FIN 46 provides guidance on variable interest entities such as the MSD joint venture and the framework through which an enterprise assesses consolidation of a variable interest entity. The Company adopted FIN 46 as of March 31, 2004 and has determined that MSD qualifies as a variable interest entity.

Buyout of the Company’s interest in MSD

        Pursuant to the MSD joint venture agreement, MSD and MST had a joint right to purchase the Company’s entire interest in MSD upon termination or expiration of the MSD joint venture agreement at a price equal to fair market value less a discount that depended on the circumstances giving rise to termination or expiration of the agreement. The MSD joint venture agreement sets forth a valuation process for determination of the purchase price, which was to be determined before MSD or MST was required to commit to purchasing the interest. On April 29, 2004, following the expiration of the MSD joint venture agreement, MSD and MST gave notice to commence the valuation process. The valuation process was temporarily stayed in connection with the litigation the Company brought against MSD, MST and Jacob Wohlstadter.

        Pursuant to the settlement, MST or MSD will purchase, and the Company will sell, its entire interest in MSD, regardless of the purchase price. As contemplated by the MSD joint venture agreement, the purchase price will be equal to fair market value of the Company’s interests less a discount factor of 7.5%. Fair market value will be determined in accordance with the valuation process set forth in the MSD joint venture agreement. In the settlement, the Company agreed to certain matters in connection with the valuation process, including the timetable for the appraisals. The Company and MSD each appointed an appraiser and their appraisal reports were received on August 30, 2004. As the value determined by the two appraisers differed by more than 10%, a third appraiser has been appointed. The third appraiser’s report will be due on or about October 15, 2004. The fair market value will equal the average of the two closest determinations. Once the fair market value and purchase price are determined, the purchase will occur, which date is referred to as the completion date, and the Company will no longer be a member of MSD.

        As provided in the MSD joint venture agreement, MSD or MST will be required to pay the Company the outstanding purchase price plus simple (cumulated, not compounded) interest at the fixed annual rate of 0.5% over the prime rate in effect on the purchase date. The purchase price is payable over time in installments equal to the sum of 5% of MSD net sales, as determined in accordance with the MSD agreements, and 20% of the net proceeds realized by MSD from the sale of its debt or equity securities in any third-party financing after the date of the sale of the Company’s interest in MSD. As part of the settlement, the Company received a $2.0 million non-refundable prepayment from MSD for future amounts payable by MSD to it in respect of the purchase price in the form of a credit against amounts the Company agreed to pay MSD pursuant to the settlement. The amount of the prepayment credit outstanding from time to time will bear simple interest (cumulated, not compounded) at the fixed annual rate of 0.5% over the prime rate in effect on the date that MSD or MST, as the case may be, purchases the Company’s interests in MSD. The amount of the prepayment credit that is outstanding is the total amount, including accrued interest, reduced from time to time by the amount due and payable to the Company pursuant to the buyout of its interest in MSD. No further cash payments will be payable by MSD to the Company pursuant to the buyout until the $2.0 million prepayment credit, including accrued interest, is no longer deemed outstanding. In the event sufficient net sales or third-party financings do not materialize, the Company will not receive any additional payments from MSD or MST, as the case may be, for the purchase of its interest in MSD. As security for the payment obligation, the Company will hold a security interest in the interests in MSD that are being purchased. MST or MSD, as the case may be, may repay all or any part of the outstanding purchase price plus accrued interest at any time and from time to time without penalty.

        Under the MSD joint venture agreement, the parties are responsible for all fees and costs of the appraiser designated by it and one-half of all fees and costs of the third appraiser. Pursuant to the settlement, the Company agreed to pay MSD’s or MST’s, as applicable, share of such fees and costs, and to add such fees and costs to the purchase price payable by MSD or MST for the Company’s interest in MSD.

