UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Filed by the Registrant       þ
Filed by a Party other than the Registrant       o

Check the appropriate box

þ		Preliminary Proxy Statement
o		Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

ANIMAS CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

			(1	)		Title of each class of securities to which transaction applies:
						common stock, $.01 par value
			(2	)		Aggregate number of securities to which transaction applies:
						22,971,991 shares of common stock (includes 2,118,891 shares underlying options to purchase common stock and 78,900 warrants to purchase common stock and 10,870 shares representing the maximum number of shares that could be issued under the employee stock purchase plan)
			(3	)		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):
						$24.50 per share of common stock (with respect to outstanding options and warrants, the per share price was based on the difference between the $24.50 per share and the per share exercise price of in-the-money options and warrants)
			(4	)		Proposed maximum aggregate value of transaction: $538,009,401.08
			(5	)		Total fee paid: $57,567

o		Fee paid previously with written preliminary materials:
o		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

			(1	)		Amount previously paid:
			(2	)		Form, Schedule or Registration Statement No.:
			(3	)		Filing Party:
			(4	)		Date Filed:

 

 

January ___, 2006

Dear Animas Stockholder:

You are cordially invited to attend the special meeting of stockholders of Animas Corporation, to be held on                                          ___, 2006 at ___, local time, at 200 Lawrence Drive, West Chester, PA 19380.

At the special meeting, we will ask you to adopt the merger agreement among us, Johnson & Johnson and a wholly owned subsidiary of Johnson & Johnson. If the merger is completed, you will be entitled to receive $24.50 in cash, without interest, for each share of our common stock that you own.

Our board of directors has carefully reviewed and considered the terms and conditions of the proposed merger. Based on its review, the board of directors has determined that the merger agreement, the merger and the transactions described in the merger agreement are fair to and in the best interests of our stockholders. ACCORDINGLY, OUR BOARD OF DIRECTORS HAS APPROVED AND DECLARED ADVISABLE THE MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT.

Your vote is important. We cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of a majority of our shares of common stock outstanding and entitled to vote at the special meeting. Failure to submit a signed proxy or vote in person at the special meeting will have the same effect as a vote against the adoption of the merger agreement. Only stockholders who owned shares of our common stock at the close of business on ___ ___, 2006 will be entitled to vote at the special meeting.

Certain of our stockholders have entered into a stockholder agreement in which they agreed to vote, in the aggregate, 6,153,393 shares of common stock (representing approximately 29.64% of the shares of our common stock outstanding as of the record date) in favor of adopting the merger agreement.

In addition to the number of shares of common stock covered by the stockholder agreement, an affiliate of Johnson & Johnson currently owns approximately 7.79% of the shares of our common stock outstanding as of the record date, which are expected to be voted in favor of adopting the merger agreement.

PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY. If you hold your shares in “street name”, you should instruct your broker how to vote in accordance with your voting instruction form.

This proxy statement explains the proposed merger and merger agreement, and provides specific information concerning the special meeting. Please review this document carefully.

Sincerely,

Katherine D. Crothall
President and Chief Executive Officer

This proxy statement is dated                                          ___, 2006, and is first being mailed to stockholders of Animas Corporation on or about                                         ___, 2006.

ANIMAS CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on                                         __, 2006

To the stockholders of Animas Corporation:

We will hold a special meeting of the stockholders of Animas Corporation at 200 Lawrence Drive, West Chester, PA 19380, on ___ ___, 2006 at ___ ___, local time, and any adjournments or postponements thereof, for the following purposes:

     1. To consider and vote upon a proposal to adopt the merger agreement among Johnson & Johnson, Emerald Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, and us. In the merger, Emerald Merger Sub, Inc. will merge with and into Animas, with Animas surviving as a wholly owned subsidiary of Johnson & Johnson, and each outstanding share of our common stock will be converted into the right to receive $24.50 in cash, without interest; and

     2. To transact such other business that may properly come before the special meeting and any adjournments or postponements of the special meeting, including, if submitted to a vote of the stockholders, a motion to adjourn the special meeting to another time or place for the purpose of soliciting additional proxies.

We will transact no other business at the special meeting except such business as may properly be brought before the special meeting or any adjournments or postponements of the special meeting. Only stockholders who owned shares of our common stock at the close of business on ___ ___, 2006, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

We cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the shares of our common stock outstanding and entitled to vote at the special meeting. This proxy statement describes the proposed merger and the actions to be taken in connection with the merger and provides additional information about the parties involved. Please give this information your careful attention.

Under Delaware law, holders of our common stock who do not vote in favor of the adoption of the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for an appraisal prior to the vote on the merger agreement and they comply with the Delaware law procedures explained in the accompanying proxy statement. See “The Merger—Appraisal Rights” on page 42.

OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT.

Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid return envelope. You may revoke the proxy at any time prior to its exercise in the manner described in this proxy statement. Any stockholder present at the special meeting, including any adjournments or postponements of it, may revoke such stockholder’s proxy and vote personally on the proposal to adopt the merger agreement. Executed proxies with no instructions indicated thereon will be voted “FOR” the adoption of the merger agreement. If you fail to return your proxy or to vote in person at the special meeting, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting, and will effectively be counted as a vote against the adoption of the merger agreement. PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.

		By order of the board of directors, Sincerely,
		Richard A. Baron Secretary, Vice President, Finance and Chief Financial Officer
West Chester, Pennsylvania		___, 2006

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE MERGER			1
SUMMARY			4
The Companies			4
The Special Meeting			5
The Merger			6
Recommendation of our Board of Directors			8
Opinion of our Financial Advisor			8
Interests of Our Directors and Executive Officers in the Merger			8
Material U.S. Federal Income Tax Consequences of the Merger			9
Appraisal Rights			9
The Paying Agent			10
Regulatory Filings and Approvals Required to Complete the Merger			10
The Merger Agreement			10
Termination of the Merger Agreement			10
THE COMPANIES			12
Animas Corporation			12
Johnson & Johnson			13
Emerald Merger Sub, Inc.			13
THE SPECIAL MEETING			14
Date, Time and Place			14
Purpose of the Special Meeting			14
Record Date; Shares Entitled to Vote; Quorum			14
Vote Required			14
Shares Owned by Our Directors and Executive Officers			14
Voting of Proxies			15
Revocability of Proxies			16
Solicitation of Proxies			16
Delivery of Proxy Statement to Multiple Stockholders with the Same Address			16
THE MERGER			18
Background of the Merger			18
Reasons for the Merger			22

Recommendation of Our Board of Directors			24
Opinion of Our Financial Advisor—Piper Jaffray & Co.			24
Interests of Our Directors and Executive Officers in the Merger			34
Material U.S. Federal Income Tax Consequences			39
Regulatory Approvals			41
Appraisal Rights			42
Delisting and Deregistration of Our Common Stock			45
Structure of the Merger			45
Effective Time of the Merger			45
The Merger Consideration			46
Treatment of Our Stock Options and Employee Stock Purchase Plan			46
Treatment of Our Warrants			47
Surrender of Stock Certificates			47
Lost Certificates			48
Unclaimed Amounts			48
THE MERGER AGREEMENT			49
Representations and Warranties			49
Covenants			51
Directors’ and Officers’ Indemnification, Advancement of Expenses, Exculpation and Insurance			55
Employee Benefits Matters			55
Efforts to Consummate the Merger			56
Conditions to the Completion of the Merger			57
No Solicitation			59
Termination			61
Amendment, Extension and Waiver			63
Assignment			63
Fees and Expenses			63
STOCKHOLDER AGREEMENT			65
Voting Arrangements and Related Provisions			65
Termination			66

STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS			67
OTHER MATTERS			69
FUTURE STOCKHOLDER PROPOSALS			69
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			69
WHERE YOU CAN FIND ADDITIONAL INFORMATION			69
ANNEX A—AGREEMENT AND PLAN OF MERGER
ANNEX B—STOCKHOLDER AGREEMENT
ANNEX C—OPINION OF PIPER JAFFRAY & CO.
ANNEX D—SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW

QUESTIONS AND ANSWERS ABOUT THE MERGER

Q:		What will happen to Animas Corporation as a result of the merger?
A:		If the merger is completed, Emerald Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, will merge with and into Animas Corporation (which we refer to as “Animas”), with Animas surviving as a wholly owned subsidiary of Johnson & Johnson. Animas is expected to operate as a stand-alone entity reporting through LifeScan, Inc., a Johnson & Johnson company.
Q:		What will happen to my shares of Animas common stock after the merger?
A:		Upon completion of the merger, each share of our outstanding common stock will automatically be canceled and will be converted into the right to receive a per share amount equal to $24.50 in cash, without interest.
Q:		What will happen to my options after the merger?
A:		Pursuant to the merger agreement, we have taken all action necessary to adjust the terms of all outstanding options to acquire shares of our common stock, whether vested or unvested, to provide that, upon completion of the merger, each option outstanding immediately prior to the completion of the merger will be canceled and the holder of that option will be entitled to receive a single lump sum cash payment equal to the number of shares of our common stock for which the option was exercisable, multiplied by the excess of the $24.50 per share merger consideration over the per share exercise price of the option.
Q:		What will happen to my warrants after the merger?
A:		Pursuant to the merger agreement, we have taken, or will take, all action necessary to cause each warrant to acquire shares of our common stock that is outstanding immediately prior to the completion of the merger to be canceled in exchange for a cash payment equal to the number of shares of our common stock subject to the warrant, multiplied by the excess of the $24.50 per share merger consideration over the per share exercise price of the warrant.
Q:		What will happen to the Animas Employee Stock Purchase Plan?
A:		Pursuant to the merger agreement, we have taken all action necessary under the employee stock purchase plan to provide that:

	•		participants will not be permitted to increase their payroll deductions or purchase elections from those in effect on the date of the merger agreement;
	•		no offering period will be commenced after the date of the merger agreement;
	•		each participant’s outstanding right to purchase shares of our common stock under the plan was suspended on December 31, 2005, with all amounts allocated for each participant’s account under the employee stock purchase plan as of the suspension date being used to purchase shares of our common stock at the applicable price determined pursuant to the plan, using the suspension date as the final purchase date for the then outstanding offering period; and

•

the employee stock purchase plan will terminate immediately preceding the closing of the merger.

Q:		Will the merger be taxable to me?
A:		Generally, yes. The receipt of $24.50 in cash for each share of our common stock pursuant to the merger will be a taxable transaction for U.S. Federal income tax purposes. For U.S. Federal income tax purposes, generally you will realize taxable gain or loss as a result of the merger measured by the difference, if any, between $24.50 per share and your adjusted tax basis in that share.
		You should read “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 39 for a more complete discussion of the Federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You should consult your tax advisor to fully understand the tax consequences of the merger to you.
Q:		How does our board of directors recommend that I vote?
A:		Our board of directors unanimously recommends that our stockholders vote “FOR” the proposal to adopt the merger agreement. You should read “The Merger—Reasons for the Merger” for a discussion of the factors that our board of directors considered in deciding to recommend the adoption of the merger agreement.
Q:		What vote of our stockholders is required to adopt the merger agreement?
A:		For us to complete the merger, stockholders holding at least a majority of the outstanding shares of our common stock and entitled to vote at the special meeting must vote “FOR” the adoption of the merger agreement.
Q:		Am I entitled to appraisal rights?
A:		Yes. Under Delaware law, holders of our common stock who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares as determined by the Delaware Court of Chancery if the merger is completed, but only if they submit a written demand for an appraisal prior to the vote on the merger agreement and they comply with the Delaware law procedures explained in this proxy statement.
Q:		What do I need to do now?
A:		After carefully reading and considering the information contained in this proxy statement, please complete, sign and date your proxy and return it in the enclosed postage-paid return envelope as soon as possible, so that your shares may be represented at the special meeting. You may also authorize a proxy to vote your shares by telephone or via the internet in accordance with the instructions provided herein. If you sign and send in your proxy and do not indicate how you want to vote, we will count your proxy as a vote in

		favor of the adoption of the merger agreement.
Q:		What happens if I do not submit a proxy or vote in person at the special meeting?
A:		Because the required vote of our stockholders is based upon the number of outstanding shares of our common stock, rather than upon the shares actually voted, the failure by the holder of any such shares to submit a proxy or to vote in person at the special meeting, including abstentions and broker non-votes, will have the same effect as a vote against the adoption of the merger agreement. The special meeting will take place on ___ ___, 2006, at ___ ___, local time, at 200 Lawrence Drive, West Chester, PA 19380. You may attend the special meeting and vote your shares in person, rather than completing, signing, dating and returning your proxy.
Q:		Can I change my vote after I have mailed my signed proxy?
A:		Yes. You can change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can send a written notice stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy bearing a later date. If you choose either of these two methods, you must submit your notice of revocation or your new proxy to us prior to the special meeting to the attention of our Secretary at 200 Lawrence Drive, West Chester, PA 19380. Third, you can attend the special meeting and deliver a signed notice of revocation, deliver a later-dated duly executed proxy or vote in person. Attendance at the special meeting will not, in and of itself, result in the revocation of a proxy or cause shares to be voted.
Q:		If my Animas shares are held in “street name” by my broker or bank, will my broker or bank vote my shares for me?
A:		Your broker or bank will vote your Animas shares only if you provide instructions on how to vote. You should follow the directions provided by your broker or bank regarding how to instruct your broker or bank to vote your shares. Without instructions, your shares will not be voted, which will have the effect of a vote against the adoption of the merger agreement.
Q:		Should I send in my stock certificates now?
A:		No. After the merger is completed, you will receive a transmittal form with instructions for the surrender of Animas stock certificates. Please do not send in your stock certificates with your proxy.
Q:		When do you expect the merger to be completed?
A:		In addition to obtaining stockholder approval, we must satisfy all other closing conditions, including the expiration or termination of applicable regulatory waiting periods, before the merger can be completed. We currently expect to complete the merger promptly following satisfaction of such closing conditions.
Q:		Who can help answer my questions?
A:		If you have any questions about the merger or if you need additional copies of this proxy statement or the enclosed proxy, you should contact Georgeson Shareholder Communications, Inc., the proxy solicitor for the special meeting, at 17 State Street, 10th Floor, New York, New York 10004, or call (     )     -        .

SUMMARY

This summary highlights selected information from this proxy statement and may not contain all the information that is important to you. You should carefully read this entire proxy statement and the other documents to which we have referred you. See also “Where You Can Find Additional Information” on page 69. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

The Companies

     Animas Corporation (see page 12)

          200 Lawrence Drive, West Chester, Pennsylvania 19380, Telephone: (610) 644-8990. Animas designs, develops, manufactures, and sells external insulin pumps for people with diabetes. Animas was incorporated in Delaware in July 1996 and introduced its first generation pump in July 2000. Animas believes that it is the second largest supplier of insulin pumps to the United States market in terms of new insulin pump placements. Animas began shipping its third generation pump, the IR 1200, in April of 2004. Animas believes that the IR 1200 is the smallest full-featured insulin pump on the market. The IR 1200 has a large display, long battery life, precise insulin delivery, and enhanced waterproof integrity. In February of 2005, Animas began to ship the IR 1250. The IR 1250 utilizes the IR 1200 platform but includes additional software which incorporates a food database of up to 500 items and tunes for alerts. Animas also provides ancillary supplies on an ongoing basis for patients using our pumps, including insulin cartridges, infusion sets, batteries, and various accessories. Animas provides extensive education programs and services to people with diabetes.

          Animas has approximately 130 full-time sales and clinical personnel located throughout the United States. Animas’ approximately 55 person direct sales force promotes its pump in the United States to healthcare professionals who advise patients on monitoring and managing their diabetes and to patients who express interest in pump therapy. Animas’ approximately 75 full-time equivalent diabetes educators, or clinical managers, train and provide clinical support to patients.

     Johnson & Johnson (see page 13)

          One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933, Telephone: (732) 524-0400. Johnson & Johnson, a holding company of over 200 operating subsidiaries, is one of the world’s most comprehensive and broadly based manufacturers of health care products, as well as a provider of related services, for the consumer, pharmaceutical, and medical devices and diagnostics markets. The more than 200 operating companies employ approximately 115,000 men and women in 57 countries and sell products throughout the world.

     Emerald Merger Sub, Inc. (see page 13)

          One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933, Telephone: (732) 524-0400. Emerald Merger Sub, Inc. is a wholly-owned subsidiary of Johnson & Johnson. Emerald Merger Sub, Inc. was formed solely for the purpose of facilitating the acquisition of our company by Johnson & Johnson.

The Special Meeting

     Date, Time and Place (see page 14)

          The special meeting of our stockholders will be held at 200 Lawrence Drive, West Chester, Pennsylvania 19380, at ___, local time, on ___ ___, 2006. At the special meeting, our stockholders will be asked to adopt the merger agreement.

     Record Date, Voting Power (see page 14)

          Our stockholders are entitled to vote at the special meeting if they owned shares of our common stock as of the close of business on ___ ___, 2006, the record date. On the record date, there were ___shares of our common stock outstanding. Stockholders will have one vote at the special meeting for each share of our common stock that they owned on the record date.

     Voting and Revocability of Proxies (see pages 15 and 16)

          Stockholders should complete, date and sign the accompanying proxy and promptly return it in the pre-addressed accompanying envelope. Brokers or banks holding shares in “street name” may vote the shares only if the stockholder provides instructions on how to vote. Brokers or banks will provide stockholders with directions on how to instruct the broker or bank to vote the shares. All properly executed proxies that we receive prior to the vote at the special meeting, and that are not revoked, will be voted in accordance with the instructions indicated on the proxies. If no direction is indicated on a properly executed proxy returned to us, the underlying shares will be voted “FOR” the adoption of the merger agreement.

          You can also authorize a proxy to vote your shares by telephone or via the internet in accordance with the instructions provided in the accompanying proxy. Voting by proxy via telephone or via the internet is fast, convenient and your proxy is immediately tabulated. Also, by using the telephone or the internet, you help us reduce postage and proxy tabulation costs. Instructions to authorize a proxy to vote your shares by telephone or via the internet may be found on your proxy card, or can be provided by your broker, our transfer agent, StockTrans, Inc., or our proxy solicitor, Georgeson Stockholder Communications, Inc. Please do not return the enclosed proxy card if you authorize a proxy to vote your shares by telephone or via the internet.

          We do not expect any other business to come before the special meeting. If other business properly comes before the special meeting, the persons named as proxies will vote in accordance with their judgment.

          A stockholder may revoke its proxy at any time prior to its use by delivering a signed notice of revocation or a later-dated, signed proxy to our Secretary. In addition, a stockholder may revoke its proxy by delivering, on the day of the special meeting, a signed notice of revocation or a later-dated signed proxy to the chairman of the special meeting. A stockholder also may revoke such stockholder’s proxy by attending the special meeting and voting in person. Attendance at the special meeting does not in itself result in the revocation of a proxy or cause shares to be voted.

     Vote Required (see page 14)

          The adoption of the merger agreement requires the affirmative vote of stockholders holding a majority of the shares of our common stock outstanding at the close of business on the record date.

     Shares Owned by Our Directors and Executive Officers (see page 14)

          On the record date, our directors and executive officers beneficially owned and were entitled to vote shares of our common stock, which represented approximately      % of the shares of our common stock outstanding on that date.

     Stockholder Agreement (see page 65)

          Certain of our stockholders have entered into a stockholder agreement with Johnson & Johnson. Under the terms of the stockholder agreement, these stockholders have agreed to vote, in the aggregate, 6,153,393 shares of our common stock (representing approximately 29.64% of our outstanding shares as of the record date) in favor of the adoption of the merger agreement and to take or refrain from taking certain related actions. A copy of the stockholder agreement is included in this proxy statement as Annex B. You are encouraged to read it carefully and in its entirety.

          In addition to the number of shares of common stock covered by the stockholder agreement, an affiliate of Johnson & Johnson currently owns approximately 7.79% of our outstanding shares as of the record date, which are expected to be voted in favor of adopting the merger agreement.

     Solicitation of Proxies and Expenses (see page 16)

          We will bear the cost and expense associated with the solicitation of proxies from our stockholders. In addition to solicitation by mail, our directors, officers and employees may solicit proxies from our stockholders by telephone, internet, facsimile, or other electronic means or in person. Brokerage houses, nominees, fiduciaries and other custodians will be requested to forward soliciting materials to beneficial owners and will be reimbursed for their reasonable expenses incurred in sending proxy materials to beneficial owners. We have retained Georgeson Shareholder Communications, Inc. to assist in soliciting proxies.

The Merger

     Structure of the Merger (see page 45)

          This proxy statement relates to the proposed acquisition of our company by Johnson & Johnson pursuant to a merger agreement, dated as of December 16, 2005, among Johnson & Johnson, Emerald Merger Sub, Inc., a wholly owned subsidiary of Johnson & Johnson, and us. If the merger is completed, we will become a wholly owned subsidiary of Johnson & Johnson.

     Consideration (see page 46)

          At the closing of the merger, our stockholders will be entitled to receive, for each share of our common stock they hold, $24.50 in cash, without interest. Based on the number of shares of our common stock outstanding on December 16, 2005 and assuming the conversion of all options and the exercise of all warrants exercisable for our common stock and the purchase of up to 10,870 shares of our common stock pursuant to our employee stock purchase plan, the aggregate consideration paid by Johnson & Johnson to our stockholders will be approximately $538 million.

     Options (see page 46)

          Pursuant to the merger agreement, we have taken all action necessary to adjust the terms of all outstanding options to acquire shares of our common stock, whether vested or unvested, to provide that, upon completion of the merger, each option outstanding immediately prior to the completion of the merger will be canceled and the holder of that option will be entitled to receive a single lump sum cash payment equal to the number of shares of our common stock for which the option was exercisable, multiplied by the excess of the $24.50 per share merger consideration over the per share exercise price of the option.

     Warrants (see page 47)

          Pursuant to the merger agreement, we have taken, or will take, all action necessary to cause each warrant to acquire shares of our common stock outstanding immediately prior to the completion of the merger to be canceled in exchange for a lump sum cash payment equal to the number of shares of our common stock subject to the warrant, multiplied by the excess of the $24.50 per share merger consideration over the per share exercise price of the warrant.

