Exhibit 10.1

 

DEPOMED, INC.

SECURITIES PURCHASE AGREEMENT

April 21, 2003

 

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DEPOMED, INC.
SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (“Agreement”) is made as of April 21, 2003
(the “Effective Date”), by and among DepoMed, Inc., a California corporation
(the “Company”), and each of those persons and entities, severally and not
jointly, listed as a Purchaser on the Schedule of Purchasers attached as
Exhibit A hereto (the “Schedule of Purchasers”).  Such persons and entities are
hereinafter collectively referred to herein as “Purchasers” and each
individually as a “Purchaser.”

 

AGREEMENT

 

In consideration of the mutual covenants contained in this Agreement, and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and each Purchaser (severally and not jointly) hereby
agree as follows:

 

SECTION 1.         AUTHORIZATION OF SALE OF THE SECURITIES.

 

On the terms and subject to the conditions of this Agreement, the Company has,
or before the Closing (as defined below) will have, authorized the sale and
issuance of up to $20,000,000 aggregate purchase price of shares of its Common
Stock, no par value per share (the “Common Stock”), at a purchase price per
share equal to $2.16, and warrants (including any Additional Warrants which may
be issuable after the Closing pursuant to Section 8.1(f) hereof, the “Warrants”)
to purchase Common Stock in the form attached hereto as Exhibit B with an
initial exercise price equal to $2.16 per share.  The shares of Common Stock and
the Warrants collectively are referred to as the “Securities”.

 

SECTION 2.         AGREEMENT TO SELL AND PURCHASE THE SECURITIES.

 

2.1           SALE OF SECURITIES.  AT THE CLOSING (AS DEFINED IN SECTION 3), THE
COMPANY WILL SELL TO EACH PURCHASER, AND EACH PURCHASER WILL SEVERALLY, AND NOT
JOINTLY, PURCHASE FROM THE COMPANY, THE NUMBER OF SHARES OF COMMON STOCK AND
WARRANTS, FOR THE AGGREGATE PURCHASE PRICE, SET FORTH OPPOSITE SUCH PURCHASER’S
NAME ON THE SCHEDULE OF PURCHASERS ATTACHED AS EXHIBIT A HERETO.

 

2.2           SEPARATE AGREEMENT.  EACH PURCHASER SHALL SEVERALLY, AND NOT
JOINTLY, BE LIABLE FOR ONLY THE PURCHASE PRICE OF THE SECURITIES BEING PURCHASED
BY SUCH PURCHASER HEREUNDER AS SET FORTH ON EXHIBIT A ATTACHED HERETO.  THE
COMPANY’S AGREEMENT WITH EACH OF THE PURCHASERS IS A SEPARATE AGREEMENT, AND THE
SALE OF THE SECURITIES TO EACH OF THE INDIVIDUAL PURCHASERS IS A SEPARATE SALE. 
EXCEPT AS SET FORTH IN SECTION 7.5, THE PURCHASE OBLIGATIONS OF EACH RESPECTIVE
PURCHASER HEREUNDER ARE INDEPENDENT AND ARE NOT CONDITIONED ON THE PURCHASE OF
ANY SECURITIES BY ANY OR ALL OF THE OTHER PURCHASERS.  ALL OBLIGATIONS,
AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE RESPECTIVE PURCHASERS
HEREUNDER ARE SEVERAL, AND NOT JOINT, IN NATURE.

 

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SECTION 3.                         CLOSING AND DELIVERY.

 

3.1           CLOSING.  THE CLOSING OF THE PURCHASE AND SALE OF THE SECURITIES
PURSUANT TO THIS AGREEMENT (THE “CLOSING”) SHALL BE HELD ON APRIL 21, 2003, AT
THE OFFICES OF HELLER EHRMAN WHITE & MCAULIFFE, 275 MIDDLEFIELD ROAD, MENLO
PARK, CALIFORNIA 94025, OR ON SUCH OTHER DATE AND AT SUCH OTHER PLACE AS MAY BE
AGREED BY THE COMPANY AND THE PURCHASERS.  AT OR PRIOR TO THE CLOSING, THE
COMPANY AND EACH PURCHASER SHALL EXECUTE AND DELIVER (OR CAUSE THE EXECUTION AND
DELIVERY OF) ANY RELATED AGREEMENTS OR OTHER DOCUMENTS REQUIRED TO BE EXECUTED
AND DELIVERED AT THE CLOSING, DATED AS OF THE DATE OF THE CLOSING (THE “CLOSING
DATE”).

 

3.2           DELIVERY OF THE SECURITIES.  AT THE CLOSING, THE SECURITIES
PURCHASED BY EACH RESPECTIVE PURCHASER WILL BE ISSUED IN THE NAME OF SUCH
PURCHASER, AND THE NAME OF SUCH PURCHASER WILL BE REGISTERED ON THE BOOKS OF THE
COMPANY AS THE RECORD OWNER OF SUCH SECURITIES.  AT THE CLOSING, THE COMPANY
WILL PROVIDE TO EACH PURCHASER COPIES OF THE SECURITIES PURCHASED BY SUCH
PURCHASER AND ISSUED AT THE CLOSING.  WITHIN TWO BUSINESS DAYS AFTER THE
CLOSING, THE COMPANY WILL DELIVER TO EACH RESPECTIVE PURCHASER STOCK
CERTIFICATES REPRESENTING THE SHARES OF COMMON STOCK, AND WARRANT CERTIFICATES
REPRESENTING THE WARRANTS, PURCHASED BY SUCH PURCHASER PURSUANT HERETO.

 

3.3           DELIVERY OF THE PURCHASE PRICE FOR THE SECURITIES AT THE CLOSING. 
IN EXCHANGE FOR THE SECURITIES, EACH PURCHASER SHALL PAY THE AMOUNT SET FORTH
OPPOSITE SUCH PURCHASER’S NAME ON EXHIBIT A ATTACHED HERETO BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS TO THE BANK ACCOUNT DESIGNATED BY THE COMPANY ON
EXHIBIT C ATTACHED HERETO.

 

SECTION 4.         REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

For purposes of this Section 4, the “Company” shall mean the Company together
with any Subsidiary (as defined below) of the Company.  Except as set forth on
the Schedule of Exceptions attached hereto as Exhibit D, the Company hereby
represents and warrants to and, where applicable, covenants and agrees with,
each individual Purchaser as follows:

 

4.1           ORGANIZATION AND STANDING.  THE COMPANY IS A CORPORATION DULY
INCORPORATED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE
OF CALIFORNIA AND HAS FULL CORPORATE POWER AND AUTHORITY TO OWN OR LEASE ITS
PROPERTIES AND CONDUCT ITS BUSINESS AS PRESENTLY CONDUCTED.  THE COMPANY IS DULY
REGISTERED OR QUALIFIED TO DO BUSINESS AS A FOREIGN CORPORATION, AND IS IN GOOD
STANDING, IN ALL JURISDICTIONS IN WHICH THE CHARACTER OF THE PROPERTY OWNED OR
LEASED OR THE NATURE OF THE BUSINESS TRANSACTED BY THE COMPANY MAKES SUCH
REGISTRATION OR QUALIFICATION NECESSARY, EXCEPT WHERE THE FAILURE TO BE SO
QUALIFIED WOULD NOT HAVE A “COMPANY MATERIAL ADVERSE EFFECT” (AS DEFINED
BELOW).  EXCEPT AS SET FORTH IN THE SCHEDULE OF EXCEPTIONS, THE COMPANY HAS NO
SUBSIDIARY (AS DEFINED BELOW) OR ANY EQUITY OR OTHER OWNERSHIP INTEREST
(INCLUDING WITHOUT LIMITATION ANY INTEREST CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR ANY EQUITY OR OTHER OWNERSHIP INTEREST) IN ANY OTHER ENTITY, AND
IS NOT A PARTICIPANT IN ANY JOINT VENTURE OR OTHER SIMILAR ARRANGEMENT. 
“COMPANY MATERIAL ADVERSE EFFECT” OR “COMPANY MATERIAL ADVERSE CHANGE” MEANS (I)
ANY CHANGE IN, OR EFFECT ON, THE BUSINESS, PROPERTIES, PROSPECTS,

 

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RESULTS OF OPERATIONS, ASSETS OR FINANCIAL CONDITION OF THE COMPANY, OR ANY
CHANGE OR INCREASE IN THE LIABILITIES OF THE COMPANY, THAT IS OR WOULD
INDIVIDUALLY OR IN THE AGGREGATE REASONABLY BE EXPECTED TO BE MATERIALLY ADVERSE
TO THE COMPANY, OTHER THAN (A) ANY SUCH CHANGE OR EFFECT RESULTING FROM THE
PUBLIC ANNOUNCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, OR
(B) ANY CHANGE OR EFFECT IN THE UNITED STATES ECONOMY IN GENERAL AND NOT
SPECIFICALLY RELATING TO THE COMPANY, INCLUDING WITHOUT LIMITATION ANY SUCH
CHANGE OR EFFECT REASONABLY RELATED TO THE CONFLICT BETWEEN THE UNITED STATES
AND THE COUNTRY OF IRAQ AND/OR TERRORIST ACTIVITY AGAINST THE UNITED STATES OR
ITS CITIZENS, (II) ANY MATERIAL ADVERSE EFFECT ON THE COMPANY’S ABILITY TO
CONSUMMATE THE TRANSACTION CONTEMPLATED HEREBY, INCLUDING THE ISSUANCE AND SALE
OF THE SECURITIES, AND (III) ANY MATERIAL ADVERSE EFFECT ON THE COMPANY’S
ABILITY TO PERFORM ITS OBLIGATIONS HEREUNDER AND UNDER THE SECURITIES. 
“SUBSIDIARY” MEANS ANY PERSON IN WHICH THE COMPANY DIRECTLY OR INDIRECTLY
THROUGH SUBSIDIARIES OR OTHERWISE, BENEFICIALLY OWNS AT LEAST 50% OF EITHER THE
EQUITY INTEREST IN, OR THE VOTING CONTROL OF, SUCH PERSON, WHETHER OR NOT
EXISTING ON THE DATE HEREOF.  “PERSON” MEANS ANY INDIVIDUAL, PARTNERSHIP,
CORPORATION, LIMITED LIABILITY COMPANY, BUSINESS TRUST, JOINT STOCK COMPANY,
TRUST, UNINCORPORATED ASSOCIATION, JOINT VENTURE OR OTHER BUSINESS ENTITY.

 

4.2           CORPORATE POWER; AUTHORIZATION.  THE COMPANY HAS ALL REQUISITE
CORPORATE RIGHT, POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT, TO
SELL AND ISSUE THE SECURITIES HEREUNDER AND TO CARRY OUT AND PERFORM ALL OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.  ALL CORPORATE AND OTHER ACTION ON THE PART OF
THE COMPANY, ITS DIRECTORS AND SHAREHOLDERS NECESSARY FOR THE AUTHORIZATION,
EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT BY THE COMPANY, THE
AUTHORIZATION, SALE, ISSUANCE AND DELIVERY OF THE SECURITIES CONTEMPLATED HEREIN
AND THE PERFORMANCE OF THE COMPANY’S OBLIGATIONS HEREUNDER HAS BEEN TAKEN OR
WILL BE TAKEN PRIOR TO THE CLOSING.  THIS AGREEMENT HAS BEEN DULY EXECUTED AND
DELIVERED BY THE COMPANY AND CONSTITUTES THE LEGAL, VALID AND BINDING OBLIGATION
OF THE COMPANY, ENFORCEABLE IN ACCORDANCE WITH ITS TERMS, EXCEPT THAT
(A) ENFORCEABILITY MAY BE LIMITED BY APPLICABLE BANKRUPTCY, INSOLVENCY,
REORGANIZATION, MORATORIUM OR SIMILAR LAWS RELATING TO OR AFFECTING THE
ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, (B) ENFORCEABILITY MAY BE LIMITED BY
EQUITABLE PRINCIPLES GENERALLY, AND (C) ENFORCEABILITY OF THOSE PROVISIONS OF
SECTION 8.2 RELATING TO INDEMNITY MAY BE LIMITED UNDER APPLICABLE LAW OR FOR
REASONS OF PUBLIC POLICY.

 

4.3           NO CONFLICT.  THE EXECUTION AND DELIVERY OF THIS AGREEMENT DOES
NOT, AND THE PERFORMANCE BY THE COMPANY OF ITS OBLIGATIONS UNDER THIS AGREEMENT
AND THE ISSUANCE, SALE AND DELIVERY OF THE SECURITIES BY THE COMPANY WILL NOT
(I) CONFLICT WITH, RESULT IN A BREACH OR VIOLATION OF, OR CONSTITUTE A DEFAULT
UNDER (WITH OR WITHOUT NOTICE OR LAPSE OF TIME OR BOTH) OR (II) RESULT IN THE
CREATION OR IMPOSITION OF ANY LIEN, CLAIM, OPTION, CHARGE, SECURITY INTEREST,
LIMITATION, ENCUMBRANCE OR RESTRICTION PURSUANT TO THE TERMS, CONDITIONS OR
PROVISIONS OF:

 

(A)           THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OR BYLAWS OF
THE COMPANY OR ANY SIMILAR ORGANIZATIONAL DOCUMENT OF ANY SUBSIDIARY, IN EACH
CASE, AS IN EFFECT ON THE DATE HEREOF;

 

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(B)           ANY LEASE, LOAN AGREEMENT, MORTGAGE, SECURITY AGREEMENT, TRUST
INDENTURE OR OTHER AGREEMENT OR INSTRUMENT TO WHICH THE COMPANY IS A PARTY OR BY
WHICH IT IS BOUND OR TO WHICH ANY OF ITS PROPERTIES OR ASSETS IS SUBJECT; OR

 

(C)           ANY DECREE, ORDER, STATUTE, LAW, RULE, REGULATION OR JUDGMENT
APPLICABLE TO THE COMPANY.

 

4.4           ISSUANCE AND DELIVERY OF THE SECURITIES.  THE SHARES OF COMMON
STOCK TO BE ISSUED AT THE CLOSING HAVE BEEN DULY AUTHORIZED AND, WHEN ISSUED AND
PAID FOR IN COMPLIANCE WITH THE PROVISIONS OF THIS AGREEMENT, WILL BE VALIDLY
ISSUED, FULLY PAID AND NONASSESSABLE.  THE WARRANTS AND THE ADDITIONAL WARRANTS,
WHEN ISSUED AND PAID FOR IN COMPLIANCE WITH THE PROVISIONS OF THIS AGREEMENT,
WILL CONSTITUTE A LEGAL, VALID AND BINDING OBLIGATION OF THE COMPANY,
ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS, EXCEPT THAT (A) ENFORCEABILITY MAY
BE LIMITED BY APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR
SIMILAR LAWS RELATING TO OR AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS
GENERALLY, AND (B) ENFORCEABILITY MAY BE LIMITED BY EQUITABLE PRINCIPLES
GENERALLY.  THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS
AND THE ADDITIONAL WARRANTS (THE “WARRANT SHARES”) HAVE BEEN DULY AUTHORIZED
AND, WHEN ISSUED IN COMPLIANCE WITH THE WARRANTS AND THE ADDITIONAL WARRANTS,
WILL BE VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.  THE ISSUANCE AND DELIVERY
OF THE SECURITIES AND ANY WARRANT SHARES IS NOT SUBJECT TO PREEMPTIVE, CO-SALE,
RIGHT OF FIRST REFUSAL OR ANY OTHER SIMILAR RIGHTS OF OR IN FAVOR OF ANY PERSON,
GROUP OR ENTITY.

 

4.5           SEC DOCUMENTS; FINANCIAL STATEMENTS; NO MATERIAL MISSTATEMENTS. 
THE COMPANY HAS FILED IN A TIMELY MANNER ALL DOCUMENTS REQUIRED TO BE FILED BY
IT WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION” OR THE “SEC”)
UNDER SECTIONS 13, 14(A) OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE “EXCHANGE ACT”).  SUCH DOCUMENTS ARE REFERRED TO COLLECTIVELY
HEREIN AS THE “SEC DOCUMENTS.”  AS OF THEIR RESPECTIVE FILING DATES (OR, IF
AMENDED OR SUPPLEMENTED PRIOR TO THE DATE OF THIS AGREEMENT, WHEN SO AMENDED OR
SUPPLEMENTED), ALL SEC DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE
REQUIREMENTS OF THE EXCHANGE ACT.  NONE OF THE SEC DOCUMENTS AS OF ITS
RESPECTIVE DATE OF FILING CONTAINED ANY UNTRUE STATEMENT OF MATERIAL FACT OR
OMITTED TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO
MAKE THE STATEMENTS MADE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY
WERE MADE, NOT MISLEADING.  THE FINANCIAL STATEMENTS OF THE COMPANY INCLUDED IN
THE SEC DOCUMENTS (AS RESTATED PRIOR TO THE DATE OF THIS AGREEMENT, THE
“FINANCIAL STATEMENTS”) COMPLY AS TO FORM IN ALL MATERIAL RESPECTS WITH
APPLICABLE ACCOUNTING REQUIREMENTS AND WITH THE PUBLISHED RULES AND REGULATIONS
OF THE SEC WITH RESPECT THERETO.  THE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN
ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (“GAAP”)
CONSISTENTLY APPLIED FOR THE PERIODS PRESENTED AND FAIRLY PRESENT THE FINANCIAL
POSITION OF THE COMPANY AT AND AS OF THE DATES THEREOF AND THE RESULTS OF ITS
OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED (SUBJECT, IN THE CASE OF
UNAUDITED STATEMENTS, TO NORMAL YEAR-END ADJUSTMENTS).  NONE OF THE INFORMATION
OR STATEMENTS (INCLUDING REPRESENTATIONS AND WARRANTIES) OF OR REGARDING THE
COMPANY MADE IN THIS AGREEMENT OR IN ANY OF THE INVESTOR PRESENTATION MATERIALS
PROVIDED TO THE PURCHASERS BY THE COMPANY AND IDENTIFIED IN SECTION 4.5(A) OF
THE SCHEDULE OF EXCEPTIONS CONTAINS ANY UNTRUE STATEMENT OF MATERIAL FACT OR
OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE

 

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MADE, NOT MISLEADING.  THE COPIES OF THE DOCUMENTS AND FILINGS SET FORTH ON
SCHEDULE 4.5(B) OF THE SCHEDULE OF EXCEPTIONS PROVIDED TO AND RELIED ON BY THE
PURCHASERS IN CONNECTION WITH ASSESSING WHETHER TO PURCHASE THE SECURITIES ARE
TRUE, COMPLETE AND CORRECT COPIES OF SUCH DOCUMENTS AS ENTERED INTO BY THE
COMPANY AND THE PARTIES THERETO OR AS FILED BY THE COMPANY WITH THE SECRETARY OF
STATE OF THE STATE OF CALIFORNIA, AS THE CASE MAY BE, AND NONE OF SUCH DOCUMENTS
OR FILINGS SUBSEQUENTLY HAVE BEEN AMENDED OR TERMINATED, ALL SUCH DOCUMENTS AND
FILINGS REMAIN IN FULL FORCE AND EFFECT IN ACCORDANCE WITH THEIR TERMS, THERE
HAVE BEEN NO BREACHES OR VIOLATIONS THEREOF BY THE COMPANY OR, TO THE COMPANY’S
KNOWLEDGE, BY ANY OTHER PARTY THERETO.  NONE OF THE STATEMENTS (INCLUDING
REPRESENTATIONS AND WARRANTIES) OF THE COMPANY IN THIS AGREEMENT ARE MATERIALLY
INCONSISTENT WITH THE INFORMATION AND STATEMENTS CONTAINED IN THE COMPANY’S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 2002.