MSD joint venture agreement and MSD limited liability company agreement

        IGEN was obligated to refrain from developing or commercializing any products, processes or services that are related to the MSD research program in the diagnostic field, as defined for the purposes of the MSD agreements, or to MSD’s research technologies as described in the MSD agreements, subject to certain exceptions. For purposes of the MSD agreements, the diagnostic field is defined to mean all diagnostic devices and procedures for the measurement or detection of identifiable substances for human clinical research, environmental, agricultural, veterinary, food testing, industrial or similar purposes. As part of the MSD joint venture agreement, MSD granted to the Company an exclusive, worldwide, royalty-free license to use in the diagnostic field certain defined improvements developed by MSD in the MSD research program. However, the Company may not make, use or sell products, processes or services that use certain defined ECL improvements granted to it by MSD if doing so would compete with MSD in the diagnostic field or use research technologies defined in the MSD agreements. Although the MSD joint venture agreement has expired, the license granted to the Company to use in the diagnostic field certain defined ECL improvements developed by MSD remains in effect. In addition, after the Company ceases to be a member of MSD, MSD may require the Company to distribute MSD’s products pursuant to a mutually agreeable distribution agreement, and the Company will be required to pay to MST a royalty of 3% of net sales of MSD products sold by it.

        During its term, the MSD joint venture agreement limited the business of MSD to performing the MSD research program and developing, manufacturing, marketing and selling products in the diagnostic field. Because the MSD joint venture agreement has expired, this limitation on MSD’s business activity no longer applies. In the settlement, the parties acknowledged that it is the current intent of MSD that it will operate and do business in technology related fields, including the healthcare field, the software field, and detection and measurement technologies. Furthermore, although the MSD joint venture agreement has expired, the Company remains subject to limitations on its ability to manufacture, market and sell in the diagnostic field, as defined in the MSD agreements, instruments that use an electrode to start the ECL process where the electrode is disposable, consumable or not permanently installed and, MST retains sole ownership of all inventions, concepts, know-how and technology developed by MSD as well as all patent applications, patents and copyrights.

        In addition, because the MSD joint venture agreement has expired, the restrictions on MSD offering employment to the Company’s employees have ceased. Certain of the Company’s other obligations under the MSD joint venture agreement survive its termination, including the following:

        In addition, the Company is obligated under the MSD limited liability company agreement to indemnify each officer and member of the board of managers of MSD with respect to any action taken by such person during the time IGEN or the Company, as the case may be, was or were a member of MSD by reason of the fact that such person is or was an officer or a member of the board of managers of MSD. Under the settlement, the parties agreed that this indemnification obligation applies only to acts, events or inactions, actual or alleged, occurring on or before the completion date without regard to whether the legal proceeding or other event triggering the indemnification obligation is initiated prior to or after this date.

        Prior to the exercise by MSD and MST of their right to purchase the Company’s interest in MSD, the Company was required to pay the expenses associated with prosecuting and maintaining the patents licensed by MST to MSD under the MSD/MST license agreement. A portion of the $3.0 million payment the Company made to MSD in connection with the settlement was made in full and complete satisfaction of any obligation it had in connection with such expenses.

        In addition, because MSD and MST have exercised their right to purchase the Company’s interest in MSD, the Company is obligated under the MSD joint venture agreement to vote its interest in MSD in the manner requested by MST (subject to certain limitations), provide reasonable cooperation and provide such consents to permit MSD to raise additional capital and terminate the Company’s status as a party to the MSD/MST license agreement entered into in connection with the original formation of the joint venture.

IGEN/MSD license agreement

        Under the terms of the IGEN/MSD license agreement, which is one of the MSD agreements, the Company granted to MSD a worldwide, perpetual, exclusive license (with certain exceptions) to its technology, including ECL technology, for use in MSD’s research program. In connection with the merger and related transactions, IGEN assigned the IGEN/MSD license agreement to the Company. The IGEN/MSD license agreement survived the expiration of the MSD joint venture agreement and will survive the termination of the Company’s status as a member of MSD.

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        In addition, when the Company ceases to be a member of MSD, it will become entitled to receive quarterly royalty payments from MSD of 3% of the net sales price on all products developed and sold by MSD using the patents it received as part of the merger and related transactions. The royalty obligation will expire as the relevant patents expire.

        In accordance with the terms of the MSD agreements and subject to certain exceptions, the Company consented to the sublicensing by MSD of the licenses granted pursuant to the IGEN/MSD license agreement to any affiliate of MSD. Any such sublicensee is required to, among other things, make royalty payments to the Company in accordance with the IGEN/MSD license agreement.