     Employee Stock Purchase Plan (see page 46)

          Pursuant to the merger agreement, we have taken all action necessary under the employee stock purchase plan to provide that: (1) participants will not be permitted to increase their payroll deductions or purchase elections from those in effect on the date of the merger agreement, (2) no offering period will be commenced after the date of the merger agreement, (3) each participant’s outstanding right to purchase shares of our common stock under the plan will be suspended on December 31, 2005, with all amounts allocated for each participant’s account under the employee stock purchase plan as of the suspension date being used to purchase shares of our common stock at the applicable price determined pursuant to the plan, using the suspension date as the final purchase date for each then outstanding offering period, and (4) the employee stock purchase plan will terminate immediately preceding the closing of the merger.

     Closing

          We expect to close the merger promptly after the adoption of the merger agreement by our stockholders and after all other conditions to the merger have been satisfied or waived. At present, we anticipate that the closing will occur promptly following the special meeting of our stockholders.

Recommendation of our Board of Directors (see page 24)

          Our board of directors has determined that the merger agreement is advisable, and that the terms of the merger agreement and the transactions described in the merger agreement are fair to, and in the best interests of, our stockholders. The board of directors recommends that our stockholders vote “FOR” the adoption of the merger agreement.

Opinion of our Financial Advisor (see page 24)

          In connection with the merger, our board of directors received a written opinion from our financial advisor, Piper Jaffray & Co. (which we refer to in this proxy statement as “Piper Jaffray”), as to the fairness, from a financial point of view, of the merger consideration to be received by holders of our common stock. The full text of Piper Jaffray’s written opinion, dated December 15, 2005 is included in this proxy statement as Annex C. You are encouraged to read this opinion carefully and in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken. Piper Jaffray’s opinion was provided to our board of directors in its evaluation of the merger consideration, does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how to vote or act with respect to any matters relating to the merger.

Interests of Our Directors and Executive Officers in the Merger (see page 34)

          In considering the recommendation of our board of directors to vote for the proposal to adopt the merger agreement, you should be aware that all of our directors and executive officers have personal interests in the merger that are, or may be, different from, or in addition to, your interests. Our executive officers are entitled to benefits under employment and/or change in control agreements pursuant to which they will receive severance benefits if their employment is terminated following the completion of the merger under specified circumstances.

          In connection with the execution of the merger agreement and as an inducement to Johnson & Johnson to enter into the merger agreement, on December 16, 2005, we entered into an amendment to the employment agreement of our Chief Executive Officer, Katherine D. Crothall, which provides that Dr. Crothall will continue to be employed by us as President for a period of six months after the consummation of the merger. Upon the expiration of the six months or if Dr. Crothall’s employment is terminated by us without cause following the consummation of the merger but prior to the expiration of such six-month period, the cash severance payments she would otherwise be entitled to receive in eighteen monthly installments shall instead be paid in a lump sum subject to her providing Animas with a release. Mr. Baron, our Chief Financial Officer, is also entitled to severance payments upon a termination without cause under the terms of his employment agreement. Mr. Baron’s severance under his employment agreement will be in addition to the amounts payable under his change of control agreement.

          We also have change in control agreements with Richard Baron, Audrey Finkelstein, James McGee, Douglas Schumer, Eric Schwartz, Daniel Sunday and Doug Woodruff that provide that in the event that we terminate such individual’s employment without cause or such individual resigns with good reason during the period commencing 30 days before or one year after the date of a change of control, such individual is entitled to receive a lump sum payment

equal to one year of his or her then-current base salary. In addition, in the event that such individual has remained employed from the consummation of a change of control through the one-year anniversary of such change of control, such individual is entitled to receive a lump sum payment equal to one year of his or her then-current base salary.

          In addition, upon completion of the merger, each outstanding option and warrant to purchase shares of our common stock held by directors and executive officers as well as our employees and former employees, whether or not the option is vested, will be canceled in exchange for a cash payment equal to the excess of the $24.50 per share merger consideration over the per share option and warrant exercise price, multiplied by the number of shares of our common stock subject to the option. Finally, the terms of the merger agreement provide for continued indemnification and liability insurance coverage of our current directors and executive officers. Our board of directors was aware of these interests and considered them, among other matters, when approving the merger agreement. For a more complete description, see “The Merger—Interests of Our Directors and Executive Officers in the Merger.”

Material U.S. Federal Income Tax Consequences of the Merger (see page 39)

          The receipt of $24.50 in cash for each share of our common stock pursuant to the merger will be a taxable transaction for U.S. Federal income tax purposes. For U.S. Federal income tax purposes, generally you will realize a taxable gain or loss as a result of the merger measured by the difference, if any, between $24.50 per share and your adjusted tax basis in that share.

          You should read “The Merger—Material U.S. Federal Income Tax Consequences” beginning on page 39 for a more complete discussion of the Federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. We urge you to consult your tax advisor to fully understand the tax consequences of the merger to you.

Appraisal Rights (see page 42)

          Stockholders who do not wish to accept the $24.50 per share cash consideration payable pursuant to the merger may seek, under Delaware law, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more or less than or the same as the $24.50 in cash per share merger consideration. This right of appraisal is subject to a number of restrictions and technical requirements. Generally, in order to exercise appraisal rights, among other things:

•

you must not vote in favor of the proposal to adopt the merger agreement;

	•		you must make a written demand on us for appraisal in compliance with Delaware law before the vote on the proposal to adopt the merger agreement at the special meeting; and
	•		you must hold your shares of record continuously from the time of making a written demand for appraisal until the completion of the merger.

          Merely voting against the merger agreement will not preserve your right of appraisal under Delaware law. 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. If you hold shares in the name of a broker or other nominee, you must instruct your nominee to take the steps necessary to enable you to assert appraisal rights. If you or your nominee fails to follow all of the steps required by the statute, you will lose your right of appraisal.

          Annex D to this proxy statement contains the relevant provisions of Delaware law relating to your right of appraisal. We encourage you to read these provisions carefully and in their entirety.

The Paying Agent

          JPMorgan Chase Bank, N.A. or another comparable institution will act as the paying agent in connection with the merger.

Regulatory Filings and Approvals Required to Complete the Merger (see page 41)

          The merger is subject to discretionary review by the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission to determine whether it is in compliance with applicable antitrust laws. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prohibits us from completing the merger until we have furnished certain information and materials to the Antitrust Division of the Department of Justice and the Federal Trade Commission, and the required waiting period has ended. Both Johnson & Johnson and we filed the required notification and report forms on December 23, 2005. The completion of the merger also is subject to compliance with applicable laws of the State of Delaware. In addition, we have made filings in Germany and Austria, and the antitrust authorities in those countries must give us approval prior to the consummation of the merger.

The Merger Agreement (see page 49)

          The merger agreement provides a detailed description of our representations and warranties to Johnson & Johnson, covenants relating to the conduct of our business, consents and approvals required for and conditions to the completion of the merger and our ability to consider other acquisition proposals. The merger agreement also provides for the automatic conversion of shares of our common stock into the right to receive the $24.50 per share merger consideration at the effective time of the merger.

Termination of the Merger Agreement (see page 61)

     The merger agreement contains provisions addressing the circumstances under which Johnson & Johnson or we may terminate the merger agreement. In addition, the merger agreement provides that, in certain circumstances, we may be required to pay Johnson & Johnson

a termination fee of $19.7 million. For a more complete description, see “The Merger Agreement—Termination” and “—Fees and Expenses.”

     A COPY OF THE MERGER AGREEMENT IS INCLUDED IN THIS PROXY STATEMENT AS ANNEX A. YOU ARE STRONGLY ENCOURAGED TO READ IT CAREFULLY AND IN ITS ENTIRETY.

THE COMPANIES

Animas Corporation

          We design, develop, manufacture, and sell external insulin pumps for people with diabetes. We were incorporated in Delaware in July 1996 and introduced our first generation pump in July 2000. We believe that we are the second largest supplier of insulin pumps to the United States market in terms of new insulin pump placements. We began shipping our third generation pump, the IR 1200, in April of 2004. We believe that the IR 1200 is the smallest full-featured insulin pump on the market. The IR 1200 has a large display, long battery life, precise insulin delivery, and enhanced waterproof integrity. In February 2005, we began to ship the IR 1250. The IR 1250 utilizes the IR 1200 platform but includes additional software which incorporates a food database of up to 500 items and tunes for alerts. We also provide ancillary supplies on an ongoing basis for patients using our pumps, including insulin cartridges, infusion sets, batteries, and various accessories. We provide extensive education programs and services to people with diabetes.

          From the introduction of the R1000, in July 2000, through September 30, 2005, we recorded over $134.5 million of revenue in pumps and $65.0 million of revenue in ancillary supplies. For the years ended December 31, 2004, 2003, and 2002, our net revenues were $67.9 million, $34.1 million, and $23.6 million, respectively. For the nine months ended September 30, 2005 and 2004, our net revenues were $62.4 million and $47.9 million, respectively. For the three months ended September 30, 2005 and 2004, our net revenues were $21.7 million and $22.6 million, respectively.

          We estimate that the size of the insulin pump and ancillary supplies market was over $540 million in the United States and over $780 million worldwide in 2004 and that the United States market has grown at a compound annual rate of over 20% during the past four years. We believe that approximately 250,000 people in the United States are using insulin pumps and that there is an estimated domestic market potential of over 1 million users. Given the increasing focus on intensive diabetes management and the opportunity to continue penetrating the potential user base, we believe that the insulin pump market is positioned for sustained growth.

          We have approximately 130 full-time sales and clinical personnel located throughout the United States. Our approximately 55 person direct sales force promotes our pumps in the United States to healthcare professionals who advise patients on monitoring and managing their diabetes and to patients who express interest in pump therapy. Our approximately 75 full-time equivalent diabetes educators, or clinical managers, train and provide clinical support to patients. Our sales force and clinical managers also participate in many local community diabetes education programs and meetings and sponsor a number of courses both to educate the community in diabetes management generally and to increase awareness of pump therapy specifically.

Johnson & Johnson

          Johnson & Johnson, a holding company of over 200 operating subsidiaries, is one of the world’s most comprehensive and broadly based manufacturers of health care products, as well as a provider of related services, for the consumer, pharmaceutical, and medical devices and diagnostics markets. The more than 200 operating companies employ approximately 115,000 men and women in 57 countries and sell products throughout the world.

          Johnson & Johnson is organized into three business segments: consumer, pharmaceutical, and medical devices and diagnostics. The consumer segment manufactures and markets a broad range of products used in the baby and child care, skin care, oral and wound care and women’s health care fields, as well as nutritional and over-the-counter pharmaceutical products. These products are marketed principally to the general public and sold both to wholesalers and directly to independent and chain retail outlets throughout the world.

          The pharmaceutical segment includes products in the following therapeutic areas: anti-fungal, anti-infective, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology, immunology, neurology, oncology, pain management, psychotropic (central nervous system) and urology areas. These products are distributed directly to retailers, wholesalers and healthcare professionals for prescription use by the general public.

          The medical devices and diagnostics segment includes a broad range of products used principally in the professional fields by physicians, nurses, therapists, diagnostic laboratories and clinics. These products include circulatory disease management products, orthopedic joint reconstruction and spinal care products, wound care and women’s health products, minimally invasive surgical products, blood glucose monitoring products, professional diagnostic products and disposable contact lenses.

          Johnson & Johnson was organized in the State of New Jersey in 1887. The address of its principal executive offices is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933, and the telephone number at that address is (732) 524-0400.

Emerald Merger Sub, Inc.

          Emerald Merger Sub, Inc. is a wholly owned subsidiary of Johnson & Johnson. Emerald Merger Sub, Inc. is a Delaware corporation that was formed solely for the purpose of facilitating the acquisition of our company by Johnson & Johnson. The address of its principal executive offices is One Johnson & Johnson Plaza, New Brunswick, New Jersey 08933, and the telephone number at that address is (732) 524-0400.

THE SPECIAL MEETING

We are furnishing this proxy statement to our stockholders as of the record date, as part of the solicitation of proxies by our board of directors for use at the special meeting.

Date, Time and Place

          The special meeting of our stockholders will be held at 200 Lawrence Drive, West Chester, PA 19380, at ___, local time, on ___ ___, 2006.

Purpose of the Special Meeting

          At the special meeting, we will ask our stockholders to adopt the merger agreement. Our board of directors has determined that the merger and the other transactions described in the merger agreement are fair to, and in the best interests of, our stockholders, and has approved and declared advisable the merger agreement and recommends that our stockholders vote “FOR” the adoption of the merger agreement.

Record Date; Shares Entitled to Vote; Quorum

          Only holders of record of our common stock at the close of business on ___ ___, 2006, the record date, are entitled to notice of and to vote at the special meeting. On the record date,                                          shares of our common stock were issued and outstanding and held by approximately ___holders of record. A quorum will be considered present at the special meeting if a majority of all the shares of our common stock issued and outstanding on the record date and entitled to vote at the special meeting are represented at the special meeting in person or by a properly executed proxy. Holders of record of our common stock on the record date are entitled to one vote per share on each matter submitted to a vote at the special meeting.

          Under Delaware law and our certificate of incorporation and bylaws, if a quorum is present, the affirmative vote of a majority of the shares present in person or represented by proxy at the special meeting and voting is necessary to vote to adjourn or postpone the special meeting, assuming such a motion is made. Abstentions and broker non-votes will have no effect on any motion to adjourn or postpone the special meeting for purposes of determining whether there are sufficient votes at the time of the special meeting to approve and adopt the merger agreement.

Vote Required

          The adoption of the merger agreement requires the affirmative vote of stockholders holding a majority of the shares of our common stock outstanding on the record date. Because the required vote of our stockholders is based upon the number of outstanding shares of our common stock, rather than upon the shares actually voted, the failure by the holder of any such shares to submit a proxy or to vote in person at the special meeting, including abstentions and broker non-votes, will have the same effect as a vote against the adoption of the merger agreement.

Shares Owned by Our Directors and Executive Officers

          At the close of business on the record date, our directors and executive officers beneficially owned and were entitled to vote an aggregate of                     shares of our common stock, which represented approximately ___% of the shares of our common stock

outstanding on that date. Under the terms of the stockholder agreement, certain of our stockholders have agreed to vote, in the aggregate, 6,153,393 shares of our common stock for the adoption of the merger agreement. As of the record date, such shares represented approximately 29.64% of the shares of our common stock outstanding. In addition to the number of shares of common stock covered by the stockholder agreement, an affiliate of Johnson & Johnson currently owns approximately 7.79% of the shares of our common stock outstanding as of the record date, which are expected to be voted in favor of adopting the merger agreement.

Voting of Proxies

          All shares represented by properly executed proxies received prior to the special meeting will be voted at the special meeting in the manner specified by such proxies. Properly executed proxies that do not contain voting instructions will be voted “FOR” the adoption of the merger agreement. Shares of our common stock represented at the special meeting but not voting, including shares of our common stock for which proxies have been received but with respect to which holders of shares 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.

          You can also authorize a proxy to vote your shares by telephone or via the internet in accordance with the instructions provided. Voting by proxy via telephone or via the internet is fast, convenient and your proxy is immediately tabulated. Also, by using the telephone or the internet, you help us reduce postage and proxy tabulation costs. Instructions to authorize a proxy to vote your shares by telephone or via the internet may be found on your proxy card, or can be provided by your broker, our transfer agent, StockTrans, Inc., or our proxy solicitor, Georgeson Shareholder Communications, Inc. Please do not return the enclosed proxy card if you authorize a proxy to vote your shares by telephone or via the internet.

          Only shares affirmatively voted for the adoption of the merger agreement, including properly executed proxies that do not contain voting instructions, will be counted as favorable votes for that proposal. If a stockholder abstains from voting or does not execute a proxy, it will effectively count as a vote against the adoption of the merger agreement. Brokers or banks who hold shares of our common stock in “street name” for customers who are the beneficial owners of such shares may not give a proxy to vote those customers’ shares in the absence of specific instructions from those customers. If no instructions are given to the broker or bank holding shares, or if instructions are given to the broker or bank indicating that the broker or bank does not have authority to vote on the proposal to adopt the merger agreement, then, in either case, the shares will be counted as present for purposes of determining whether a quorum exists, will not be voted on the proposal to adopt the merger agreement and will effectively count as votes against the adoption of the merger agreement.

          The persons named as proxies by a stockholder who votes for the proposal to adopt the merger agreement may propose and vote the shares underlying any such proxies for one or more adjournments of the special meeting, including adjournments to permit further solicitations of proxies. No proxy voted against the proposal to adopt the merger agreement will be voted in favor of any such adjournment or postponement.

          We do not expect that any matter other than the proposal to adopt the merger agreement will be brought before the special meeting. If, however, other matters are brought before the special meeting, the persons named as proxies will vote in accordance with their judgment.

Revocability of Proxies

          A stockholder can change its vote or revoke its proxy at any time before the proxy is voted at the special meeting. A proxy may be revoked by the person who executed it at, or before, the special meeting by:

	•		delivering to our corporate secretary a written notice of revocation of a previously delivered proxy bearing a later date than the previously delivered proxy;
	•		duly executing, dating and delivering to our corporate secretary a subsequent proxy;
	•		attending the Special Meeting and voting in person; or
	•		in addition to the foregoing, if you authorized a proxy to vote your shares by telephone or via the internet, you may also revoke your proxy by authorizing a new proxy by telephone or via the internet.

          If a stockholder chooses either of the first two methods, it must submit its notice of revocation or its new proxy to us prior to the special meeting at 200 Lawrence Drive, West Chester, PA 19380, Attention: Richard A. Baron, Secretary. Attendance at the special meeting will not in and of itself result in the revocation of a proxy or cause shares to be voted. If you have instructed your broker to vote your shares, you must follow directions from your broker to change these instructions.

Solicitation of Proxies

          We will bear the cost of the solicitation of proxies from our stockholders. In addition to solicitation by mail, our directors, officers and employees may solicit proxies from stockholders by telephone or other electronic means or in person. We will cause brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record by such persons. We will reimburse such custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in doing so.

          Georgeson Shareholder Communications, Inc., will assist in our solicitation of proxies. We will pay Georgeson a fee (not to exceed $12,000), will reimburse Georgeson for certain out-of-pocket expenses, and will indemnify Georgeson against certain losses arising out of its proxy solicitation services on our behalf.

          STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES . A transmittal form with instructions for the surrender of certificates representing shares of our common stock will be mailed to stockholders shortly after completion of the merger.

Delivery of Proxy Statement to Multiple Stockholders with the Same Address

          The U.S. Securities and Exchange Commission (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.

     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 retrieve your own copy, please notify your broker and direct your written request to Georgeson Shareholder Communications, Inc. at 17 State Street, 10th Floor, New York, New York 10004, or call (___) ___-___. If you would like to receive your own set of our proxy materials in the future, please contact your broker and Georgeson to inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.

THE MERGER

While we believe that the following description covers the material terms of the merger and the related transactions, this summary may not contain all of the information that is important to you. You should carefully read this entire document, including the annexes, and the other documents we refer to for a more complete understanding of the merger and the related transactions.

Background of the Merger

          In January 2001, Johnson & Johnson Development Corporation, which we refer to as JJDC, a Johnson & Johnson subsidiary, invested $4 million in Animas in an equity financing including other investors. JJDC invested in subsequent equity financing rounds in February 2002 and June 2003. The total investment made by JJDC in Animas was $12.2 Million. As of the record date, JJDC owns 1,616,488 shares representing 7.79% of the outstanding shares of common stock of Animas.

          From January 2001 until the initial public offering of Animas in May 2004, JJDC had the right to receive materials delivered to the board of directors and “observer rights” with respect to board of directors meetings.

          Since June 2003, a Marketing Agreement has been in place between LifeScan, Inc., which we refer to as LifeScan, a Johnson & Johnson subsidiary, and Animas pursuant to which we have provided LifeScan’s One Touch UltraSmart, a glucose meter, to users of our insulin pumps.

          In December 2003, LifeScan and Animas met to discuss Johnson & Johnson’s possible interest in acquiring Animas. In February 2004, Animas Directors Edward Cahill, Thomas Morse, and Dr. Crothall met with Johnson & Johnson and LifeScan executives at Johnson & Johnson’s headquarters to continue these discussions. At a meeting on February 18, 2004, our board of directors concluded that it was not in the best interests of stockholders to pursue the matter further at that time.

           In April 2004, Johnson & Johnson contacted Dr. Crothall and requested a meeting. The meeting was attended by Mr. Morse and Dr. Crothall, representing Animas, and Eric Milledge, Company Group Chairman of LifeScan, John Klopp, Vice-President of Business Development at LifeScan, Nick Valeriani, Worldwide Chairman, Cardiovascular Devices and Diagnostics at Johnson & Johnson, and Dominic Caruso, Vice President of Group Finance, Medical Devices and Diagnostics at Johnson & Johnson. At the meeting, Johnson & Johnson expressed its possible interest in acquiring Animas and requested three months to perform due diligence. At that time, Animas was in the process of its initial public offering which it expected to complete in May 2004. At a meeting on April 22, 2004, the board of directors of Animas concluded that allowing Johnson & Johnson to conduct due diligence and pursuing the possible transaction at that time would require that Animas not proceed with its initial public offering. The board determined that, given the financial position of Animas, it was not in the best interest of stockholders to delay completion of the initial public offering when there was no guarantee that a satisfactory transaction with Johnson & Johnson could be completed.

          On its own initiative, Piper Jaffray & Co., which has provided strategic and financial advisory services to Animas from time to time and which acted as joint book-running manager with respect to the initial public offering of Animas in May 2004, discussed the possible acquisition of Animas with a number of parties in the medical device industry that Piper Jaffray thought might have an interest in an acquisition of Animas. In the course of these discussions, one third party expressed an interest in meeting with management of Animas and receiving an overview of the business. In July 2004, Dr. Crothall and a representative of Piper Jaffray met with senior management of such third party and made a presentation. No further discussions were held with the third party, which we refer to as Company X, in 2004.

          In January 2005, representatives of Piper Jaffray met with Mr. Dakers and John Papa, Treasurer of Johnson & Johnson. The representatives of Johnson & Johnson indicated a desire to continue a dialogue with Animas but informed Animas that they had no immediate interest in pursuing an acquisition of Animas.

          On May 6, 2005, senior management of Company X contacted Piper Jaffray and communicated that the board of directors of Company X had authorized its management to formally approach Animas to open discussions with respect to a potential acquisition of Animas. Piper Jaffray contacted Dr. Crothall to convey this message.