 

4.6           INTELLECTUAL PROPERTY RIGHTS AND LICENSES.

 

(A)           DEFINITIONS.  AS USED HEREIN, THE TERM “INTELLECTUAL PROPERTY”
MEANS ALL INTELLECTUAL PROPERTY RIGHTS OWNED OR LICENSED BY THE COMPANY ARISING
FROM OR ASSOCIATED WITH THE FOLLOWING, WHETHER PROTECTED, CREATED OR ARISING
UNDER THE LAWS OF THE UNITED STATES OR ANY OTHER JURISDICTION:  (I) TRADE NAMES,
TRADEMARKS AND SERVICE MARKS (REGISTERED AND UNREGISTERED), DOMAIN NAMES AND
OTHER INTERNET ADDRESSES OR IDENTIFIERS, TRADE DRESS AND SIMILAR RIGHTS AND
APPLICATIONS (INCLUDING INTENT TO USE APPLICATIONS) TO REGISTER ANY OF THE
FOREGOING (COLLECTIVELY, “MARKS”); (II) PATENTS AND PATENT APPLICATIONS,
INCLUDING CONTINUATION, DIVISIONAL, CONTINUATION-IN-PART, REEXAMINATION AND
REISSUE PATENT APPLICATIONS AND ANY PATENTS ISSUING THEREFROM, AND RIGHTS IN
RESPECT OF UTILITY MODELS OR INDUSTRIAL DESIGNS (COLLECTIVELY, “PATENTS”);
(III) COPYRIGHTS AND REGISTRATIONS AND APPLICATIONS THEREFOR (COLLECTIVELY,
“COPYRIGHTS”); (IV) NON-PUBLIC KNOW-HOW, INVENTIONS, DISCOVERIES, IMPROVEMENTS,
CONCEPTS, IDEAS, METHODS, PROCESSES, DESIGNS, PLANS, SCHEMATICS, DRAWINGS,
FORMULAE, TECHNICAL DATA, SPECIFICATIONS, RESEARCH AND DEVELOPMENT INFORMATION,
TECHNOLOGY AND PRODUCT ROADMAPS, DATA BASES AND OTHER PROPRIETARY OR
CONFIDENTIAL INFORMATION, INCLUDING CUSTOMER LISTS, BUT EXCLUDING ANY COPYRIGHTS
OR PATENTS THAT MAY COVER OR PROTECT ANY OF THE FOREGOING (COLLECTIVELY, “TRADE
SECRETS”); AND (V) ANY OTHER PROPRIETARY, INTELLECTUAL OR INDUSTRIAL PROPERTY
RIGHTS OF ANY KIND OR NATURE THAT DO NOT COMPRISE OR ARE NOT PROTECTED BY MARKS,
PATENTS, COPYRIGHTS, OR TRADE SECRETS.

 

(B)           COMPANY INTELLECTUAL PROPERTY.  SECTION 4.6(B) OF THE SCHEDULE OF
EXCEPTIONS SETS FORTH AN ACCURATE AND COMPLETE LIST, AS OF THE DATE HEREOF, OF
ALL MARKS, COPYRIGHTS AND PATENTS OWNED (IN WHOLE OR IN PART) OR LICENSED BY THE
COMPANY THAT ARE USED IN OR RELATE TO THE BUSINESS AS CURRENTLY CONDUCTED AND AS
CURRENTLY ANTICIPATED TO BE CONDUCTED IN THE FUTURE BY THE COMPANY
(COLLECTIVELY, “COMPANY INTELLECTUAL PROPERTY”).

 

(C)           ACTIONS TO PROTECT INTELLECTUAL PROPERTY.  THE COMPANY HAS TAKEN
REASONABLE STEPS TO PROTECT ITS RIGHTS IN THE COMPANY INTELLECTUAL PROPERTY AND
MAINTAIN THE CONFIDENTIALITY OF ALL OF THE TRADE SECRETS OF THE COMPANY. 
WITHOUT LIMITING THE FOREGOING, THE COMPANY HAS AND ENFORCES A POLICY REQUIRING
EACH OF THE EMPLOYEES (OTHER THAN NON-TECHNICAL EMPLOYEES WHO HAVE NOT
CONTRIBUTED IN ANY WAY TO THE DEVELOPMENT OR CREATION OF ANY COMPANY
INTELLECTUAL PROPERTY), CONSULTANTS AND CONTRACTORS OF THE COMPANY TO ENTER INTO
PROPRIETARY INFORMATION, CONFIDENTIALITY AND ASSIGNMENT AGREEMENTS WHICH ARE
SUBSTANTIALLY IN THE FORM

 

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ATTACHED AS ATTACHMENT 4.6(C) TO THE SCHEDULE OF EXCEPTIONS, AND ALL CURRENT AND
FORMER EMPLOYEES (OTHER THAN NON-TECHNICAL EMPLOYEES WHO HAVE NOT CONTRIBUTED IN
ANY WAY TO THE DEVELOPMENT OR CREATION OF ANY COMPANY INTELLECTUAL PROPERTY OR
TRADE SECRETS), CONSULTANTS AND CONTRACTORS OF THE COMPANY HAVE EXECUTED SUCH AN
AGREEMENT.  EXCEPT AS SET FORTH IN SECTION 4.6(C) OF THE SCHEDULE OF EXCEPTIONS,
THE COMPANY HAS NOT DISCLOSED, AND IS NOT UNDER ANY CONTRACTUAL OR OTHER
OBLIGATION TO DISCLOSE, TO ANOTHER PERSON ANY OF ITS TRADE SECRETS, EXCEPT
PURSUANT TO AN ENFORCEABLE CONFIDENTIALITY AGREEMENT OR UNDERTAKING, AND, TO THE
KNOWLEDGE OF THE COMPANY, NO PERSON HAS MATERIALLY BREACHED ANY SUCH AGREEMENT
OR UNDERTAKING.

 

(D)           ADVERSE OWNERSHIP CLAIMS.  EXCEPT AS SET FORTH IN SECTION 4.6(D)
OF THE SCHEDULE OF EXCEPTIONS, THE COMPANY OWNS EXCLUSIVELY ALL RIGHT, TITLE AND
INTEREST IN AND TO ALL OF THE COMPANY INTELLECTUAL PROPERTY AND THE TRADE
SECRETS FREE AND CLEAR OF ANY AND ALL LIENS, ENCUMBRANCES OR OTHER ADVERSE
OWNERSHIP CLAIMS (OTHER THAN LICENSES GRANTED BY THE COMPANY TO ANOTHER PERSON
IN THE ORDINARY COURSE OF BUSINESS LISTED UNDER SECTION 4.6(G) BELOW), AND THE
COMPANY HAS NOT RECEIVED ANY NOTICE OR CLAIM CHALLENGING THE COMPANY’S OWNERSHIP
OF THE COMPANY INTELLECTUAL PROPERTY OR THE TRADE SECRETS OR SUGGESTING THAT ANY
OTHER PERSON HAS ANY CLAIM OF LEGAL OR BENEFICIAL OWNERSHIP WITH RESPECT
THERETO, NOR TO THE KNOWLEDGE OF THE COMPANY IS THERE A REASONABLE BASIS FOR ANY
CLAIM THAT THE COMPANY DOES NOT SO OWN OR LICENSE ANY OF SUCH COMPANY
INTELLECTUAL PROPERTY OR THE TRADE SECRETS.

 

(E)           VALIDITY AND ENFORCEABILITY.  TO THE COMPANY’S KNOWLEDGE, THE
COMPANY INTELLECTUAL PROPERTY IS VALID, ENFORCEABLE, AND SUBSISTING.  THE
COMPANY HAS NOT RECEIVED ANY NOTICE OR CLAIM CHALLENGING OR QUESTIONING THE
VALIDITY OR ENFORCEABILITY OF ANY OF THE COMPANY INTELLECTUAL PROPERTY OR
INDICATING AN INTENTION ON THE PART OF ANY PERSON TO BRING A CLAIM THAT ANY OF
THE COMPANY INTELLECTUAL PROPERTY IS INVALID OR UNENFORCEABLE OR HAS BEEN
MISUSED, AND, WITH RESPECT TO THE PATENTS CONTAINED WITHIN THE COMPANY
INTELLECTUAL PROPERTY, TO THE COMPANY’S KNOWLEDGE, THE COMPANY HAS DISCLOSED
RELEVANT PRIOR ART IN THE PROSECUTION OF ITS PATENTS IN ACCORDANCE WITH ITS
OBLIGATIONS PURSUANT TO 37 CFR 1.56.

 

(F)            STATUS AND MAINTENANCE OF COMPANY INTELLECTUAL PROPERTY AND TRADE
SECRETS.  EXCEPT AS SET FORTH IN SECTION 4.6(F) OF THE SCHEDULE OF EXCEPTIONS:
(I) TO THE COMPANY’S KNOWLEDGE, THE COMPANY HAS NOT TAKEN ANY ACTION OR FAILED
TO TAKE ANY ACTION (INCLUDING THE MANNER IN WHICH IT HAS CONDUCTED ITS BUSINESS,
OR USED OR ENFORCED, OR FAILED TO USE OR ENFORCE, ANY OF THE COMPANY
INTELLECTUAL PROPERTY OR TRADE SECRETS) THAT WOULD RESULT IN THE ABANDONMENT,
CANCELLATION, FORFEITURE, RELINQUISHMENT, INVALIDATION OR UNENFORCEABILITY OF
ANY OF THE COMPANY INTELLECTUAL PROPERTY OR IN ANY OF THE TRADE SECRETS NOT
REMAINING PROPRIETARY TO THE COMPANY; AND (II) ALL COMPANY INTELLECTUAL PROPERTY
THAT HAS BEEN REGISTERED OR FILED, TO THE COMPANY’S KNOWLEDGE, HAS BEEN
REGISTERED OR FILED IN ACCORDANCE WITH ALL APPLICABLE LEGAL REQUIREMENTS
(INCLUDING, IN THE CASE OF THE COMPANY’S MARKS, THE TIMELY POST-REGISTRATION
FILING OF AFFIDAVITS OF USE AND INCONTESTABILITY AND RENEWAL APPLICATIONS).  TO
THE COMPANY’S KNOWLEDGE, THE COMPANY HAS TIMELY PAID ALL FILING, EXAMINATION,
ISSUANCE, POST REGISTRATION AND MAINTENANCE FEES, ANNUITIES AND THE LIKE
ASSOCIATED WITH OR REQUIRED WITH RESPECT TO ANY OF THE COMPANY INTELLECTUAL
PROPERTY.  THE COMPANY HEREBY COVENANTS AND AGREES THAT IT SHALL NOT, PRIOR TO
THE CLOSING DATE, SELL, ASSIGN, TRANSFER, LICENSE, ABANDON, LET LAPSE, DISCLOSE,
MISUSE, MISAPPROPRIATE, DIMINISH, DESTROY OR

 

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OTHERWISE DISPOSE OF OR ENCUMBER THE COMPANY INTELLECTUAL PROPERTY OR THE TRADE
SECRETS IN ANY MANNER.

 

(G)           LICENSE AGREEMENTS.  SECTION 4.6(G)(1) OF THE SCHEDULE OF
EXCEPTIONS SETS FORTH A COMPLETE AND ACCURATE LIST OF ALL AGREEMENTS CURRENTLY
IN EFFECT GRANTING TO THE COMPANY ANY RIGHT UNDER OR WITH RESPECT TO ANY COMPANY
INTELLECTUAL PROPERTY OR TRADE SECRETS OTHER THAN STANDARD DESKTOP SOFTWARE
APPLICATIONS USED GENERALLY IN THE COMPANY’S OPERATIONS.  SECTION 4.6(G)(2) OF
THE SCHEDULE OF EXCEPTIONS SETS FORTH A COMPLETE AND ACCURATE LIST OF ALL
LICENSE AGREEMENTS CURRENTLY IN EFFECT UNDER WHICH THE COMPANY LICENSES OR
GRANTS ANY OTHER RIGHTS UNDER ANY COMPANY INTELLECTUAL PROPERTY OR TRADE SECRETS
TO ANOTHER PERSON, EXCLUDING NON-EXCLUSIVE INTERNAL USE LICENSES GRANTED BY THE
COMPANY TO END USER CUSTOMERS THAT HAVE PURCHASED OR LICENSED PRODUCTS.

 

(H)           SUFFICIENCY OF THE COMPANY INTELLECTUAL PROPERTY.  TO THE
COMPANY’S KNOWLEDGE, THE COMPANY INTELLECTUAL PROPERTY AND THE TRADE SECRETS
TOGETHER CONSTITUTE ALL THE MATERIAL INTELLECTUAL PROPERTY RIGHTS NECESSARY FOR
THE CONDUCT OF THE COMPANY’S BUSINESS AS IT IS CURRENTLY CONDUCTED AND
REASONABLY ANTICIPATED TO BE CONDUCTED IN THE FUTURE.

 

(I)            NO INFRINGEMENT BY THE COMPANY OR THIRD PARTIES; NO VIOLATIONS. 
TO THE COMPANY’S KNOWLEDGE, NONE OF THE PRODUCTS, PROCESSES, SERVICES, OR OTHER
TECHNOLOGY OR MATERIALS, OR ANY COMPANY INTELLECTUAL PROPERTY OR TRADE SECRETS
DEVELOPED, USED, LEASED, LICENSED, SOLD, IMPORTED OR OTHERWISE DISTRIBUTED OR
DISPOSED OF, OR OTHERWISE COMMERCIALLY EXPLOITED BY OR FOR THE COMPANY OR ANY
OTHER ACTIVITIES OR OPERATIONS OF THE COMPANY INFRINGES UPON, MISAPPROPRIATES,
VIOLATES, DILUTES OR CONSTITUTES THE UNAUTHORIZED USE OF, ANY INTELLECTUAL
PROPERTY OF ANY THIRD PARTY, AND THE COMPANY HAS NOT RECEIVED ANY NOTICE OR
CLAIM ASSERTING OR SUGGESTING THAT ANY SUCH INFRINGEMENT, MISAPPROPRIATION,
VIOLATION, DILUTION OR UNAUTHORIZED USE IS OR MAY BE OCCURRING OR HAS OR MAY
HAVE OCCURRED, NOR, TO THE KNOWLEDGE OF THE COMPANY, IS THERE ANY REASONABLE
BASIS THEREFOR.  NO COMPANY INTELLECTUAL PROPERTY OR TRADE SECRETS ARE SUBJECT
TO ANY OUTSTANDING ORDER, JUDGMENT, DECREE, OR STIPULATION RESTRICTING THE USE
THEREOF BY THE COMPANY OR, IN THE CASE OF ANY COMPANY INTELLECTUAL PROPERTY OR
TRADE SECRETS LICENSED TO OTHERS, RESTRICTING THE SALE, TRANSFER, ASSIGNMENT OR
LICENSING THEREOF BY THE COMPANY TO ANY PERSON.  TO THE COMPANY’S KNOWLEDGE, NO
THIRD PARTY IS MISAPPROPRIATING, INFRINGING, DILUTING OR VIOLATING IN ANY
MATERIAL RESPECT ANY COMPANY INTELLECTUAL PROPERTY OR THE TRADE SECRETS.  TO THE
COMPANY’S KNOWLEDGE, NO PRODUCT, TECHNOLOGY, SERVICE OR PUBLICATION OF THE
COMPANY VIOLATES ANY LAW OR REGULATION.

 

(J)            RESTRICTIONS ON EMPLOYEES.  TO THE KNOWLEDGE OF THE COMPANY, NO
EMPLOYEE OR INDEPENDENT CONTRACTOR OF THE COMPANY IS OBLIGATED UNDER ANY
AGREEMENT OR SUBJECT TO ANY JUDGMENT, DECREE OR ORDER OF ANY COURT OR
ADMINISTRATIVE AGENCY, OR ANY OTHER RESTRICTION THAT WOULD OR MAY MATERIALLY
INTERFERE WITH SUCH EMPLOYEE OR CONTRACTOR CARRYING OUT HIS OR HER DUTIES FOR
THE COMPANY OR THAT WOULD MATERIALLY CONFLICT WITH THE COMPANY’S BUSINESS AS
PRESENTLY CONDUCTED AND PROPOSED TO BE CONDUCTED.

