30, 2005, for so long as that certain Agreement and Plan of Merger dated August&nbsp;12,
2005, by and among the Corporation, Nektar Therapeutics and Oski Acquisition Corporation (the "</FONT><FONT SIZE=2><I><U>Nektar Merger Agreement</U></I></FONT><FONT SIZE=2>") is
effective. Subject to the preceding sentence, the Series&nbsp;A-1 Preferred Dividends shall be cumulative, whether or not earned or declared, and shall be paid quarterly in arrears on
the first day of January, April, July and October in each year. The Series&nbsp;A-1 Preferred Dividends shall be paid to each holder of Series&nbsp;A-1 Preferred Stock, at
the Corporation's election, out of legally available funds or through the issuance of such number of shares of Common Stock determined by dividing the amount of the total accrued but unpaid dividends
then outstanding on such holder's shares of the Common Stock by the then existing Fair Market Value (rounded up to the nearest whole share). Any election by the Corporation to pay dividends in cash or
shares of Common Stock shall be made uniformly with respect to all outstanding shares of Series&nbsp;A-1 Preferred Stock for a given dividend period. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>FIFTH:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4(c) of the Certificate of Designations of the Corporation is hereby amended and restated in its
entirety to read: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>The
Requisite Holders, by written notice to the Corporation at least two (2)&nbsp;Business Days prior to the effective date thereof (and in no event less than eighteen
(18)&nbsp;Business Days after receipt of an Acquisition Notice (as defined below) or less than eight (8)&nbsp;Business Days after </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>D-1</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_lz1423_1_2"> </A>
<UL>
<UL>

<P><FONT SIZE=2>a
Change Notice (as defined below)), may elect to treat any of the following transactions as a dissolution or winding up of the Corporation for the purposes of this Section&nbsp;4: (1)&nbsp;a
consolidation or merger of the Corporation with or into any other corporation or corporations which results in the stockholders of the Corporation owning less than fifty percent (50%) of the
outstanding capital stock of the surviving entity; (2)&nbsp;a sale of all or substantially all of the assets of the Corporation; (3)&nbsp;the issuance and/or sale by the Corporation in one or a
series of related transactions of shares of Common Stock (or securities convertible or exchangeable into or exercisable for shares of Common Stock) constituting a majority of the shares of Common
Stock outstanding immediately following such issuance (treating all securities convertible or exchangeable into or exercisable for shares of Common Stock as having been fully converted, exchanged and
exercised); and (4)&nbsp;any other form of acquisition or business combination where the Corporation is the target of such acquisition and where a change in control occurs such that the Person
seeking to acquire the Corporation has the power to elect a majority of the Board as a result of the transaction; (each such event an
"</FONT><FONT SIZE=2><I><U>Acquisition</U></I></FONT><FONT SIZE=2>"); </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that any transaction pursuant to the
Nektar Merger Agreement shall not constitute an Acquisition and in the event of the consummation of the transactions contemplated by the Nektar Merger Agreement the holders of
Series&nbsp;A-1 Preferred Stock will have rights to only that consideration specified in the Nektar Merger Agreement with respect to their shares of Series&nbsp;A-1
Preferred Stock. The Corporation shall give written notice (the "</FONT><FONT SIZE=2><I><U>Acquisition Notice</U></I></FONT><FONT SIZE=2>") to the holders of
Series&nbsp;A-1 Preferred Stock at least twenty (20)&nbsp;Business Days prior to the consummation of any Acquisition. Such Acquisition Notice shall describe the material terms and
conditions of such Acquisition and the rights of the holders of Series&nbsp;A-1 Preferred Stock pursuant to this Section&nbsp;4, and the Corporation shall give such holders written
notice (a "</FONT><FONT SIZE=2><I><U>Change Notice</U></I></FONT><FONT SIZE=2>") of any material changes at least ten (10)&nbsp;Business Days prior to the consummation of any
Acquisition. </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><B>[Remainder of page intentionally left blank]</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>D-2</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_lz1423_1_3"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Aerogen,&nbsp;Inc.. has caused this Certificate of Amendment to be executed by <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>,
its President and Chief Executive
Officer, this [<U>&nbsp;&nbsp;&nbsp;&nbsp;</U>] day of [<U>&nbsp;&nbsp;&nbsp;&nbsp;</U>], 2005. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>AEROGEN, INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="38%"><FONT SIZE=2>President and Chief Executive Officer</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I,
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, hereby certify that I am the duly elected and acting Secretary of Aerogen,&nbsp;Inc., that
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
is the duly elected and acting President and Chief Executive Officer of Aerogen,&nbsp;Inc., and that the signature of
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> appearing above is his genuine
signature. </FONT></P>

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<TR VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2>Dated: [<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>], 200
[<U>&nbsp;&nbsp;&nbsp;&nbsp;</U>].</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, Secretary</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>D-3</FONT></P>

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<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><B>PROXY  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AEROGEN,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>


PROXY SOLICITED BY THE BOARD OF DIRECTORS<BR>
FOR THE SPECIAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON OCTOBER&nbsp;19, 2005

 </B></FONT></P>

<P>


<FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints John Hodgman and Robert&nbsp;S. Breuil, and each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Aerogen,&nbsp;Inc. (the "Company") which the undersigned may be entitled to vote at the Special Meeting of Stockholders of the Company to be held
at the Company's offices at 2071 Stierlin Court, Suite 100, Mountain View, CA 94043 on October&nbsp;19, 2005 at 10:00&nbsp;a.m. (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come before the meeting.