          During May 2005, representatives of Piper Jaffray met with the board of directors of Animas and representatives of Pepper Hamilton LLP (“Pepper Hamilton”), Animas’ outside counsel. The parties discussed Company X’s interest and the potential interest of other parties, including Johnson & Johnson. The board directed management to communicate with Johnson & Johnson and solicit its potential interest in a transaction. In light of the discussions Piper Jaffray had with industry participants and its assessment of the competitive position and interest of others, the board directed management to solicit only the interest of Johnson & Johnson in addition to Company X. The board authorized management to engage Piper Jaffray as financial advisor to Animas.

          On May 23, 2005, Dr. Crothall met with a member of senior management of Company X. Company X expressed interest in receiving non-public information and to meet again for a more detailed presentation of Animas.

          In May 2005, Piper Jaffray requested Johnson & Johnson to formally express its interest in acquiring Animas, should it exist. Johnson & Johnson requested a meeting with management of Animas and the receipt of non-public information.

          On May 29, 2005, Dr. Crothall met with John Klopp to generally discuss Animas and Johnson & Johnson based on publicly available information. Mr. Klopp expressed interest in receiving non-public information and to meet subsequently for a more detailed presentation.

          In June 2005, representatives of Animas and Pepper Hamilton negotiated confidentiality agreements with Company X and Johnson & Johnson. Johnson & Johnson signed a

competitive process for pursuing a potential acquisition of Animas was ongoing and to invite both parties to complete their due diligence and submit their proposals to acquire Animas.

          On October 9, 2005, Animas made a data room available to both parties. During the months of October and November, 2005, Johnson & Johnson and Company X each continued to conduct due diligence of Animas, including meetings with senior management and the receipt of non-public information.

          On November 11, 2005, Company X contacted Piper Jaffray, indicated a desire to continue due diligence of Animas and provided an indicative value for Animas.

          On November 17, 2005, Johnson & Johnson provided an indicative value for Animas that was higher than that provided by Company X. Johnson & Johnson also stated that it had substantially completed its due diligence of Animas and was prepared to move quickly toward a definitive agreement to acquire Animas.

          At a meeting on November 17, 2005, Piper Jaffray discussed with the board of directors of Animas the indicative valuations of each of Johnson & Johnson and Company X, as well as each party’s statements regarding its ability to move definitively and timely toward an acquisition of Animas. Our board instructed Piper Jaffray to indicate to Johnson & Johnson an interest in considering a transaction if Johnson & Johnson was able to increase its indicative value for Animas. In light of the valuation proposed by Company X and its requirement for further due diligence, our board of directors determined that it was unlikely that a satisfactory transaction would result with Company X. As a result, no further proprietary information was provided to Company X.

          On December 3, 2005, Mr. Valeriani contacted Dr. Crothall and proposed an acquisition of Animas at a valuation that was higher than its indicative valuation. Our board of directors convened on December 3, 2005 to discuss Johnson & Johnson’s revised proposal. No formal action was taken at this meeting.

          On December 6, 2005, Dr. Crothall and Mr. Morse met with Mr. Valeriani and Mr. Dakers to further discuss Johnson & Johnson’s proposal. Following those discussions, Johnson & Johnson proposed a revised valuation of $24.50 per common share for the acquisition of Animas, which was higher than the valuation proposed by Johnson & Johnson on December 3, 2005. The board of directors of Animas convened that evening and received a presentation from Piper Jaffray addressing the valuation proposed by Johnson & Johnson. Our board authorized management to negotiate a definitive merger agreement with Johnson & Johnson to present to our board for its consideration and approval.

          From December 7 until December 15, 2005, Animas and Johnson & Johnson negotiated the merger agreement and related documentation. On December 15, 2005, the board of directors of Animas convened to discuss the merger agreement and related documentation, as well as an analysis of the proposed transaction prepared by Piper Jaffray. The Piper Jaffrey analysis, which had been distributed to our board of directors for consideration prior to the meeting, addressed the fairness, from a financial point of view, of Johnson & Johnson’s offer to the holders of Animas common stock. Following the presentations made by the legal and

financial advisors of Animas, our board of directors approved the merger agreement and the merger.

Reasons for the Merger

          The board of directors of Animas in attendance at a special meeting held on December 15, 2005 unanimously determined that the merger agreement and the transactions contemplated thereby are fair, advisable to and in the best interests of our stockholders and unanimously approved the merger agreement. The board of directors unanimously recommends that you vote FOR the adoption of the merger agreement at the special meeting.

          In the course of determining that the merger agreement is fair, advisable to and in the best interests of our stockholders, our board of directors consulted with management, as well as its legal and financial advisors, and considered the following potentially positive factors:

	•		the potential stockholder value that could be expected to be generated from remaining an independent company and the assessment by management and our board of directors that this alternative was not reasonably likely to create greater value for our stockholders than the merger;
	•		the familiarity of our board of directors with, and information provided by management as to, our business, financial condition, results of operations and competitive position, the nature of our business and our strategic objectives, including the micropump and microneedle projects, and the risks involved in achieving those objectives, as well as information provided by management and our financial advisor as to the industry in which we compete and general economic and market conditions;
	•		the belief by our board of directors that we have obtained the highest price per share that Johnson & Johnson is willing to pay, taking into account the extensive negotiations between the parties and indications of price from another party;
	•		our assessment as to the low likelihood that a third party would offer a higher price than Johnson & Johnson; taking into account the extensive discussions we held with another party, Company X, referenced in the Background of the Merger and the contacts our management and our financial advisor have had over time with other potential acquirors;
	•		the fact that the merger consideration is all cash, which provides certainty of value to holders of our common stock compared to a transaction in which stockholders would receive stock;
	•		the support for the merger expressed by certain of our principal stockholders, as evidenced by the stockholder agreement;
	•		the financial presentation of Piper Jaffray, including its opinion, dated December 15, 2005, to our board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration to be received by holders of our common stock, as more fully described below under “The Merger—Opinion of Our Financial Advisor—Piper Jaffray;”

	•		the fact that the merger would be subject to the approval of our stockholders and that if a higher offer were to be made to our stockholders prior to the completion of the merger, our stockholders (other than those party to the stockholder agreement) are free not to approve the merger with Johnson & Johnson;
	•		the availability of appraisal rights for our stockholders who properly exercise their statutory appraisal rights;
	•		the current and historical market prices of our common stock relative to the $24.50 per share merger consideration, and the fact that $24.50 per share represented a 34.6% premium over the closing price of our common stock on December 15, 2005 and a 40.4% premium to the average closing price of our common stock over the 20 trading day period up to and including December 15, 2005; and
	•		the terms of the merger agreement, as reviewed by our board of directors with our legal advisors, including:

	•		sufficient operating flexibility for us to conduct our business in the ordinary course between signing and closing;
	•		the absence of a financing condition; and
	•		our ability to furnish information to and conduct negotiations with a third party, as more fully described under “The Merger Agreement—No Solicitation.”

Our board of directors also considered a number of potentially negative factors in its deliberations concerning the merger, including, but not limited to:

	•		that we will no longer exist as an independent company and our stockholders will no longer participate in our growth;
	•		that, under the terms of the merger agreement and the stockholder agreement, neither we nor the relevant stockholders can solicit other acquisition proposals, we must pay to Johnson & Johnson a termination fee if the merger agreement is terminated under certain circumstances, and certain holders of our common stock have agreed to vote, in the aggregate, approximately 29.64% of the shares of our common stock outstanding (as of the record date) for the merger, and an affiliate of Johnson & Johnson owns approximately 7.79% of the shares of our common stock outstanding as of the record date, all of which may deter others from proposing an alternative transaction that may be more advantageous to our stockholders;
	•		the fact that gains from an all-cash transaction would be taxable to our stockholders for U.S. federal income tax purposes;
	•		that, while the merger is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied, and as a result, it is possible that the merger may not be completed even if approved by our stockholders (see “The Merger Agreement—Conditions to the Completion of the Merger”); and

•

the possibility of disruption to our operations following announcement of the merger, and the resulting effect on our company if the merger does not close.

          During its consideration of the transaction with Johnson & Johnson, our board of directors was also aware that all of our directors and executive officers have interests in the merger that are, or may be, different from, or in addition to, those of our stockholders generally, as described under “The Merger—Interests of Our Directors and Executive Officers in the Merger.”

          While our board of directors considered potentially negative and potentially positive factors, our board of directors concluded that, overall, the potentially positive factors outweighed the potentially negative factors.

          The foregoing discussion summarizes the material information and factors considered by our board of directors in its consideration of the merger. Our board of directors collectively reached the decision to approve the merger agreement in light of the factors described above and other factors that each member of our board of directors felt were appropriate. In view of the variety of factors and the quality and amount of information considered, our board of directors did not find it practicable to and did not make specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Individual members of our board of directors may have given different weight to different factors.

Recommendation of Our Board of Directors

          Our board of directors has determined that the merger and the other transactions described in the merger agreement are fair to, and in the best interests of, our stockholders. Accordingly, our board of directors has approved and declared advisable the merger agreement and unanimously recommends that our stockholders vote “FOR” the adoption of the merger agreement.

Opinion of Our Financial Advisor—Piper Jaffray & Co.

          Animas retained Piper Jaffray to act as its financial advisor, and, if requested, to render to the board of directors of Animas an opinion as to the fairness, from a financial point of view, to the holders of common stock of the merger consideration proposed to be paid in the merger.

          The full text of the Piper Jaffray written opinion dated December 15, 2005, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as Annex C and is incorporated in its entirety herein by reference. Holders of our common stock are urged to, and should, carefully read the Piper Jaffray opinion in its entirety. The Piper Jaffray opinion addresses only the fairness of the merger consideration, from a financial point of view and as of the date of the opinion, to holders of common stock of the merger consideration proposed to be paid in the merger. The Piper Jaffray opinion was directed to Animas’ board of directors and was not intended to be, and does not constitute, a recommendation to any of our stockholders as to how our stockholders should vote or act on any matter relating to the proposed merger.

          In arriving at its opinion, Piper Jaffray, among other things, reviewed:

•

the financial terms of the draft of the merger agreement dated December 14, 2005;

	•		certain publicly available financial, business and operating information related to Animas;
	•		certain internal financial projections for Animas that were prepared for financial planning purposes and furnished to Piper Jaffray by the management of Animas;
	•		certain publicly available market and securities data of Animas;
	•		certain financial, market performance and other data of certain other public companies that Piper Jaffray deemed relevant;
	•		the financial terms, to the extent publicly available, of certain merger transactions that Piper Jaffray deemed relevant; and
	•		other information, financial studies, analyses and investigations and other factors that Piper Jaffray deemed relevant for purposes of its opinion.

          In addition, Piper Jaffray performed a discounted cash flow analysis for Animas on a stand-alone basis. Piper Jaffray conducted such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as Piper Jaffray deemed necessary and appropriate in arriving at its opinion. Piper Jaffray also conducted discussions with members of the senior management of Animas and members of the board of directors of Animas concerning the financial condition, historical and current operating results, business and prospects for Animas.

          The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which was reviewed with our board at a meeting held on December 6, 2005 and was formally delivered to our board at a meeting held on December 15, 2005. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, this summary does not purport to be a complete description of the analyses performed by Piper Jaffray or of its presentations to our board on December 6 and 15, 2005.

          This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary, and considered as a whole, in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of those analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Jaffray. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before December 13, 2005, and is not necessarily indicative of current market conditions.

     Consideration

          Giving effect to the $24.50 per share cash consideration, the outstanding common stock of Animas and outstanding options and warrants to purchase common stock, Piper Jaffray calculated the aggregate net equity value of Animas in the merger to be approximately $538.0 million and the aggregate enterprise value (equity value plus debt less cash) of Animas to be approximately $518.6 million.

     Comparable Public Company Analysis

          Piper Jaffray reviewed selected financial data and ratios for Animas’ management’s internal forecasts for 2005, 2006 and 2007 and compared them to corresponding consensus Wall Street analyst forecasts, where applicable, for publicly traded companies that are engaged primarily in the medical technology industry and which Piper Jaffray believed were similar to Animas’ business. Piper Jaffray selected these companies based on information obtained by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

	•		companies with medical technology Standard Industrial Classification codes;
	•		business models with primary capital equipment were omitted;
	•		companies with revenue for the last twelve months between $50 million and $150 million;
	•		companies with expected 2005 versus 2004 revenue growth greater than 15%; and
	•		companies with expected 2006 versus 2005 revenue growth between 15% and 50%.

          Based on these criteria, Piper Jaffray identified and analyzed 8 comparable companies: Angiodynamics, Cepheid, Digene, Given Imaging, I-Flow, LifeCell Corp., OraSure and Tripath Imaging.

          Piper Jaffray compared valuation multiples for Animas derived from the aggregate values based on the market price and the merger consideration and projected revenue and earnings data for Animas, on the one hand, to valuation multiples for the selected comparable companies derived from their market valuation and projected revenue and earnings data, on the other hand.

          This analysis produced valuation multiples as follows:

Animas

Comparable Companies Multiples

Merger

Current (1)

Consideration(2)

Minimum

Mean

Median

Maximum

Enterprise value as a multiple of estimated year 2005 revenues(3)

4.3x

6.2x

2.5x

5.1x

4.4x

8.3x

Enterprise value as a multiple of estimated year 2006 revenues(3)

3.4x

4.8x

2.1x

4.0x

3.6x

6.7x

Enterprise value as a multiple of estimated year 2007 revenues(3)

2.6x

3.6x

1.8x

3.4x

3.3x

5.4x

Price-to-earnings ratio 2006(3)

43.4x

61.0x

36.5x

45.7x

40.1x

58.6x

Price-to-earnings ratio 2007(3)

20.0x

28.0x

19.4x

27.9x

23.6x

39.7x

          Piper Jaffray, among other things, compared the enterprise value of each of the comparable companies to their respective estimated revenues for the calendar years 2005, 2006 and 2007 in order to determine the ratio between enterprise value and revenue for each comparable company. Piper Jaffray also calculated the price-to-earnings ratio for each comparable company for the same periods. The implication of this analysis is that the higher the ratio of enterprise value to revenue or the higher the price-to-earnings ratio, as applicable, for a given company, the greater the implied value of the company. This analysis showed that, based on the estimates and assumptions used in the analysis, (i) when comparing the enterprise value to estimated revenue for the calendar years 2005, 2006 and 2007, the proposed merger consideration implied a value for Animas that was within the range of values of the comparable companies and (ii) when comparing the projected price-to-earnings ratio for calendar years 2006 and 2007, the proposed merger consideration implied a value for Animas that exceeded the multiples for 2006 and was within the range of values of the comparable companies in 2007.

     Comparable Transaction Analysis

          Piper Jaffray reviewed transactions involving target companies that it deemed comparable to Animas. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and press reports, databases and other sources and by applying the following criteria:

	•		transactions involving target companies with medical technology Standard Industrial Classification codes;
	•		transactions that were announced or completed since January 1, 1998, in which the target company had revenues during the last twelve months of greater than $25 million and with expected future twelve months revenue versus last twelve months revenue growth between 15% and 30%; and
	•		transactions in which the acquiring company purchased a controlling interest in the target;

          Based on these criteria, the following transactions were deemed similar to the proposed transaction: the acquisitions of Advanced Neromodulation by St. Jude Medical, CTI Molecular Imaging by Siemens AG, Closure Medical by Johnson & Johnson, Endocardial Solutions by St. Jude Medical, ALARIS Medical Systems, Inc. by Cardinal Health, Horizon Medical Products, Inc. by RITA Medical Systems, Interpore International by Biomet, TheraSense by Abbott Laboratories, Invivo Corporation by Intermagnetics General, I-Stat Corporation by Abbott Laboratories, Oratec Interventions by Smith & Nephew, Inverness Medical (Diabetes) by Johnson & Johnson, Biometrix by Genzyme Biosurgery, Implant Innovations Inc. by Biomet and Xomed by Medtronic.

          Piper Jaffray calculated the enterprise value to the revenues for the last twelve months preceding each transaction and to projected revenues for the twelve consecutive months following each transaction, or the forward period, and the equity value to net income for the forward period for each transaction. Piper Jaffray then compared the results of these calculations with similar calculations for the merger. The analysis indicated the following multiples:

Comparable Selected Medical Technology

Animas

Transaction Multiples

Merger

Current (1)

Consideration(2)

Minimum

Mean

Median

Maximum

Enterprise value to revenues for last twelve months(3)

4.4x

6.3x

2.2x

6.0x

5.5x

11.3x

Enterprise value to projected revenues for forward period(4)

3.7x

5.2x

1.9x

4.9x

4.5x

8.6x

Equity value to projected net income for forward period(4)

86.2x

120.9x

18.8x

51.8x

49.8x

131.3x

          Piper Jaffray also reviewed other transactions involving target companies that it deemed comparable to Animas. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and press reports, databases and other sources and by applying the following criteria:

	•		transactions involving target companies with medical technology Standard Industrial Classification codes;
	•		transactions that were announced or completed since January 1, 1996, in which the target company’s business involved primarily diabetes; and
	•		transactions in which the acquiring company purchased a controlling interest in the target.

          Based on these criteria, the following transactions were deemed similar to the proposed transaction: the acquisition of TheraSense by Abbott Laboratories, Disetronic Holdings AG by Roche Holdings AG, Minimed by Medtronic, Inverness Medical (Diabetes) by Johnson & Johnson and MediSense by Abbott Laboratories.

          Piper Jaffray calculated the enterprise value to the revenues for the last twelve months preceding each transaction and to projected revenues for the twelve consecutive months following each transaction, or the forward period, and the equity value to net income for the forward period for each transaction. Piper Jaffray then compared the results of these calculations with similar calculations for the merger. The analysis indicated the following multiples:

Comparable Diabetes

Animas

Transaction Multiples

Merger

Current (1)

Consideration(2)

Minimum

Mean

Median

Maximum

Enterprise value to revenues for last twelve months(3)

4.4x

6.3x

4.8x

7.1x

5.5x

10.1x

Enterprise value to projected revenues for forward period(4)

3.7x

5.2x

4.0x

5.9x

4.7x

8.6x

Equity value to projected net income for forward period(4)

86.2x

120.9x

23.2x

67.1x

56.9x

131.3x

          The two transactional analyses above showed that, based on the estimates and assumptions used in the analyses, (i) the enterprise value implied by the proposed merger consideration as a multiple of revenues for the last twelve months and projected revenues for the forward period was within the range of similar multiples for the comparable transactions and (ii) the equity value implied by the proposed merger consideration as a multiple of projected net income for the forward period was within the range of similar multiples for the comparable transactions.

     Premiums Paid Analysis

          Piper Jaffray reviewed publicly available information for selected completed or pending transactions to determine the premiums payable in the transactions over recent trading prices and over the 52-week high trading price for the target companies. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:

	•		transactions involving a change in control;
	•		transactions involving target companies with medical technology Standard Industrial Classification codes; and
	•		transactions announced since July 1, 2001 with deal size greater than $100 million.

          This group included the acquisition of Advanced Neuromodulation by St. Jude Medical, ALARIS Medical Systems by Cardinal Health, Centerpulse by Zimmer, Closure Medical by Johnson & Johnson, Compex Technologies by Encore Medical, CTI Molecular Imaging by Siemens AG, Disetronic by Roche Holdings, Endocardial Solutions by St. Jude Medical, Fusion Medical Technologies by Baxter International, Getz Brothers & Co. Inc. by St. Jude Medical, Guidant by Johnson & Johnson, I-Stat by Abbott Laboratories, Imatron by GE Medical Systems, Inamed by Medicis, Instrumentarium by General Electric, Interpore International by Biomet, Invivo Corp. by Intermagnetics General Corp., MedSource Technologies by UTI Corp., Ocular Sciences by Cooper Companies, Oratec Interventions by Smith & Nephew, Sola International by Carl Zeiss & EQT, TheraSense by Abbott Laboratories, VidaMed by Medtronic and VISX by Advanced Medical Optics. The table below shows a comparison of premiums paid in these transactions to the premium that would be paid to Animas’ stockholders based on the merger consideration payable in the transaction.

										Comparable Premium
		Merger								(Discount)
		Consideration				Minimum				Mean				Median				Maximum
One week before announcement(1)			37.8	%			3.1	%			31.0	%			25.0	%			75.1	%
Four weeks before announcement(2)			50.5	%			1.1	%			31.4	%			26.6	%			69.7	%
52-week high(3)			8.9	%			(29.6	%)			5.4	%			3.6	%			39.7	%

          Piper Jaffray observed that the premium implied by the merger consideration was within the range of premiums paid in the selected transactions based on the market price one week before announcement and four weeks before announcement and based on the 52-week high for the market price.

     Discounted Cash Flows Analysis

          Piper Jaffray performed a discounted cash flows analysis for Animas in which it calculated the present value of the projected future cash flows of Animas using internal financial planning data prepared by Animas’ management. Piper Jaffray estimated a range of theoretical values for Animas based on the net present value of Animas’ projected annual cash flows and a terminal value for Animas at December 31, 2009. Piper Jaffray applied a range of discount rates of 17.5% to 22.5%, based on an analysis of the weighted average cost of capital for companies in the comparable companies group described above and Piper Jaffray’s judgment concerning the rates of return investors would expect in similar investments and a range of terminal value multiples of 12x to 14x of forecasted fiscal 2009 earnings before interest, taxes, depreciation and amortization. This analysis resulted in implied per share values of Animas common stock ranging from a low of $21.63 to a high of $28.08. Piper Jaffray observed that the merger consideration was within the range of values derived from this analysis.

          Although the summary set forth above does not purport to be a complete description of the analyses performed by Piper Jaffray, the material analyses performed by Piper Jaffray in rendering its opinion have been summarized above. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Instead Piper Jaffray made its determination as to the fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred

to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. No company or transaction used in the above analyses as a comparison is directly comparable to Animas or the proposed merger.

          The analyses of Piper Jaffray are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by the analyses. Analyses relating to the value of companies do not purport to be appraisals or valuations or necessarily reflect the price at which companies may actually be sold. No company or transaction used in any analysis for purposes of comparison is identical to Animas or the merger. Accordingly, an analysis of the results of the comparisons is not mathematical; rather, it involves complex considerations and judgments about differences in the companies to which Animas was compared and other factors that could affect the public trading or comparable transaction value of the companies. These analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper Jaffray does not assume responsibility if future results are materially different from those forecasted.

          As described above, Piper Jaffray’s opinion to the board was one of many factors taken into consideration by the board in making its determination to approve the merger agreement. The above summary does not purport to be a complete description of the analyses performed by Piper Jaffray in connection with the opinion and is qualified by reference to the written opinion of Piper Jaffray set forth in Annex C.