 

4.7           CAPITALIZATION.  THE AUTHORIZED CAPITAL STOCK OF THE COMPANY AS OF
THE DATE OF THIS AGREEMENT CONSISTS OF 100,000,000 SHARES OF COMPANY COMMON
STOCK, 5,000,000 SHARES OF

 

7

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PREFERRED STOCK, NO PAR VALUE, OF WHICH 25,000 SHARES HAVE BEEN DESIGNATED
SERIES A PREFERRED STOCK (THE “SERIES A PREFERRED”).  AS OF THE CLOSE OF
BUSINESS ON MARCH 31, 2003 THERE WERE (I) 16,460,566 SHARES OF COMMON STOCK
ISSUED AND OUTSTANDING, OF WHICH NO SHARES WERE OWNED BY THE COMPANY,
(II) 12,015 SHARES OF SERIES A PREFERRED ISSUED AND OUTSTANDING, OF WHICH NO
SHARES WERE OWNED BY THE COMPANY, AND (III) NO OTHER SHARES OF ANY OTHER CLASS
OR SERIES OF CAPITAL STOCK OF THE COMPANY ISSUED OR OUTSTANDING.  AS OF THE
CLOSE OF BUSINESS ON MARCH 31, 2003, THERE WERE ISSUED AND OUTSTANDING COMMON
STOCK PURCHASE WARRANTS, NO PAR VALUE (THE “COMPANY WARRANTS”) TO PURCHASE
1,818,629 SHARES OF COMMON STOCK WITH A WEIGHTED AVERAGE EXERCISE PRICE OF
$4.56.  THE COMPANY HAS NO CAPITAL STOCK RESERVED FOR ISSUANCE, EXCEPT THAT, AS
OF THE DAY PRIOR TO EXECUTION OF THIS AGREEMENT, THERE WERE (I) 3,325,217 SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT TO OPTIONS OUTSTANDING ON THE
DATE HEREOF PURSUANT TO THE COMPANY’S AMENDED AND RESTATED 1995 STOCK OPTION
PLAN, (II) 1,818,629 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE UPON EXERCISE
OF THE COMPANY WARRANTS, (III) 1,404,102 SHARES OF COMMON STOCK RESERVED FOR
ISSUANCE UPON CONVERSION OF THE SERIES A PREFERRED, (IV) 981,975 SHARES OF
COMMON STOCK RESERVED FOR ISSUANCE UPON CONVERSION OF THE CONVERTIBLE PROMISSORY
NOTE OF THE COMPANY DATED JANUARY 21, 2000 (THE “CONVERTIBLE NOTE”), (V) 821,959
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE PURSUANT TO AN OPTION OUTSTANDING
ON THE DATE HEREOF PURSUANT TO THE CONDITIONAL OPTION ISSUED TO BIOVAIL
LABORATORIES INCORPORATED WITH AN EXERCISE PRICE OF $5.125 (THE “BIOVAIL
CONDITIONAL OPTION”), (VI) 210,835 SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
PURSUANT TO AN OPTION OUTSTANDING ON THE DATE HEREOF PURSUANT TO THE PURCHASER’S
OPTION ISSUED TO BIOVAIL LABORATORIES INCORPORATED WITH AN EXERCISE PRICE OF
$5.707 (THE “BIOVAIL OPTION”); AND (VII) 3,240,745 SHARES RESERVED FOR ISSUANCE
UPON EXERCISE OF THE WARRANTS.  SINCE THE DAY PRIOR TO EXECUTION OF THIS
AGREEMENT, THE COMPANY HAS NOT ISSUED ANY OPTIONS, WARRANTS OR CAPITAL STOCK
EXCEPT PURSUANT TO THE EXERCISE OF OPTIONS OR COMPANY WARRANTS OR THE CONVERSION
OF THE OUTSTANDING SERIES A PREFERRED OR THE CONVERTIBLE NOTE OUTSTANDING AS OF
SUCH DATE AND IN ACCORDANCE WITH THEIR TERMS.  THE COMMON STOCK TO BE ISSUED
UPON EXERCISE OF THE WARRANTS AND THE ADDITIONAL WARRANTS HAVE BEEN DULY
AUTHORIZED AND RESERVED FOR ISSUANCE AND, WHEN ISSUED UPON SUCH EXERCISE, WILL
BE VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.  THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE SERIES A PREFERRED REFERENCED IN CLAUSE (III)
ABOVE, HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE AND UPON ISSUANCE
UPON CONVERSION OF THE SERIES A PREFERRED, WILL BE VALIDLY ISSUED, FULLY PAID
AND NON-ASSESSABLE.  ALL THE OUTSTANDING COMMON STOCK AND SERIES A PREFERRED
ARE, AND ALL SHARES OF COMMON STOCK WHICH MAY BE ISSUED PURSUANT TO THE EXERCISE
OF OUTSTANDING OPTIONS OR COMPANY WARRANTS OR THE OUTSTANDING BIOVAIL
CONDITIONAL OPTION OR THE OUTSTANDING BIOVAIL OPTION OR UPON CONVERSION OF THE
OUTSTANDING CONVERTIBLE NOTE HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE
AND, WHEN ISSUED IN ACCORDANCE WITH THE RESPECTIVE TERMS THEREOF, WILL BE DULY
AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.  EXCEPT FOR THE
CONVERTIBLE NOTE, THERE ARE NO BONDS, DEBENTURES, NOTES OR OTHER INDEBTEDNESS
HAVING GENERAL VOTING RIGHTS (OR CONVERTIBLE INTO SECURITIES HAVING SUCH RIGHTS)
(“VOTING DEBT”) OF THE COMPANY ISSUED AND OUTSTANDING.  EXCEPT AS STATED ABOVE,
THERE ARE NO EXISTING OPTIONS, WARRANTS, CALLS, SUBSCRIPTIONS OR OTHER RIGHTS,
AGREEMENTS, ARRANGEMENTS OR COMMITMENTS OF ANY CHARACTER, RELATING TO THE ISSUED
OR UNISSUED CAPITAL STOCK OF THE COMPANY, OBLIGATING THE COMPANY TO ISSUE,
TRANSFER, SELL, REDEEM, PURCHASE, REPURCHASE OR OTHERWISE ACQUIRE OR CAUSE TO BE
ISSUED, TRANSFERRED, SOLD, REDEEMED, PURCHASED, REPURCHASED OR OTHERWISE
ACQUIRED ANY CAPITAL STOCK OR VOTING DEBT OF, OR

 

8

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OTHER EQUITY INTEREST IN, THE COMPANY OR SECURITIES OR RIGHTS CONVERTIBLE INTO
OR EXCHANGEABLE FOR SUCH SHARES OR EQUITY INTERESTS OR OBLIGATIONS OF THE
COMPANY TO GRANT, EXTEND OR ENTER INTO ANY SUCH OPTION, WARRANT, CALL,
SUBSCRIPTION OR OTHER RIGHT, AGREEMENT, ARRANGEMENT OR COMMITMENT.  THE ISSUANCE
OF COMMON STOCK OR OTHER SECURITIES PURSUANT TO ANY PROVISION OF THIS AGREEMENT
OR THE WARRANTS OR ADDITIONAL WARRANTS WILL NOT GIVE RISE TO ANY PREEMPTIVE
RIGHTS OR RIGHTS OF FIRST REFUSAL ON BEHALF OF ANY PERSON OR RESULT IN THE
TRIGGERING OF ANY ANTI-DILUTION OR OTHER SIMILAR RIGHTS, OTHER THAN AS SET FORTH
IN SECTION 4.7 OF THE SCHEDULE OF EXCEPTIONS.

 

4.8           LITIGATION.  THERE IS NO PENDING OR, TO THE COMPANY’S KNOWLEDGE,
THREATENED, LEGAL, ADMINISTRATIVE OR GOVERNMENTAL ACTION, SUIT OR OTHER
PROCEEDING TO WHICH THE COMPANY IS A PARTY OR TO WHICH IT OR ITS PROPERTY OR
ASSETS ARE OR REASONABLY MAY BE SUBJECT.

 

4.9           GOVERNMENTAL CONSENTS.  NO (A) CONSENT, APPROVAL, ORDER OR
AUTHORIZATION OF, OR (B) REGISTRATION, QUALIFICATION, DESIGNATION, DECLARATION
OR FILING WITH, ANY FEDERAL, STATE, OR LOCAL ADMINISTRATIVE, REGULATORY OR
GOVERNMENTAL AUTHORITY (EACH, A “GOVERNMENTAL AUTHORITY”) OR ANY OTHER PERSON
(INCLUDING WITHOUT LIMITATION THE APPROVAL OR CONSENT OF ANY SHAREHOLDERS OF THE
COMPANY (“SHAREHOLDER APPROVAL”) PURSUANT TO ANY RULE, REGULATION OR REQUIREMENT
OF THE AMERICAN STOCK EXCHANGE (“AMEX”) OR UNDER THE CALIFORNIA GENERAL
CORPORATION LAW) IS REQUIRED IN CONNECTION WITH THE EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE ISSUANCE AND SALE OF THE SECURITIES, THE CONSUMMATION OF THE
OTHER TRANSACTIONS CONTEMPLATED HEREBY, OR THE PERFORMANCE BY THE COMPANY OF ITS
OBLIGATIONS HEREUNDER EXCEPT FOR (I) COMPLIANCE WITH THE REQUIREMENTS OF THE
AMEX (WHICH, FOR AVOIDANCE OF DOUBT, DOES NOT REQUIRE SHAREHOLDER APPROVAL),
(II) COMPLIANCE WITH THE NOTICE FILING REQUIRED BY RULE 506 UNDER REGULATION D
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ANY
SECURITIES AND BLUE SKY LAWS IN THE STATES AND OTHER JURISDICTIONS IN WHICH
SHARES OF COMMON STOCK ARE OFFERED AND/OR SOLD, WHICH COMPLIANCE WILL BE TIMELY
EFFECTED IN ACCORDANCE WITH SUCH REQUIREMENTS AND LAWS AND (III) THE FILING OF A
REGISTRATION STATEMENT AND ALL AMENDMENTS THERETO WITH THE SEC, AND CAUSING SUCH
REGISTRATION STATEMENT TO BECOME AND REMAIN EFFECTIVE, AS CONTEMPLATED BY
SECTION 8.1 OF THIS AGREEMENT.

 

4.10         NO COMPANY MATERIAL ADVERSE CHANGE.  SINCE DECEMBER 31, 2002, THERE
HAS NOT BEEN A COMPANY MATERIAL ADVERSE CHANGE OR ANY EVENT, CONDITION OR
OCCURRENCE WHICH COULD REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE
CHANGE.

 

4.11         LISTING; MAINTENANCE OF LISTING.  THE COMMON STOCK IS TRADED ON
AMEX.  THE COMPANY HAS OBTAINED LISTING APPROVAL FROM THE AMEX (AND ANY OTHER
SECURITIES EXCHANGE UPON WHICH THE COMMON STOCK IS LISTED) FOR THE LISTING OF
THE COMMON STOCK PURCHASED HEREUNDER (AND ALL WARRANT SHARES).  ALL SUCH
SECURITIES WILL BE APPROVED FOR LISTING ON THE AMEX (AND ANY OTHER SECURITIES
EXCHANGE UPON WHICH THE COMMON STOCK IS LISTED) IMMEDIATELY UPON THE
EFFECTIVENESS OF THE REGISTRATION STATEMENT REQUIRED TO BE FILED BY THE COMPANY
PURSUANT TO SECTION 8 HEREOF (THE “REGISTRATION STATEMENT”).  FOR SO LONG AS THE
COMPANY IS OBLIGATED TO KEEP AND MAINTAIN THE EFFECTIVENESS OF THE REGISTRATION
STATEMENT, THE COMPANY WILL USE ITS REASONABLE BEST EFFORTS TO MAINTAIN ITS
LISTING ON THE AMEX; PROVIDED, HOWEVER, THAT THIS SECTION 4.11 SHALL NOT
PROHIBIT THE COMPANY FROM LISTING THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET, PROVIDED, THAT THE COMPANY TAKES APPROPRIATE ACTIONS TO ENSURE THAT ALL
SHARES

 

9

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OF COMMON STOCK PURCHASED HEREUNDER (AND THE WARRANT SHARES) ALSO ARE LISTED ON
THE NASDAQ NATIONAL MARKET UPON AND AT ALL TIMES DURING THE EFFECTIVENESS OF THE
REGISTRATION STATEMENT.

 

4.12         BOARD MATTERS.

 

(A)           MDS NOMINEE.  FOR SO LONG AS THE MDS PARTIES (AS DEFINED BELOW)
ARE THE “BENEFICIAL OWNERS” (AS DEFINED IN RULE 13D-3 OF THE EXCHANGE ACT) OF A
NUMBER OF SHARES OF COMMON STOCK EQUAL TO AT LEAST 25% OF THE AGGREGATE NUMBER
OF SHARES OF COMMON STOCK PURCHASED BY THE MDS PARTIES (AS DEFINED BELOW) AT THE
CLOSING (AS ADJUSTED FOR STOCK SPLITS, STOCK DIVIDENDS AND OTHER SIMILAR
TRANSACTIONS AFFECTING THE COMMON STOCK OF THE COMPANY WHICH OCCUR AFTER THE
CLOSING DATE), THE MDS PARTIES (AS DEFINED BELOW) THEN HOLDING THE SECURITIES
SHALL BE ENTITLED TO DESIGNATE ONE NOMINEE FOR DIRECTOR (THE “MDS NOMINEE”) FOR
ELECTION TO THE COMPANY’S BOARD OF DIRECTORS.  IN CONNECTION WITH THE FOREGOING,
THE COMPANY WILL USE ITS BEST EFFORTS TO EFFECT SUCH ELECTION TO BE EFFECTIVE
ONE DAY AFTER THE CLOSING DATE AND TO CAUSE THE MDS NOMINEE TO CONTINUE AS A
MEMBER OF THE COMPANY’S BOARD OF DIRECTORS FOR SO LONG AS THE MDS PARTIES,
TOGETHER WITH THEIR RESPECTIVE AFFILIATES AND SUBSIDIARIES, HOLDS AT LEAST THE
MINIMUM NUMBER OF SHARES OF COMMON STOCK SPECIFIED IN THE PRECEDING SENTENCE,
INCLUDING THE INCLUSION OF THE DESIGNATED MDS NOMINEE ON THE RECOMMENDED SLATE
OF DIRECTORS PRESENTED AT EACH REGULAR OR SPECIAL MEETING OF THE SHAREHOLDERS OF
THE COMPANY AT WHICH DIRECTORS OF THE COMPANY ARE TO BE ELECTED.  THE INITIAL
MDS NOMINEE SHALL BE MICHAEL CALLAGHAN.  FOR PURPOSES HEREOF, “MDS PARTIES”
MEANS, COLLECTIVELY, (I) MDS CAPITAL CORP., AN ONTARIO CORPORATION (“MDS”),
(II) ANY AFFILIATE OF MDS OR ANY OTHER MDS PARTY, AND (III) ANY PERSON WHICH IS
AN INVESTMENT FUND TO WHICH MDS OR ANY OF ITS AFFILIATES PROVIDES INVESTMENT
MANAGEMENT AND/OR ADVISORY SERVICES, WHICH FOR GREATER CERTAINLY CURRENTLY
INCLUDES MDS LIFE SCIENCES TECHNOLOGY FUND II NC LIMITED PARTNERSHIP, MDS LIFE
SCIENCES TECHNOLOGY FUND II QUEBEC LIMITED PARTNERSHIP, MLII CO-INVESTMENT FUND
NC LIMITED PARTNERSHIP AND SC BIOTECHNOLOGY DEVELOPMENT FUND LP AND “MDS PARTY”
MEANS ANY ONE OF THE MDS PARTIES.  “AFFILIATE” MEANS, WITH RESPECT TO ANY
PERSON, ANY OTHER PERSON WHICH, DIRECTLY OR INDIRECTLY, IS IN CONTROL OF, IS
CONTROLLED BY, OR IS UNDER COMMON CONTROL WITH, SUCH PERSON; A PERSON SHALL BE
DEEMED TO CONTROL ANOTHER PERSON IF THE CONTROLLING PERSON POSSESSES, DIRECTLY
OR INDIRECTLY, THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND
POLICIES OF SUCH OTHER PERSON, WHETHER THROUGH THE OWNERSHIP OF EQUITY INTEREST
IN SUCH OTHER PERSON, BY CONTRACT, OR OTHERWISE.

 

(B)           COMPANY NOMINEE.  FOR SO LONG AS THE PURCHASERS AND THE MDS
PARTIES, TOGETHER WITH THEIR AFFILIATES AND SUBSIDIARIES, COLLECTIVELY ARE THE
“BENEFICIAL OWNERS” (AS DEFINED IN RULE 13D-3 OF THE EXCHANGE ACT) OF A NUMBER
OF SHARES OF COMMON STOCK EQUAL TO AT LEAST 25% OF THE AGGREGATE NUMBER OF
SHARES OF COMMON STOCK OF THE COMPANY PURCHASED BY THE PURCHASERS AT THE CLOSING
(AS ADJUSTED FOR STOCK SPLITS, STOCK DIVIDENDS AND OTHER SIMILAR TRANSACTIONS
AFFECTING THE COMMON STOCK OF THE COMPANY WHICH OCCUR AFTER THE CLOSING DATE),
THE COMPANY AND THE MDS PARTIES THEN HOLDING SECURITIES SHALL JOINTLY DESIGNATE
A NOMINEE FOR ELECTION TO THE COMPANY’S BOARD OF DIRECTORS AN INDIVIDUAL (THE
“COMPANY NOMINEE”) WHO IS AN “INDEPENDENT DIRECTOR” AND HAS EXTENSIVE EXPERIENCE
IN PHARMACEUTICAL DEVELOPMENT.  FOR PURPOSES OF THIS SECTION 4.12, A PERSON WHO
MEETS ALL OF THE FOLLOWING CRITERIA SHALL BE DEEMED TO BE AN “INDEPENDENT
DIRECTOR”: ANY PERSON WHO (I) HAS NOT BEEN EMPLOYED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES FOR THE CURRENT YEAR OR ANY OF THE PAST THREE YEARS; (II) HAS NOT
ACCEPTED ANY

 

10

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COMPENSATION FROM THE COMPANY OR ANY OF ITS SUBSIDIARIES IN EXCESS OF $60,000
DURING THE PREVIOUS FISCAL YEAR, OTHER THAN COMPENSATION FOR BOARD SERVICE,
BENEFITS UNDER A TAX-QUALIFIED RETIREMENT PLAN, OR NON-DISCRETIONARY
COMPENSATION; (III) IS NOT A MEMBER OF THE IMMEDIATE FAMILY OF AN INDIVIDUAL WHO
IS, OR HAS BEEN IN ANY OF THE PAST THREE YEARS, EMPLOYED BY THE COMPANY OR ANY
OF ITS SUBSIDIARIES AS AN EXECUTIVE OFFICER (“IMMEDIATE FAMILY” INCLUDES A
PERSON’S SPOUSE, PARENTS, CHILDREN, SIBLINGS, MOTHER-IN-LAW, FATHER-IN-LAW,
BROTHER-IN-LAW, SISTER-IN-LAW, SON-IN-LAW, DAUGHTER-IN-LAW, AND ANYONE WHO
RESIDES IN SUCH PERSON’S HOME); (IV) IS NOT A PARTNER IN, OR A CONTROLLING
SHAREHOLDER OR AN EXECUTIVE OFFICER OF, ANY FOR-PROFIT BUSINESS ORGANIZATION TO
WHICH THE CORPORATION MADE, OR FROM WHICH THE COMPANY RECEIVED, PAYMENTS (OTHER
THAN THOSE ARISING SOLELY FROM INVESTMENTS IN THE CORPORATION’S SECURITIES) THAT
EXCEED THE GREATER OF (A) 5% OF THE CORPORATION’S OR BUSINESS ORGANIZATION’S
CONSOLIDATED GROSS REVENUES FOR THAT YEAR AND (B) $200,000 IN ANY OF THE PAST
THREE YEARS; (V) IS NOT EMPLOYED AS AN EXECUTIVE OF ANOTHER ENTITY WHERE ANY OF
THE COMPANY’S EXECUTIVES SERVE ON THAT ENTITY’S COMPENSATION COMMITTEE; AND (VI)
IS NOT AN EMPLOYEE, DIRECTOR, OFFICER, PARTNER, MEMBER, PRINCIPAL OR FOUNDER OF
ANY ENTITY THAT PROVIDES LEGAL, ACCOUNTING OR OTHER PROFESSIONAL SERVICES TO THE
COMPANY OR ITS SUBSIDIARIES.  IN CONNECTION WITH THE FOREGOING, THE COMPANY WILL
USE ITS BEST EFFORTS TO EFFECT SUCH APPOINTMENT AS PROMPTLY AS REASONABLY
PRACTICABLE AFTER THE CLOSING DATE BUT IN ANY EVENT WITHIN SIX MONTHS AFTER THE
CLOSING DATE, AND TO CAUSE THE COMPANY NOMINEE TO CONTINUE AS A MEMBER OF THE
COMPANY’S BOARD OF DIRECTORS FOR SO LONG AS THE PURCHASERS AND THE MDS PARTIES,
TOGETHER WITH THEIR RESPECTIVE AFFILIATES OR SUBSIDIARIES, COLLECTIVELY HOLD AT
LEAST THE MINIMUM NUMBER OF SHARES OF COMMON STOCK SPECIFIED IN THE FIRST
SENTENCE OF THIS SECTION 4.12(B), INCLUDING THE INCLUSION OF THE DESIGNATED
COMPANY NOMINEE ON THE RECOMMENDED SLATE OF DIRECTORS PRESENTED AT ANY REGULAR
OR SPECIAL MEETING OF THE SHAREHOLDERS OF THE COMPANY AT WHICH DIRECTORS OF THE
COMPANY ARE TO BE ELECTED.  PRIOR TO SUCH ELECTION, THE DESIGNATED COMPANY
NOMINEE SHALL BE ENTITLED TO BE AN OBSERVER AT THE MEETINGS OF THE COMPANY’S
BOARD OF DIRECTORS AND SHALL BE PROVIDED ALL MATERIALS PROVIDED TO THE MEMBERS
OF THE BOARD OF DIRECTORS WITH RESPECT TO SUCH MEETINGS REASONABLY IN ADVANCE OF
EACH SUCH MEETING.  THE COMPANY NOMINEE SHALL BE SUBJECT TO THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE SECURITIES, SUCH APPROVAL NOT TO BE UNREASONABLY
DELAYED, CONDITIONED OR WITHHELD.