</FONT>

</P>

<P><FONT SIZE=2>


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless a contrary direction is indicated, this Proxy will be voted FOR Proposals&nbsp;1, 2 and 3. If specific instructions are indicated, this Proxy will be voted in accordance
therewith.

</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>(Continued, and to be marked, dated and signed, on the other side)  </B></FONT></P>

<HR NOSHADE>
<P ALIGN="CENTER"><FONT SIZE=2><B>Address Change/Comments (Mark the corresponding box on the reverse side)  </B></FONT></P>

<HR NOSHADE>
<P ALIGN="CENTER"><FONT SIZE=2><B>^&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOLD AND DETACH HERE&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;^  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>Please Mark Here for Address Change or Comments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="55%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>SEE REVERSE SIDE<BR></FONT>
</TD>
</TR>
</TABLE>
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<P>


<FONT SIZE=2><B>THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE BOARD
OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS&nbsp;1 AND 2.</B></FONT>

</P>




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<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>FOR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>AGAINST</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2>ABSTAIN</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>PROPOSAL 1.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of August&nbsp;12, 2005, among Nektar Therapeutics ("Nektar"), Oski Acquisition Corporation, an indirect wholly-owned subsidiary of
Nektar, and Aerogen.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
FOR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><BR>
AGAINST</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><BR>
ABSTAIN</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>PROPOSAL 2.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>To vote upon a proposal to amend Aerogen's Certificate of Designations, Preferences and Rights of the Series&nbsp;A-1 Preferred Stock (the "Certificate of Designations") by filing with the Secretary of State of Delaware a
Certificate of Amendment to such Certificate of Designations.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
FOR</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><BR>
AGAINST</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><BR>
ABSTAIN</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>PROPOSAL 3.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>To vote to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of adoption of the Merger Agreement and/or in favor of approval of the Certificate of
Amendment.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER"><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
</TABLE>

<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="11%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><B>Signature</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><B>Signature</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><B>Date</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as
such.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>^&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOLD AND DETACH HERE&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;^  </B></FONT></P>

<UL>
<UL>
<UL>

<P><FONT SIZE=2>Choose
</FONT><FONT SIZE=2><B>MLink<SUP>SM</SUP></B></FONT><FONT SIZE=2> for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and
more. Simply log on to </FONT><FONT SIZE=2><B>Investor ServiceDirect&reg;</B></FONT><FONT SIZE=2> at www.melloninvestor.com/isd where step-by-step instructions
will prompt you through enrollment. </FONT></P>

</UL>
</UL>
</UL>
<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=124,EFW="2163034",CP="AEROGEN, INC.",DN="1",CHK=648429,FOLIO='blank',FILE='DISK134:[05PAL4.05PAL1444]MA1444A.;10',USER='LHOUSE',CD='16-SEP-2005;00:08' -->
<UL>
<UL>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<BR>
<P><br><A NAME="05PAL1423_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_be1423_1">NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 19, 2005</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_be1423_2">THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT AND "FOR" THE APPROVAL OF THE CERTIFICATE OF AMENDMENT. YOUR VOTE IS IMPORTANT.</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1423_1">TABLE OF CONTENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1423_1">SUMMARY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1423_1">QUESTIONS AND ANSWERS ABOUT THE MERGER</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di1423_1">RISK FACTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1423_2">CAUTION REGARDING FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1423_3">THE COMPANIES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1423_4">THE SPECIAL MEETING</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dk1423_1">PROPOSAL ONE: THE MERGER</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dq1423_1">THE MERGER AGREEMENT</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ds1423_1">PROPOSAL 2: THE CERTIFICATE OF AMENDMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1423_2">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1423_3">MARKET FOR THE COMMON STOCK; DIVIDEND DATA</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ds1423_4">OTHER MATTERS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_le1423_1">AGREEMENT AND PLAN OF MERGER</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_lm1423_1">ARTICLE 4 Representations and Warranties of Parent and Merger Sub</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_lm1423_2">ARTICLE 5 Covenants and Agreements</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_lz1423_1">CERTIFICATE OF AMENDMENT TO CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF THE SERIES A-1 PREFERRED STOCK OF AEROGEN, INC.</A></FONT><BR>
<!-- SEQ=,FILE='QUICKLINK',USER=BKYNARD,SEQ=,EFW="2163034",CP="AEROGEN, INC.",DN="1" -->
<!-- TOCEXISTFLAG -->
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