          Piper Jaffray relied upon and assumed the accuracy, completeness and fairness of the financial, accounting and other information provided to it by Animas or otherwise made available to it, and did not assume the responsibility to independently verify this information. Animas has advised Piper Jaffray that it does not publicly disclose internal financial information of the type provided to Piper Jaffray, that such information was prepared for planning purposes and not with the expectation of public disclosure, and that there is no assurance that any forward looking financial information or projections contained in such internal financial information will be realized. Piper Jaffray also assumed, in reliance upon the assurances of the management of Animas, that the information provided to Piper Jaffray by Animas was prepared on a reasonable basis, in accordance with industry practice, and, with respect to financial forecasts, projections and other estimates and other business outlook information, reflected the best currently available estimates and judgments of the management of Animas, was based on reasonable assumptions and that there is not, and the management of Animas was not aware of, any information or facts that would make the information provided to Piper Jaffray incomplete or misleading. Piper Jaffray expresses no opinion as to such financial forecasts, projections and other estimates and other business outlook information or the assumptions on which they are based. Without limiting the generality of the foregoing, Piper Jaffray assumed that Animas was not a party to any material pending transaction, including any external financing, recapitalization, acquisition or merger, divestiture or spin-off other than the proposed merger.

          Piper Jaffray assumed that the final form of the merger agreement would be in all material respects identical to the last draft reviewed by Piper Jaffray, without modification of material terms or conditions by Animas, Johnson & Johnson or any other party thereto. Piper Jaffray also assumed that the merger would be consummated pursuant to the terms of the merger agreement reviewed by Piper Jaffray without amendments thereto and with full satisfaction of all covenants and conditions without any waiver by any party of any material obligation thereunder.

In arriving at its opinion, Piper Jaffray assumed that all necessary regulatory approvals and consents required for the merger would be obtained in a manner that would not adversely affect Animas or alter the terms of the merger. Piper Jaffray expressed no opinion regarding whether the necessary approvals or other conditions to the consummation of the merger would be obtained or satisfied.

          Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of Animas, and was not furnished with any appraisals or valuations. The analyses performed by Piper Jaffray were going concern analyses. Piper Jaffray expressed no opinion regarding the liquidation value of Animas. Without limiting the generality of the foregoing, Piper Jaffray did not undertake any independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities to which Animas or any of its affiliates is a party or may be subject, and at the direction of Animas, and with its consent, Piper Jaffray’s opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or damages arising out of any such matters.

          Piper Jaffray’s opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation as of the date of the opinion; events occurring after the date of the opinion could materially affect the assumptions used by Piper Jaffray in preparing its opinion. Piper Jaffray expressed no opinion as to the price at which shares of Animas common stock have traded or may trade following the announcement of the merger or at any time after the date of the opinion. Piper Jaffray has not agreed or undertaken to reaffirm or revise its opinion or otherwise comment on any events occurring after the date it was given and does not have any obligation to update, revise or reaffirm its opinion.

          In connection with its engagement, Piper Jaffray was requested to and did solicit indications of interest from, and hold discussions with, selected third parties regarding the possible acquisition of all or part of Animas. While Piper Jaffray rendered its opinion and provided certain analyses to the Animas board of directors, Piper Jaffray was not requested to, and did not make, any recommendation to the board as to the specific form or amount of the consideration to be received by Animas stockholders in the proposed merger, which was determined through negotiations between Animas and Johnson & Johnson. Piper Jaffray was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with or effect the merger or the structure thereof, or the relative merits of the merger compared to any alternative business strategy or transaction in which Animas might engage.

          Piper Jaffray is regularly engaged as a financial advisor in connection with mergers and acquisitions, underwritings and secondary distributions of securities and private placements. The Animas board of directors selected Piper Jaffray to render its fairness opinion in connection with the proposed merger on the basis of its experience and reputation in acting as a financial advisor in connection with mergers and acquisitions. Piper Jaffray in the ordinary course of its business may actively trade securities of Animas for its own account or the accounts of its customers and, accordingly, may at any time hold long or short positions in these securities.

          Piper Jaffray acted as financial advisor to Animas in connection with the merger. Under the terms of our engagement letter with Piper Jaffray, Animas has agreed to pay Piper Jaffray a $500,000 fee for providing the opinion that is not contingent upon consummation of the

proposed merger. Animas has also agreed to pay Piper Jaffray a fee in the event of the consummation of the proposed merger currently estimated to be approximately $4,600,000. Whether or not the proposed merger is consummated, Animas has also agreed to reimburse Piper Jaffray for its reasonable out-of-pocket expenses and to indemnify it against certain liabilities relating to or arising out of services performed by Piper Jaffray in rendering its opinion to the Animas board of directors. These fees and expenses are customary amounts for transactions of this type.

Interests of Our Directors and Executive Officers in the Merger

          In considering the recommendation of our board of directors with respect to the merger, our stockholders should be aware that all of our directors and executive officers have personal interests in the merger that are, or may be, different from, or in addition to, your interests. Our board of directors was aware of the interests described below and considered them, among other matters, when approving the merger.

     Employment Agreements with Executive Officers

          On February 20, 2004, we entered into an amended and restated employment agreement with Katherine D. Crothall, our President and Chief Executive Officer. In connection with the execution of the merger agreement and as an inducement to Johnson & Johnson to enter into the merger agreement, on December 16, 2005, we, Johnson & Johnson and Dr. Crothall entered into a modification to her employment agreement. Under the terms of the revised agreement, following the consummation of the merger, Dr. Crothall will continue to be employed by us as President for a period of six months. If Dr. Crothall’s employment terminates at the expiration of such six-month period, or if her employment is terminated by us without cause following the consummation of the merger but prior to the expiration of such six-month period, the cash severance payments that she would otherwise be entitled to receive in eighteen monthly installments pursuant to the employment agreement shall instead be payable to her in a lump sum amount as soon as practicable following her termination of employment. If Dr. Crothall’s employment terminates following the consummation of the merger but prior to the expiration of such six-month period by reason of a constructive termination without cause (within the meaning of her employment agreement entered into in February 2004) or her voluntary resignation, Dr. Crothall would be entitled to receive the severance compensation and benefits that she would otherwise be entitled to receive upon a termination of her employment by us without cause pursuant to the employment agreement (with any applicable cash severance payments being paid in eighteen monthly installments as provided in her employment agreement). Dr. Crothall has also agreed to waive any pro-rata bonus that would otherwise be payable to her pursuant to the employment agreement upon a termination of employment. Dr. Crothall subjected herself to increased non-compete and non-solicitation/non-hire restrictions which were for five years and three years, respectively, following the consummation of the merger. If the merger agreement is terminated, the modification to her employment agreement described above will be void and have no further force and effect.

          In addition, in connection with the execution of the merger agreement, on December 16, 2005, we entered into an amendment to Dr. Crothall’s employment agreement whereby our severance obligations to Dr. Crothall were modified to be consistent with the amendment to the change in control agreements relating to Section 409A of the Internal Revenue Code, described below.

          On February 20, 2004, we entered into an employment agreement with our Chief Financial Officer, Richard Baron. Under his employment agreement, if we terminate Mr. Baron’s employment for cause or he voluntarily terminates his employment for any reason, Mr. Baron will receive only those benefits required to be provided to him by the terms of any of our applicable benefit plans. If we terminate Mr. Baron’s employment without cause and he executes a release of claims that he may have against Animas, we will continue to pay Mr. Baron his then-current base salary and benefits for the 12-month period following his date of termination and certain other benefits required by the terms of our applicable benefit plans. Mr. Baron’s severance under his employment agreement will be in addition to the amounts payable under his change in control agreement, described below. Mr. Baron’s employment agreement also contains non-competition provisions prohibiting him from competing against us during his term of employment and for two years after a termination of employment. In connection with the execution of the merger agreement, on December 22, 2005, we entered into an amendment to Mr. Baron’s employment agreement whereby our severance obligations to Mr. Baron were modified to be consistent with the amendment to the change in control agreements relating to Section 409A of the Internal Revenue Code, described below.

     Change in Control Agreements with Executive Officers

          We entered into change in control agreements with Richard Baron, Audrey Finkelstein, James McGee, Douglas Schumer, Eric Schwartz, Daniel Sunday and Doug Woodruff that provide that in the event that we terminate such individual’s employment without cause or such individual resigns with good reason during the period commencing 30 days before or one year after the date of a change of control, such individual is entitled to receive a lump sum payment equal to one year of his or her then-current base salary. In addition, in the event that such individual has remained employed from the consummation of a change of control through the one-year anniversary of such change of control, such individual is entitled to receive a lump sum payment equal to one year of his then-current base salary.

          The following chart sets forth, for each of Animas’ executive officers, the estimated value of the cash severance (or retention) payments and other benefits due the executive officer (based on payments under employment agreements plus bonuses and payments under change of control agreements) as of December 15, 2005 (the date of the merger agreement) excluding the amount of any excise tax gross-up and the value of any stock options subject to accelerated vesting (See “—Outstanding Stock Options and Employee Stock Purchase Plan”).

		Payment and
Executive Officers		Benefit Amount ($)
Katherine D. Crothall,			585,000
President and Chief
Executive Officer
Richard A. Baron,			512,000
Vice President
Finance and Chief
Financial Officer

		Payment and
Executive Officers		Benefit Amount ($)
Audrey Finkelstein,			349,000
Executive Vice
President,
Marketing, Sales
and Clinical
James McGee,			247,000
Executive Vice
President
Eric Ian Schwartz,			223,000
Vice President
General Counsel
Doug Schumer, Vice			223,000
President
Engineering
Daniel Sunday,			180,000
Vice President of
Operations
Doug Woodruff, Vice			184,000
President of Quality
Assurance and
Regulatory Affairs

     Amendment to Change in Control Agreements with Executive Officers

          In connection with the execution of the merger agreement, on December 22, 2005, we entered into an amendment to the change in control agreements whereby if Section 409A of the Internal Revenue Code is deemed to apply to the severance benefits payable under the agreements, then any such payment payable during the six month period immediately following the termination of such executive officer’s employment will be delayed and paid in a lump sum as soon as practicable following the expiration of such six month period.

     Outstanding Stock Options and Employee Stock Purchase Plan

          Pursuant to the merger agreement, our board of directors and compensation committee took action to accelerate the vesting and exercisability of outstanding stock options. Each outstanding unexercised option to purchase our common stock held by directors and executive officers, employees, former employees and consultants, will be canceled upon the completion of the merger in exchange for a cash payment equal to the excess of the $24.50 per share merger consideration over the per share option exercise price, multiplied by the number of shares of our common stock subject to the option.

          The directors and executive officers identified in the following table will benefit from the acceleration of the vesting of and exercisability of our stock options:

Vested Stock

Unvested Stock

Value of Vested

Value of Unvested

Executive Officers and Directors

Options

Options

Stock Options ($)

Stock Options($)

Katherine D.Crothall,

105,333

74,668

1,592,635

1,128,980

President and Chief

Executive Officer

Executive Officers		Vested Stock				Unvested Stock				Value of Vested				Value of Unvested
and Directors		Options				Options				Stock Options ($)				Stock Options($)
Richard A. Baron,			69,200				78,800				1,321,448				503,296
Vice President
Finance and Chief
Financial Officer
Audrey Finkelstein,			38,668				77,999				549,831				789,508
Executive Vice
President, Marketing,
Sales and Clinical
James McGee,			21,333				81,001				322,555				825,605
Executive Vice
President
Eric Ian Schwartz,			0				20,000				0				131,800
Vice President
General Counsel
Doug Schumer, Vice			0				35,000				0				150,150
President
Engineering
Daniel Sunday, Vice			16,800				23,534				329,056				123,074
President of
Operations
Doug Woodruff, Vice			11,334				22,666				100,533				201,047
President of Quality
Assurance and
Regulatory Affairs
Edward Cahill			34,208				6,959				384,669				50,867
Graeme A. Crothall			32,333				6,334				368,551				46,623
William A. Graham			52,333				6,334				764,751				46,623
David Joseph			68,479				7,272				1,101,872				52,992
John J. McDonough			36,270				7,647				402,397				55,538
Thomas Morse			35,895				7,522				399,173				54,690
A. Peter Parsons			46,393				7,084				659,837				51,716
Totals			568,579				462,820				8,297,308				4,212,509

          Our employee stock purchase plan was suspended on December 31, 2005, and immediately prior to such suspension, each participant’s outstanding right to purchase shares of our common stock terminated and all amounts allocated for each participant’s account (including for our executive officers) under the employee stock purchase plan as of that date will be used to purchase shares of our common stock at the applicable price determined pursuant to the plan, using the suspension date as the final purchase date for each then outstanding offering period.

     Indemnification

          The terms of the merger agreement provide for the continued indemnification of our current directors and officers, including the continuation of the equivalent of our current officers’ and directors’ liability insurance for a period of six years, as more fully described under “The Merger Agreement—Directors’ and Officers’ Indemnification, Advancement of Expenses, Exculpation and Insurance.”

     Warrants

          In addition, William A. Graham, IV owns 13,333 warrants which will be canceled upon completion of the merger for a cash payment equal to the difference between the exercise price of $10.00 per share and the $24.50 per share merger consideration.

Material U.S. Federal Income Tax Consequences

          The following is a summary of the material U.S. Federal income tax consequences of the merger to U.S. holders (as defined below) whose shares of our common stock are converted into the right to receive cash in the merger. The discussion does not purport to consider all aspects of U.S. Federal income taxation that might be relevant to particular holders. The discussion is based on current law which is subject to change, possibly with retroactive effect. The discussion applies only to U.S. holders who hold shares of our common stock as capital assets. This discussion does not apply to certain types of holders (such as insurance companies, tax-exempt organizations and retirement plans, banks and other financial institutions, traders, broker-dealers, dealers in securities or foreign currencies, S corporations, partnerships, or mutual funds, persons who hold or have held our common stock as part of a straddle or a hedging, integrated constructive sale or conversion transaction for tax purposes, persons subject to alternative minimum tax, persons who acquired their shares of our common stock upon the exercise of stock options or otherwise as compensation (including, without limitation, persons who acquired their shares pursuant to our employee stock purchase plan), or persons with a functional currency other than the U.S. dollar) who may be subject to special rules.

          In addition, this discussion does not address any state, local or foreign tax consequences of the merger.

          For purposes of this discussion, a U.S. holder is any individual, corporation, estate or trust that is a beneficial holder of our common stock and that is, for U.S. Federal income tax purposes:

	•		an individual citizen or resident of the United States;
	•		a corporation, or other entity treated as a corporation for U.S. Federal income tax purposes, that is created or organized under the laws of the United States or any political subdivision thereof;
	•		an estate whose income is subject to U.S. Federal income taxation regardless of its source; or
	•		a trust (1) if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all of the trust’s substantial decisions or (2) which has made an election to be treated as a U.S. person.

          If a partnership or other pass-through entity holds shares of our common stock or options or warrants, the tax treatment of a partner or owner of such partnership or other pass-through entity generally will depend upon the status of the partner or owner and the activities of the partnership or pass-through entity. Accordingly, we urge partnerships and other pass-through entities that hold shares of our common stock or options or warrants and partners or owners in such partnerships or pass-through entities to consult their tax advisors.

          The receipt of cash for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. Federal income tax purposes. In general, a U.S. holder who surrenders shares of our common stock for cash in the merger will recognize a capital gain or loss for U.S. Federal income tax purposes equal to the difference, if any, between the amount of cash received and the U.S. holder’s adjusted tax basis in the shares of our common stock surrendered. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction) surrendered for cash pursuant to the merger. Such gain or loss will be long-term capital gain or loss provided that a U.S. holder’s holding period for such shares is more than one year at the time of the completion of the merger. Capital gains of individuals derived in respect of capital assets held for more than one year are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses.

          Federal backup withholding tax generally will be withheld from all cash payments to which a U.S. holder is entitled pursuant to the merger agreement, if (1) the IRS notifies us or our paying agent that the taxpayer identification number (typically, the social security number in the case of individuals, or employer identification number, in the case of other holders) provided by the U.S. holder is incorrect; (2) a U.S. holder does not have a taxpayer identification number and does not provide one to us within 60 days of signing the Substitute Form W-9; (3) the stockholder underreports interest and dividend payments that he or she receives on his or her tax return and the IRS notifies us or our paying agent that withholding is required; or (4) the U.S. holder fails to certify under penalties of perjury that he or she is not subject to backup withholding. Each of our eligible holders should complete and sign the Substitute Form W-9 included as part of the letter of transmittal to be returned to the paying agent, in order to provide the information and certification necessary to avoid backup withholding tax, unless an exemption applies and is established in a manner satisfactory to the paying agent.

          Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. Federal income tax liability provided that you furnish the required information to the IRS.

          U.S. holders considering the exercise of their appraisal rights should consult their own tax advisors concerning the application of Federal income tax laws to their particular situations as well as any consequences of the exercise of such rights arising under the laws of any other taxing jurisdiction.

          THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO THE MERGER, AND IS NOT TAX ADVICE. THEREFORE, YOU ARE URGED TO CONSULT YOUR TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

Regulatory Approvals

          Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder by the U.S. Federal Trade Commission, certain transactions, including the merger, may not be completed unless certain waiting period requirements have been satisfied. Johnson & Johnson and we filed a notification and report form with the Antitrust Division of the U.S. Department of Justice and the U.S. Federal Trade Commission on December 23, 2005. At any time before or after the effective time of the merger, the Antitrust Division, the Federal Trade Commission or others could take action under the antitrust laws, including seeking to prevent the merger, to rescind the merger or to conditionally approve the merger upon the divestiture by us or Johnson & Johnson of substantial assets. In addition, under certain circumstances, private parties and state attorneys general may also bring actions under U.S. antitrust laws. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

          Further, we have made filings in Germany and Austria, and the antitrust authorities in those countries must give us approval prior to the consummation of the merger.

Appraisal Rights

     Holders of shares of our common stock who do not vote in favor of the adoption of the merger agreement and who properly demand appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the General Corporation Law of the State of Delaware, which is referred to in this proxy statement as Section 262.

     The following discussion is not a complete statement of the law pertaining to appraisal rights under Section 262 and is qualified in its entirety by the full text of Section 262 which is included in this proxy statement as Annex D. All references in Section 262 and in this summary to a “stockholder” are to the record holder of the shares of our common stock as to which appraisal rights are asserted. A person having a beneficial interest in shares of our common stock held of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights.

     Under Section 262, persons who hold shares of our common stock who follow the procedures set forth in Section 262 will be entitled to have their shares of our common stock appraised by the Delaware Court of Chancery and to receive payment of the “fair value” of the shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with a fair rate of interest, as determined by the court.

     Under Section 262, where a merger is to be submitted for approval at a meeting of stockholders, as in the case of the adoption of the merger agreement by our stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement shall constitute the notice, and the applicable statutory provisions are included in this proxy statement as Annex D. Any holder of our common stock who wishes to exercise appraisal rights or who wishes to preserve such holder’s right to do so, should review the following discussion and Annex D carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights.

     A holder of shares of our common stock wishing to exercise the holder’s appraisal rights must deliver to us, before the vote on the adoption of the merger agreement at the special meeting, a written demand for the appraisal of such holder’s shares and must not vote in favor of the adoption of the merger agreement. A holder of shares of our common stock wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the effective time of the merger. A vote against the adoption of the merger agreement will not in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote. The demand must reasonably inform us of the identity of the holder as well as the intention of the holder to demand an appraisal of the “fair value” of the shares held by the holder. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the merger agreement at the special meeting will constitute a waiver of appraisal rights.

     Only a holder of record of shares of our common stock is entitled to assert appraisal rights for the shares of our common stock registered in that holder’s name. A demand for appraisal in respect of shares of our common stock should be executed by or on behalf of the

holder of record, fully and correctly, as the holder’s name appears on the holder’s stock certificates, and must state that the person intends thereby to demand appraisal of the holder’s shares of our common stock in connection with the merger. If the shares of our common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand should be made in that capacity, and if the shares of our common stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner or owners. A record holder such as a broker who holds shares of our common stock as nominee for several beneficial owners may exercise appraisal rights with respect to the shares of our common stock held for one or more beneficial owners while not exercising the rights with respect to the shares of our common stock held for other beneficial owners; in such case, however, the written demand should set forth the number of shares of our common stock as to which appraisal is sought and where no number of shares of our common stock is expressly mentioned the demand will be presumed to cover all shares of our common stock held in the name of the record owner. Stockholders who hold their shares of our common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.

     All written demands for appraisal pursuant to Section 262 should be sent or delivered to Animas Corporation, 200 Lawrence Drive, West Chester, PA 19380, Attention: General Counsel.

     Within 10 days after the effective time of the merger, the surviving corporation must notify each holder of our common stock who has complied with Section 262 and who has not voted in favor of the adoption of the merger agreement that the merger has become effective. Within 120 days after the effective time of the merger, but not thereafter, the surviving corporation or any holder of our common stock who has so complied with Section 262 and is entitled to appraisal rights under Section 262 may file a petition in the Delaware Court of Chancery demanding a determination of the fair value of the holder’s shares of our common stock. The surviving corporation is under no obligation to and has no present intention to file a petition. Accordingly, it is the obligation of the holders of our common stock to initiate all necessary action to perfect their appraisal rights in respect of shares of our common stock within the time prescribed in Section 262.

     Within 120 days after the effective time of the merger, any holder of our common stock who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving corporation a statement setting forth the aggregate number of shares not voted in favor of the adoption of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The statement must be mailed within ten days after a written request therefor has been received by the surviving corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later.

     If a petition for an appraisal is timely filed by a holder of shares of our common stock and a copy thereof is served upon the surviving corporation, the surviving corporation will then be

obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded an appraisal of their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the Court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the holders of shares of our common stock who demanded payment for their shares to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceeding; and if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to the stockholder.

     After determining the holders of our common stock entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of their shares of our common stock, 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. Holders of our common stock considering seeking appraisal should be aware that the fair value of their shares of our common stock as so determined could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares of our common stock and that investment banking opinions as to the fairness from a financial point of view of the consideration payable in a merger are not necessarily opinions as to fair value under Section 262. 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 262, the “fair value” of a share of our common stock is less than the merger consideration. 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 in the appraisal proceedings. In addition, Delaware courts have decided that the statutory appraisal remedy, depending on factual circumstances, may or may not be a dissenter’s exclusive remedy. The Court will also determine the amount of interest, if any, to be paid upon the amounts to be received by persons whose shares of our common stock have been appraised. The costs of the action may be determined by the Court and taxed upon the parties as the Court deems equitable. The Court may also order that all or a portion of the expenses incurred by any stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts utilized in the appraisal proceeding, be charged pro rata against the value of all the shares entitled to be appraised.