 

(C)           VOTING COMMITMENTS.  IN ORDER TO ACCOMPLISH THE PURPOSE AND INTENT
OF THE PRECEDING SUBPARAGRAPHS (A) AND (B), NAMELY THAT THE MDS NOMINEE AND THE
COMPANY NOMINEE SHALL BE ELECTED TO THE COMPANY’S BOARD OF DIRECTORS AND
CONTINUE TO HOLD SUCH POSITIONS FOR THE ENTIRE TIME THE MDS PARTIES, OR THE
PURCHASERS, AS THE CASE MAY BE (TOGETHER WITH THEIR RESPECTIVE AFFILIATES AND
SUBSIDIARIES) HOLD THE MINIMUM NUMBER OF SHARES OF COMMON STOCK SPECIFIED IN THE
FIRST SENTENCES OF SUCH SUBPARAGRAPHS, THE COMPANY SHALL CAUSE THE EXECUTION AND
DELIVERY OF A NOMINEE VOTING COMMITMENT IN THE FORM ATTACHED HERETO AS EXHIBIT G
BY EACH OF THE PERSONS NAMED THEREIN.  THE PURCHASERS, TOGETHER WITH THE PERSONS
NAMED HEREIN AS SIGNATORIES TO THE NOMINEE VOTING COMMITMENTS, COLLECTIVELY OWN
OR CONTROL AT LEAST 42.0% OF THE OUTSTANDING VOTING STOCK OF THE COMPANY AS OF
THE DATE HEREOF.  FURTHER, EACH OF THE PURCHASERS HEREBY UNCONDITIONALLY AND
IRREVOCABLY COVENANTS AND AGREES TO VOTE ALL SHARES OF VOTING STOCK OF THE
COMPANY NOW OR AT ANY TIME OWNED OR CONTROLLED BY SUCH PURCHASER AT ANY REGULAR
OR SPECIAL MEETING OF THE SHAREHOLDERS OF THE COMPANY AT WHICH DIRECTORS OF THE
COMPANY ARE TO BE ELECTED (OR PURSUANT TO ANY WRITTEN CONSENT TO EFFECT THE
SAME) TO CAUSE THE ELECTIONS OF THE MDS NOMINEE AND THE COMPANY NOMINEE.

 

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(D)           D&O INSURANCE; DIRECTOR FEES AND EXPENSES.  FOR SO LONG AS THE MDS
NOMINEE OR THE COMPANY NOMINEE SERVE ON THE COMPANY’S BOARD OF DIRECTORS, THE
COMPANY SHALL INDEMNIFY THE MDS NOMINEE AND THE COMPANY NOMINEE TO THE FULL
EXTENT OF CALIFORNIA AND ANY OTHER APPLICABLE LAW AND SHALL MAINTAIN A POLICY OF
DIRECTORS AND OFFICERS INSURANCE WITH COVERAGE AMOUNTS AND SCOPE OF COVERAGE
COMPARABLE TO THE COVERAGE AMOUNTS AND SCOPE OF COVERAGE OF THE COMPANY’S
CURRENT DIRECTORS AND OFFICERS INSURANCE POLICY, AND UNDERWRITTEN BY A
FINANCIALLY SOUND, NATIONALLY RECOGNIZED INSURANCE COMPANY.  IN ADDITION, THE
MDS NOMINEE AND THE COMPANY NOMINEE SHALL BE ENTITLED TO RECEIVE THE SAME
COMPENSATION FOR SERVING AS DIRECTORS AS IS AFFORDED TO OTHER MEMBERS OF THE
BOARD OF DIRECTORS AND SHALL BE REIMBURSED FOR THE REASONABLE COSTS AND EXPENSES
INCURRED IN PREPARING FOR, TRAVELING TO AND ATTENDING MEETINGS OF THE BOARD OF
DIRECTORS AND OTHERWISE SERVING IN SUCH CAPACITY.

 

(E)           DIRECTOR INDEPENDENCE.  THE COMPANY SHALL USE ITS REASONABLE BEST
EFFORTS TO TAKE ALL ACTION TO CAUSE A MAJORITY OF THE MEMBERS OF THE COMPANY’S
BOARD OF DIRECTORS TO BE “INDEPENDENT DIRECTORS” (AS DEFINED IN SECTION 4.12(B)
ABOVE) AS PROMPTLY AS PRACTICABLE AFTER THE CLOSING DATE, BUT IN ANY EVENT NO
LATER THAN SIX MONTHS AFTER THE CLOSING DATE.  FOR THE AVOIDANCE OF DOUBT, IN
ADDITION TO COMPLIANCE WITH THE PROVISIONS OF THIS SECTION 4.12(E), THE COMPANY
SHALL AT ALL TIMES BE IN COMPLIANCE WITH THE RULES AND REGULATIONS OF AMEX (OR
ANY OTHER SECURITIES EXCHANGE OR QUOTATION SYSTEM ON WHICH THE COMMON STOCK IS
THEN LISTED OR QUOTED).  THE PARTIES HEREBY AGREE THAT, FOLLOWING THE
APPOINTMENT OF THE MDS NOMINEE TO THE COMPANY’S BOARD OF DIRECTORS, THE
FOLLOWING DIRECTORS WILL BE CONSIDERED INDEPENDENT DIRECTORS WITHIN THE MEANING
OF THIS SECTION 4.12(E):  G. STEVEN BURRILL, W. LEIGH THOMPSON AND THE MDS
NOMINEE, IN EACH CASE FOR SO LONG AS SUCH PERSONS CONTINUE TO QUALIFY UNDER THE
STANDARDS SET FORTH IN THE DEFINITION OF “INDEPENDENT DIRECTOR” SPECIFIED ABOVE.

 

(F)            BOARD SIZE.  THE COMPANY AGREES THAT THE MAXIMUM SIZE OF THE
COMPANY’S BOARD OF DIRECTORS SHALL BE SEVEN MEMBERS FROM AND  AFTER THE CLOSING,
EXCLUDING:  (I) ANY DIRECTORS NOMINATED BY BIOVAIL LABORATORIES INCORPORATED
(“BIOVAIL”) PURSUANT TO SECTION 3.02 OF THE STOCK PURCHASE AGREEMENT BETWEEN
BIOVAIL AND THE COMPANY DATED AS OF MAY 28, 2002; (II) ANY DIRECTOR NOMINATED BY
ELAN CORPORATION, PLC (“ELAN”) PURSUANT TO CLAUSE 5.1.1. OF THE SUBSCRIPTION,
JOINT DEVELOPMENT AND OPERATING AGREEMENT BY AND AMONG ELAN, ELAN PHARMA
INTERNATIONAL LIMITED, ELAN INTERNATIONAL SERVICES, LTD. AND THE COMPANY AND
DEPOMED DEVELOPMENT, LTD.; (III) ANY DIRECTORS IN EXCESS OF SEVEN MEMBERS TO THE
EXTENT NECESSARY TO COMPLY WITH SEC REGULATIONS OR OTHER REGULATORY REQUIREMENTS
OR STOCK EXCHANGE LISTING STANDARDS APPLICABLE TO THE COMPANY; AND (IV) ANY
DIRECTORS IN EXCESS OF SEVEN MEMBERS APPROVED BY A MAJORITY OF THE COMPANY’S
INDEPENDENT DIRECTORS (AS DEFINED IN SECTION 4.11(B) ABOVE) OR BY AT LEAST
TWO-THIRDS OF THE COMPANY’S ENTIRE BOARD OF DIRECTORS.

 

4.13         INVESTMENT COMPANY.  THE COMPANY IS NOT AN “INVESTMENT COMPANY”
WITHIN THE MEANING OF SUCH TERM UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

 

4.14         INDEBTEDNESS.  THE SEC REPORTS FILED ON OR PRIOR TO THE DATE HEREOF
(AND PRIOR TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE PARTIES
HERETO) SET FORTH ALL OUTSTANDING SECURED AND UNSECURED INDEBTEDNESS OF THE
COMPANY, OR FOR WHICH THE COMPANY HAS ANY

 

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COMMITMENTS OR PAYMENT OBLIGATIONS.  FOR THE PURPOSES OF THIS AGREEMENT,
“INDEBTEDNESS” MEANS:

 

(A)           ANY LIABILITIES FOR BORROWED MONEY OR AMOUNTS OWED IN EXCESS OF
$25,000 (OTHER THAN TRADE ACCOUNTS PAYABLE INCURRED IN THE ORDINARY COURSE OF
BUSINESS);

 

(B)           ALL GUARANTIES, ENDORSEMENTS AND OTHER CONTINGENT OBLIGATIONS IN
RESPECT OF INDEBTEDNESS OR PAYMENT OBLIGATIONS OF OTHERS, WHETHER OR NOT THE
SAME ARE OR SHOULD BE REFLECTED IN THE COMPANY’S BALANCE SHEET (OR THE NOTES
THERETO), EXCEPT GUARANTIES BY ENDORSEMENT OF NEGOTIABLE INSTRUMENTS FOR DEPOSIT
OR COLLECTION OR SIMILAR TRANSACTIONS IN THE ORDINARY COURSE OF BUSINESS; AND

 

(C)           THE PRESENT VALUE OF ANY LEASE PAYMENTS IN EXCESS OF $25,000 DUE
UNDER LEASES REQUIRED TO BE CAPITALIZED IN ACCORDANCE WITH GAAP.

 

The Company is not in default with respect to any Indebtedness.

 

4.15         CERTAIN FEES.  OTHER THAN THE FEES SPECIFIED IN SECTION 4.16 OF
EXHIBIT D PAYABLE BY THE COMPANY TO THOMAS WEISEL PARTNERS LLC (THE “PLACEMENT
AGENT”), NO BROKERS’, FINDERS’ OR FINANCIAL ADVISORY FEES OR COMMISSIONS ARE
PAYABLE BY THE COMPANY WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

 

4.16         MATERIAL AGREEMENTS.  EXCEPT AS SET FORTH IN THE SEC REPORTS FILED
ON OR PRIOR TO THE DATE HEREOF (AND PRIOR TO THE EXECUTION AND DELIVERY OF THIS
AGREEMENT BY THE PARTIES HERETO), THE COMPANY IS NOT A PARTY TO ANY WRITTEN OR
ORAL CONTRACT, INSTRUMENT, AGREEMENT, COMMITMENT, OBLIGATION, PLAN OR
ARRANGEMENT, A COPY OF WHICH WOULD BE REQUIRED TO BE FILED WITH THE SEC AS AN
EXHIBIT TO FORM 10-K, FORM 10-Q OR FORM 8-K OR WHICH IS OTHERWISE MATERIAL TO
THE COMPANY (EACH, A “MATERIAL AGREEMENT”).  THE COMPANY HAS TIMELY OBSERVED AND
PERFORMED ALL MATERIAL OBLIGATIONS REQUIRED TO BE OBSERVED AND PERFORMED BY IT
UNDER EACH SUCH MATERIAL AGREEMENT, HAS NEVER RECEIVED ANY NOTICE ALLEGING OR
ASSERTING A VIOLATION OR BREACH THEREOF OR DEFAULT THEREUNDER AND, TO THE
COMPANY’S KNOWLEDGE, IS NOT IN BREACH OF OR DEFAULT UNDER ANY MATERIAL AGREEMENT
NOW IN EFFECT, THE RESULT OF WHICH COULD REASONABLY BE EXPECTED TO CAUSE A
COMPANY MATERIAL ADVERSE EFFECT.

 

4.17         TRANSACTIONS WITH AFFILIATES.  EXCEPT AS SET FORTH IN THE SEC
REPORTS FILED ON OR PRIOR TO THE DATE HEREOF (AND PRIOR TO THE EXECUTION AND
DELIVERY OF THIS AGREEMENT BY THE PARTIES HERETO), THERE ARE (I) NO LOANS,
LEASES, AGREEMENTS, CONTRACTS, ROYALTY AGREEMENTS, MANAGEMENT CONTRACTS OR
ARRANGEMENTS OR OTHER CONTINUING TRANSACTIONS WITH AGGREGATE OBLIGATIONS OF ANY
PARTY EXCEEDING $25,000 BETWEEN (A) THE COMPANY OR ANY OF ITS CUSTOMERS OR
SUPPLIERS, ON THE ONE HAND, AND (B) ON THE OTHER HAND, ANY OFFICER, EMPLOYEE,
CONSULTANT OR DIRECTOR OF THE COMPANY, OR ANY PERSON WHO WOULD BE COVERED BY
ITEM 404(A) OF REGULATION S-K, OR ANY COMPANY OR OTHER ENTITY CONTROLLED BY ANY
SUCH OFFICER, EMPLOYEE, CONSULTANT, DIRECTOR OR PERSON (COLLECTIVELY, “COVERED
PERSONS”), AND (II) NO TRANSACTIONS OR CONTEMPLATED TRANSACTIONS WITH ANY
COVERED PERSONS THAT WOULD BE REQUIRED TO BE DISCLOSED PURSUANT TO ITEM 404 OF
REGULATION S-K.

 

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4.18         TAXES.  THE COMPANY HAS ACCURATELY PREPARED AND TIMELY FILED ALL
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX RETURNS FOR INCOME, GROSS RECEIPTS,
SALES, USE AND OTHER TAXES, ASSESSMENTS AND CUSTOM DUTIES (COLLECTIVELY “TAXES”)
REQUIRED BY LAW TO BE FILED BY IT, HAS TIMELY PAID OR MADE PROVISIONS FOR THE
PAYMENT OF ALL TAXES SHOWN TO BE DUE, AND ADEQUATE PROVISIONS HAVE BEEN AND ARE
REFLECTED IN THE FINANCIAL STATEMENTS OF THE COMPANY FOR ALL CURRENT TAXES AND
OTHER CHARGES TO WHICH THE COMPANY IS SUBJECT AND WHICH CURRENTLY ARE NOT DUE
AND PAYABLE, EXCEPT FOR TAXES WHICH, IF UNPAID, INDIVIDUALLY OR IN THE
AGGREGATE, DO NOT AND WOULD NOT HAVE A COMPANY MATERIAL ADVERSE EFFECT.  NONE OF
THE STATE OR FEDERAL INCOME TAX RETURNS OF THE COMPANY FOR THE PAST SIX YEARS
HAS BEEN AUDITED BY THE INTERNAL REVENUE SERVICE OR ANY STATE TAXING AUTHORITY,
NOR HAS THE COMPANY RECEIVED ANY NOTICE OF ANY PENDING OR THREATENED AUDIT OR
EXAMINATION.  THE COMPANY HAS NO KNOWLEDGE OF ANY ADDITIONAL ASSESSMENTS,
ADJUSTMENTS OR CONTINGENT LIABILITY FOR TAXES (WHETHER FEDERAL, STATE, LOCAL OR
FOREIGN) PENDING OR THREATENED AGAINST THE COMPANY FOR ANY PERIOD, NOR OF ANY
BASIS FOR ANY SUCH ASSESSMENT, ADJUSTMENT OR CONTINGENCY.

 

4.19         STABILIZATION.  THE COMPANY HAS NOT TAKEN, AND THE COMPANY WILL USE
ITS REASONABLE BEST EFFORTS TO CAUSE EACH OF ITS OFFICERS, DIRECTORS AND
AFFILIATES NOT TO TAKE, DIRECTLY OR INDIRECTLY, ANY ACTION DESIGNED TO OR WHICH
HAS CONSTITUTED OR WHICH WOULD REASONABLY BE EXPECTED TO CAUSE OR RESULT IN,
STABILIZATION OR MANIPULATION UNDER THE EXCHANGE ACT OF THE PRICE OF ANY CAPITAL
STOCK OF THE COMPANY.