MSD/MST sublicense agreement

        MST holds a worldwide, perpetual, non-exclusive sublicense from MSD, which is referred to in this Proxy Statement as the MSD/MST sublicense agreement, to use the Company’s technology to make, use or sell products or processes applying or related to the technologies used in the MSD research program outside the diagnostic field. Whether or not the Company is a member of MSD, it is entitled to receive quarterly royalty payments from MST of 6% of the net sales price on any products developed and sold by MST using the patents the Company received as part of the merger and related transactions. The Company assumed IGEN’s obligation under the MSD agreements to make the Company’s technology available for sublicense by MSD to MST, and these obligations survived the expiration of the MSD joint venture agreement and will survive the termination of the Company’s or MST’s status as a member of MSD. The Company is not, however, obligated to make available for sublicense by MSD to MST any technology or improvements to its technology developed after the expiration of the MSD joint venture agreement or the termination of the Company’s or MST’s status as a member of MSD. In addition, the Company may terminate its participation in the MSD/MST sublicense agreement upon MSD’s or MST’s material breach, after notice and an opportunity to cure the breach.

Transitional services and subleases

        When the MSD joint venture agreement expired, the Company was no longer required to provide research personnel and corporate services to MSD. The Company has continued, and expects that it will continue, to provide limited corporate services, consisting primarily of information technology and purchasing services support, to MSD on a transitional basis at MSD’s expense. The Company bills MSD for these services on a periodic basis.

        MSD leases certain facilities and related equipment from the Company (including laboratory facilities located in its corporate headquarters) pursuant to sublease agreements which remained in effect following the expiration of the joint venture agreement. The term of each sublease will expire one day prior to the expiration of the prime lease for that facility. Each sublease agreement provides that, subject to certain exceptions, the Company must exercise all available extension rights under the prime lease. Each of MSD and the Company may unilaterally terminate any or all of the subleases by providing at least 18 months prior written notice of termination. Notwithstanding the termination of any sublease, MSD may elect to remain in the subleased facility after the 18-month period expires for any period of time selected by MSD, but not longer than one day prior to the expiration of the prime lease (including any extensions to the prime lease). After a notice of termination of a sublease has been sent, MSD will be required to pay its pro rata share of all rental and other expenses the Company incurs under the prime lease. On February 29, 2004, the Company elected to terminate all of the subleases effective the earlier of September 1, 2005, or the date on which the applicable prime lease terminates. As part of the settlement, MSD’s rental expense payment obligations for the period from March 1, 2004 through August 31, 2005, will be added to the purchase price of the Company’s interest in MSD in lieu of MSD making current payments.

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        In addition, pursuant to the settlement, MSD will sublease certain warehouse space to Mr. Jacob Wohlstadter for the period from August 1, 2004 through August 31, 2005 for an upfront payment by Jacob Wohlstadter to MSD of $23,994.75.

Employment agreement

        The Company assumed an employment agreement pursuant to which Mr. Jacob Wohlstadter is serving as the president and chief executive officer of MSD. The current term of the employment runs through November 30, 2005. The term of the employment agreement will automatically renew for a 12-month period on November 30 of each year unless either MSD or Mr. Jacob Wohlstadter gives notice of termination no later than 180 days prior to that renewal date. Most of the Company’s obligations under the employment agreement have ended, except that the Company remains obligated to maintain in effect directors and officers liability insurance coverage for Mr. Jacob Wohlstadter, to pay or cause MSD to pay a gross-up for any “parachute” excise tax that may be imposed and to indemnify Mr. Jacob Wohlstadter against certain liabilities, including liability from the MSD joint venture relating to the period of IGEN’s or the Company’s involvement with MSD.

Consulting agreement

        Mr. Jacob Wohlstadter had a consulting agreement with IGEN that the Company assumed. This consulting agreement terminated on August 15, 2004. Pursuant to the consulting agreement, Mr. Jacob Wohlstadter was entitled to receive such fees as the Company and Mr. Jacob Wohlstadter agree to when consulting services are requested by it. The Company did not ask Mr. Jacob Wohlstadter to perform, nor did he perform, any compensable consulting services during the years ended March 31, 2004 and 2003. During fiscal 2002, Mr. Jacob Wohlstadter received from IGEN $275,000 and options to purchase IGEN common stock for consulting services performed for IGEN for the period from 1995 through 2001.

Certain indemnification agreements and obligations

        Mr. Jacob Wohlstadter and JW Consulting Services, L.L.C., a company established and wholly-owned by Mr. Jacob Wohlstadter, have an indemnification agreement with IGEN that the Company assumed. Pursuant to the indemnification agreement, the Company will indemnify Mr. Jacob Wohlstadter and JW Consulting Services, L.L.C. against any claims arising out of the performance or non-performance of services to or for the benefit of the Company.