     Any holder of shares of our common stock who has duly demanded an appraisal in compliance with Section 262 will not, after the effective time of the merger, be entitled to vote the shares of our common stock subject to the demand for any purpose or be entitled to the payment of dividends or other distributions on those shares of our common stock (except dividends or other distributions payable to holders of record of our common stock as of a record date prior to the effective time of the merger).

     If any stockholder who demands appraisal of shares of our common stock under Section 262 fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal, the shares of our common stock of the stockholder will be converted into the right to receive $24.50 in cash per share. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to

appraisal if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the stockholder delivers to the surviving corporation a written withdrawal of the holder’s demand for appraisal and an acceptance of the merger, except that any attempt to withdraw made more than 60 days after the effective time of the merger will require the written approval of the surviving corporation and, once a petition for appraisal is filed, the appraisal proceeding may not be dismissed as to any holder absent court approval.

     Failure to follow the steps required by Section 262 for perfecting appraisal rights may result in the loss of such rights (in which event the holder of our common stock will be entitled to receive the consideration specified in the merger agreement).

Delisting and Deregistration of Our Common Stock

     If the merger is completed, our common stock will be delisted from the Nasdaq National Market and will be deregistered under the Securities Exchange Act of 1934, as amended.

Structure of the Merger

     The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, Emerald Merger Sub, Inc. will be merged with and into us and the separate corporate existence of Emerald Merger Sub, Inc. will thereupon cease, and we will be the surviving corporation and all of our rights, privileges, powers, immunities, purposes and franchises will continue unaffected by the merger, except that all of our then outstanding common stock will be owned by Johnson & Johnson and all outstanding options and warrants will be canceled.

Effective Time of the Merger

     The merger will become effective when a certificate of merger is duly filed with the Secretary of State of the State of Delaware or at such later time as the parties agree to and specify in the certificate of merger. Such filing will be made no later than the second business day after the satisfaction or waiver of the conditions to the completion of the merger described in the merger agreement. See “The Merger Agreement—Conditions to the Completion of the Merger.” The merger agreement also provides that:

	•		our amended and restated certificate of incorporation will be amended at the completion of the merger to be in the form of Exhibit A to the merger agreement and, as so amended, will be the restated certificate of incorporation of the surviving corporation until changed or amended;
	•		the by-laws of Emerald Merger Sub, Inc. as in effect immediately prior to the closing of the merger, will be the by-laws of the surviving corporation;
	•		the directors of Emerald Merger Sub, Inc. immediately prior to the closing of the merger, will be the directors of the surviving corporation; and
	•		the officers of Emerald Merger Sub, Inc. immediately prior to the closing of the merger, will be the officers of the surviving corporation.

The Merger Consideration

     Each share of our common stock issued and outstanding immediately before the merger, other than treasury shares, shares for which appraisal rights have been perfected and shares held by Johnson & Johnson or Emerald Merger Sub, Inc., will automatically be canceled and will cease to exist and will be converted into the right to receive $24.50 in cash, without interest. After the merger is effective, each holder of a certificate representing any of these shares of our common stock will no longer have any rights with respect to the shares, except for the right to receive the $24.50 per share merger consideration or, if a holder exercises appraisal rights, the right to receive payment of the judicially determined fair value of its shares upon compliance with the requirements of Delaware law. Each share of our common stock held by us as treasury shares or held by Johnson & Johnson or Emerald Merger Sub, Inc. at the time of the merger will be canceled without any payment.

     YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY. A transmittal form with instructions for the surrender of certificates representing shares of our common stock will be mailed to stockholders shortly after completion of the merger.

Treatment of Our Stock Options and Employee Stock Purchase Plan

     Prior to the completion of the merger, holders of outstanding stock options will have the opportunity to exercise all of their outstanding stock options, including stock options for which the vesting is accelerated in connection with the merger in accordance with the terms and conditions of our 1996 Incentive Stock Plan, our 1998 Equity Compensation Plan and our 2004 Equity Incentive Plan. Upon completion of the merger, each outstanding stock option that has not been exercised will be canceled and the holder of that stock option will be entitled to receive a single lump sum cash payment equal to the product of:

	•		the number of shares of our common stock for which the stock option has not been exercised; and
	•		the excess, if any, of the $24.50 per share merger consideration over the per share exercise price of the stock option.

     Subject to any applicable withholding taxes, the payment for options will be made, without interest, though our normal payroll procedures as soon as practicable following the completion of the merger.

     We are required to ensure that there will be no stock options exercisable for our capital stock outstanding as of the effective time.

     Our board of directors has taken actions under the employee stock purchase plan to provide that:

	•		participants will not be permitted to increase their payroll deductions or purchase elections from those in effect on the date of the merger agreement;
	•		no offering period will be commenced after the date of the merger agreement;
	•		each participant’s outstanding right to purchase shares of our common stock under the plan was suspended on

December 31, 2005, with all amounts allocated for each participant’s account under the employee stock purchase plan as of the suspension date being used to purchase shares of our common stock at the applicable price determined pursuant to the plan, using the suspension date as the final purchase date for each then outstanding offering period;

•

the employee stock purchase plan will terminate immediately preceding the closing of the merger.

     At the closing of the merger, the shares of common stock purchased under the employee stock purchase plan will automatically be canceled and will be converted into the right to receive a per share amount equal to $24.50 in cash, without interest. The most recent offering period under our employee stock purchase plan has terminated and a new offer period was not commenced. As a result, there are no shares under the employee stock purchase plan to be canceled or purchased other than shares to which an employee is entitled and has not received.

Treatment of Our Warrants

     Pursuant to the merger agreement, we have taken, or will take, any action necessary to cause each warrant to acquire shares of our common stock outstanding immediately prior to the completion of the merger to be canceled in exchange for a lump sum cash payment equal to the product of:

	•		the number of shares of our common stock subject to the warrant; and
	•		the excess, if any, of the $24.50 per share merger consideration over the per share exercise price of the warrant.

     Payments with respect to warrants shall be made by the paying agent as soon as practicable following the effective time of the merger. All amounts payable shall be subject to any required withholding of taxes and shall be paid without interest.

Surrender of Stock Certificates

     At the effective time of the merger, Johnson & Johnson will deposit for the benefit of our stockholders the aggregate merger consideration into an exchange fund with JPMorgan Chase Bank, N.A. or another comparable institution, as paying agent. At the effective time of the merger, shares of our common stock (except for shares for which appraisal rights have been perfected, as described in “Appraisal Rights” above):

	•		will no longer be outstanding;
	•		will automatically be canceled; and
	•		will cease to exist.

     In addition, from and after the effective time of the merger, each certificate formerly representing any such share of our common stock will represent only the right to receive the $24.50 per share merger consideration which the holder of the certificate is entitled to receive pursuant to the merger.

     No interest will accrue or be paid with respect to the merger consideration. Until holders of certificates previously representing shares of our common stock have surrendered those

certificates to the paying agent for exchange, holders will not receive the merger consideration due in respect of the shares formerly represented by such certificates.

     As soon as practicable after the effective time of the merger, the paying agent will mail to each holder of record of shares of our common stock a letter of transmittal and instructions for its use in delivering certificates to the paying agent in exchange for the merger consideration due in respect of the shares formerly represented by such certificates. After receipt of its certificates by the paying agent, together with a properly executed letter of transmittal, the paying agent will deliver to each stockholder the $24.50 per share merger consideration multiplied by the number of shares formerly represented by the certificate(s) surrendered by the stockholder. In the event of a transfer of ownership of our common stock which is not registered in the transfer records of our transfer agent, payment of the merger consideration may be made to a person other than the person in whose name the surrendered certificate is registered if:

	•		the certificate is properly endorsed or otherwise in proper form for transfer; and
	•		the person requesting the merger consideration pays any transfer or other taxes required by reason of the payment of the merger consideration due in respect of the shares formerly represented by such certificate to a person other than the registered holder of the surrendered certificate or establishes to Johnson & Johnson’s reasonable satisfaction that such tax has been paid or is not applicable.

Lost Certificates

     If any certificate representing shares of our common stock is lost, stolen or destroyed, the paying agent will deliver the applicable merger consideration due in respect of the shares formerly represented by that certificate if:

	•		the stockholder asserting the claim of a lost, stolen or destroyed certificate makes an affidavit of that fact; and
	•		upon request of Johnson & Johnson, the stockholder posts a bond in a reasonable amount designated by Johnson & Johnson as security against any claim that may be made with respect to that certificate against Johnson & Johnson.

Unclaimed Amounts

     Any portion of the exchange fund which remains undistributed to our stockholders after the six month anniversary of the effective time of the merger will be delivered by the paying agent to Johnson & Johnson, upon demand, and any of our stockholders who have not previously surrendered their stock certificates will only be entitled to look to Johnson & Johnson for payment of the merger consideration due in respect of the shares formerly represented by their certificates. Subject to the other terms of the merger agreement, Johnson & Johnson will remain liable for the payment of the merger consideration to these stockholders.

THE MERGER AGREEMENT

The following is a summary of the material provisions of the merger agreement, a copy of which is attached hereto as Annex A. This summary is qualified in its entirety by reference to the full text of the merger agreement and you are urged to carefully read the full text of the merger agreement. The merger agreement is incorporated into this proxy statement by this reference.

The merger agreement has been attached as an annex and the following summary has been included to provide you with information regarding its terms. It is not intended to provide any other factual information about us. Such information can be found elsewhere in this proxy statement and in the other public filings we make with the Securities and Exchange Commission, which are available without charge at www.sec.gov.

The merger agreement contains representations and warranties we made to Johnson & Johnson and Emerald Merger Sub, Inc., as well as representations Johnson & Johnson and Emerald Merger Sub, Inc. made to us. The assertions embodied in those representations and warranties are qualified by information in confidential disclosure schedules that we have exchanged with Johnson & Johnson and Emerald Merger Sub, Inc. in connection with signing the merger agreement. While we do not believe that they contain information securities laws require us to publicly disclose other than information that has already been so disclosed, the confidential disclosure schedules do 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 actual state of facts, since they are modified in important part by the underlying confidential disclosure schedules. These confidential disclosure schedules contain information that has been included in our prior public disclosures, as well as potential additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement, which subsequent information may or may not be fully reflected in our public disclosures.

Representations and Warranties

     The merger agreement contains customary representations and warranties relating to, among other things:

	•		our corporate organization and similar corporate matters and the corporate organization and similar matters of Johnson & Johnson and Emerald Merger Sub, Inc.;
	•		our capital structure;
	•		our obligations with respect to our capital stock;
	•		the authorization, execution, delivery, performance and enforceability of, and required consents, approvals, orders and authorizations of governmental authorities relating to, the merger agreement and related matters of us and of Johnson & Johnson and Emerald Merger Sub, Inc.;
	•		our filings with the Securities and Exchange Commission and the accuracy of information, including financial information, contained in these documents;

	•		our compliance with the Sarbanes-Oxley Act of 2002 and other matters related to our internal and disclosure controls;
	•		the accuracy of the information supplied by or on behalf of us, Johnson & Johnson and Emerald Merger Sub, Inc. in connection with this proxy statement;
	•		the absence of material changes or events concerning us;
	•		pending or threatened material litigation against us;
	•		matters related to the existence of certain of our contracts and defaults under our contracts;
	•		our compliance with applicable laws and environmental matters;
	•		absence of changes in our benefit plans;
	•		absence of collective bargaining agreements or other labor union agreements between us or any of our subsidiaries and our employees;
	•		matters affecting us relating to the Employee Retirement Income Security Act of 1974, as amended, and our employee benefits;
	•		matters related to our pension plans and the timely filing of determination letter applications;
	•		absence of excess parachute payments to any of our officers, directors, employees or consultants;
	•		completion and accuracy of our tax filings and payment of our taxes;
	•		validity of our title to, or leasehold or sublease interests in, our properties and tangible assets and compliance with the terms of our leases and subleases;
	•		matters relating to our intellectual property;
	•		matters relating to the existence of confidentiality and noncompete agreements with our employees, contractors or consultants which have proprietary knowledge of or information relating to the manufacturing process or the formulation of our products;
	•		the required vote of our stockholders;
	•		the applicability of state takeover statutes and takeover provisions in our certificate of incorporation;
	•		our engagement and payment of fees for accountants, brokers, financial advisor and legal counsel in connection with the merger;
	•		our receipt of an opinion from our financial advisor;
	•		certain contracts relating to research, clinical trial development, distribution, sale, supply, license, marketing, co-promotion or manufacturing;
	•		our compliance with applicable regulatory and governmental requirements;
	•		our maintenance of insurance;

	•		the operations of Emerald Merger Sub, Inc.;
	•		Johnson & Johnson’s ability to pay the aggregate merger consideration; and
	•		Johnson & Johnson’s and its affiliates’ existing ownership or control over shares of Animas common stock.

Covenants

     Under the merger agreement, we have agreed that, prior to the effective time of the merger, subject to certain exceptions, we will carry on our business in the ordinary course, consistent with past practice and as currently proposed (as of the date of the merger agreement) by us to be conducted and in compliance with applicable laws and regulations, and will use all commercially reasonable efforts to preserve intact our current business organizations, to keep available the services of our current officers, employees and consultants and preserve our relationships with those persons having business dealings with us. In addition, we have agreed that, among other things and subject to certain exceptions, we, and our subsidiaries, may not, without Johnson & Johnson’s prior written consent:

	•		declare, set aside or pay any dividends on, or make any other distribution (whether in cash, stock or property) in respect of, any of our capital stock, or form a subsidiary;
	•		split, combine or reclassify any of our capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of, or in substitution for shares of our capital stock;
	•		purchase, redeem or otherwise acquire any shares of our capital stock or any other securities or any rights, warrants or options to acquire any such shares or other securities, except for purchases, redemptions or other acquisitions of capital stock or other securities required under the terms of any plans, arrangements or agreements existing as of the date of the merger agreement between us and any of our directors or employees;
	•		issue, deliver, sell, grant, pledge or otherwise encumber or subject to any lien any shares of our capital stock, any other voting securities or any securities convertible into, or any rights, warrants, options to acquire, any such shares, voting securities or convertible securities, or “phantom” stock, “phantom” stock rights, stock appreciation rights or stock based performance units, other than the issuance of our common stock upon the exercise of options or warrants that were outstanding on the date of the merger agreement;
	•		amend our amended and restated certificate of incorporation or by-laws, except as may be required by law, or the rules and regulations of the Securities and Exchange Commission or The Nasdaq Stock Market, Inc.;
	•		acquire by merger, consolidation, purchasing of assets or in any other manner any person or division, business or equity interest of any person;
	•		acquire any asset or assets that, individually, has a purchase price in excess of $50,000 or, in the aggregate, have a purchase price in excess of $250,000, except for new capital expenditures which are subject to the limitations described below;

and except for purchases of components, raw materials or supplies in the ordinary course of business consistent with past practice;

	•		sell, lease, license, mortgage, sell and leaseback, dispose of or otherwise encumber or subject to any lien or otherwise dispose of any of our properties or other assets or any interests therein (including securitizations), except for sales of inventory and used equipment in the ordinary course of business, consistent with past practice;
	•		enter into, modify or amend any lease of property, except for modifications or amendments that are not materially adverse to us and our subsidiaries taken as a whole;
	•		incur any indebtedness for borrowed money or guarantee any such indebtedness of another person, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities, guarantee any debt securities of another person, enter into any “keep well” or other arrangement to maintain any financial statement condition of another person or enter into any arrangement having an economic effect of any of the foregoing;
	•		make any loans, advances, or capital contributions to, or investments in, any other person, other than to employees for travel expenses in the ordinary course of business consistent with past practice;
	•		make any new capital expenditure or expenditures which, in the aggregate, are in excess of $250,000;
	•		except as required by law or judgment, pay, discharge, settle or satisfy any claims, liabilities, obligations or litigation, other than the payment, discharge, settlement or satisfaction in the ordinary course of business consistent with past practice or in accordance with the terms of, liabilities disclosed, reflected or reserved against in our most recent financial statements filed with the Securities and Exchange Commission or incurred since the date of such financial statements in the ordinary course of business consistent with past practice, cancel any indebtedness, waive or assign any claims or rights of substantial value, waive any benefits of, agree to modify in any respect, or fail to enforce, or consent to any matter with respect to which consent is required under, any standstill or similar agreement to which we are a party, or waive any material benefits of, or agree to modify in any material respect or fail to enforce in any material respect, or consent to any matter with respect to which consent is required under, any material confidentiality or similar agreement to which we are a party;
	•		enter into or negotiate contracts relating to the research, clinical trial, development, distribution, sale, supply, license, marketing, co-promotion or manufacturing by third parties of our products (including products under development), or products (including products under development) licensed by us or our intellectual property rights, or initiate, launch or commence any sale, marketing, distribution, co-promotion or any similar activity with respect to any new product in or outside the United States;

	•		enter into, modify, amend or terminate any contract or waive, release or assign any material rights or claims under such contract, which if so entered into, modified, amended, terminated, waived, released or assigned would reasonably be expected to adversely affect us in any material respect, impair in any material respect our ability to perform our obligations under the merger agreement or prevent or materially delay the completion of the transactions described in the merger agreement;
	•		enter into any contract to the extent that the completion of the transactions described in the merger agreement or our compliance with the provisions of the merger agreement would reasonably be expected to conflict with, or result in a violation or breach of, or default under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any lien in or upon any of our property or assets, or require Johnson & Johnson to license or transfer any of its intellectual property rights or other material assets, or give rise to any increased, additional, accelerated, or guaranteed right or entitlements of any third party under, or result in any material alteration of, any provision of such contract;
	•		enter into any contract containing any restriction on our ability, or the ability of any of our affiliates, to assign our and their rights, interests, or obligations under such contract, unless such restriction expressly excludes any assignment to Johnson & Johnson or any of its affiliates in connection with or following the completion of the merger and the other transactions described in the merger agreement;
	•		sell, transfer or license to any person or otherwise extend, amend or modify any of our intellectual property rights;
	•		adopt, enter into, terminate or amend any collective bargaining agreement, benefit plan or any benefit agreement between us and one or more of our current or former directors, officers, employees or consultants;
	•		increase in any manner the compensation, bonus or fringe or other benefits of, or pay any bonus of any kind or amount whatsoever to, any current or former officer, director, employee or consultant;
	•		pay any benefit or amount not required under any benefit plan or arrangement as in effect on the date of the merger agreement;
	•		grant or pay any severance or termination pay or increase in any manner the severance or termination pay of any current or former director, officer, employee or consultant;
	•		grant any awards under any bonus, incentive, performance, or other compensation plan or arrangement, benefit agreement or benefit plan (including the grant of stock options, “phantom” stock rights, stock based or stock related awards, performance units or restricted stock or the removal of existing restrictions in any benefit agreement or benefit plan or agreements or awards made under such benefit agreements or benefit plans);

	•		amend or modify any stock option or warrant;
	•		take any action to fund or in any other way secure the payment of compensation or benefits under any employee plan, agreement, contract or arrangement, or benefit plan or benefit agreement;
	•		take any action to accelerate the vesting or payment of any compensation or benefit under any benefit plan or benefit agreement, except for the acceleration of the vesting of outstanding stock options as described in the merger agreement;
	•		materially change any actuarial or other assumption used to calculate funding obligations with respect to any pension plan or change the way in which contributions to any pension plan are made or the basis on which such contributions are determined;
	•		except as required by generally accepted accounting principles, revalue any of our material assets, or make any changes to our accounting methods, principles or practices; or
	•		authorize any of, or commit, resolve or propose or agree to take any of, the above actions.

     Each party agrees to notify the other party of:

	•		any representation or warranty in the merger agreement that is qualified as to materiality becoming untrue or inaccurate in any respect;
	•		any representation or warranty that is not so qualified as to materiality becoming untrue or inaccurate in any material respect; or
	•		the failure to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by the party under the merger agreement.

     Each party shall promptly provide the other with copies of all filings made with any governmental entity in connection with the merger agreement.

     Between the date of the merger agreement and the effective date, we will:

	•		timely file all required tax returns;
	•		timely pay all taxes due;
	•		accrue a reserve in the books and records and financial statements in accordance with past practice for all taxes payable;
	•		promptly notify Johnson & Johnson of any suit, claim, action, investigation, proceeding or audit pending against or with respect to us in respect of any material amount of tax and not settle or compromise any such action without Johnson & Johnson’s consent;
	•		not make any material tax election or settle or compromise any material tax liability, other than with Johnson & Johnson’s consent or other than in the ordinary course of business; and

•

terminate as of the closing date all existing tax sharing agreements, tax indemnity obligations and similar agreements, arrangements or practices to which we are a party or may otherwise be bound so that we will have no further rights or liabilities under such agreements, arrangements or practices.

Directors’ and Officers’ Indemnification, Advancement of Expenses, Exculpation and Insurance

     Johnson & Johnson has agreed to cause the surviving corporation to assume the obligations with respect to all rights to indemnification, advancement of expenses and all exculpation from liability for acts or omissions occurring at or prior to the effective time of the merger existing in favor of our present and former officers or directors as provided in our restated certificate of incorporation or by-laws or any indemnification agreement between any such person and us, in each case as in effect as of the date of the merger agreement, and such obligations will survive the merger and will continue in full force and effect in accordance with their terms. The merger agreement also provides that Johnson & Johnson will maintain our current officers’ and directors’ liability insurance for a period of six years after the completion of the merger to cover any acts or omissions occurring at or prior to the effective time of the merger covering those persons who were, as of the date of the merger agreement, covered by that policy, on terms with respect to coverage and amounts no less favorable than those of the policy in effect on the date of the merger agreement (provided that in satisfying this obligation, Johnson & Johnson is not required to pay more than $2,000,000 in the aggregate to obtain such coverage). In the event such coverage cannot be obtained for $2,000,000 or less in the aggregate, Johnson & Johnson will be obligated to provide such coverage as may be obtained for such $2,000,000 aggregate amount.