 

4.20         ENVIRONMENTAL MATTERS.  ALL REAL PROPERTY AT ANY TIME OWNED, LEASED
OR OTHERWISE OPERATED BY COMPANY IS FREE OF CONTAMINATION RELATING TO THE
COMPANY, ITS BUSINESS OR ITS USE AND OCCUPATION THEREOF, FROM ANY SUBSTANCE,
WASTE OR MATERIAL CURRENTLY IDENTIFIED TO BE TOXIC OR HAZARDOUS PURSUANT TO,
WITHIN THE DEFINITION OF A SUBSTANCE WHICH IS TOXIC OR HAZARDOUS UNDER, OR WHICH
MAY RESULT IN LIABILITY UNDER, ANY ENVIRONMENTAL LAW, INCLUDING, WITHOUT
LIMITATION, ANY ASBESTOS, POLYCHLORINATED BIPHENYLS, RADIOACTIVE SUBSTANCE,
METHANE, VOLATILE HYDROCARBONS, INDUSTRIAL SOLVENTS, OIL OR PETROLEUM OR
CHEMICAL LIQUIDS OR SOLIDS, LIQUID OR GASEOUS PRODUCTS, OR ANY OTHER MATERIAL OR
SUBSTANCE (“HAZARDOUS SUBSTANCE”) WHICH HAS OR COULD REASONABLY BE EXPECTED TO
CAUSE OR CONSTITUTE A HEALTH, SAFETY, OR ENVIRONMENTAL HAZARD TO ANY PERSON OR
PROPERTY OR RESULT IN ANY ENVIRONMENTAL LIABILITIES AND COSTS IN EXCESS OF
$100,000 IN THE AGGREGATE.  THE COMPANY HAS NOT CAUSED OR SUFFERED TO OCCUR ANY
RELEASE, SPILL, MIGRATION, LEAKAGE, DISCHARGE, DISPOSAL, UNCONTROLLED LOSS,
SEEPAGE, OR FILTRATION OF HAZARDOUS SUBSTANCES WHICH COULD REASONABLY BE
EXPECTED TO RESULT IN ENVIRONMENTAL LIABILITIES AND COSTS IN EXCESS OF $100,000
IN THE AGGREGATE.  THE COMPANY HAS GENERATED, TREATED, STORED AND DISPOSED OF
ANY HAZARDOUS SUBSTANCES IN FULL COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS
(AS DEFINED BELOW), EXCEPT FOR SUCH NON-COMPLIANCES WHICH COULD NOT REASONABLY
BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.  THE COMPANY HAS
OBTAINED, OR HAS APPLIED FOR, AND IS IN FULL COMPLIANCE WITH AND IN GOOD
STANDING UNDER ALL PERMITS REQUIRED UNDER ENVIRONMENTAL LAWS (EXCEPT FOR SUCH
FAILURES WHICH COULD NOT REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL
ADVERSE EFFECT) AND THE COMPANY HAS NO KNOWLEDGE OF ANY PROCEEDINGS TO
SUBSTANTIALLY MODIFY OR TO REVOKE ANY SUCH PERMIT.  THERE ARE NO INVESTIGATIONS,
PROCEEDINGS OR LITIGATION PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED,
AFFECTING OR AGAINST THE COMPANY OR ANY OF ITS CURRENT OR FORMER FACILITIES
RELATING TO ENVIRONMENTAL LAWS OR HAZARDOUS SUBSTANCES.  FOR PURPOSES OF THIS
AGREEMENT, “ENVIRONMENTAL LAWS” MEANS ALL FEDERAL, NATIONAL, STATE, REGIONAL AND
LOCAL

 

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LAWS, STATUTES, ORDINANCES AND REGULATIONS, IN EACH CASE AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, AND ANY JUDICIAL OR ADMINISTRATIVE
INTERPRETATION THEREOF, INCLUDING ORDERS, CONSENT DECREES OR JUDGMENTS RELATING
TO THE REGULATION AND PROTECTION OF HUMAN HEALTH, SAFETY, THE ENVIRONMENT AND
NATURAL RESOURCES.

 

4.21         LABOR, EMPLOYMENT AND BENEFIT MATTERS.

 

(A)           THERE ARE NO STRIKES OR OTHER LABOR DISPUTES AGAINST THE COMPANY
PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED.  HOURS WORKED BY AND PAYMENT
MADE TO EMPLOYEES OF THE COMPANY HAVE BEEN IN COMPLIANCE WITH THE FAIR LABOR
STANDARDS ACT AND ANY OTHER APPLICABLE LABOR OR EMPLOYMENT LAW (EXCEPT SUCH
NON-COMPLIANCE AS COULD NOT REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL
ADVERSE EFFECT).  THERE IS NO ORGANIZING ACTIVITY INVOLVING EMPLOYEES OF THE
COMPANY PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED BY ANY LABOR UNION OR
GROUP OF EMPLOYEES.  THERE ARE NO REPRESENTATION PROCEEDINGS PENDING OR, TO THE
COMPANY’S KNOWLEDGE, THREATENED WITH THE NATIONAL LABOR RELATIONS BOARD, AND NO
LABOR ORGANIZATION OR GROUP OF EMPLOYEES OF THE COMPANY HAS MADE A PENDING
DEMAND FOR RECOGNITION.  THERE ARE NO COMPLAINTS OR CHARGES AGAINST THE COMPANY
PENDING OR, TO THE COMPANY’S KNOWLEDGE, THREATENED, TO BE FILED WITH ANY
GOVERNMENTAL AUTHORITY OR ARBITRATOR BASED ON, ARISING OUT OF OR IN CONNECTION
WITH, OR OTHERWISE RELATING TO, THE EMPLOYMENT OR TERMINATION OF EMPLOYMENT BY
THE COMPANY OF ANY INDIVIDUAL.

 

(B)           THE COMPANY IS NOT, AND DURING THE FIVE YEARS PRECEDING THE DATE
OF THIS AGREEMENT WAS NOT, A PARTY TO ANY LABOR OR COLLECTIVE BARGAINING
AGREEMENT AND THERE ARE NO LABOR OR COLLECTIVE BARGAINING AGREEMENTS WHICH
PERTAIN TO EMPLOYEES OF THE COMPANY.

 

(C)           EACH EMPLOYEE BENEFIT PLAN OF THE COMPANY IS IN COMPLIANCE WITH
ALL APPLICABLE LAW, EXCEPT FOR SUCH NONCOMPLIANCE WHICH COULD NOT REASONABLY BE
EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(D)           THE COMPANY HAS NO LIABILITIES, CONTINGENT OR OTHERWISE, INCLUDING
WITHOUT LIMITATION, LIABILITIES FOR RETIREE HEALTH, RETIREE LIFE, SEVERANCE OR
RETIREMENT BENEFITS, WHICH ARE NOT FULLY REFLECTED ON THE COMPANY’S BALANCE
SHEET AS OF DECEMBER 31, 2002 OR FULLY FUNDED.  THE TERM “LIABILITIES” AS USED
IN THE PRECEDING SENTENCE SHALL BE CALCULATED IN ACCORDANCE WITH REASONABLE
ACTUARIAL ASSUMPTIONS AND ALSO SHALL INCLUDE ANY OBLIGATION OWED TO A
GOVERNMENTAL AUTHORITY FOR THE PURPOSE OF PROVIDING RETIREE HEALTH, RETIREE
LIFE, SEVERANCE, RETIREMENT OR OTHER BENEFITS.

 

(E)           THE COMPANY HAS NOT TERMINATED ANY “EMPLOYEE PENSION BENEFIT PLAN
“ AS DEFINED IN SECTION 3(2) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED AND ALL RULES AND REGULATIONS PROMULGATED THEREUNDER (“ERISA”)
OR INCURRED OR EXPECTS TO INCUR ANY OUTSTANDING LIABILITY UNDER TITLE IV
THEREUNDER.

 

4.22         COMPLIANCE WITH LAW.

 

(A)           THE COMPANY IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL
APPLICABLE LAWS.  FOR PURPOSES OF THIS AGREEMENT, “APPLICABLE LAWS” INCLUDES,
WITHOUT LIMITATION, ALL

 

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APPLICABLE LAWS RELATING TO HEALTH CARE, THE HEALTH CARE INDUSTRY AND THE
PROVISION OF HEALTH CARE SERVICES, THIRD PARTY REIMBURSEMENT (INCLUDING MEDICARE
AND MEDICAID), PUBLIC HEALTH AND SAFETY (INCLUDING WITHOUT LIMITATION THE
FEDERAL FOOD, DRUG AND COSMETICS ACT, THE CONTROLLED SUBSTANCES ACT AND THE
COMPREHENSIVE DRUG ABUSE PREVENTION AND CONTROL ACT OF 1970 AND ANY OTHER
SIMILAR ACT OR LAW TO WHICH THE COMPANY IS SUBJECT AND THE RULES AND REGULATIONS
PROMULGATED BY THE UNITED STATES FOOD AND DRUG ADMINISTRATION, THE UNITED STATES
DRUG ENFORCEMENT ADMINISTRATION AND SIMILAR AUTHORITIES IN ANY U.S. OR NON-U.S.
JURISDICTION WITH JURISDICTION OVER THE COMPANY) AND WRONGFUL DEATH AND MEDICAL
MALPRACTICE.  THE COMPANY HAS NOT RECEIVED ANY NOTICE OF, NOR DOES THE COMPANY
HAVE ANY KNOWLEDGE OF, ANY VIOLATION (OR OF ANY INVESTIGATION, INSPECTION, AUDIT
OR OTHER PROCEEDING BY ANY GOVERNMENTAL AUTHORITY INVOLVING ALLEGATIONS OF ANY
VIOLATION) OF ANY APPLICABLE LAW INVOLVING OR RELATED TO THE COMPANY WHICH HAS
NOT BEEN DISMISSED OR OTHERWISE DISPOSED OF.  THE COMPANY HAS NOT RECEIVED
NOTICE AND OTHERWISE HAS NO KNOWLEDGE THAT THE COMPANY IS CHARGED WITH,
THREATENED WITH OR UNDER INVESTIGATION WITH RESPECT TO, ANY VIOLATION OF ANY
APPLICABLE LAW, AND THE COMPANY HAS NO KNOWLEDGE OF ANY PROPOSED CHANGE IN ANY
APPLICABLE LAW THAT WOULD HAVE A COMPANY MATERIAL ADVERSE EFFECT.  THE COMPANY
HAS NOT RECEIVED ANY OPINION OR MEMORANDUM OR LEGAL ADVICE FROM LEGAL COUNSEL TO
THE EFFECT THAT IT IS EXPOSED, FROM A LEGAL STANDPOINT, TO ANY LIABILITY,
INCLUDING, WITHOUT LIMITATION ,ANY LIABILITY UNDER ANY OF THE MATERIAL
AGREEMENTS, WHICH MAY BE MATERIAL TO ITS BUSINESS, PROSPECTS, FINANCIAL
CONDITION, OPERATIONS, PROPERTY OR AFFAIRS OR RESULT IN A COMPANY MATERIAL
ADVERSE EFFECT.  THERE IS NO EXISTING LAW, RULE, REGULATION OR ORDER, AND THE
COMPANY IS NOT AWARE OF ANY PROPOSED LAW, RULE, REGULATION OR ORDER, WHETHER
FEDERAL, STATE, COUNTY OR LOCAL, WHICH WOULD PROHIBIT THE COMPANY FROM, OR
OTHERWISE MATERIALLY ADVERSELY AFFECT THE COMPANY IN CONDUCTING ITS BUSINESS IN
ANY JURISDICTION IN WHICH IT PROPOSES TO CONDUCT BUSINESS.

 

(B)           THE COMPANY HAS, AND, TO THE COMPANY’S KNOWLEDGE, ALL PROFESSIONAL
EMPLOYEES OR AGENTS OF THE COMPANY WHO ARE PERFORMING HEALTH CARE OR HEALTH CARE
RELATED FUNCTIONS ON BEHALF OF THE COMPANY HAVE, ALL LICENSES, FRANCHISES,
PERMITS, ACCREDITATIONS, PROVIDER NUMBERS, AUTHORIZATIONS, INCLUDING
CERTIFICATES OF NEED, CONSENTS OR ORDERS OF, OR FILINGS WITH, OR OTHER APPROVALS
FROM ALL GOVERNMENTAL AUTHORITIES (“APPROVALS”) NECESSARY FOR THE CONDUCT OF, OR
RELATING TO THE OPERATION OF, THE BUSINESS OF THE COMPANY AND THE OCCUPANCY AND
OPERATION, FOR ITS PRESENT USES, OF THE REAL AND PERSONAL PROPERTY WHICH THE
COMPANY OWNS OR LEASES.  NEITHER THE COMPANY NOR, TO THE COMPANY’S KNOWLEDGE,
ITS PROFESSIONAL EMPLOYEES OR AGENTS (ACTING IN SUCH CAPACITIES) IS IN VIOLATION
OF ANY SUCH APPROVAL IN ANY MATERIAL RESPECT OR ANY TERMS OR CONDITIONS
THEREOF.  ALL SUCH APPROVALS ARE IN FULL FORCE AND EFFECT, HAVE BEEN ISSUED TO
AND FULLY PAID FOR BY THE HOLDER THEREOF AND NO NOTICE OR WARNING FROM ANY
GOVERNMENTAL AUTHORITY WITH RESPECT TO THE SUSPENSION, REVOCATION OR TERMINATION
OF ANY APPROVAL HAS BEEN, TO THE KNOWLEDGE OF THE COMPANY, THREATENED OR ISSUED
OR GIVEN TO THE COMPANY.  NO SUCH APPROVALS WILL IN ANY WAY BE AFFECTED BY,
TERMINATE OR LAPSE BY REASON OF THE CONSUMMATION OF ALL OR ANY PORTION OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

4.23         CERTAIN REGULATORY MATTERS.  THE COMPANY HAS NOT SINCE INCEPTION
RECEIVED NOTICE THAT THE COMPANY HAS BEEN, OR TO THE COMPANY’S KNOWLEDGE WILL
BE, THE SUBJECT OF ANY INVESTIGATIVE PROCEEDING BEFORE ANY FEDERAL OR STATE
REGULATORY AUTHORITY OR THE AGENT OF ANY SUCH AUTHORITY, INCLUDING, WITHOUT
LIMITATION, FEDERAL AND STATE HEALTH AUTHORITIES.

 

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4.24         OWNERSHIP OF PROPERTY.  THE COMPANY HAS (A) GOOD AND MARKETABLE AND
INSURABLE FEE SIMPLE TITLE TO ITS OWNED REAL PROPERTY, FREE AND CLEAR OF ALL
LIENS, CLAIMS, CHARGES OR ENCUMBRANCES, (B) A VALID AND MARKETABLE LEASEHOLD
INTEREST IN ALL LEASED REAL PROPERTY, AND EACH OF SUCH LEASES IS VALID AND
ENFORCEABLE BY THE COMPANY IN ACCORDANCE WITH ITS TERMS AND IS IN FULL FORCE AND
EFFECT, AND (C) GOOD AND MARKETABLE TITLE TO, OR VALID LEASEHOLD INTERESTS IN,
ALL OF ITS OTHER PROPERTIES AND ASSETS FREE AND CLEAR OF ALL LIENS, CLAIMS,
CHARGES OR ENCUMBRANCES, EXCEPT AS SET FORTH IN THAT CERTAIN LOAN AND SECURITY
AGREEMENT, DATED AS OF MARCH 29, 2001, BY AND BETWEEN THE COMPANY AND GATX
VENTURES, INC.

 

4.25         REGISTRATION RIGHTS.  EXCEPT AS SPECIFIED IN SECTION 4.25 OF
EXHIBIT D OR AS PROVIDED IN THIS AGREEMENT, THE COMPANY IS NOT UNDER ANY
OBLIGATION TO REGISTER UNDER THE SECURITIES ACT. ANY OF ITS PRESENTLY
OUTSTANDING SECURITIES OR ANY SECURITIES WHICH HEREAFTER MAY BE ISSUED.

 

4.26         INSURANCE.  THE COMPANY MAINTAINS INSURANCE POLICIES WHICH ARE IN
FULL FORCE AND EFFECT AND ARE IN AMOUNTS AND FOR COVERAGE CUSTOMARY AND
REASONABLY PRUDENT FOR THE INDUSTRY IN WHICH COMPANY OPERATES AND IN LIGHT OF
THE VALUE OF THE COMPANY’S ASSETS AND PROPERTIES AND THE HAZARDS TO WHICH THEY
ARE SUBJECTED.

 

4.27         INDEMNIFICATION.  THE COMPANY SHALL INDEMNIFY AND HOLD HARMLESS
EACH PURCHASER, AND EACH OFFICER, DIRECTOR OR AFFILIATE OF SUCH PURCHASER (EACH,
AN “INDEMNIFIED PARTY”), FROM AND AGAINST ANY AND ALL CLAIMS, COSTS, LOSSES,
DAMAGES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION,
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AS INCURRED IN CONNECTION WITH
INVESTIGATING, PREPARING FOR, PROSECUTING AND DEFENDING AGAINST ANY ACTION, SUIT
OR PROCEEDING, REFERRED TO COLLECTIVELY AS “LOSSES”) INCURRED OR SUFFERED BY ANY
INDEMNIFIED PARTY ARISING OUT OF ANY MISREPRESENTATION OR MATERIAL OMISSION OF
OR RELATING TO THE COMPANY CONTAINED HEREIN OR ANY BREACH OF OR FAILURE TO
OBSERVE, PERFORM OR COMPLY WITH ANY REPRESENTATION, WARRANTY, COVENANT OR
AGREEMENT MADE OR TO BE OBSERVED, PERFORMED OR COMPLIED WITH BY THE COMPANY
PURSUANT TO THIS AGREEMENT.  SUCH INDEMNIFICATION SHALL, TO THE EXTENT IT
RELATES TO CLAIMS OR CAUSES OF ACTIONS AGAINST AN INDEMNIFIED PARTY ASSERTED BY
A THIRD PARTY OR ANOTHER PURCHASER, BE SUBJECT TO THE PROCEDURES AND PROVISIONS
SET FORTH IN SECTIONS 8.2(D), (E) AND (F) HEREOF, BUT SHALL NOT BE SUBJECT TO OR
INTERPRETED OR APPLIED WITH REFERENCE TO ANY OTHER SUBSECTION OF SECTION 8.2.

 

4.28         S-3 ELIGIBILITY AND 144 AVAILABILITY.  THE COMPANY CURRENTLY IS
ELIGIBLE TO REGISTER ITS SECURITIES FOR RESALE BY SELLING SHAREHOLDERS UNDER A
REGISTRATION STATEMENT ON FORM S-3 AND THE COMPANY IS UNAWARE OF ANY FACTS OR
CIRCUMSTANCES THAT REASONABLY MIGHT RENDER SUCH FORM UNAVAILABLE FOR USE BY THE
COMPANY TO REGISTER ALL REGISTRABLE SECURITIES AS PROVIDED HEREIN.  THE COMPANY
IS NOT AWARE OF ANY FACTS AND CIRCUMSTANCES RELATING TO THE COMPANY OR ITS
STATUS AS A REPORTING COMPANY UNDER THE EXCHANGE ACT WHICH WOULD CAUSE ITS
SHAREHOLDERS TO BE INELIGIBLE TO SELL SECURITIES PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT, ASSUMING SUCH SHAREHOLDERS COMPLY WITH THE VOLUME, MANNER OF
SALE, TIMING AND ANY OTHER APPLICABLE REQUIREMENTS APPLICABLE TO SALES BY SUCH
SHAREHOLDERS UNDER RULE 144.

 

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SECTION 5.         REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

 

5.1           EACH PURCHASER, SEVERALLY AS TO ITSELF AND ITS AFFAIRS ONLY AND
NOT JOINTLY WITH ANY OTHER PURCHASER, REPRESENTS AND WARRANTS TO AND, WHERE
APPLICABLE, COVENANTS WITH THE COMPANY THAT:

 

(A)           PURCHASER, TAKING INTO ACCOUNT THE PERSONNEL AND RESOURCES IT CAN
PRACTICALLY BRING TO BEAR ON THE PURCHASE OF THE SECURITIES CONTEMPLATED HEREBY,
IS SUFFICIENTLY KNOWLEDGEABLE, SOPHISTICATED AND EXPERIENCED IN INVESTMENT
MATTERS TO EVALUATE THE MERITS AND RISKS OF PURCHASING AND HOLDING THE
SECURITIES.