        In addition, the Company assumed a letter agreement dated August 15, 2001 among Jacob Wohlstadter, MSD, MST and IGEN. Pursuant to the letter agreement, IGEN agreed to fund reasonable ongoing legal fees and related charges and costs incurred by Jacob Wohlstadter, MSD and MST arising out of or related to IGEN’s litigation with Roche. MSD had submitted to IGEN invoices for legal fees and expenses for the period from March 1, 2003 through September 30, 2003 of approximately $1.3 million. IGEN paid approximately $423,000 of the submitted expenses, which an independent committee of IGEN’s board of directors believed was the maximum amount IGEN was obligated to pay under the letter agreement. A portion of the $3.0 million payment the Company made to MSD in connection with the settlement was made in full and complete satisfaction of the dispute.

        The Company agreed under the settlement to indemnify MSD, MST and Jacob Wohlstadter and their respective directors, officers, employees and agents for any losses, costs, fees and expenses arising out of or related in any way to past, current or future audits of MSD, the preparation of MSD audited or unaudited financial statements requested by the Company.

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        In addition, the Company agreed to indemnify MSD, MST and Jacob Wohlstadter and their respective directors, officers, employees and agents for any losses, costs, fees and expenses with respect to regulatory (Securities and Exchange Commission or otherwise) or legal proceedings and investigations resulting from or related to the fact that the Company is (or the Company’s predecessor, IGEN, was) an issuer of publicly traded securities. The Company is not required to indemnify MSD, MST or Jacob Wohlstadter for acts either resulting in a criminal conviction or finally adjudged by a court of competent jurisdiction to constitute fraud or intentional misrepresentations.

Related Companies

        The Company’s chief executive officer, Samuel Wohlstadter, is the principal and controlling stockholder, a director and the chief executive officer of each of Wellstat Biologics Corporation, Wellstat Therapeutics Corporation, Hyperion Catalysis International, Proteinix Corporation and Integrated Chemical Synthesizers, Inc. The Company’s president and chief operating officer, Richard Massey, is also a director of Hyperion and he is a less than 10% stockholder in Proteinix.

        The Company has shared services arrangements with each of these affiliated companies. These shared services include accounting and finance, human resources and other administrative services, as well as facility related costs and services. Shared services costs allocated to Hyperion, Wellstat Biologics, Wellstat Therapeutics, Proteinix and Integrated Chemical Synthesizers totaled $1.0 million, $1.0 million and $1.3 million for the years ended March 31, 2004, 2003 and 2002, respectively, which reduced certain operating costs and expenses of the Company for the respective periods. Amounts allocated to these affiliated companies are calculated and billed monthly based upon costs incurred by the Company and are determined through allocation methods that include time-spent and square footage utilized. The affiliated companies had prepaid approximately $12,000 under the shared services arrangements at March 31, 2004, and the amount due from affiliated companies under the shared services arrangements was approximately $200,000 at March 31, 2003. All such balances were settled subsequent to each respective year-end.

Equity right purchase and license amendment agreement

        In 1993, IGEN enacted a reorganization that included the discontinuation of its pharmaceutical development operations. As part of that reorganization, IGEN entered into an agreement with Pro-Neuron, Inc., which was renamed Wellstat Therapeutics. Under the agreement, Wellstat Therapeutics assumed contractual and financial responsibility for IGEN’s commitments, agreements and contract research programs related to the IGEN prodrug cancer program. In connection with this assumption, IGEN granted to Wellstat Therapeutics an exclusive, worldwide and perpetual license to its patents, patent applications, know-how and trade secrets relating to the IGEN prodrug cancer program, subject to certain limitations. IGEN was entitled to receive a royalty from Wellstat Therapeutics based on net sales of products made pursuant to the license. To date, there have been no products developed under this license. At the same time, Wellstat Therapeutics granted to IGEN an exclusive, worldwide and perpetual license to its patents, patent applications, know-how and trade secrets relating to Wellstat Therapeutics’s proprietary diagnostics product opportunities, subject to certain limitations, in a field that includes research, industrial and clinical diagnostic markets. Wellstat Therapeutics was entitled to receive a royalty based on net sales made pursuant to the license. To date, there have been no products developed under this license. In connection with the assumption of contractual and financial responsibility for IGEN’s commitments, agreements and contract research programs and the grants of the licenses, Wellstat Therapeutics was paid $5 million by IGEN, which was scheduled to convert into 4.5% of the fully diluted equity of Wellstat Therapeutics on December 31, 2003. This equity right has no historic cost basis in the consolidated financial statements of IGEN.