Employee Benefits Matters

     The merger agreement provides that, for a period of not less than six months from the effective time of the merger, our employees who remain in the employment of the surviving corporation and its subsidiaries (whom we refer to as “continuing employees”) will receive employee benefits that are substantially comparable in the aggregate to the employee benefits provided to our employees immediately prior to the completion of the merger. However, neither Johnson & Johnson nor the surviving corporation nor any of their subsidiaries will have any obligation to issue, or adopt any plans or arrangements providing for the issuance of, shares of capital stock, warrants, options, stock appreciation rights or other rights in respect of any shares of capital stock of any entity or any securities convertible or exchangeable into such shares pursuant to any such plans or arrangements, and none of our plans or arrangements providing for issuance of shares will be taken into account in determining whether employee benefits are substantially comparable in the aggregate.

     Johnson & Johnson will cause the surviving corporation to recognize the service of each continuing employee as if such service had been performed with Johnson & Johnson as follows:

	•		for purposes of vesting (but not benefit accrual) under Johnson & Johnson’s defined benefit pension plan;
	•		for purposes of eligibility for vacation under Johnson & Johnson’s vacation program;

	•		for purposes of eligibility and participation under any health or welfare plan maintained by Johnson & Johnson (other than any post-employment health or post-employment welfare plan); and
	•		unless covered under another arrangement with us, for benefit accrual purposes under Johnson & Johnson’s severance plan.

but solely to the extent that Johnson & Johnson makes such plan or program available to employees of the surviving corporation, and not for purposes of any other employee benefit plan of Johnson & Johnson.

     In addition, with respect to any welfare plan maintained by Johnson & Johnson in which continuing employees are eligible to participate after the completion of the merger, Johnson & Johnson will, and will cause the surviving corporation to:

	•		waive all limitations as to preexisting conditions and exclusions with respect to participation and coverage requirements applicable to such employees to the extent such conditions and exclusions were satisfied or did not apply to such employees under our welfare plans prior to the completion of the merger; and
	•		provide each continuing employee with credit for any co-payments and deductibles paid prior to the completion of the merger in satisfying any analogous deductible or out-of-pocket requirements to the extent applicable under any such plan.

     Nothing in the merger agreement requires Johnson & Johnson or the surviving corporation to continue any specific plans or to continue the employment of any specific person.

Efforts to Consummate the Merger

     Each party agrees to use its commercially reasonable efforts to do all things necessary, proper or advisable, in the most expeditious manner practicable, to complete and make effective the merger and other transactions described in the merger agreement and the stockholder agreement, including using commercially reasonable efforts to accomplish the following:

	•		the taking of all acts necessary to cause the conditions to closing to be satisfied as promptly as practicable;
	•		the obtaining of all necessary actions or nonactions, waivers, consents and approvals from governmental entities and the making of all necessary registrations and filings (including filings with governmental entities) and the taking of all necessary steps to obtain an approval or waiver from, or avoid an action or proceeding by, any governmental entity; and
	•		the obtaining of all necessary consents, approvals or waivers from third parties (subject to certain exceptions).

     In addition, we will take all actions necessary to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the merger agreement, the stockholder agreement, the merger or any of the transactions described in the merger agreement or the stockholder agreement, and if a state takeover statute or similar statute becomes applicable, we will take all necessary actions to ensure that the merger and the other transactions described in

the merger agreement and the stockholder agreement may be completed as promptly as practicable. Nothing in the merger agreement, however, requires Johnson & Johnson to agree to, or proffer to, divest or hold separate any assets or any portion of any business of Johnson & Johnson, any portion of our assets or business or any portion of the assets or business of our or their subsidiaries.

Conditions to the Completion of the Merger

     Each party’s obligation to effect the merger is subject to the satisfaction or waiver of various conditions which include, in addition to other customary closing conditions, the following:

	•		the merger agreement has been adopted by the affirmative vote of stockholders holding a majority of the shares of our common stock outstanding and entitled to vote at the special meeting;
	•		the waiting period applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired or has been terminated;
	•		all applicable antitrust and regulatory clearances shall have been obtained from the relevant governmental entities in Germany and Austria; and
	•		no restraining order, injunction or other court order or statute, law, rule, legal restraint or prohibition is in effect that (1) prevents the completion of the merger, or (2) has had or would reasonably be expected to have a material adverse effect on us.

     Each party’s obligation to effect the merger is further subject to the satisfaction or waiver of the following additional condition:

•

the other party to the merger agreement has performed in all material respects all agreements and covenants required to be performed by it under the merger agreement on or prior to the date on which the merger is to become effective.

     Johnson & Johnson’s obligation to effect the merger is further subject to satisfaction or waiver of the following additional conditions:

	•		our representations and warranties set forth in the merger agreement that are qualified as to materiality are true and correct, and such representations and warranties to the extent that they are not so qualified are true and correct in all material respects, in each case 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 to the extent that such representations and warranties expressly relate to an earlier date, in which case, as of such earlier date;
	•		there is no pending suit, action or proceeding by any governmental entity, or by any other person having a reasonable likelihood of prevailing in a manner contemplated in clauses (1), (2) or (3) below, (1) challenging the acquisition by Johnson & Johnson or Emerald Merger Sub, Inc. of any shares of our common stock, seeking to restrain or prohibit the completion of the merger, or seeking to place limitations on the ownership of shares of our common stock, or shares of common stock of the surviving corporation, by Johnson & Johnson or Emerald

Merger Sub, Inc. or seeking to obtain from us, Johnson & Johnson or Emerald Merger Sub, Inc. any damages that are material in relation to us, (2) seeking to prohibit or materially limit the ownership or operation by us, Johnson & Johnson or any of its subsidiaries of any portion of their respective businesses or assets, or to compel us, Johnson & Johnson or any of their subsidiaries to divest or hold separate any portion of our or their businesses or assets, as a result of the merger, (3) seeking to prohibit Johnson & Johnson or any of its affiliates from effectively controlling in any material respect our business or operations or (4) otherwise having or being reasonably expected to have, a material adverse effect; and

•

there is no restraining order, injunction or other court order or statute, law, rule, legal restraint or prohibition that would reasonably be expected to result in any of the effects described in the immediately preceding paragraph.

     The merger agreement provides that a “material adverse effect” on us means any change, effect, event, occurrence, state of facts or development which individually or in the aggregate would reasonably be expected to result in any change or effect that (1) is materially adverse to our business, financial condition, properties, assets, liabilities (contingent or otherwise), results of operations or prospects or (2) would reasonably be expected to prevent or materially impede, interfere with, hinder or delay our completion of the merger or the other transactions contemplated by the merger agreement, in each case, subject to specified guidelines of interpretation and subject further to the limitation 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:

	•		any change relating to the United States economy or securities markets in general;
	•		any failure, in and of itself, by us to meet any internal or published projections, forecasts, or revenue or earnings predictions for any period ending on or after the date of the merger agreement (although the facts or occurrences giving rise or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be a material adverse effect); and
	•		any adverse change, effect, event, occurrence, state of facts or development reasonably attributable to the conditions affecting the industry in which we participate, other than as may arise or result from regulatory action by a governmental entity, so long as the effects do not disproportionately impact us.

     Our obligation to effect the merger is further subject to satisfaction or waiver of the following additional condition:

•

the representations and warranties of Johnson & Johnson and Emerald Merger Sub, Inc. set forth in the merger agreement that are qualified as to materiality are true and correct, and the representations of Johnson & Johnson and Emerald Merger Sub, Inc. set forth in the merger agreement that are not so qualified are true and correct in all material respects, in each case 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 to the extent such representations and warranties expressly relate to an earlier date, in which case as of such earlier date.

     We can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so. We cannot at this point determine whether the waiver of any particular condition would materially change the terms of the merger. If we determine that a waiver of a condition would materially change the terms of the merger or otherwise be required by applicable law, we will resolicit proxies. In making our determination of whether the waiver of a particular condition would materially change the terms of the merger, we would consider, among other factors:

	•		the reasons for the waiver;
	•		the effect of the waiver on the terms of the merger;
	•		whether the requirement being waived was necessary in order to make the transaction fair to our stockholders from a financial point of view; and
	•		the availability of alternative transactions to us and our prospects as an independent entity.

No Solicitation

     The merger agreement provides that we will not, nor will we authorize or permit any of our directors, officers, or employees or any investment banker, financial advisor, attorney, accountant or other advisor or representative retained by us or any of our affiliates to, directly or indirectly:

	•		solicit, initiate or knowingly encourage, or take any other action designed to, or which would reasonably be expected to, facilitate, any takeover proposal, as described below; or
	•		enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any person any information, or otherwise cooperate in any way with, any takeover proposal.

     The merger agreement provides that, notwithstanding the restrictions described above, if at any time prior to the time that our stockholders approve the adoption of the merger agreement:

	•		we receive a bona fide written takeover proposal that our board of directors determines in good faith, after consultation with outside counsel and a financial advisor of nationally recognized reputation, constitutes or would reasonably be expected to lead to a superior proposal, as described below, and
	•		the takeover proposal was not solicited after the date of the merger agreement, was made after the date of the merger agreement and did not otherwise result from our breach of the merger agreement,

we may, if our board of directors determines in good faith, after consultation with outside counsel, that it is required to do so in order to comply with its fiduciary duties to our stockholders under applicable law:

	•		furnish, under a customary confidentiality agreement, information about us to the person making such superior proposal provided that all information provided to a person has been provided to Johnson & Johnson; and
	•		participate in discussions or negotiations regarding such superior proposal.

     The merger agreement provides that:

	•		the term “takeover proposal” means any inquiry, proposal or offer from any person relating to, or that would reasonably be expected to lead to, any direct or indirect acquisition or purchase, in one transaction or a series of transactions, of assets or businesses that constitute 15% or more of our revenues, net income or assets, taken as a whole, or 15% or more of any class of our equity securities, any tender offer or exchange offer that if completed would result in any person beneficially owning 15% or more of any class of our equity securities, or any merger, consolidation, business combination, recapitalization, liquidation, dissolution, joint venture, binding share exchange or similar transaction involving us pursuant to which any person or the stockholders of any person would own 15% or more of any class of our equity securities or of any resulting parent company of us, other than the transactions contemplated by the merger agreement and the stockholder agreement; and
	•		the term “superior proposal” means a bona fide offer made by a third party that if completed would result in the third party (or its stockholders) owning, directly or indirectly, all or substantially all of (A) our common stock then outstanding, (B) common stock of the surviving entity in a merger or the direct or indirect parent of the surviving entity in a merger, or (C) our assets, in each case, which our board of directors determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) to be (1) more favorable to our stockholders from a financial point of view than the merger, taking into account all the terms and conditions of such proposal as compared to the merger agreement (including any changes to the financial terms of the merger agreement proposed by Johnson & Johnson in response to such offer or otherwise), and (2) reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal.

     The merger agreement further provides that neither our board of directors nor any committee of our board of directors will:

	•		withdraw (or modify in a manner adverse to Johnson & Johnson), or publicly propose to withdraw (or modify in a manner adverse to Johnson & Johnson), the approval, recommendation or declaration of advisability by our board of directors or such committee of our board of directors of the merger agreement, the merger or the other transactions contemplated by the merger agreement; or recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any takeover proposal (any such action being a “Company Adverse Recommendation Change”); or
	•		approve or recommend, or propose to approve or recommend, or allow us or any of our affiliates to execute or enter into, any letter of intent, memorandum of

understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement constituting or related to, or that is intended to or would reasonably be expected to lead to, any takeover proposal, other than a customary confidentiality agreement to facilitate the disclosure of information about us to any person making a superior proposal, as described above.

     However, at any time prior to the time stockholder approval is obtained, our board of directors may make a Company Adverse Recommendation Change if it determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) that it is required to do so in order to comply with its fiduciary duties to our stockholders under applicable law; provided, however, that before doing so, our board of directors is required to give Johnson & Johnson four business days prior written notice (which notice must state the reasons for the change, including the terms and conditions of any superior proposal that is the basis of the proposed action by our board of directors), and is required to take into account any changes to the financial terms of the merger agreement proposed by Johnson & Johnson in response to such notice or otherwise before making a Company Adverse Recommendation Change.

     If our board of directors, or any committee of our board of directors, makes a Company Adverse Recommendation Change, Johnson & Johnson is entitled to terminate the merger agreement.

     If Johnson & Johnson terminates the merger agreement in this circumstance, we must pay Johnson & Johnson a fee in the amount of $19.7 million. See “—Termination” and “—Fees and Expenses.

Termination

     The merger agreement may be terminated at any time prior to the effective time of the merger, regardless of whether our stockholders have approved the adoption of the merger agreement:

	•		by mutual written consent of Johnson & Johnson, Emerald Merger Sub, Inc. and us;
	•		by either Johnson & Johnson or us if the merger has not been completed on or before June 15, 2006; provided, however, that this right to terminate the merger agreement is not available to any party whose breach of a representation or warranty or whose action or failure to act has been a principal cause of or resulted in the failure of the merger to be completed on or before June 15, 2006;
	•		by either Johnson & Johnson or us if any restraining order, injunction or other court order or statute, law, rule, legal restraint or prohibition:

	•		prevents the completion of the merger, or
	•		has had or would reasonably be expected to have a material adverse effect on us is in effect and has become final and nonappealable;

	•		by either Johnson & Johnson or us, if our stockholders do not approve the adoption of the merger agreement at the special meeting, or at any adjournment or postponement thereof;
	•		by Johnson & Johnson if we have breached or failed to perform any of our representations, warranties, covenants or agreements set forth in the merger agreement, if the breach or failure to perform:

	•		would give rise to the failure of the closing conditions relating to our representations and warranties, and our covenants or agreements described under the caption “—Conditions to the Completion of the Merger”, and
	•		is incapable of being cured by us, or is not cured, within 30 calendar days following receipt of written notice of such breach or failure to perform from Johnson & Johnson;

•

by Johnson & Johnson, if a restraining order, injunction or other court order or statute, law, rule, legal restraint or prohibition:

	•		challenging the acquisition by Johnson & Johnson or Emerald Merger Sub, Inc. of any shares of our common stock, seeking to restrain or prohibit the completion of the merger, or seeking to place limitations on the ownership of shares of our common stock (or shares of common stock of the surviving corporation) by Johnson & Johnson or Emerald Merger Sub, Inc., or seeking to obtain from Johnson & Johnson, Emerald Merger Sub, Inc. or us any damages that are material in relation to us,
	•		seeking to prohibit or materially limit the ownership or operation by us or Johnson & Johnson, or their subsidiaries, of any portion of our or their respective businesses or assets or to compel us, Johnson & Johnson, or their subsidiaries, to divest or hold separate any portion of our or their respective businesses or assets, as a result of the merger,
	•		seeking to prohibit Johnson & Johnson or its subsidiaries from effectively controlling in any material respect our business or operations, or
	•		otherwise having, or being reasonably expected to have, a material adverse effect is in effect and has become final and nonappealable;

•

by us, if Johnson & Johnson has breached or failed to perform any of its representations, warranties, covenants or agreements set forth in the merger agreement, if the breach or failure to perform:

•

gives rise to the failure of the closing conditions relating to Johnson & Johnson’s representations and warranties, and covenants or agreements described under the caption “—Conditions to the Completion of the Merger”, and

•

is incapable of being cured, or is not cured, by Johnson & Johnson within 30 calendar days following receipt of written notice of such breach or failure to perform from us; or

•

by Johnson & Johnson, in the event that prior to the obtaining of stockholder approval:

	•		a Company Adverse Recommendation Change shall have occurred; or
	•		our board of directors fails publicly to reaffirm its recommendation of the merger agreement, the merger or the other transactions contemplated by the merger agreement within 10 business days of receipt of a written request by Johnson & Johnson to provide such reaffirmation following a takeover proposal.

Amendment, Extension and Waiver

     Subject to applicable law:

	•		the merger agreement may be amended by mutual consent of the parties in writing at any time, except that after the merger agreement has been adopted by our stockholders, no amendment may be entered into which requires approval by such stockholders unless such further approval is obtained; and
	•		at any time prior to the effective time of the merger, a party may, by written instrument signed on behalf of such party, extend the time for performance of the obligations of any other party to the merger agreement, waive inaccuracies in representations and warranties of any other party contained in the merger agreement or in any related document and waive compliance by any other party with any agreement or condition in the merger agreement.

Assignment

     The merger agreement provides that Johnson & Johnson may assign its interests and obligations under the merger agreement to any of its direct or indirect wholly owned subsidiaries and that Emerald Merger Sub, Inc. may assign its interest and obligations under the merger agreement to Johnson & Johnson or any of Johnson & Johnson’s direct or indirect wholly owned subsidiaries. However, no such assignment shall relieve Johnson & Johnson or Emerald Merger Sub, Inc., as applicable, of any of their obligations under the merger agreement and they shall remain secondarily liable with respect to such obligations.

Fees and Expenses

     The merger agreement generally provides that each party will pay its own fees and expenses in connection with the merger agreement and the transactions described in the merger agreement, whether or not the merger is completed. However, we must pay Johnson & Johnson a $19.7 million termination fee if:

•

the merger agreement is terminated by Johnson & Johnson pursuant to its right described in the last major bullet point under the heading “—Termination”; or

•

prior to obtaining stockholder approval, we or our stockholders receive a takeover proposal or a takeover proposal otherwise becomes publicly known or any person publicly announces an intention, whether or not conditional, to make a takeover proposal, the merger agreement is terminated by either Johnson & Johnson or us because either (1) a vote in respect of the adoption of the merger agreement has not been taken at the special meeting of our stockholders on or before June 15, 2006 or (2) our stockholders have not adopted the merger agreement at the special meeting and, within 12 months after such termination, we complete, or enter into a definitive agreement to complete, the transactions described in any takeover proposal.

STOCKHOLDER AGREEMENT

The following description summarizes the material provisions of the stockholder agreement and is qualified in its entirety by reference to the complete text of the stockholder agreement. The stockholder agreement included in this proxy statement as Annex B contains the complete terms of that agreement and stockholders should read it carefully and in its entirety.

Voting Arrangements and Related Provisions

     In connection with the execution of the merger agreement, certain of our stockholders (one of which is a director) entered into a stockholder agreement with Johnson & Johnson. The stockholders have agreed to vote shares of our common stock (together representing approximately 29.64% of the outstanding shares of our common stock as of the record date) in favor of the adoption of the merger agreement, the approval of the merger and the approval of the other transactions described in the merger agreement.

     Each of these stockholders also agreed to vote these shares of our common stock held by that stockholder against the following actions:

	•		any merger agreement or merger or similar transaction or takeover proposal as described in “The Merger Agreement—No Solicitation”; and
	•		any amendment to our amended and restated certificate of incorporation or bylaws or any other proposed action or transaction that would impede, frustrate, prevent or nullify the merger, the merger agreement or the transactions described in the merger agreement.

     In connection with the stockholder agreement, the stockholders further agreed not to:

	•		sell, transfer, pledge, assign or otherwise dispose of these shares of our common stock or enter into any contract or other arrangement with respect to the sale, transfer, pledge, assignment or disposition of these shares of our common stock; provided, however, such shares may be sold, transferred or assigned by the stockholders to members of such stockholder’s family or family trust or to a charitable institution or, by a stockholder that is a family trust to a grantor or beneficiary of that trust, if, in each case, the transferee agrees to be bound by the terms of the stockholder agreement;
	•		enter into voting arrangements whether by proxy, voting agreement or otherwise with respect to these shares of our common stock;
	•		solicit, initiate, encourage or otherwise facilitate, any inquiries or the making of any proposal that constitutes or would reasonably be expected to lead to a takeover proposal, as described in “The Merger Agreement—No Solicitation”, or enter into any agreement, or engage in or continue any discussions, or furnish any information with respect to, a takeover proposal;
	•		take any action to revoke or terminate a revocable trust or take any action which would restrict, limit or frustrate the merger agreement or the transactions described in the merger agreement; or
	•		exercise any rights of appraisal or dissent.

     Each of the parties to the stockholder agreement has irrevocably granted to, and appointed Johnson & Johnson and Richard S. Dakers, James J. Bergin and Steven M. Rosenberg, in their respective capacities as officers or authorized representatives of Johnson & Johnson and any individual who succeeds any of them, and each of them individually, and any individual designated in writing by any of them, as that party’s proxy and attorney-in-fact to vote, or grant a consent with respect to, that party’s shares of our common stock which are subject to the stockholder agreement in favor of the adoption and approval of the merger agreement and the merger and the other transactions described therein and against certain alternative transactions.

Termination

     The stockholder agreement generally terminates on the earlier of the effective date of the merger, the date of termination of the merger agreement or, at the option of any stockholder, upon any amendment, modification, change or waiver to the merger agreement subsequent to the date of the stockholder agreement that results in any decrease in the price to be paid per share for each share of our common stock.

STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS

     The following table and notes set forth information with respect to the beneficial ownership of shares of our common stock by each of our directors and executive officers, by such persons as a group, and by any other stockholder that is known to us to be the beneficial owner of 5% or more of our common stock. Unless otherwise indicated, the information is as of December 16, 2005 and is based upon information furnished to us by such persons or entities. For purposes of this table, and as used elsewhere in this proxy statement, the term “beneficial owner” means any person who, directly or indirectly, has or shares the power to vote, or to direct the voting of, a security or the power to dispose, or to direct the disposition of, a security or has the right to acquire shares within sixty (60) days.

						Percentage
		Number of Shares of Common				of Common Stock
Name of Beneficial Owner (a)		Stock Beneficially Owned				Outstanding
Named Executive Officers and Directors
Katherine D. Crothall (1)			2,893,184				13.9	%
Richard A. Baron (2)			21,334				*
Audrey Finkelstein			—				*
James McGee			1,301				*
Doug Schumer			—				*
Eric Ian Schwartz			—				*
Daniel Sunday			111				*
Doug Woodruff			122				*
Edward Cahill (3)			901,885				4.5	%
Graeme Crothall (4)			2,893,184				13.9	%
William A. Graham, IV (5)			1,735,809				8.7	%
David Joseph			—				*
John J. McDonough			—				*
Thomas Morse (6)			571,983				2.9	%
A. Peter Parsons (7)			369,710				2.0	%
All Other 5% Stockholders
Johnson & Johnson (8)			6,153,393				26.6	%
Johnson & Johnson Development Corporation (9)			1,616,488				7.8	%
Delaware Management Holdings Inc. (10)			1,359,743				6.6	%
All directors and executive officers as a group (15 persons)			6,144,967				29.6	%

OTHER MATTERS

     As of the date of this proxy statement, we know of no matters that will be presented for consideration at the special meeting other than as described in this proxy statement.