 

(B)           PURCHASER IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT FOR
INVESTMENT ONLY AND WITH NO PRESENT INTENTION OF RESELLING OR DISTRIBUTING SUCH
SECURITIES IN VIOLATION OF THE SECURITIES ACT.  PURCHASER HAS NO ARRANGEMENTS OR
UNDERSTANDINGS WITH ANY OTHER PERSON, GROUP OR ENTITY REGARDING THE TRANSFER,
RESALE OR DISTRIBUTION OF ANY SUCH SECURITIES IN VIOLATION OF THE SECURITIES
ACT.

 

(C)           PURCHASER WILL NOT, DIRECTLY OR INDIRECTLY, OFFER, SELL, PLEDGE,
TRANSFER OR OTHERWISE DISPOSE OF (OR SOLICIT ANY OFFERS TO BUY, PURCHASE OR
OTHERWISE ACQUIRE OR TAKE A PLEDGE OF) ANY OF THE SECURITIES PURCHASED HEREUNDER
EXCEPT AS PERMITTED BY THIS AGREEMENT AND IN COMPLIANCE WITH THE SECURITIES ACT,
APPLICABLE BLUE SKY LAWS, AND THE RULES AND REGULATIONS PROMULGATED THERE UNDER.

 

(D)           PURCHASER IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF
RULE 501 OF REGULATION D PROMULGATED UNDER THE SECURITIES ACT OR A “QUALIFIED
INSTITUTIONAL BUYER” WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT.

 

(E)           PURCHASER HAS FULL RIGHT, POWER, AUTHORITY AND CAPACITY TO ENTER
INTO THIS AGREEMENT AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND
HAS TAKEN ALL NECESSARY ACTION TO AUTHORIZE THE EXECUTION, DELIVERY AND
PERFORMANCE OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS.  UPON THE EXECUTION
AND DELIVERY OF THIS AGREEMENT BY EACH PURCHASER, THIS AGREEMENT SHALL
CONSTITUTE A VALID AND BINDING OBLIGATION OF SUCH PURCHASER, ENFORCEABLE AGAINST
SUCH PURCHASER IN ACCORDANCE WITH ITS TERMS, EXCEPT THAT (I) ENFORCEABILITY MAY
BE LIMITED BY APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM OR
SIMILAR LAWS RELATING TO OR AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS
GENERALLY, (II) ENFORCEABILITY MAY BE LIMITED BY EQUITABLE PRINCIPLES GENERALLY,
AND (III) ENFORCEABILITY OF THOSE PROVISIONS OF SECTION 8.2 RELATING TO
INDEMNITY MAY BE LIMITED UNDER APPLICABLE LAW OR FOR REASONS OF PUBLIC POLICY.

 

5.2           RESTRICTIONS ON TRANSFER.  FOR SO LONG AS THE COMPANY COMPLIES IN
ALL MATERIAL RESPECTS WITH ALL OF THE PROVISIONS OF SECTION 8.1 HEREOF, EXCEPT
AS SET FORTH BELOW, DURING THE PERIOD BEGINNING ON THE DATE HEREOF AND ENDING ON
THE DATE THAT THE REGISTRATION STATEMENT IS DECLARED EFFECTIVE BY THE SEC, EACH
PURCHASER COVENANTS AND AGREES NOT TO, AND WILL CAUSE ITS OFFICERS, DIRECTORS
AND AFFILIATES NOT TO, OFFER, SELL, CONTRACT TO SELL, PLEDGE OR OTHERWISE
DISPOSE OF, DIRECTLY OR INDIRECTLY, ANY OF THE SECURITIES, ENTER INTO A
TRANSACTION WHICH WOULD HAVE THE SAME

 

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EFFECT, OR ENTER INTO ANY SWAP OR OTHER ARRANGEMENT THAT TRANSFERS, IN WHOLE OR
IN PART, ANY OF THE ECONOMIC CONSEQUENCES OF OWNERSHIP OF ANY OF THE SECURITIES,
WHETHER ANY SUCH AFOREMENTIONED TRANSACTION IS TO BE SETTLED BY DELIVERY OF THE
SECURITIES OR SUCH OTHER SECURITIES, IN CASH OR OTHERWISE, OR PUBLICLY DISCLOSE
THE INTENTION TO MAKE ANY SUCH OFFER, SALE, PLEDGE OR DISPOSITION, OR TO ENTER
INTO ANY SUCH TRANSACTION, SWAP OR OTHER ARRANGEMENT; PROVIDED, HOWEVER, THAT
THE FOREGOING COVENANTS SHALL NOT RESTRICT OR PROHIBIT (A) ANY OF THE PURCHASERS
OR THEIR RESPECTIVE AFFILIATES FROM ENTERING INTO ANY HEDGING TRANSACTION WITH
RESPECT TO SECURITIES OF THE COMPANY (“COMPANY SECURITIES”) OR (B) TRANSFERS OR
ASSIGNMENTS OF COMPANY SECURITIES BETWEEN OR AMONG ANY OF THE MDS PARTIES OR
BETWEEN OR AMONG ANY OF THE PURCHASERS AND THEIR RESPECTIVE AFFILIATES, IN EACH
CASE SUBJECT ONLY TO COMPLIANCE WITH APPLICABLE LAW; PROVIDED, FURTHER, HOWEVER,
THAT THE FOREGOING RESTRICTIONS ARE EXPRESSLY CONDITIONED UPON AND SUBJECT TO
THE REQUIREMENT THAT THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY MUST
AGREE TO THE SAME RESTRICTIONS AND PROHIBITIONS WITH RESPECT TO ANY COMPANY
SECURITIES OWNED BY THEM AS THOSE APPLICABLE TO PURCHASER SET FORTH ABOVE, BY
EXECUTING AND DELIVERING A WRITTEN INSTRUMENT, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO PURCHASER, EVIDENCING AND EFFECTING THE SAME.  FOR AVOIDANCE OF
DOUBT, NOTHING CONTAINED IN THIS SECTION 5.2 SHALL RESTRICT OR PROHIBIT A
PURCHASER FROM (A) EXERCISING WARRANTS OR ADDITIONAL WARRANTS OR (B)
RELINQUISHING WARRANTS OR ADDITIONAL WARRANTS PURSUANT TO A CASHLESS EXERCISE
(AS DEFINED IN THE WARRANTS AND ADDITIONAL WARRANTS) THEREOF.

 

5.3           LEGENDS.  THE PURCHASERS ACKNOWLEDGE AND AGREE THAT THE SECURITIES
MAY BEAR ONE OR MORE LEGENDS IN SUBSTANTIALLY THE FOLLOWING FORM AND SUBSTANCE:

 

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT UPON SATISFACTION
OF CERTAIN CONDITIONS, WHICH ARE SET FORTH IN THAT CERTAIN SECURITIES PURCHASE
AGREEMENT DATED APRIL 21, 2003, WHICH ALSO CONTAINS VARIOUS OTHER PROVISIONS
AFFECTING THESE SECURITIES, BINDING UPON TRANSFEREES HEREOF.  A COPY OF THIS
AGREEMENT MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL.”

 

In addition, certificates representing the Securities may contain any legend
required by the blue sky laws of any other state to the extent such laws are
applicable to the purchase and sale of the Securities hereunder.  All such
legends shall be removed (or replacement certificates without such legends shall
be issued), promptly upon any Purchaser’s request, at any time from and after
the earliest of (i) the resale of the Securities pursuant to the Registration
Statement (as defined below) following the effectiveness of the Registration
Statement, (ii) receipt by the Company, following the effectiveness of the
Registration Statement, of a certification from the Purchaser that the
Securities will be resold pursuant to the Registration Statement and in
accordance with applicable prospectus delivery requirements or (iii) the time
that the Securities may be freely resold by the Purchaser pursuant to Rule 144.

 

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5.4           RESTRICTED SECURITIES.  PURCHASER UNDERSTANDS THAT THE SECURITIES
ARE CHARACTERIZED AS “RESTRICTED SECURITIES” UNDER THE FEDERAL SECURITIES LAWS,
INASMUCH AS THEY ARE BEING ACQUIRED FROM THE COMPANY IN A TRANSACTION NOT
INVOLVING A PUBLIC OFFERING AND THAT UNDER SUCH LAWS AND APPLICABLE REGULATIONS
SUCH SECURITIES MAY BE RESOLD WITHOUT REGISTRATION UNDER THE SECURITIES ACT ONLY
IN CERTAIN LIMITED CIRCUMSTANCES.  IN THIS CONNECTION, EACH PURCHASER REPRESENTS
THAT IT IS FAMILIAR WITH COMMISSION RULE 144, AS PRESENTLY IN EFFECT, AND
UNDERSTANDS THE RESALE LIMITATIONS IMPOSED THEREBY AND BY THE SECURITIES ACT.

 

5.5           NO RECOMMENDATION BY REGULATORY AUTHORITIES.  THE SECURITIES
OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY.  FURTHERMORE, THE FOREGOING AUTHORITIES HAVE
NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS AGREEMENT.  ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

SECTION 6.         CONDITIONS TO COMPANY’S OBLIGATIONS AT THE CLOSING.

 

The Company’s obligation to complete the sale and issuance of the Securities and
deliver the Securities purchased by each respective Purchaser at the Closing
shall be subject to the following conditions, unless waived by the Company:

 

6.1           RECEIPT OF PAYMENT.  THE COMPANY SHALL HAVE RECEIVED PAYMENT, BY
WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS, IN THE FULL AMOUNT OF THE PURCHASE
PRICE FOR THE NUMBER OF SECURITIES BEING PURCHASED BY EACH RESPECTIVE PURCHASER
AT THE CLOSING AS SET FORTH OPPOSITE SUCH PURCHASER’S NAME ON THE SCHEDULE OF
PURCHASERS ATTACHED AS EXHIBIT A.

 

6.2           REPRESENTATIONS AND WARRANTIES.  THE REPRESENTATIONS AND
WARRANTIES MADE BY SUCH PURCHASER IN SECTION 5 HEREOF SHALL BE TRUE AND CORRECT
IN ALL MATERIAL RESPECTS WHEN MADE AND SHALL BE TRUE AND CORRECT IN ALL
MATERIALS RESPECTS ON THE CLOSING DATE.

 

SECTION 7.         CONDITIONS TO PURCHASERS’ OBLIGATIONS AT THE CLOSING.

 

Each Purchaser’s obligation to accept delivery of the Securities and to pay for
the Securities shall be subject to the following conditions, to the extent not
waived by such Purchaser:

 

7.1           REPRESENTATIONS AND WARRANTIES CORRECT; COMPLIANCE WITH
COVENANTS.  THE REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN SECTION 4
HEREOF SHALL BE TRUE AND CORRECT WHEN MADE AND SHALL BE TRUE AND CORRECT ON THE
CLOSING DATE.  THE COMPANY SHALL HAVE COMPLIED WITH ALL COVENANTS REQUIRED TO
HAVE BEEN PERFORMED BY IT PRIOR TO THE CLOSING DATE.

 

7.2           COMPLIANCE CERTIFICATE.  EACH PURCHASER SHALL HAVE RECEIVED A
CERTIFICATE SIGNED BY AN APPROPRIATE OFFICER OF THE COMPANY CERTIFYING TO THE
FULFILLMENT OF THE CONDITIONS SET FORTH IN THIS SECTION 7.

 

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7.3           OPINION OF COUNSEL.  THE PURCHASERS SHALL HAVE RECEIVED AN OPINION
OF HELLER EHRMAN WHITE & MCAULIFFE LLP, COUNSEL TO THE COMPANY, IN THE FORM
ATTACHED HERETO AS EXHIBIT E.

 

7.4           BOARD OF DIRECTORS.  THE MDS NOMINEE SHALL HAVE BEEN APPOINTED TO
THE COMPANY’S BOARD OF DIRECTORS, SUCH APPOINTMENT TO TAKE EFFECT ONE BUSINESS
DAY AFTER THE COMPANY’S RECEIPT OF THE PURCHASE PRICE FOR THE SECURITIES SET
FORTH OPPOSITE MDS CAPITAL’S NAME ON SCHEDULE OF PURCHASERS ATTACHED AS
EXHIBIT A.

 

7.5           MINIMUM PURCHASE AMOUNT.  THE COMPANY SHALL SELL AND ISSUE A
MINIMUM OF AT LEAST $15,000,000 AGGREGATE PURCHASE PRICE OF COMMON STOCK TO THE
PURCHASERS COLLECTIVELY AT THE CLOSING, OF WHICH AT LEAST 15% OF THE AGGREGATE
NUMBER OF SHARES OF COMMON STOCK SO SOLD AND ISSUED AT THE CLOSING MUST BE
PURCHASED BY BIOVAIL.

 

7.6           OFFICER AND DIRECTOR LOCK-UP AGREEMENT.  EACH OF THE DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY SHALL HAVE EXECUTED AND DELIVERED THE LOCK-UP
AGREEMENT ATTACHED AS EXHIBIT F.

 

7.7           VOTING COMMITMENT.  JOHN N. SHELL, JOHN W. SHELL AND ORBIMED
ADVISORS LLC SHALL HAVE EXECUTED AND DELIVERED NOMINEE VOTING COMMITMENTS IN THE
FORM ATTACHED AS EXHIBIT G.

 

7.8           SECRETARY’S CERTIFICATE.  THE COMPANY SHALL HAVE DELIVERED A
CERTIFICATE, EXECUTED ON BEHALF OF THE COMPANY BY ITS SECRETARY, DATED AS OF THE
CLOSING DATE, CERTIFYING THE RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF
THE COMPANY APPROVING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
ISSUANCE OF THE SECURITIES, THE RESERVATION FOR ISSUANCE OF ANY WARRANT SHARES
ISSUABLE UPON EXERCISE OF THE WARRANTS AND ADDITIONAL WARRANTS, CERTIFYING THE
CURRENT VERSIONS OF THE ARTICLES OF INCORPORATION AND BYLAWS OF THE COMPANY AND
CERTIFYING AS TO THE SIGNATURES AND AUTHORITY OF PERSONS SIGNING THIS AGREEMENT
AND RELATED DOCUMENTS ON BEHALF OF THE COMPANY.

 

7.9           NO INJUNCTIONS.  NO JUDGMENT, WRIT, ORDER, INJUNCTION, AWARD OR
DECREE OF OR BY ANY COURT, OR JUDGE, JUSTICE OR MAGISTRATE, INCLUDING ANY
BANKRUPTCY COURT OR JUDGE, OR ANY ORDER OF OR BY ANY GOVERNMENTAL AUTHORITY,
SHALL HAVE BEEN ISSUED, AND NO ACTION OR PROCEEDING SHALL HAVE BEEN INSTITUTED
BY ANY GOVERNMENTAL AUTHORITY, ENJOINING OR PREVENTING THE ISSUANCE AND SALE OF
THE SECURITIES AND THE CONSUMMATION OF THE OTHER TRANSACTIONS CONTEMPLATED
HEREBY.

 

7.10         NO STOP ORDERS.  NO STOP ORDER OR SUSPENSION OF TRADING SHALL HAVE
BEEN IMPOSED BY AMEX, THE COMMISSION OR ANY OTHER GOVERNMENTAL REGULATORY BODY
WITH RESPECT TO PUBLIC TRADING IN THE COMMON STOCK.

 

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SECTION 8.                            REGISTRATION OF REGISTRABLE SECURITIES;
COMPLIANCE WITH THE SECURITIES
ACT.

 

8.1           REGISTRATION PROCEDURES AND EXPENSES.  THE COMPANY HEREBY
COVENANTS AND AGREES TO DO THE FOLLOWING:

 

(A)           THE COMPANY SHALL PREPARE AND FILE THE REGISTRATION STATEMENT WITH
THE COMMISSION AS PROMPTLY AS PRACTICABLE, BUT IN ANY EVENT WITHIN TEN BUSINESS
DAYS, AFTER THE CLOSING DATE.  THE REGISTRATION STATEMENT SHALL BE A “SHELF”
REGISTRATION STATEMENT ON FORM S-3 IF THE COMPANY IS THEN ELIGIBLE TO USE SUCH
FORM OR, IF NOT THEN ELIGIBLE, ANOTHER FORM OF REGISTRATION STATEMENT THEN
AVAILABLE TO THE COMPANY APPROPRIATE FOR THE INTENDED METHOD OR METHODS OF
DISPOSITION OF THE COMMON STOCK PURCHASED HEREUNDER AND THE WARRANT SHARES
(COLLECTIVELY, THE “REGISTRABLE SECURITIES”), INCLUDING WITHOUT LIMITATION A
REGISTRATION STATEMENT ON FORM S-1.  THE REGISTRATION STATEMENT SHALL REGISTER
WITH THE COMMISSION THE RESALE BY THE PURCHASERS, FROM TIME TO TIME, OF THE
REGISTRABLE SECURITIES THROUGH AMEX (OR ANY OTHER SECURITIES EXCHANGE OR
QUOTATION SYSTEM ON WHICH THE COMMON STOCK IS THEN LISTED OR QUOTED) OR IN
PRIVATELY-NEGOTIATED TRANSACTIONS, AND SHALL NOT INCLUDE ANY OTHER SECURITIES OF
THE COMPANY OR ANY OTHER HOLDER WITHOUT THE PRIOR WRITTEN CONSENT OF MDS AND THE
HOLDERS OF A MAJORITY OF THE COMMON STOCK AND WARRANT SHARES HELD BY THE
PURCHASERS, EXCEPT PURSUANT TO PIGGYBACK REGISTRATION RIGHTS GRANTED BY THE
COMPANY TO (I) BIOVAIL PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT DATED AS OF
JULY 9, 2002 BY AND BETWEEN THE COMPANY AND BIOVAIL, AND (II) ELAN INTERNATIONAL
SERVICES, LTD. (“EIS”) PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT DATED AS OF
JANUARY 21, 2000 BY AND BETWEEN THE COMPANY AND EIS.  THE COMPANY SHALL USE ITS
REASONABLE BEST EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BE DECLARED
EFFECTIVE WITHIN FIVE BUSINESS DAYS AFTER RECEIPT OF NOTIFICATION THAT THE
REGISTRATION STATEMENT WILL NOT BE SUBJECT TO SEC REVIEW, AND WITHIN 60 DAYS
AFTER THE CLOSING DATE IN THE EVENT OF AN SEC REVIEW.