        In lieu of the conversion, on December 30, 2003, IGEN and Wellstat Therapeutics entered into an equity right purchase and license amendment agreement pursuant to which effective as of February 10, 2004:

•

Wellstat Therapeutics repurchased IGEN’s right to receive a 4.5% equity interest in Wellstat Therapeutics;

•

the intellectual property licenses from IGEN to Wellstat Therapeutics and from Wellstat Therapeutics to IGEN was terminated; and

•

IGEN confirmed the 1993 transfer to Wellstat Therapeutics of its interest in the ProGen joint venture through which IGEN had conducted its prodrug research prior to the execution of the 1993 agreement.

        In return, Wellstat Therapeutics paid IGEN $1.7 million in cash. Although these transactions were completed on February 10, 2004, certain representations, warranties and covenants under the equity right purchase and license amendment agreement survived and the Company has assumed the agreement in connection with the merger and related transactions. IGEN’s audit committee, with the assistance of independent financial and legal advisors, negotiated and approved the agreement on behalf of IGEN.

        Also in 1993, as part of the discontinuation of its pharmaceutical development operations, IGEN entered into an agreement with Proteinix. Under the agreement, Proteinix assumed contractual and financial responsibility for IGEN’s commitments, agreements and contract research programs related to the IGEN Abzymes program development operations. In connection with this assumption, IGEN granted to Proteinix an exclusive, worldwide and perpetual license to its patents, patent applications, know-how and trade secrets relating to the IGEN Abzymes program, subject to certain limitations. IGEN was entitled to receive a royalty from Proteinix based on net sales of products made pursuant to the license. To date, there have been no products developed under this license. At the same time, Proteinix granted to IGEN an exclusive, worldwide and perpetual license to its patents, patent applications, know-how and trade secrets relating to Proteinix’s ubiquitin fusion technology for the production of diagnostic reagents together with product opportunities, subject to certain limitations, in a field that includes research, industrial and clinical diagnostic markets. Proteinix was entitled to receive a royalty based on net sales made pursuant to the license. To date, there have been no products developed under this license. In connection with the assumption of contractual and financial responsibility for IGEN’s commitments, agreements and contract research programs and the grants of the licenses, Proteinix was paid $3.2 million by IGEN, which was scheduled to convert into 4.5% of the fully diluted equity of Proteinix on December 31, 2003. This equity right has no historic cost basis in the consolidated financial statements of IGEN.

In lieu of the conversion, on December 30, 2003, IGEN and Proteinix entered into an equity right purchase and license amendment agreement pursuant to which effective as of February 10, 2004:

•

Proteinix repurchased IGEN's right to receive a 4.5% equity right in Proteinix;

•

the intellectual property licenses from IGEN to Proteinix and from Proteinix to IGEN were terminated; and

•

Proteinix purchased the intellectual property assets, including the “Abzyme”trademark, underlying the licenses between IGEN and Proteinix and between IGEN and Wellstat Therapeutics.

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        In return, Proteinix paid IGEN $50,000 in cash and granted to IGEN a fully-paid, worldwide, perpetual, royalty-free, non-exclusive license to practice all diagnostic rights in the abzyme technology embodied in the sold intellectual property. The Company has assumed this license in connection with the merger and related transactions. Under this license, the Company limited rights to sublicense the intellectual property to strategic partners, customers, distributors and in the context of bona fide research collaborations. Although these transactions were completed on February 10, 2004, certain representations, warranties and covenants under the equity right purchase and license amendment agreement survived and the Company has assumed the agreement in connection with the merger and related transactions. IGEN’s audit committee, with the assistance of independent financial and legal advisors, negotiated and approved the agreement on behalf of IGEN.

Transactions with Directors and Executive Officers

        In connection with the exercise of employee stock options in July 2000, Mr. Samuel Wohlstadter, IGEN’s chairman and chief executive officer at the time, received a loan from IGEN. The loan was a 6.62% simple interest only, full recourse loan against all assets of Mr. Wohlstadter in the principal amount of $2,060,500, maturing in July 2007. This loan was to be transferred to the Company as part of the merger and related transactions, but Mr. Wohlstadter repaid the loan in full in January 2004.