FUTURE STOCKHOLDER PROPOSALS

     Our 2006 annual meeting of stockholders is not yet scheduled to take place. We will hold the 2006 annual meeting of our stockholders only if the merger is not completed. The deadline for submission of stockholder proposals for inclusion in our proxy materials for the 2006 annual meeting was December 16, 2005. If the merger is not completed, under Rule 14a-8 of the Securities Exchange Act of 1934, as amended, our stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the 2006 annual meeting by submitting their proposal in writing to our Secretary.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     The information contained in this proxy statement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include statements about our ability to complete the merger.

     When used in this proxy statement, we intend the words “may”, “believe”, “anticipate”, “plan”, “expect”, “predict”, “estimate”, “require”, “intend” and similar words to identify “forward-looking statements.” These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements, to be far different from that suggested by our forward-looking statements. Such risks and uncertainties include our inability to complete the merger and the other risks and factors identified from time to time in reports we file with the Securities and Exchange Commission or in public statements issued by us. You should not place undue reliance on our forward-looking statements. We disclaim any obligation to update any of these factors or to publicly announce the results of any revisions to any of these forward-looking statements, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file with the Securities and Exchange Commission at the facilities of the Securities and Exchange Commission located at 100 F Street, N.E., Washington, D.C. 20549 or at the offices of the National Association of Securities Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20006. Please call the Securities and Exchange Commission at 1 800-SEC-0330 for further information on its public reference rooms. Our Securities and Exchange Commission filings also are available to the public at its website at http://www.sec.gov.

     THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN SUCH JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION

CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. 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                                                              , 2006. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.

     THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY INDICATES THAT ANOTHER DATE APPLIES.

ANNEX A —AGREEMENT AND PLAN OF MERGER

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

Dated as of December 16, 2005,

Among

JOHNSON & JOHNSON,

EMERALD MERGER SUB, INC.

And

ANIMAS CORPORATION

TABLE OF CONTENTS

		Page
ARTICLE I
The Merger
SECTION 1.01. The Merger			1
SECTION 1.02. Closing			1
SECTION 1.03. Effective Time			2
SECTION 1.04. Effects of the Merger			2
SECTION 1.05. Certificate of Incorporation and By-laws			2
SECTION 1.06. Directors			2
SECTION 1.07. Officers			2
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock			3
SECTION 2.02. Exchange of Certificates			4
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company			6
SECTION 3.02. Representations and Warranties of Parent and Sub			33
ARTICLE IV
Covenants Relating to Conduct of Business; No Solicitation
SECTION 4.01. Conduct of Business			35
SECTION 4.02. No Solicitation			40
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Proxy Statement; Stockholders’ Meeting			43
SECTION 5.02. Access to Information; Confidentiality			44

				Page
SECTION 5.03.		Commercially Reasonable Efforts		44
SECTION 5.04.		Company Stock Options; ESPP; Warrants		45
SECTION 5.05.		Indemnification; Advancement of Expenses; Exculpation and Insurance		47
SECTION 5.06.		Fees and Expenses		48
SECTION 5.07.		Public Announcements		48
SECTION 5.08.		Stockholder Litigation		49
SECTION 5.09.		Employee Matters		49
SECTION 5.10.		Stockholder Agreement Legend		50
SECTION 5.11.		Certain Other Actions		50
		ARTICLE VI
		Conditions Precedent
SECTION 6.01.		Conditions to Each Party’s Obligation to Effect the Merger		50
SECTION 6.02.		Conditions to Obligations of Parent and Sub		51
SECTION 6.03.		Conditions to Obligation of the Company		52
SECTION 6.04.		Frustration of Closing Conditions		52
		ARTICLE VII
		Termination, Amendment and Waiver
SECTION 7.01.		Termination		53
SECTION 7.02.		Effect of Termination		54
SECTION 7.03.		Amendment		54
SECTION 7.04.		Extension; Waiver		54
SECTION 7.05.		Procedure for Termination or Amendment		54
		ARTICLE VIII
		General Provisions
SECTION 8.01.		Nonsurvival of Representations and Warranties		54
SECTION 8.02.		Notices		55
SECTION 8.03.		Definitions		56
SECTION 8.04.		Interpretation		57
SECTION 8.05.		Consents and Approvals		57
SECTION 8.06.		Counterparts		57
SECTION 8.07.		Entire Agreement; No Third-Party Beneficiaries		57
SECTION 8.08.		GOVERNING LAW		57
SECTION 8.09.		Assignment		58
SECTION 8.10.		Specific Enforcement; Consent to Jurisdiction		58
SECTION 8.11.		Waiver of Jury Trial		58
SECTION 8.12.		Severability		58

-ii-

		Page
Annex I Index of Defined Terms
Exhibit A Restated Certificate of Incorporation of the Surviving Corporation

-iii-

          AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of December 16, 2005, among JOHNSON & JOHNSON, a New Jersey corporation (“Parent”), EMERALD MERGER SUB, INC., a Delaware corporation and a wholly owned Subsidiary of Parent (“Sub”), and ANIMAS CORPORATION, a Delaware corporation (the “Company”).

          WHEREAS the Board of Directors of each of the Company and Sub has approved and declared advisable, and the Board of Directors of Parent has approved, this Agreement and the merger of Sub with and into the Company (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding share of common stock, par value $0.01 per share, of the Company (“Company Common Stock”), other than (i) shares of Company Common Stock directly owned by Parent, Sub or the Company and (ii) the Appraisal Shares, will be converted into the right to receive $24.50 in cash;

          WHEREAS simultaneously with the execution and delivery of this Agreement and as a condition to Parent’s willingness to enter into this Agreement, Parent and certain stockholders of the Company (the “Principal Stockholders”) entered into an agreement (the “Stockholder Agreement”) pursuant to which the Principal Stockholders agreed to vote to, approve and adopt this Agreement and to take certain other actions in furtherance of the consummation of the Merger upon the terms and subject to the conditions set forth in the Stockholder Agreement; and

          WHEREAS Parent, 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.

          NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement, and subject to the conditions set forth herein, the parties hereto agree as follows:

ARTICLE I

The Merger

          SECTION 1.01. The Merger. 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 “DGCL”), Sub shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Sub shall cease and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”) and shall succeed to and assume all the rights and obligations of Sub in accordance with the DGCL.

          SECTION 1.02. Closing. The closing of the Merger (the “Closing”) will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later

shall deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto.

          (h) Withholding Rights. Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as Parent, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Paying Agent.

ARTICLE III

Representations and Warranties

          SECTION 3.01. Representations and Warranties of the Company. Except as set forth in the disclosure schedule (with specific reference to the particular Section or subsection of this Agreement to which the information set forth in such disclosure schedule relates; provided, however, that any information set forth in one section of the Company Disclosure Schedule shall be deemed to apply to each other Section or subsection thereof or hereof to which its relevance is readily apparent on its face) delivered by the Company to Parent prior to the execution of this Agreement (the “Company Disclosure Schedule”), the Company represents and warrants to Parent and Sub as follows:

     (a) Organization, Standing and Corporate Power. Each of the Company and its Subsidiaries has been duly organized, and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as the case may be, and has all requisite power and authority and possesses all governmental licenses, permits, authorizations and approvals necessary to enable it to use its corporate or other name and to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as presently conducted and as currently proposed by its management to be conducted, except where the failure to have such government licenses, permits, authorizations or approvals individually or in the aggregate has not had and would not

reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. The Company has made available to Parent, prior to the execution of this Agreement, complete and accurate copies of the Company Certificate and its Amended and Restated By-laws (as amended, the “Company By-laws”), and the comparable organizational documents of each of its Subsidiaries, in each case as amended to the date hereof. The Company has made available to Parent complete and accurate copies of the minutes (or, in the case of minutes that have not yet been finalized, drafts thereof) of all meetings of the stockholders of the Company and each of its Subsidiaries, the Board of Directors of the Company and each of its Subsidiaries and the committees of each of such Board of Directors, in each case held since January 1, 2002 and prior to the date hereof.

     (b) Subsidiaries. Section 3.01(b) of the Company Disclosure Schedule lists each of the Subsidiaries of the Company and, for each such Subsidiary, the jurisdiction of incorporation or formation and, as of the date hereof, each jurisdiction in which such Subsidiary is qualified or licensed to do business. All the issued and outstanding shares of capital stock of, or other equity interests in, each such Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company free and clear of all pledges, liens, charges, encumbrances or security interests of any kind or nature whatsoever (collectively, “Liens”), and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other equity interests. Except for the capital stock of, or voting securities or equity interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock of, or other voting securities or equity interests in, any corporation, partnership, joint venture, association or other entity.

     (c) Capital Structure. The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock and 10,000,000 shares of preferred stock, par value $0.01 per share (“Company Preferred Stock”). At the close of business on December 13, 2005, (i) 20,763,330 shares of Company Common Stock were issued and outstanding, (ii) 0 shares of Company Common Stock were held by the Company in its treasury, (iii) 10,266,667 shares of Company Common Stock were reserved for issuance pursuant to the 1996 Incentive Stock Plan, the 1998 Equity Compensation Plan, the 2004 Equity Incentive Plan and the 2004 Employee Stock Purchase Plan (the “ESPP”, and such plans, collectively, the “Company Stock Plans”), of which 2,118,891 shares of Company Common Stock were subject to outstanding Company Stock Options, (iv) no shares of Company Preferred Stock were issued or outstanding or were held by the Company as treasury shares and (v) warrants to acquire 78,900 shares of Company Common Stock from the Company pursuant to the warrant agreements set forth on Schedule 3.01(c) of the Company Disclosure Schedule and previously delivered in complete and correct form to Parent (the “Warrants”) were issued and outstanding. Except as set forth above in this Section 3.01(c), at the close of business on December 13, 2005, no

shares of capital stock or other voting securities or equity interests of the Company were issued, reserved for issuance or outstanding. There are no outstanding shares of Company Common Stock or Company Preferred Stock subject to vesting or restrictions on transfer, stock appreciation rights, “phantom” stock rights, performance units, rights to receive shares of Company Common Stock on a deferred basis or other rights (other than Company Stock Options and Warrants) that are linked to the value of Company Common Stock (collectively, but exclusive of rights under the ESPP, “Company Stock-Based Awards”). Section 3.01(c) of the Company Disclosure Schedule sets forth a complete and accurate list, as of December 13, 2005, of all outstanding options to purchase shares of Company Common Stock (collectively, but exclusive of rights under the ESPP, “Company Stock Options”) under the Company Stock Plans or otherwise, and all outstanding Warrants, the number of shares of Company Common Stock (or other stock) subject thereto, the grant dates, expiration dates, exercise or base prices (if applicable) and vesting schedules thereof and the names of the holders thereof. All (i) outstanding shares of Company Common Stock in respect of which the Company has a right under specified circumstances to repurchase such shares by the Company at a fixed purchase price and (ii) Company Stock Options are evidenced by stock option agreements or other award agreements, in each case in the forms set forth in Section 3.01(c) of the Company Disclosure Schedule, and no stock option agreement, restricted stock purchase agreement or other award agreement contains terms that are inconsistent with such forms. Each Company Stock Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies and the exercise price of each other Company Stock Option is no less than the fair market value of a share of Company Common Stock as determined on the date of grant of such Company Stock Option. As of the close of business on December 13, 2005, there were outstanding Company Stock Options to purchase 2,118,891 shares of Company Common Stock with exercise prices on a per share basis lower than the Merger Consideration, and the weighted average exercise price of such Company Stock Options was equal to $11.40. The maximum number of shares of Company Common Stock that could be purchased with accumulated payroll deductions under the ESPP at the close of business on December 31, 2005 (assuming the fair market value of a share of Company Common Stock on such date is equal to the Merger Consideration and payroll deductions continue at the current rate) is 10,870. As of the close of business on December 13, 2005, there were outstanding Warrants to purchase 78,900 shares of Company Common Stock with exercise prices on a per share basis lower than the Merger Consideration. Each Company Stock Option may, by its terms, be canceled in connection with the transactions contemplated hereby for a lump sum cash payment in accordance with and to the extent required by Section 5.04(a). All Warrants may, by their terms, be canceled in exchange for a lump sum cash payment in accordance with and to the extent required by Section 5.04(c). All outstanding shares of capital stock of the Company are, and all shares which may be issued pursuant to the Company Stock Options, the Warrants or rights under the ESPP will be, when issued in accordance with the

terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above in this Section 3.01(c), (x) there are not issued, reserved for issuance or outstanding (A) any shares of capital stock or other voting securities or equity interests of the Company, (B) any securities of the Company convertible into or exchangeable or exercisable for shares of capital stock or other voting securities or equity interests of the Company or (C) any warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company and (y) there are not any outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such securities or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Neither the Company nor any of its Subsidiaries is a party to any voting agreement with respect to the voting of any such securities. Except as set forth above in this Section 3.01(c), there are no outstanding (1) securities of the Company or any of its Subsidiaries convertible into or exchangeable or exercisable for shares of capital stock or voting securities or equity interests of any Subsidiary of the Company, (2) warrants, calls, options or other rights to acquire from the Company or any of its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to issue, any capital stock, voting securities, equity interests or securities convertible into or exchangeable or exercisable for capital stock or voting securities of any Subsidiary of the Company or (3) obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any such outstanding securities of any Subsidiary of the Company or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities of any Subsidiary of the Company.

     (d) Authority; Noncontravention. The Company has all requisite corporate power and authority to execute and deliver this Agreement and, subject to receipt of the Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to the obtaining of the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy,

insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies. The Board of Directors of the Company, at a meeting duly called and held at which all directors of the Company were present, duly and unanimously adopted resolutions (i) approving and declaring advisable this Agreement, the Merger and the other transactions contemplated by this Agreement, (ii) declaring that it is in the best interests of the stockholders of the Company that the Company enter into this Agreement and consummate the Merger and the other transactions contemplated by this Agreement on the terms and subject to the conditions set forth in this Agreement, (iii) directing that the adoption of this Agreement be submitted as promptly as practicable to a vote at a meeting of the stockholders of the Company and (iv) recommending that the stockholders of the Company adopt this Agreement, which resolutions, as of the date of this Agreement, have not been subsequently rescinded, modified or withdrawn in any way. The execution and delivery of this Agreement do not, and the consummation of the Merger and the other transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties or other assets of the Company or any of its Subsidiaries under, (x) the Company Certificate or the Company By-laws or the comparable organizational documents of any of its Subsidiaries, (y) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease or other contract, agreement, obligation, commitment, arrangement, understanding, instrument, permit, franchise or license, whether oral or written (each, including all amendments thereto, a “Contract”), to which the Company or any of its Subsidiaries is a party or any of their respective properties or other assets is subject or (z) subject to (i) the Stockholder Approval and (ii) the governmental filings and the other matters referred to in the following sentence, any (A) statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or other assets or (B) order, writ, injunction, decree, judgment or stipulation, in each case applicable to the Company or any of its Subsidiaries or their respective properties or other assets, other than, in the case of clauses (y) and (z), any such conflicts, violations, breaches, defaults, rights, losses or Liens that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Federal, state, local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental self-regulatory agency, commission or authority (each, a “Governmental Entity”) is required by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation of the Merger or the other transactions contemplated by this Agreement, except for

(1) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (including the rules and regulations promulgated thereunder, the “HSR Act”), and the receipt, termination or expiration, as applicable, of approvals or waiting periods required under the HSR Act or any other applicable competition, merger control, antitrust or similar law or regulation, (2) the filing with the Securities and Exchange Commission (the “SEC”) of (A) a proxy statement relating to the adoption by the stockholders of the Company of this Agreement (as amended or supplemented from time to time, the “Proxy Statement”) and (B) such reports under the Securities Exchange Act of 1934, as amended (including the rules and regulations promulgated thereunder, the “Exchange Act”), as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (3) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware and appropriate documents with the relevant authorities of other states in which the Company or any of its Subsidiaries is qualified to do business, (4) any filings required under the rules and regulations of the Nasdaq National Market and (5) such other consents, approvals, orders, authorizations, actions, registrations, declarations and filings the failure of which to be obtained or made individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect.

     (e) Company SEC Documents. (i) The Company has filed all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) with the SEC required to be filed by the Company since May 11, 2004 (such documents, together with any documents filed during such period by the Company with the SEC on a voluntary basis on Current Reports on Form 8-K, the “Company SEC Documents”). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the provisions of the Securities Act of 1933, as amended (including the rules and regulations promulgated thereunder, the “Securities Act”), the Exchange Act, and the Sarbanes-Oxley Act of 2002 (including the rules and regulations promulgated thereunder, “SOX”) applicable to such Company SEC Documents, and none of the Company SEC Documents 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. Except to the extent that information contained in any Company SEC Document has been revised, amended, supplemented or superseded by a later-filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits 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 were made, not misleading, which individually or in the aggregate would require an amendment, supplement or corrective filing to any such Company SEC Document. Each of the financial statements (including any related notes) of the Company included in the Company SEC Documents

complied at the time it was filed as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect at the time of filing, has been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented 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 then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as disclosed in the Company SEC Documents filed by the Company on or after January 1, 2005 and publicly available prior to the date of this Agreement, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which individually or in the aggregate have had or would reasonably be expected to have a Material Adverse Effect. None of the Subsidiaries of the Company are, or have at any time, been subject to the reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.

     (ii) Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all applicable certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of SOX with respect to the Company SEC Documents, and the statements contained in such certifications are true and accurate. For purposes of this Agreement, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX. None of the Company or any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

     (iii) The Company maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, consistently applied, (B) that transactions are executed only in accordance with the authorization of management and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s assets.

     (iv) The “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) utilized by the Company are reasonably designed to ensure that all information (both financial and non-financial) 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 the rules and forms of the SEC, and that all such information required to be disclosed is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to enable the chief executive officer and chief financial officer of the Company to make the certifications required under the Exchange Act with respect to such reports.

     (v) Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand or any “off balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of its Subsidiaries in the Company’s or such Subsidiary’s published financial statements or other Company SEC Documents.

     (vi) Since January 1, 2003, the Company has not received any oral or written notification of any (x) “significant deficiency” or (y) “material weakness” in the Company’s internal controls over financial reporting. There is no outstanding “significant deficiency” or “material weakness” which the Company’s independent accountants certify has not been appropriately and adequately remedied by the Company. For purposes of this Agreement, the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them in Release 2004-001 of the Public Company Accounting Oversight Board, as in effect on the date hereof.

     (f) Information Supplied. None of the information supplied or to be supplied by or on behalf of the Company specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the stockholders of the Company and at the time of the Stockholders’ Meeting, 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, except that no representation, warranty or covenant is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by or on behalf of Parent or Sub in writing specifically for inclusion or incorporation by reference in the Proxy Statement. The Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act.

     (g) Absence of Certain Changes or Events. Except for liabilities incurred in connection with this Agreement and except as disclosed in the Company SEC Documents filed by the Company and publicly available prior to the date of this Agreement (the “Filed Company SEC Documents”) or as expressly permitted pursuant to Section 4.01(a)(i) through (xvi), since the date of the most recent audited financial statements included in the Filed Company SEC Documents, the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice, and there has not been any Material Adverse Change, and from such date until the date hereof there has not been (i) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any capital stock of the Company or any of its Subsidiaries, (ii) any purchase, redemption or other acquisition by the Company or any of its Subsidiaries of any shares of capital stock or any other securities of the Company or any of its Subsidiaries or any options, warrants, calls or rights to acquire such shares or other securities, (iii) any split, combination or reclassification of any capital stock of the Company or any of its Subsidiaries or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of their respective capital stock, (iv) (A) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or consultant of the Company or its Subsidiaries of any increase in compensation, bonus or fringe or other benefits or any granting of any type of compensation or benefits to any current or former director, officer, employee or consultant not previously receiving or entitled to receive such type of compensation or benefit, except for normal increases in cash compensation in the ordinary course of business consistent with past practice or as was required under any Company Benefit Agreement or Company Benefit Plan in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, (B) any granting by the Company or any of its Subsidiaries to any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries of any right to receive any increase in severance or termination pay, or (C) any entry by the Company or any of its Subsidiaries into, or any amendments of (1) any employment, deferred compensation, consulting, severance, change of control, termination or indemnification agreement or any other agreement, plan or policy with or involving any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries or (2) any agreement with any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries, the benefits of which are contingent, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company of a nature contemplated by this Agreement (all such agreements under this clause (C), collectively, “Company Benefit Agreements”), (D) any adoption of, any amendment to or any termination of any Company Benefit Plan, or (E) any payment of any benefit under, or the grant of any award under, or any amendment to, or termination of, any bonus, incentive, performance or other compensation plan or arrangement, Company Benefit

Agreement or Company Benefit Plan (including in respect of stock options, “phantom” stock, stock appreciation rights, restricted stock, “phantom” stock rights, restricted stock units, deferred stock units, performance stock units or other stock-based or stock-related awards or the removal or modification of any restrictions in any Company Benefit Agreement or Company Benefit Plan or awards made thereunder) except for normal increases in cash compensation in the ordinary course of business consistent with past practice or as required to comply with applicable law or any Company Benefit Agreement or Company Benefit Plan in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, (v) any damage, destruction or loss to any asset of the Company or any of its Subsidiaries, whether or not covered by insurance, that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, (vi) any change in accounting methods, principles or practices by the Company materially affecting its assets, liabilities or businesses, except insofar as may have been required by a change in GAAP or (vii) any material tax election or any settlement or compromise of any material income tax liability.

     (h) Litigation. Except as disclosed in the Filed Company SEC Documents, there is no suit, action or proceeding pending or, to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective assets that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against, or, to the Knowledge of the Company, investigation by any Governmental Entity involving, the Company or any of its Subsidiaries or any of their respective assets that individually or in the aggregate has had or would reasonably be expected to have a Material Adverse Effect.