 

(B)           IN CONNECTION WITH THE COMPANY’S REGISTRATION OBLIGATIONS UNDER
THIS SECTION 8, IN ADDITION TO FILING THE REGISTRATION STATEMENT AS PROVIDED IN
SECTION 8.1(A), THE COMPANY SHALL AS PROMPTLY AS PRACTICABLE:

 

(I)            PREPARE AND FILE WITH THE SEC SUCH AMENDMENTS, (INCLUDING WITHOUT
LIMITATION SUCH AMENDMENTS AS MAY BE NECESSARY TO REGISTER ALL WARRANT SHARES
ISSUABLE UPON EXERCISE OF ADDITIONAL WARRANTS AND, IF INCLUDING ALL SUCH WARRANT
SHARES IN ONE AMENDMENT WOULD CAUSE THE AMENDED REGISTRATION STATEMENT TO NOT BE
IMMEDIATELY EFFECTIVE UPON FILING BY VIRTUE OF RULE 462 PROMULGATED UNDER THE
SECURITIES ACT, THE COMPANY SHALL FILE SUCCESSIVE AMENDMENTS TO ACCOMPLISH SUCH
REGISTRATION SUCH THAT ALL AMENDMENTS INCLUDE THE MAXIMUM NUMBER OF ADDITIONAL
WARRANT SHARES POSSIBLE AND ARE IMMEDIATELY EFFECTIVE UPON FILING) AND
SUPPLEMENTS TO THE REGISTRATION STATEMENT AND THE PROSPECTUS INCLUDED THEREIN AS
MAY BE NECESSARY TO KEEP THE REGISTRATION STATEMENT AND SUCH PROSPECTUS
EFFECTIVE AND TO ENSURE THAT THE STATEMENTS MADE THEREIN ARE NOT MISLEADING IN
ANY MATERIAL RESPECT (OR VOID OF ANY STATEMENT NECESSARY TO MAKE THE STATEMENTS
MADE THEREIN NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN WHICH THE
STATEMENTS THEREIN WERE MADE) UNTIL THE EARLIEST OF (A) THE DATE ON WHICH ALL
REGISTRABLE SECURITIES HAVE BEEN SOLD THEREUNDER; (B) SUCH TIME AS ALL OF THE
REGISTRABLE SECURITIES HELD BY EACH PURCHASER CAN BE SOLD WITHIN A GIVEN
THREE-MONTH PERIOD PURSUANT TO

 

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RULE 144 UNDER THE SECURITIES ACT; OR (C) THE DATE ON WHICH ALL REGISTRABLE
SECURITIES ARE FREELY TRADABLE WITHOUT RESTRICTION UNDER THE SECURITIES ACT. 
NOTWITHSTANDING THE FOREGOING, FOLLOWING THE EFFECTIVENESS OF THE REGISTRATION
STATEMENT, THE COMPANY MAY REQUEST THAT THE PURCHASERS REFRAIN FROM SELLING
REGISTRABLE SECURITIES UNDER THE REGISTRATION STATEMENT FOR UP TO 30 DAYS, AS
APPROPRIATE (A “SUSPENSION PERIOD”), BY GIVING REASONABLE PRIOR WRITTEN NOTICE
TO THE PURCHASERS, IF THE COMPANY’S BOARD OF DIRECTORS SHALL HAVE DETERMINED IN
GOOD FAITH THAT INFORMATION CONTAINED IN THE REGISTRATION STATEMENT CONTAINS
MATERIAL MISSTATEMENTS OR OMISSIONS AND CORRECTING THE SAME WOULD REQUIRE THE
COMPANY TO DISCLOSE ANY MATERIAL CORPORATE DEVELOPMENT NOT OTHERWISE REQUIRED TO
BE THEN DISCLOSED UNDER APPLICABLE LAW AND THAT DISCLOSURE OF SUCH INFORMATION
AT THE TIME WOULD NOT BE IN THE BEST INTERESTS OF THE COMPANY; PROVIDED,
HOWEVER, THAT THIS RIGHT SHALL IN NO WAY MINIMIZE, MITIGATE OR LIMIT THE
COMPANY’S OBLIGATIONS UNDER SUBSECTION 8.1(B)(IV) BELOW TO PROMPTLY PREPARE,
FILE AND DELIVER TO THE PURCHASERS A PROSPECTUS SUPPLEMENT OR AMENDMENT BY NO
LATER THAN THE 30TH DAY AFTER THE COMMENCEMENT OF THE SUSPENSION PERIOD OR SUCH
SHORTER PERIOD AS IS REASONABLY PRACTICABLE AND APPROPRIATE.  NOTWITHSTANDING
THE FOREGOING, THE COMPANY MAY NOT GIVE NOTICE OF A SUSPENSION PERIOD MORE THAN
TWICE DURING ANY TWELVE (12) MONTH PERIOD, AND IN EACH EVENT THE COMPANY MUST
USE ITS REASONABLE BEST EFFORTS TO RESOLVE THE UNDERLYING CAUSE OR REASON FOR
THE SUSPENSION PERIOD AS PROMPTLY AS PRACTICABLE SUCH THAT THE SUSPENSION PERIOD
IS AS SHORT AS PRACTICABLE.  EACH PURCHASER AGREES THAT, UPON RECEIPT OF ANY
NOTICE FROM THE COMPANY OF A SUSPENSION PERIOD, SUCH PURCHASER WILL NOT SELL ANY
REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT UNTIL THE EARLIER
OF (I) 30 DAYS THEREAFTER AND (II) THE DATE THAT (A) SUCH PURCHASER IS ADVISED
IN WRITING BY THE COMPANY THAT THE USE OF THE APPLICABLE PROSPECTUS MAY BE
RESUMED, (B) SUCH PURCHASER HAS RECEIVED COPIES OF ANY ADDITIONAL OR
SUPPLEMENTAL OR AMENDED PROSPECTUS, IF APPLICABLE, AND (C) SUCH PURCHASER HAS
RECEIVED COPIES OF ANY ADDITIONAL OR SUPPLEMENTAL FILINGS WHICH ARE INCORPORATED
OR DEEMED TO BE INCORPORATED BY REFERENCE IN SUCH PROSPECTUS.

 

(II)           FURNISH TO EACH PURCHASER A DRAFT OF THE SELLING SHAREHOLDER
TABLE AND PLAN OF DISTRIBUTION FROM THE REGISTRATION STATEMENT PRIOR TO ITS
FILING WITH THE COMMISSION.  EACH PURCHASER SHALL FURNISH TO THE COMPANY SUCH
INFORMATION REGARDING EACH SUCH PURCHASER’S BENEFICIAL OWNERSHIP OF THE
COMPANY’S COMMON STOCK, AS WELL AS EACH PURCHASER’S PROPOSED METHOD OF
DISTRIBUTION OF THE REGISTRABLE SECURITIES WITHIN THREE BUSINESS DAYS OF RECEIPT
OF SUCH DRAFT OF THE SELLING SHAREHOLDER TABLE AND PLAN OF DISTRIBUTION FROM THE
REGISTRATION STATEMENT.

 

(III)          PERMIT SPECIAL COUNSEL TO MDS AND SPECIAL COUNSEL TO BIOVAIL TO
REVIEW ANY COMMENTS MADE BY THE STAFF OF THE COMMISSION AND THE COMPANY’S
RESPONSES THERETO, WITHIN A REASONABLE PERIOD OF TIME PRIOR TO THE FILING
THEREOF WITH THE COMMISSION (OR, IN THE CASE OF COMMENTS MADE BY THE STAFF OF
THE COMMISSION, WITHIN A REASONABLE PERIOD OF TIME FOLLOWING THE RECEIPT THEREOF
BY THE COMPANY).

 

(IV)          NOTIFY EACH PURCHASER, PROMPTLY AFTER RECEIVING NOTICE THEREOF,
WHEN THE REGISTRATION STATEMENT IS DECLARED EFFECTIVE BY THE COMMISSION.

 

(V)           FURNISH TO EACH PURCHASER WHO IS SELLING REGISTRABLE SECURITIES
THE REASONABLE NUMBER OF COPIES OF THE REGISTRATION STATEMENT, EACH AMENDMENT
AND SUPPLEMENT THERETO (IN EACH CASE INCLUDING ALL EXHIBITS THERETO BUT
EXCLUDING ALL DOCUMENTS INCORPORATED BY

 

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REFERENCE THEREIN, UNLESS SPECIFICALLY REQUESTED BY SUCH PURCHASER), AND THE
PROSPECTUS INCLUDED IN SUCH REGISTRATION STATEMENT (INCLUDING EACH PRELIMINARY
PROSPECTUS AND PROSPECTUS SUPPLEMENT) AS SUCH PURCHASER REASONABLY MAY REQUEST.

 

(VI)          FILE ANY DOCUMENTS REQUIRED OF THE COMPANY FOR BLUE SKY CLEARANCE
IN STATES SPECIFIED IN WRITING BY A PURCHASER AND TAKE ANY AND ALL SUCH ACTIONS
AS MAY BE REASONABLY NECESSARY OR ADVISABLE TO ENABLE SUCH PURCHASER TO
CONSUMMATE THE PLANNED DISPOSITION OF REGISTRABLE SECURITIES IN SUCH
JURISDICTIONS; PROVIDED, HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED TO
QUALIFY TO DO BUSINESS OR CONSENT TO SERVICE OF PROCESS IN ANY JURISDICTION IN
WHICH IT IS NOT NOW SO QUALIFIED OR HAS NOT SO CONSENTED.

 

(VII)         NOTIFY EACH PURCHASER, AT ANY TIME WHEN A PROSPECTUS RELATING TO
THE REGISTRABLE SECURITIES IS REQUIRED TO BE DELIVERED UNDER THE SECURITIES ACT
WITHIN THE PERIOD THAT THE COMPANY IS REQUIRED TO KEEP THE REGISTRATION
STATEMENT EFFECTIVE, OF ANY EVENT AS A RESULT OF WHICH THE PROSPECTUS INCLUDED
IN THE REGISTRATION STATEMENT (AS THEN IN EFFECT) CONTAINS AN UNTRUE STATEMENT
OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.  AS PROMPTLY
AS PRACTICABLE FOLLOWING ANY SUCH OCCURRENCE, THE COMPANY SHALL PREPARE AND
FURNISH TO EACH PURCHASER A REASONABLE NUMBER OF COPIES OF A PROSPECTUS
SUPPLEMENT OR AN AMENDMENT TO SUCH PROSPECTUS AS MAY BE NECESSARY SO THAT, AS
THEREAFTER DELIVERED TO SUBSEQUENT PURCHASERS OF THE REGISTRABLE SECURITIES,
SUCH PROSPECTUS (AS SO AMENDED OR SUPPLEMENTED) SHALL MEET THE REQUIREMENTS OF
THE SECURITIES ACT AND RELEVANT STATE SECURITIES LAWS.  EACH PURCHASER SHALL
FURNISH TO THE COMPANY SUCH INFORMATION REGARDING EACH SUCH PURCHASER AND ITS
PROPOSED METHOD OF DISTRIBUTION OF THE REGISTRABLE SECURITIES AS THE COMPANY
FROM TIME TO TIME REASONABLY MAY REQUEST AND AS SHALL BE REQUIRED BY LAW TO
EFFECT AND MAINTAIN THE REGISTRATION OF SUCH PURCHASER’S REGISTRABLE SECURITIES
UNDER THE SECURITIES ACT AND ANY STATE SECURITIES LAWS.

 

(VIII)        ADVISE EACH PURCHASER, PROMPTLY AFTER RECEIVING NOTICE THEREOF, OF
ANY STOP ORDER OR INJUNCTIVE ACTION ISSUED OR THREATENED BY THE SEC AND USE ITS
REASONABLE BEST EFFORTS TO TAKE ALL ACTIONS REQUIRED TO PREVENT THE ENTRY OF
SUCH STOP ORDER OR INJUNCTION, OR TO REMOVE OR RELEASE IT IF ENTERED.

 

(IX)           USE ITS REASONABLE BEST EFFORTS TO CAUSE ALL REGISTRABLE
SECURITIES INCLUDED IN THE REGISTRATION STATEMENT TO BE LISTED ON EACH
SECURITIES EXCHANGE OR QUOTATIONS SYSTEM ON WHICH THE COMMON STOCK IS THEN
LISTED OR PROPOSED TO BE LISTED ON OR BEFORE THE DATE OF THE FIRST SALE OF
REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT.

 

(X)            OTHERWISE USE ITS REASONABLE BEST EFFORTS TO COMPLY WITH THE
PROVISIONS OF THE SECURITIES ACT WITH RESPECT TO THE DISPOSITION OF ALL OF THE
REGISTRABLE SECURITIES IN ACCORDANCE WITH THE INTENDED METHODS OF DISPOSITION BY
THE PURCHASERS THEREOF SET FORTH IN THE REGISTRATION STATEMENT AND TO MAKE
GENERALLY AVAILABLE TO ITS SECURITY HOLDERS, AS SOON AS REASONABLY PRACTICABLE,
AN EARNINGS STATEMENT SATISFYING THE PROVISIONS OF SECTION 11(A) OF THE
SECURITIES ACT AND RULE 158 THEREUNDER.

 

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(C)           IF THE COMPANY IS NOTIFIED BY THE COMMISSION OR ANY OTHER
GOVERNMENTAL AUTHORITY OF COMPETENT JURISDICTION AND AUTHORITY (AS DETERMINED IN
GOOD FAITH AFTER CONSULTATION BETWEEN COUNSEL TO THE COMPANY AND THE PURCHASERS)
THAT SALES OF REGISTRABLE SECURITIES UNDER THE REGISTRATION STATEMENT MUST BE
SUSPENDED, DELAYED OR HALTED BECAUSE OF A DEFECT IN THE REGISTRATION STATEMENT
OR THE PROSPECTUS INCLUDED THEREIN, EACH PURCHASER AGREES THAT, UPON RECEIPT OF
ANY NOTICE FROM THE COMPANY THEREOF, SUCH PURCHASER WILL NOT SELL ANY
REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT UNTIL (I) SUCH
PURCHASER IS ADVISED IN WRITING BY THE COMPANY THAT THE USE OF THE APPLICABLE
PROSPECTUS MAY BE RESUMED, (II) SUCH PURCHASER HAS RECEIVED COPIES OF ANY
ADDITIONAL OR SUPPLEMENTAL OR AMENDED PROSPECTUS, IF APPLICABLE, AND (III) SUCH
PURCHASER HAS RECEIVED COPIES OF ANY ADDITIONAL OR SUPPLEMENTAL FILINGS WHICH
ARE INCORPORATED OR DEEMED INCORPORATED BY REFERENCE IN SUCH PROSPECTUS.

 

(D)           ALL FEES AND EXPENSES ASSOCIATED WITH THE REGISTRATION OF THE
REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT (INCLUDING,
WITHOUT LIMITATION, THE COSTS OF PREPARING, FILING, AMENDING AND SUPPLEMENTING
THE REGISTRATION STATEMENT AND THE RELATED PROSPECTUS, CAUSING AND MAINTAINING
THE EFFECTIVENESS OF THE REGISTRATION STATEMENT AND THE RELATED PROSPECTUS AND
ANY QUALIFICATION OF THE REGISTRABLE SECURITIES, PRINTERS’ FEES, ACCOUNTING
FEES, FEES AND DISBURSEMENTS OF COUNSEL TO THE COMPANY AND OTHER CUSTOMARY AND
REASONABLY RELATED EXPENSES) SHALL BE BORNE BY THE COMPANY (EXCLUSIVE OF ANY
BROKERAGE FEES, UNDERWRITING DISCOUNTS AND COMMISSIONS).  IN ADDITION, THE
COMPANY ALSO SHALL PAY THE REASONABLE FEES AND EXPENSE OF ONE SPECIAL COUNSEL TO
THE MDS PARTIES.

 

(E)           WITH A VIEW TO MAKING AVAILABLE TO THE PURCHASERS THE BENEFITS OF
RULE 144 PROMULGATED UNDER THE SECURITIES ACT (“RULE 144”) AND ANY OTHER RULE OR
REGULATION OF THE SEC THAT MAY AT ANY TIME PERMIT A PURCHASER TO SELL THE
REGISTRABLE SECURITIES TO THE PUBLIC WITHOUT REGISTRATION OR PURSUANT TO
REGISTRATION, THE COMPANY HEREBY COVENANTS AND AGREES TO:

 

(I)            MAKE AND KEEP PUBLIC INFORMATION REGARDING THE COMPANY AVAILABLE,
AS THOSE TERMS ARE UNDERSTOOD AND DEFINED IN RULE 144, AT ALL TIMES UNTIL THE
EARLIER OF (A) THE SECOND ANNIVERSARY OF THE CLOSING DATE OR (B) SUCH DATE AS
ALL REGISTRABLE SECURITIES (INCLUDING, WITHOUT LIMITATION, ALL WARRANT SHARES)
SHALL HAVE BEEN RESOLD;

 

(II)           FILE WITH THE SEC IN A TIMELY MANNER ALL REPORTS AND OTHER
DOCUMENTS REQUIRED OF THE COMPANY UNDER THE EXCHANGE ACT, OR, IF THE COMPANY IS
NOT THEN SUBJECT TO SECTION 13(A) OR 15(D) OF THE EXCHANGE ACT, WHICH IT WOULD
HAVE BEEN REQUIRED TO FILE WERE IT SO SUBJECT; AND

 

(III)          FURNISH TO ANY PURCHASER UPON REQUEST, AS LONG AS THE PURCHASER
OWNS ANY REGISTRABLE SECURITIES, (A) A WRITTEN CERTIFICATION BY THE COMPANY THAT
IT TIMELY HAS COMPLIED WITH ALL OF THE REPORTING REQUIREMENTS OF THE EXCHANGE
ACT APPLICABLE TO THE COMPANY AND UPON WHICH RULE 144 IS CONDITIONED, (B) A COPY
OF THE MOST RECENT ANNUAL AND QUARTERLY REPORT OF THE COMPANY, AND (C) SUCH
OTHER INFORMATION AND SUCH OTHER REPORTS OR DOCUMENTS AS REASONABLY MAY BE
REQUESTED IN ORDER TO AVAIL ANY PURCHASER OF ANY RULE OR REGULATION OF THE SEC
THAT PERMITS THE SALE, TRANSFER OR OTHER DISPOSITION OF ANY REGISTRABLE
SECURITIES WITHOUT REGISTRATION UNDER THE SECURITIES ACT.