        The Company has retained Wilmer, Cutler & Pickering to perform legal services. This law firm has been engaged by IGEN since 1995. Ms. Jennifer M. Drogula, who became the daughter-in-law of the Company’s chairman and chief executive officer in March 2002, has been a partner of the firm since January 1, 2001. In addition, Mr. Richard Cass, one of IGEN’s directors, was formerly a partner of the firm. The Company recorded approximately $300,000, $100,000 and $400,000 in legal fees to the law firm for fiscal 2004, 2003 and 2002, respectively. Amounts due to the law firm totaled $128,000 as of March 31, 2004. There were no amounts due at March 31, 2003.

        In addition, the Company has engaged the law firm of Hale and Dorr LLP to provide legal services. IGEN first engaged this law firm in 1994. Ms. Deborah Wohlstadter, the wife of Mr. Jacob Wohlstadter and daughter-in-law of the Company’s chairman and chief executive officer since December 2001, is a junior partner in that law firm. The Company recorded approximately $100,000 in legal fees paid to that firm during fiscal years ended 2004 and 2003.

        Wilmer Cutler & Pickering merged with Hale and Dorr during 2004 and the Company expects that it will continue to retain the law firm in the future.

Limitation on the Liability of Directors and Executive Officers

        The Company’s certificate of incorporation provides that it will indemnify its directors and officers to the fullest extent permitted by Delaware law. The Company’s certificate of incorporation also provides that it may maintain insurance, at its expense, to protect the Company and any of its directors, officers or employees against any expense, liability or loss whether or not the Company would have the power to indemnify that person against such expense, liability or loss under Delaware law. Pursuant to these provisions, the Company has entered into indemnity agreements with each of its directors and executive officers and certain of its key employees. The Company has also obtained director and officer liability insurance for claims up to $30 million.

        In addition, the Company’s certificate of incorporation provides that its directors shall not be liable for monetary damages for breach of the directors’ fiduciary duty of care as a director, except liability for:

•

any breach of the director's duty of loyalty to the Company or its stockholders;

•

acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•

under section 174 of the Delaware General Corporation Law; or

•

any transaction from which a director derived an improper personal benefit.

        If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting personal liability for directors, then the liability of a director shall be eliminated or limited to the fullest extent permitted by the Delaware law.

PERFORMANCE MEASUREMENT COMPARISON

        The following chart shows the comparison of total cumulative return on an investment of $100 invested on February 17, 2004 in cash of (i) the Company’s Common Stock, (ii) the S&P Biotechnology Index, and (iii) the NASDAQ Stock Market. All values assume reinvestment of the full amount of all dividends and are calculated as of March 31, 2004:

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STOCKHOLDER PROPOSALS

        Any proposals intended to be presented by any stockholder for action at the Company’s 2005 Annual Meeting of Stockholders must be received by the Secretary of the Company at 16020 Industrial Drive, Gaithersburg, Maryland 20877 not later than June 21, 2005 to be included in the proxy statement and proxy relating to the 2005 Annual Meeting or to be properly brought before the Company’s 2005 Annual Meeting.

By Order of the Board of Directors

/s/George V. Migausky                                                                      George V. Migausky                                                                       Secretary

Date: September 10, 2004

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APPENDIX A

BioVeris Corporation

CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS

The Audit Committee of BioVeris Corporation (the “Company”) is appointed by the Board to assist the Board in monitoring (1) the integrity of the financial statements of the Company, (2) the compliance by the Company with legal and regulatory requirements, and (3) the independence and performance of the Company’s external (and if applicable, internal) auditors.

All members of the Audit Committee shall meet the independence and experience requirements of the Nasdaq Stock Market, Inc., as in effect from time to time. All members of the Audit Committee shall also meet the independence requirements of Section 10A of the Securities Exchange Act of 1934, as amended, as in effect from time to time. The Audit Committee will have at least one member of the Audit Committee who meets the definition of a “financial expert,” as the Securities and Exchange Commission may define after the date hereof. If the Audit Committee does not have at least one member who is a financial expert, the Company will disclose that fact and the reasons why the Audit Committee does not have such a member. The members of the Audit Committee shall be appointed by the Board on the recommendation of the Chairman of the Board.

The Audit Committee shall have the authority to engage independent counsel and other advisors, as the Audit Committee determines necessary to carry out its duties. The Company shall provide appropriate funding, as determined by the Audit Committee, to pay the compensation of such advisors. The Audit Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend a meeting of the Audit Committee or to meet with any members of, or advisors to, the Audit Committee. The Audit Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.