     (i) Contracts. (i) Except as disclosed in the Filed Company SEC Documents and except with respect to licenses and other agreements relating to intellectual property, which are the subject of Section 3.01(p), as of the date hereof, neither the Company nor any of its Subsidiaries is a party to, and none of their respective properties or other assets is subject to, any Contract that is of a nature required to be filed as an exhibit to a report or filing under the Securities Act or the Exchange Act and the rules and regulations promulgated thereunder. None of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under) any Contract, to which it is a party or by which it or any of its properties or other assets is bound, except for violations or defaults that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. None of the Company or any of its Subsidiaries has entered into any Contract with any Affiliate of the Company that is currently in effect other than agreements that are

disclosed in the Filed Company SEC Documents. None of the Company or any of its Subsidiaries is a party to or otherwise bound by any agreement or covenant (A) restricting the Company’s or any of its Affiliates’ ability to compete or by any agreement or covenant restricting in any respect the research, development, distribution, sale, supply, license, marketing or manufacturing of products or services of the Company or any of its Affiliates, (B) containing a right of first refusal, right of first negotiation or right of first offer or (C) containing any material indemnity obligations to third parties.

     (ii) Each employee, contractor or consultant of the Company and its Subsidiaries who has proprietary knowledge of or information relating to the manufacturing processes, or the formulation of the products, of the Company or any of its Subsidiaries has executed and delivered to the Company or the applicable Subsidiary of the Company an agreement or agreements, substantially in the form(s) set forth in Section 3.01(i)(ii) of the Company Disclosure Schedule, restricting such person’s right to (A) use and disclose confidential information of the Company or any of its Subsidiaries and (B) enter into certain employment, consulting or similar contractual relationships with companies that are competitors of the Company and its Subsidiaries for a specified period of time.

     (j) Compliance with Laws; Environmental Matters. (i) Except with respect to Environmental Laws, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and taxes, which are the subjects of Sections 3.01(j)(ii), 3.01(l) and 3.01(n), respectively, and except as set forth in the Filed Company SEC Documents, each of the Company and its Subsidiaries is in compliance with all statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of any Governmental Entity applicable to it, its properties or other assets or its business or operations (collectively, “Legal Provisions”), except for failures to be in compliance that individually or in the aggregate have not had and would not reasonably be expected to have a Material Adverse Effect. Each of the Company and its Subsidiaries has in effect all approvals, authorizations, certificates, filings, franchises, licenses, notices and permits of or with all Governmental Entities (collectively, “Permits”), including all Permits under the Federal Food, Drug and Cosmetic Act of 1938, as amended (including the rules and regulations promulgated thereunder, the “FDCA”), and the regulations of the Federal Food and Drug Administration (the “FDA”) promulgated thereunder, necessary for it to own, lease or operate its properties and other assets and to carry on its business and operations as presently conducted and as currently proposed by its management to be conducted, except where the failure to have such Permits individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. There has occurred no default under, or violation of, any such Permit, except for any such default or violation that individually or in the aggregate has not had and would not reasonably be expected to have a Material Adverse Effect. The consummation of the Merger, in and of itself, would not cause the revocation or cancellation of any such Permit that

individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. To the Knowledge of the Company, no material action, demand, requirement or investigation by any Governmental Entity and no material suit, action or proceeding by any other person, in each case with respect to the Company or any of its Subsidiaries or any of their respective properties or other assets under any Legal Provision, is pending or threatened.

     (ii) Except for those matters disclosed in the Filed Company SEC Documents: (A) each of the Company and its Subsidiaries is, and has been, in compliance in all material respects with all Environmental Laws and has obtained and complied with all material Permits required under any Environmental Laws to own, lease or operate its properties or other assets and to carry on its business and operations as presently conducted and as currently proposed by its management to be conducted; (B) to the Knowledge of the Company, there have been no Releases or threatened Releases of Hazardous Materials in, on, under or affecting any properties currently or formerly owned, leased or operated by the Company or any of its Subsidiaries that would require investigation or clean-up under Environmental Laws; (C) there is no material investigation, suit, claim, action or proceeding pending, or to the Knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries relating to or arising under Environmental Laws, and neither the Company nor any of its Subsidiaries has received any notice of any such investigation, suit, claim, action or proceeding; (D) neither the Company nor any of its Subsidiaries is subject to material restrictions on the sale or distribution of its products as a result of any existing, pending or proposed requirement of Environmental Law and such products are not subject to material restrictions regarding post-consumer use handling or recycling; (E) neither the Company nor any of its Subsidiaries has entered into or assumed by contract or operation of law or otherwise, any material obligation, liability, order, settlement, judgment, injunction or decree relating to or arising under Environmental Laws; and (F) there are no facts, circumstances or conditions that would reasonably be expected to form the basis for any material investigation, suit, claim, action, proceeding or liability against or affecting the Company or any of its Subsidiaries relating to or arising under Environmental Laws. The term “Environmental Laws” means all applicable Federal, state, local and foreign laws (including common law), statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices, Permits, treaties or binding agreements issued, promulgated or entered into by any Governmental Entity, relating in any way to the environment, preservation or reclamation of natural resources or endangered species, the presence, management, Release or threat of Release of, or exposure to, Hazardous Materials (including any requirements related to the sale, labelling or recycling of electronic equipment), or to human health and safety. The term “Hazardous Materials” means (1) metals (including lead, mercury or cadmium), petroleum products and by-products, asbestos and asbestos-containing materials, urea formaldehyde foam insulation, medical or infectious wastes, polychlorinated biphenyls, radon gas, radioactive

substances, chlorofluorocarbons and all other ozone-depleting substances or (2) any chemical, material, substance, waste, pollutant or contaminant that is prohibited, limited or regulated by or pursuant to any Environmental Law. The term “Release” 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.

     (k) Absence of Changes in Company Benefit Plans; Labor Relations. Except as disclosed in the Filed Company SEC Documents or as expressly permitted pursuant to Section 4.01(a)(i) through (xvi), since the date of the most recent audited financial statements included in the Filed Company SEC Documents, there has not been any adoption or amendment by the Company or any of its Subsidiaries of any collective bargaining agreement or any employment, bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock appreciation, restricted stock, stock option, “phantom” stock, performance, retirement, thrift, savings, stock bonus, paid time off, perquisite, fringe benefit, vacation, severance, disability, death benefit, hospitalization, medical, welfare benefit or other plan, program, policy, arrangement, agreement or understanding (whether or not legally binding) maintained, contributed to or required to be maintained or contributed to by the Company or any of its Subsidiaries or any other person or entity that, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code (each, a “Commonly Controlled Entity”), in each case providing benefits to any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries (collectively, the “Company Benefit Plans”), or any material change in any actuarial or other assumption used to calculate funding obligations with respect to any Company Pension Plans, or any change in the manner in which contributions to any Company Pension Plans are made or the basis on which such contributions are determined, other than amendments or other changes as required to ensure that such Company Benefit Plan is not then out of compliance with applicable law, or reasonably determined by the Company to be necessary or appropriate to preserve the qualified status of a Company Pension Plan under Section 401(a) of the Code. Any shares of capital stock, options, rights, warrants or other securities issued, granted or purchased under any Company Benefit Plan have been issued, granted or purchased in compliance with applicable Legal Provisions. Except as disclosed in the Filed Company SEC Documents, there exist no currently binding Company Benefit Agreements. There are no collective bargaining or other labor union agreements to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound. As of the date hereof, none of the employees of the Company or any of its Subsidiaries are represented by any union with respect to their employment by the Company or such Subsidiary. As of the date hereof, since January 1, 2002, neither the Company nor any of its Subsidiaries has experienced any labor disputes, union organization attempts or work stoppages, slowdowns or lockouts due to labor disagreements.

     (l) ERISA Compliance. (i) Section 3.01(l)(i) of the Company Disclosure Schedule contains a complete and accurate list of each Company Benefit Plan that is an “employee pension benefit plan” (as defined in Section 3(2) of ERISA) (sometimes referred to herein as a “Company Pension Plan”), each Company Benefit Plan that is an “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) and all other Company Benefit Plans. The Company has provided to Parent complete and accurate copies of (A) each Company Benefit Plan (or, in the case of any unwritten Company Benefit Plans, descriptions thereof), (B) the two most recent annual reports on Form 5500 required to be filed with the Internal Revenue Service (the “IRS”) with respect to each Company Benefit Plan (if any such report was required), (C) the most recent summary plan description for each Company Benefit Plan for which such summary plan description is required and (D) each trust agreement and insurance or group annuity contract relating to any Company Benefit Plan. Each Company Benefit Plan has been administered in all material respects in accordance with its terms. The Company, its Subsidiaries and all the Company Benefit Plans are all in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable laws, including laws of foreign jurisdictions, and the terms of all collective bargaining agreements.

     (ii) All Company Pension Plans intended to be tax-qualified have received favorable determination letters from the IRS with respect to “TRA” (as defined in Section 1 of Rev. Proc. 93-39), and have timely filed with the IRS determination letter applications (or have received such a determination letter) with respect to “GUST” (as defined in Section 1 of Notice 2001-42) and the Economic Growth and Tax Relief Reconciliation Act of 2001, to the effect that such Company Pension Plans are qualified and exempt from Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked (or, to the Knowledge of the Company, has revocation been threatened) and no event has occurred since the date of the most recent determination letter or application therefor relating to any such Company Pension Plan that would reasonably be expected to adversely affect the qualification of such Company Pension Plan or materially increase the costs relating thereto or require security under Section 307 of ERISA. All Company Pension Plans required to have been approved by any foreign Governmental Entity have been so approved, no such approval has been revoked (or, to the Knowledge of the Company, has revocation been threatened) and no event has occurred since the date of the most recent approval or application therefor relating to any such Company Pension Plan that would reasonably be expected to materially affect any such approval relating thereto or materially increase the costs relating thereto. The Company has delivered to Parent a complete and accurate copy of the most recent determination letter received prior to the date hereof with respect to each Company Pension Plan, as well as a complete and accurate copy of each pending application for a determination letter, if any. The Company has also provided to Parent a complete and accurate list of all

amendments to any Company Pension Plan as to which a favorable determination letter has not yet been received.

     (iii) Neither the Company nor any Commonly Controlled Entity has (A) maintained, contributed to or been required to contribute to any Company Benefit Plan that is subject to Title IV of ERISA or (B) has any unsatisfied liability under Title IV of ERISA.

     (iv) All reports, returns and similar documents with respect to all Company Benefit Plans required to be filed with any Governmental Entity or distributed to any Company Benefit Plan participant have been duly and timely filed or distributed in all material respects. None of the Company or any of its Subsidiaries has received notice of, and to the Knowledge of the Company, there are no investigations by any Governmental Entity with respect to, termination proceedings or other claims (except claims for benefits payable in the normal operation of the Company Benefit Plans), suits or proceedings against or involving any Company Benefit Plan or asserting any rights or claims to benefits under any Company Benefit Plan that would give rise to any material liability, and, to the Knowledge of the Company, there are not any facts that could give rise to any material liability in the event of any such investigation, claim, suit or proceeding.

     (v) All contributions, premiums and benefit payments under or in connection with the Company Benefit Plans that are required to have been made as of the date hereof in accordance with the terms of the Company Benefit Plans have been timely made or have been reflected on the most recent consolidated balance sheet filed or incorporated by reference into the Filed Company SEC Documents. Neither any Company Pension Plan nor any single-employer plan of any Commonly Controlled Entity has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived.

     (vi) With respect to each Company Benefit Plan, (A) there has not occurred any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) in which the Company or any of its Subsidiaries or any of their respective employees, or, to the Knowledge of the Company, any trustee, administrator or other fiduciary of such Company Benefit Plan, or any agent of the foregoing, has engaged that would reasonably be expected to subject the Company or any of its Subsidiaries or any of their respective employees, or, to the Knowledge of the Company, a trustee, administrator or other fiduciary of any trust created under any Company Benefit Plan, to the tax or penalty on prohibited transactions imposed by Section 4975 of the Code or the sanctions imposed under Title I of ERISA and (B) neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any trustee, administrator or other fiduciary of any Company Benefit Plan nor any agent of any of the foregoing, has engaged in any transaction or acted in a manner, or failed to act in a manner, that would

reasonably be expected to subject the Company or any of its Subsidiaries or, to the Knowledge of the Company, any trustee, administrator or other fiduciary, to any liability for breach of fiduciary duty under ERISA or any other applicable law. No Company Benefit Plan or related trust has been terminated during the last five years, nor has there been any “reportable event” (as that term is defined in Section 4043 of ERISA) for which the 30-day reporting requirement has not been waived with respect to any Company Benefit Plan during the last five years, and no notice of a reportable event will be required to be filed in connection with the transactions contemplated by this Agreement.

     (vii) Section 3.01(l)(vii) of the Company Disclosure Schedule discloses whether each Company Benefit Plan that is an employee welfare benefit plan is (A) unfunded or self-insured, (B) funded through a “welfare benefit fund”, as such term is defined in Section 419(e) of the Code, or other funding mechanism or (C) insured. Each such employee welfare benefit plan may be amended or terminated (including with respect to benefits provided to retirees and other former employees) without material liability (other than benefits then payable under such plan without regard to such amendment or termination) to the Company or any of its Subsidiaries at any time after the Effective Time. Each of the Company and its Subsidiaries complies in all material respects with the applicable requirements of Section 4980B(f) of the Code, Sections 601-609 of ERISA or any similar state or local law with respect to each Company Benefit Plan that is a group health plan, as such term is defined in Section 5000(b)(1) of the Code or such state statute. Neither the Company nor any of its Subsidiaries has any material obligations for retiree health or life insurance benefits under any Company Benefit Plan (other than for continuation coverage required under Section 4980B(f) of the Code).

     (viii) None of the execution and delivery of this Agreement, the Stockholder Agreement, the obtaining of the Stockholder Approval or the consummation of the Merger or any other transaction expressly contemplated by this Agreement or the Stockholder Agreement (including as a result of any termination of employment on or following the Effective Time) will (A) entitle any current or former director, officer, employee or consultant of the Company or any of its Subsidiaries to severance or termination pay, (B) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Company Benefit Plan or Company Benefit Agreement or (C) result in any breach or violation of, or a default under, any Company Benefit Plan or Company Benefit Agreement. The total amount of all cash compensation and benefit payments and the fair market value of all non-cash benefits (other than Company Stock Options) that may become payable or provided to any director, officer, employee or consultant of the Company or any of its Subsidiaries under the Company Benefit Agreements (assuming for such purpose that such individuals’ employment were terminated

immediately following the Effective Time as if the Effective Time were the date hereof) will not exceed the amount set forth in Section 3.01(l)(viii) of the Company Disclosure Schedule.

     (ix) Neither the Company nor any of its Subsidiaries has any material liability or obligations, including under or on account of a Company Benefit Plan, arising out of the hiring of persons to provide services to the Company or any of its Subsidiaries and treating such persons as consultants or independent contractors and not as employees of the Company or any of its Subsidiaries.

     (x) No deduction by the Company or any of its Subsidiaries in respect of any “applicable employee remuneration” (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code.

     (m) No Excess Parachute Payments. Other than payments or benefits that may be made to the persons listed in Section 3.01(m) of the Company Disclosure Schedule (“Primary Company Executives”), no amount or other entitlement or economic benefit that could be received (whether in cash or property or the vesting of property) as a result of the execution and delivery of this Agreement, the Stockholder Agreement, the obtaining of the Stockholder Approval, the consummation of the Merger or any other transaction contemplated by this Agreement or the Stockholder Agreement (including as a result of termination of employment on or following the Effective Time) by or for the benefit of any director, officer, employee or consultant of the Company or any of its Affiliates who is a “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G-1) under any Company Benefit Plan, Company Benefit Agreement or otherwise would be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code), and no disqualified individual is entitled to receive any additional payment from the Company or any of its Subsidiaries, the Surviving Corporation or any other person in the event that the excise tax required by Section 4999(a) of the Code is imposed on such disqualified individual (a “Parachute Gross Up Payment”). Section 3.01(m) of the Company Disclosure Schedule sets forth, calculated as of the date of this Agreement, (i) the “base amount” (as such term is defined in Section 280G(b)(3) of the Code) for each Primary Company Executive and each other disqualified individual (defined as set forth above) whose Company Stock Options will vest pursuant to their terms in connection with the execution and delivery of this Agreement, the Stockholder Agreement, the obtaining of the Stockholder Approval, the consummation of the Merger or any other transaction contemplated by this Agreement or the Stockholder Agreement (including as a result of any termination of employment on or following the Effective Time) and (ii) the estimated maximum amount of “parachute payments” as defined in Section 280G of the Code that could be paid or provided to each Primary Company Executive as a result of the execution and delivery of this Agreement,

the Stockholder Agreement, the obtaining of the Stockholder Approval, the consummation of the Merger or any other transaction contemplated by this Agreement or the Stockholder Agreement (including as a result of any termination of employment on or following the Effective Time).

     (n) Taxes. (i) Each of the Company, its Subsidiaries and each Company Consolidated Group has filed or has caused to be filed in a timely manner (within any applicable extension period) all tax returns required to be filed with any taxing authority pursuant to the Code (and any applicable U.S. Treasury regulations) or applicable state, local or foreign tax laws. All such tax returns are complete and accurate in all material respects and have been prepared in substantial compliance with all applicable laws and regulations. Each of the Company, its Subsidiaries and each Company Consolidated Group has timely paid or caused to be paid (or the Company has paid on its behalf) all taxes due and owing, and the most recent financial statements contained in the Filed Company SEC Documents reflect an adequate reserve (determined in accordance with GAAP) (excluding any reserves for deferred taxes established to reflect timing differences between book and tax income) for all taxes payable by the Company and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements.

     (ii) No tax return of the Company or any of its Subsidiaries or any Company Consolidated Group is or has ever been under audit or examination by any taxing authority, and no notice of such an audit or examination has been received by the Company or any of its Subsidiaries or any Company Consolidated Group. There is no deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any material amount of taxes due and owing by the Company or any of its Subsidiaries or any Company Consolidated Group. Each deficiency resulting from any completed audit or examination relating to taxes by any taxing authority has been timely paid or is being contested in good faith and has been reserved for on the books of the Company. The relevant statute of limitation is closed with respect to Federal, state, local and foreign income tax returns of the Company, its Subsidiaries and any Company Consolidated Group for all years through December 31, 2001. There is no currently effective agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes of the Company or its Subsidiaries or any Company Consolidated Group, nor has any request been made for any such extension, and no power of attorney (other than powers of attorney authorizing employees of the Company to act on behalf of the Company) with respect to any taxes has been executed or filed with any taxing authority.

     (iii) None of the Company or any of its Subsidiaries will be required to include in a taxable period ending after the Effective Time taxable income attributable to income that accrued (for purposes of the financial statements of the Company included in the Filed Company SEC Documents) in a prior taxable

period (or portion of a taxable period) but was not recognized for tax purposes in any prior taxable period as a result of (A) the installment method of accounting, (B) the completed contract method of accounting, (C) the long-term contract method of accounting, (D) the cash method of accounting or Section 481 of the Code or (E) any comparable provisions of state or local tax law, domestic or foreign, or for any other reason, other than any amounts that are specifically reflected in a reserve for taxes on the financial statements of the Company included in the Filed Company SEC Documents.

     (iv) The Company and its Subsidiaries have complied with all applicable statutes, laws, ordinances, rules and regulations relating to the payment and withholding of any material amount of taxes (including withholding of taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code and similar provisions under any Federal, state, local or foreign tax laws) and have, within the time and the manner prescribed by law, withheld from and paid over to the proper governmental authorities all material amounts required to be so withheld and paid over under applicable laws.

     (v) Within the two-year period ending on the Closing Date, none of the Company or any of its Subsidiaries has constituted either a “distributing corporation” or a “controlled corporation” as such terms are defined in Section 355 of the Code in a distribution of stock outside of the affiliated group of which the Company is the common parent qualifying or intended to qualify for tax-free treatment (in whole or in part) under Section 355(a) or 361 of the Code.

     (vi) Neither the Company nor any of its Subsidiaries joins or has joined, for any taxable period in the filing of any affiliated, aggregate, consolidated, combined or unitary tax return, other than tax returns for the affiliated, aggregate, consolidated, combined or unitary group of which the Company is the common parent.

     (vii) No claim has ever been made by any authority in a jurisdiction where any of the Company or its Subsidiaries does not file a tax return that it is, or may be, subject to a material amount of tax by that jurisdiction.

     (viii) Neither the Company nor any of its Subsidiaries is a party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to taxes (including any advance pricing agreement, closing agreement or other agreement relating to taxes with any taxing authority).

     (ix) To the Knowledge of the Company, the net operating losses of the Company through December 31, 2004, are subject to limitations on their use as set forth in the June 7, 2005, letter addressed to the Company by Smart and Associates, LLP, a copy of which was provided to Parent. The Company has

reviewed the representations and assumptions in the letter and they are complete and accurate in all material respects.

     (x) Neither the Company nor any of its Subsidiaries has entered into any “listed transaction” and, to the Knowledge of the Company, neither the Company nor any of its Subsidiaries has entered into any “reportable transaction” (each as defined in Treasury Regulation Section 1.6011-4(b)) during the five years prior to the date of this Agreement.

     (xi) No taxing authority has asserted any material liens for taxes with respect to any assets or properties of the Company or its Subsidiaries, except for statutory liens for taxes not yet due and payable.

     (xii) Neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

     (xiii) As used in this Agreement (A) “tax” or “taxes” shall include (whether disputed or not) all (x) Federal, state, local and foreign income, property, sales, use, excise, withholding, payroll, employment, social security, capital gain, alternative minimum, transfer and other taxes and similar governmental charges, including any interest, penalties and additions with respect thereto, (y) liability for the payment of any amounts of the type described in clause (x) as a result of being a member of an affiliated, consolidated, combined, unitary or aggregate group and (z) liability for the payment of any amounts as a result of being party to any tax sharing agreement or as a result of any express or implied obligation to indemnify any other person with respect to the payment of any amounts of the type described in clause (x) or (y); (B) “Company Consolidated Group” means any affiliated group within the meaning of Section 1504(a) of the Code, or any other similar state, local or foreign law, in which the Company (or any Subsidiary of the Company) is or has ever been a member or any group of corporations with which the Company files, has filed or is or was required to file an affiliated, consolidated, combined, unitary or aggregate tax return; (C) “taxing authority” means any Federal, state, local or foreign government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority; and (D) “tax return” or “tax returns” means all returns, declarations of estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information with respect to any of foregoing, filed or to be filed with any taxing authority in connection with the determination, assessment, collection or administration of any taxes.

     (o) Title to Properties. (i) Neither the Company nor any of its Subsidiaries owns any real property. Each of the Company and its Subsidiaries has good and valid title to or valid leasehold or sublease interests or other comparable contract rights in or relating to all of its real properties and other