The Audit Committee shall meet at least quarterly. Members of the Audit Committee may participate in a meeting of the Audit Committee by means of a conference call or similar communications equipment by means of which all persons participating can hear each other. The Audit Committee shall make regular reports to the Board.

The Audit Committee shall:

1.

Be directly responsible for the appointment, compensation and oversight of the independent auditor, including resolving any disagreements between management and the independent auditor regarding financial reporting. In particular, the Audit Committee shall:

a.

Recommend to the Board the appointment of the independent auditor, which firm shall report directly to the Audit Committee;

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b.

Approve the fees to be paid to the independent auditor for audit services and, to the extent applicable, non-audit services. The Company shall provide appropriate funding for compensation of the services of the independent auditor.

2.

Preapprove all audit services and permitted non-audit services to be performed by the independent auditor of the Company. Permitted non-audit services do not include those specified as prohibited in the Sarbanes Oxley Act of 2002 and those that the Public Company Accounting Oversight Board may prohibit after the date hereof. The Audit Committee may delegate preapproval of audit and non-audit services to one or more members. Such members shall report to the full Audit Committee at each scheduled meeting whether such members preapproved any audit or non-audit services. The Company shall report any preapproved nonaudit services in its periodic reports.

3.

Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval.

4.

Review the annual audited financial statements with management, including major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the Company’s financial statements.

5.

Review an analysis prepared by management and the independent auditor of significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements. The Audit Committee will inquire of the independent auditor (including the independent auditor’s National Office, where necessary) regarding the following:

a.

all critical accounting policies and practices to be used;

b.

all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor;

c.

other material written communications between the independent auditor and the management, such as any management letter or schedule of unadjusted differences.

6.

Review with management and the independent auditor the effect of regulatory and accounting initiatives on the Company’s financial statements, such as any off-balance sheet structures and pro forma financial information disclosure.

7.

Review with management and the independent auditor the Company’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditors’ reviews of the quarterly financial statements.

8.

Discuss with management and the independent auditor earnings releases, and financial information and earnings guidance provided to analysts and ratings agencies.

9.

Meet periodically with management to review the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.

10.

Review major changes to the Company’s auditing and accounting principles and practices as suggested by the independent auditor or management.

11.

Review the experience and qualifications of the members of the independent auditor team and the quality control procedures of the independent auditor.

12.

Confirm that the lead (or coordinating) audit partner (having primary responsibility for the audit) or the audit partner responsible for reviewing the audit has not performed the audit services for the Company in more than each of the five previous years.

13.

Receive periodic reports from the independent auditor regarding the auditor’s independence consistent with Independence Standards Board Standard 1; discuss such reports with the auditor; and if so determined by the Audit Committee, take or recommend that the full Board take appropriate action to oversee the independence of the auditor.

14.

Evaluate, together with the Board, the performance of the independent auditor and, if so determined by the Audit Committee, recommend that the Board replace the independent auditor.

15.

Recommend to the Board guidelines for the Company’s hiring of employees or former employees of the independent auditor who were engaged on the Company’s account.

16.

Meet with the independent auditor prior to the audit to review the planning and staffing of the audit.

17.

Obtain from the independent auditor assurance that Section 10A of the Securities Exchange Act of 1934 has not been implicated.

18.

Obtain reports from management and its advisors that the Company’s subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Company’s Code of Conduct [to be adopted], including disclosures of insider and affiliated party transactions.

19.

Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit.

20.

Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company’s response to that letter. Such review should include any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information, and any disagreements with management.

21.

Prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement.

22.

Review and approve all related party transactions; provide oversight for the Board with respect to related party transactions, including a review with the independent auditor of any new or ongoing related party transactions and advise the Board with respect to the Company’s policies and procedures regarding compliance with the related party transaction policy.

23.

Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws, regulations and corporate governance.

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24.

Review with the Company’s General Counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or governmental agencies.

25.

Meet at least quarterly with the chief financial officer and the independent auditor in separate executive sessions.

26.

Review with management and the independent auditor any issues regarding proposed accounting treatment to be discussed with the Securities and Exchange Commission.

27.

Establish procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

28.

Review with the chief executive officer and chief financial officer all significant deficiencies and material weaknesses in the design or operation of internal controls and any fraud that involves management or other employees who have a significant role in the Company’s internal controls.

While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations and the Company’s policies and corporate governance.

Date adopted by the Board of Directors: September 24, 2003