 

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(F)            IF THE REGISTRATION STATEMENT:

 

(I)            IS NOT SUBJECT TO SEC REVIEW AND THE REGISTRATION STATEMENT IS
NOT DECLARED EFFECTIVE BY THE SEC WITHIN 90 DAYS AFTER THE CLOSING DATE (SUBJECT
TO EXTENSION AS PROVIDED IN THE LAST SENTENCE OF THIS SUBPARAGRAPH) FOR ANY
REASON WHATSOEVER; OR

 

(II)           IS SUBJECT TO SEC REVIEW AND THE COMPANY FAILS FOR ANY REASON TO
RESPOND TO EACH SEC COMMENT LETTER RELATING TO THE REGISTRATION STATEMENT WITHIN
10 BUSINESS DAYS AFTER RECEIPT OF EACH SUCH COMMENT LETTER AND THE REGISTRATION
STATEMENT IS NOT DECLARED EFFECTIVE WITHIN 90 DAYS AFTER THE CLOSING DATE
(SUBJECT TO EXTENSION AS PROVIDED IN THE LAST SENTENCE OF THIS SUBPARAGRAPH) FOR
ANY REASON WHATSOEVER; OR

 

(III)          IS NOT DECLARED EFFECTIVE BY THE SEC WITHIN 120 DAYS AFTER THE
CLOSING DATE (SUBJECT TO EXTENSION AS PROVIDED IN THE LAST SENTENCE OF THIS
SUBPARAGRAPH) FOR ANY REASON WHATSOEVER,

 

then each Purchaser shall receive a warrant substantially in the form attached
hereto as Exhibit B (each, an “Additional Warrant”) to purchase a number of
shares of Common Stock (the shares of Common Stock issuable on exercise of the
Additional Warrants being the “Additional Warrant Shares,” which shall be deemed
part of the Warrant Shares upon issuance) equal to 5% of the number of shares of
Common Stock set forth opposite such Purchaser’s name on the Schedule of
Purchasers attached as Exhibit A hereto, rounded up to the nearest whole number
of shares (as appropriately adjusted for any stock splits, combinations,
recapitalizations or other events affecting the Common Stock after the Closing
Date).  Until the Registration Statement is declared effective by the SEC, each
Purchaser shall receive such an Additional Warrant exercisable for such number
of shares (as adjusted, if applicable) (A) on the 121st day after the Closing
Date and (B) at the end of each 30 day period thereafter (each such date, an
“Additional Warrant Date”).  If the Registration Statement is declared effective
at any time after the 121st day following the Closing Date but before the next
Additional Warrant Date, each Purchaser shall receive an Additional Warrant
exercisable for the number of shares of Common Stock that would have been issued
on that next Additional Warrant Date, multiplied by a fraction, the numerator of
which is the number of days since the last Additional Warrant Date and the
denominator of which is 30.  Each Additional Warrant issued pursuant to this
Section 8.1(f) shall be dated the date of issuance, shall be exercisable from
and after the third month after issuance and shall have an exercise price per
share equal to the then effective exercise price per share under the Warrants
outstanding on the date the Additional Warrant is issued.  Each Selling
Shareholder whose Registrable Securities are being registered under the
Registration Statement shall provide to the Company any information regarding
that Selling Shareholder or such Selling Shareholder’s plan of distribution as
is reasonably necessary for the preparation of the Registration Statement and
otherwise is not reasonably available to the Company within three business days
after receipt of a written request therefor.  To the extent that the filing of
the Registration Statement, any response to SEC comments on the Registration
Statement or the Company’s ability to request that the Registration Statement be
declared effective is delayed as a direct result of the failure on the part of
one or more Selling Shareholders to provide such information to the Company
within the requisite period, the number of days in excess of the

 

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maximum time allotted for such Selling Shareholders to respond to such requests
shall not be included in determining whether the Company has complied with its
obligations to timely file and cause the effectiveness of the Registration
Statement under this Section 8.1(f).

 

(G)           TRANSFER OF REGISTRABLE SECURITIES AFTER REGISTRATION.  EACH
PURCHASER AGREES THAT SUCH PURCHASER WILL NOT EFFECT ANY DISPOSITION OF THE
REGISTRABLE SECURITIES THAT WOULD CONSTITUTE A SALE WITHIN THE MEANING OF THE
SECURITIES ACT, EXCEPT:

 

(I)            PURSUANT TO THE REGISTRATION STATEMENT;

 

(II)           PURSUANT TO RULE 144; OR

 

(III)          IN ANOTHER TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT, IN WHICH CASE SUCH PURCHASER SHALL, PRIOR TO EFFECTING SUCH
DISPOSITION, SUBMIT TO THE COMPANY AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THE PROPOSED
TRANSACTION IS IN COMPLIANCE WITH THE SECURITIES ACT.

 

(IV)          NOTWITHSTANDING THE FOREGOING, OR ANYTHING TO THE CONTRARY
CONTAINED HEREIN, EACH MDS PARTY SHALL BE ENTITLED TO TRANSFER OR ASSIGN ANY
SECURITIES PURCHASED HEREUNDER AND ANY OR WARRANT SHARES RECEIVED UPON EXERCISE
OF THE WARRANTS TO ANY OTHER MDS PARTIES AND EACH PURCHASER SHALL BE ENTITLED TO
TRANSFER OR ASSIGN ANY SECURITIES PURCHASED HEREUNDER AND ANY WARRANT SHARES
RECEIVED UPON EXERCISE OF THE WARRANTS TO ANY OF ITS AFFILIATES OR TO ANY OTHER
PURCHASER, IN EACH CASE SUBJECT ONLY TO COMPLIANCE WITH APPLICABLE SECURITIES
LAW.

 

(H)           TRANSFER OF REGISTRATION RIGHTS.  THE REGISTRATION RIGHTS GRANTED
TO THE PURCHASERS PURSUANT TO THIS SECTION 8 MAY BE ASSIGNED TO ANY TRANSFEREE
OR ASSIGNEE OF REGISTRABLE SECURITIES (INCLUDING, FOR THIS PURPOSE, ANY WARRANTS
OR ADDITIONAL WARRANTS EXERCISABLE FOR REGISTRABLE SECURITIES) IN CONNECTION
WITH ANY TRANSFER OR ASSIGNMENT OF SUCH SECURITIES; PROVIDED, HOWEVER, THAT:

 

(I)            SUCH TRANSFER OR ASSIGNMENT IS OTHERWISE EFFECTED IN ACCORDANCE
WITH APPLICABLE SECURITIES LAW;

 

(II)           IF NOT ALREADY A PARTY HERETO, THE TRANSFEREE OR ASSIGNEE AGREES
IN WRITING PRIOR TO SUCH TRANSFER TO BE BOUND IN WRITING BY THE PROVISIONS OF
THIS AGREEMENT APPLICABLE TO THE TRANSFERRING PURCHASER; AND

 

(III)          THE TRANSFERRING PURCHASER SHALL ACT AS AGENT AND REPRESENTATIVE
FOR THE TRANSFEREE AND ASSIGNEE FOR THE GIVING AND RECEIVING OF NOTICES
HEREUNDER.

 

8.2           INDEMNIFICATION.

 

(A)           DEFINITIONS.  AS USED IN THIS SECTION 8.2, THE FOLLOWING TERMS
HAVE THE FOLLOWING RESPECTIVE MEANINGS:

 

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(I)            “SELLING SHAREHOLDER” MEANS A PURCHASER OF SECURITIES UNDER THIS
AGREEMENT, ANY PERMITTED TRANSFEREE OR ASSIGNEE OF SUCH SECURITIES WHO IS
ENTITLED TO RESELL REGISTRABLE SECURITIES PURSUANT TO THE REGISTRATION STATEMENT
AND EACH OFFICER, DIRECTOR, MEMBER, SHAREHOLDER, PARTNER, AGENT, REPRESENTATIVE
OR AFFILIATE OF SUCH PURCHASER OR PERMITTED TRANSFEREE OR ASSIGNEE;

 

(II)           “REGISTRATION STATEMENT” INCLUDES ANY FINAL PROSPECTUS, EXHIBIT,
SUPPLEMENT OR AMENDMENT INCLUDED IN OR RELATING TO THE REGISTRATION STATEMENT
REFERRED TO IN SECTION 8.1; AND

 

(III)          “UNTRUE STATEMENT” INCLUDES ANY UNTRUE STATEMENT OR ALLEGED
UNTRUE STATEMENT OR ANY OMISSION OR ALLEGED OMISSION TO STATE IN THE
REGISTRATION STATEMENT A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR
NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING.

 

(B)           COMPANY INDEMNIFICATION.  THE COMPANY HEREBY UNCONDITIONALLY AND
IRREVOCABLY AGREES TO INDEMNIFY AND HOLD HARMLESS TO THE MAXIMUM EXTENT
PERMITTED BY LAW EACH SELLING SHAREHOLDER FROM AND AGAINST ANY AND ALL LOSSES
SUFFERED OR INCURRED BY SUCH SELLING SHAREHOLDER OR TO WHICH SUCH SELLING
SHAREHOLDER MAY BECOME SUBJECT (UNDER THE SECURITIES ACT OR OTHERWISE) INSOFAR
AS SUCH LOSSES (OR ACTIONS OR PROCEEDINGS IN RESPECT THEREOF) ARISE OUT OF, OR
ARE BASED UPON:

 

(I)            ANY UNTRUE STATEMENT ON OR AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT, OR ON OR AFTER THE DATE OF ANY PROSPECTUS OR PROSPECTUS
SUPPLEMENT OR THE DATE OF ANY SALE BY PURCHASER THERE UNDER; OR

 

(II)           ANY FAILURE BY THE COMPANY TO OBSERVE OR FULFILL ANY UNDERTAKING
INCLUDED IN THE REGISTRATION STATEMENT OR UNDER FEDERAL OR STATE SECURITIES LAW.

 

In any such event, the Company promptly will pay the amount of indemnified
Losses to or at the direction of the Selling Shareholder(s), and will advance or
reimburse each such Selling Shareholder for any Losses constituting legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim relating to such Losses; provided,
however, that the Company shall not be liable to such Selling Shareholder to the
extent that such Losses arise out of, or are based upon, (A) an Untrue Statement
made in such Registration Statement in reliance upon and in conformity with
information furnished to the Company by or on behalf of such Selling Shareholder
in writing specifically for inclusion in the Registration Statement, which
information was not promptly corrected in writing by such Selling Shareholder
prior to the filing of such Registration Statement, or (B) the material breach
by such Selling Shareholder of its covenants and agreements contained in
Section 8.1(c) hereof respecting the sale of Registrable Securities or (C) any
statement or omission in any Prospectus that was timely and properly noticed to
the Selling Shareholder by the Company pursuant to Section 8.1 and was timely
corrected in a subsequent prospectus timely delivered to the Selling Shareholder
prior to the pertinent sale or sales by the Selling Shareholder.

 

28

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(C)           PURCHASER INDEMNIFICATION.  SUBJECT TO THE LAST PROVISO IN THIS
SECTION 8.2(C), EACH PURCHASER, SEVERALLY AND NOT JOINTLY, AGREES TO INDEMNIFY
AND HOLD HARMLESS THE COMPANY (AND EACH PERSON, IF ANY, WHO CONTROLS THE COMPANY
WITHIN THE MEANING OF SECTION 15 OF THE SECURITIES ACT, EACH OFFICER OF THE
COMPANY WHO SIGNS THE REGISTRATION STATEMENT AND EACH DIRECTOR OF THE COMPANY)
FROM AND AGAINST ANY LOSSES TO WHICH THE COMPANY (OR ANY SUCH OFFICER, DIRECTOR
OR CONTROLLING PERSON) MAY BECOME SUBJECT (UNDER THE SECURITIES ACT OR
OTHERWISE), INSOFAR AS SUCH LOSSES (OR ACTIONS OR PROCEEDINGS IN RESPECT
THEREOF) ARISE DIRECTLY OUT OF, OR ARE BASED PRIMARILY UPON:

 

(I)            THE MATERIAL BREACH BY SUCH PURCHASER OF ITS COVENANTS AND
AGREEMENTS CONTAINED IN SECTION 8.1(C) HEREOF RESPECTING THE SALE OF REGISTRABLE
SECURITIES; OR

 

(II)           ANY UNTRUE STATEMENT CONTAINED IN THE REGISTRATION STATEMENT ON
OR AFTER THE EFFECTIVE DATE THEREOF, OR IN ANY PROSPECTUS SUPPLEMENT AS OF ITS
ISSUE DATE OR DATE OF ANY SALE BY SUCH PURCHASER THEREUNDER, IF SUCH UNTRUE
STATEMENT WAS MADE IN RELIANCE UPON AND IN CONFORMITY WITH INFORMATION FURNISHED
BY OR ON BEHALF OF SUCH PURCHASER IN WRITING SPECIFICALLY FOR INCLUSION IN THE
REGISTRATION STATEMENT.

 

In such event, such Purchaser will reimburse the Company (or such officer,
director or controlling Person), as the case may be, for any Losses constituting
legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim relating to such
Losses; provided, however, that notwithstanding the foregoing or anything to the
contrary contained in this Agreement, in no event shall any Purchaser be liable
for or obligated to pay an amount of Losses (including the amount of any legal
or other expenses reimbursed as provided in this sentence) in excess of the net
amount of cash proceeds received by such Purchaser from the sale of Registrable
Securities under the Registration Statement.  Notwithstanding the foregoing or
anything to the contrary herein, in no event shall any Purchaser be liable for
Losses arising from or relating to the material breach or Untrue Statement of or
regarding any other Purchaser or if such Purchaser provided corrected
information to the Company on a timely basis and the Company did not timely
reflect such corrected information in the Registration Statement, the related
prospectus or an amendment or supplement thereto.

 

(D)           INDEMNIFICATION PROCEDURES.  PROMPTLY AFTER THE INCURRENCE OF ANY
LOSSES OR THE RECEIPT BY ANY INDEMNIFIED PERSON OF A NOTICE OF A CLAIM OR THE
BEGINNING OF ANY ACTION IN RESPECT OF LOSSES WHICH INDEMNITY IS TO BE SOUGHT
AGAINST AN INDEMNIFYING PERSON PURSUANT TO SECTION 4.27 (WITH RESPECT TO
INDEMNIFICATION BY THE COMPANY ONLY) OR THIS SECTION 8.2, SUCH INDEMNIFIED
PERSON SHALL NOTIFY THE INDEMNIFYING PERSON IN WRITING OF THE NATURE AND AMOUNT
OF SUCH LOSSES OR THE NATURE AND ESTIMATED LOSSES ASSOCIATED WITH SUCH CLAIM OR
OF THE COMMENCEMENT OF SUCH ACTION; PROVIDED, HOWEVER, THAT NO FAILURE OR DELAY
IN GIVING SUCH NOTICE SHALL RELEASE AN INDEMNIFYING PARTY FROM ANY OF ITS
OBLIGATIONS UNDER SECTION 4.27 OR THIS SECTION 8.2, UNLESS, AND THEN ONLY TO THE
EXTENT THAT, SUCH FAILURE OR DELAY ACTUALLY RESULTS IN MATERIAL DAMAGE OR
PREJUDICE TO THE INDEMNIFYING PARTY.  SUBJECT TO THE PROVISIONS HEREINAFTER
STATED, IN CASE ANY SUCH ACTION SHALL BE BROUGHT AGAINST AN INDEMNIFIED PERSON
AND SUCH INDEMNIFYING PERSON SHALL HAVE BEEN NOTIFIED THEREOF, SUCH INDEMNIFYING
PERSON SHALL BE ENTITLED

 

29

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TO PARTICIPATE THEREIN (AT ITS OWN COST AND EXPENSE, WHICH SHALL NOT BE DEEMED
LOSSES FOR PURPOSES HEREOF), AND, TO THE EXTENT IT SHALL WISH, TO ASSUME THE
DEFENSE THEREOF, WITH COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED
PERSON.  AFTER NOTICE FROM THE INDEMNIFYING PERSON TO SUCH INDEMNIFIED PERSON OF
ITS ELECTION TO ASSUME THE DEFENSE THEREOF, SUCH INDEMNIFYING PERSON SHALL NOT
BE LIABLE TO SUCH INDEMNIFIED PERSON FOR ANY LEGAL EXPENSES SUBSEQUENTLY
INCURRED BY SUCH INDEMNIFIED PERSON IN CONNECTION WITH THE DEFENSE THEREOF
(BEYOND ANY REASONABLE FEES, COSTS AND EXPENSES INCURRED IN PROPERLY
TRANSITIONING THE DEFENSE OR REPRESENTATION TO THE INDEMNIFYING PERSON’S COUNSEL
SO SELECTED OR AMOUNTS INCURRED TO DATE BUT NOT YET PRESENTED FOR PAYMENT) IF
THE INDEMNIFYING PERSON IN FACT PROMPTLY ASSUMES SUCH DEFENSE; PROVIDED,
HOWEVER, THAT IF THERE EXISTS OR SHALL EXIST A CONFLICT OF INTEREST THAT WOULD
MAKE IT INAPPROPRIATE, IN THE OPINION OF COUNSEL TO THE INDEMNIFIED PERSON, FOR
THE SAME COUNSEL TO REPRESENT BOTH THE INDEMNIFIED PERSON AND SUCH INDEMNIFYING
PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF, THE INDEMNIFIED PERSON SHALL BE
ENTITLED TO SELECT AND RETAIN ITS OWN INDEPENDENT COUNSEL AT THE COST AND
EXPENSE OF SUCH INDEMNIFYING PERSON; PROVIDED, HOWEVER, THAT NO INDEMNIFYING
PERSON SHALL BE RESPONSIBLE FOR THE FEES AND EXPENSES OF MORE THAN ONE SEPARATE
COUNSEL FOR ALL INDEMNIFIED PARTIES (IN ADDITION TO NOT MORE THAN ONE LOCAL
COUNSEL IN EACH RELEVANT JURISDICTION).  THE INDEMNIFYING PARTY SHALL NOT BE
LIABLE TO INDEMNIFY AN INDEMNIFIED PARTY FOR LOSSES ASSOCIATED WITH ANY
SETTLEMENT, OR CONSENT TO JUDGMENT, EFFECTED WITHOUT THE INDEMNIFYING PARTY’S
PRIOR CONSENT (NOT TO BE UNREASONABLY DELAYED, CONDITIONED OR WITHHELD). 
FURTHER, THE INDEMNIFYING PARTY SHALL NOT CONSENT TO ENTRY OF ANY JUDGMENT OR
ENTER INTO ANY SETTLEMENT AGREEMENT WITH RESPECT TO ANY INDEMNIFIED LOSSES WHICH
(I) CONTAINS ANY ADMISSION OF FAULT OR LIABILITY OF THE INDEMNIFIED PARTY, (II)
DOES NOT INCLUDE AN UNCONDITIONAL WAIVER AND RELEASE OF ANY FURTHER OR
ADDITIONAL CLAIMS BY THE CLAIMANTS OR PLAINTIFFS AGAINST THE INDEMNIFIED PARTY,
OR (III) OBLIGATES THE INDEMNIFIED PERSON TO TAKE OR REFRAIN FROM TAKING ANY
ACTION (OTHER THAN WITH RESPECT TO ANY SETTLED CLAIM).

 

(E)           CONTRIBUTION.  EACH PARTY HERETO AGREES THAT, IF FOR ANY REASON
THE INDEMNIFICATION PROVISIONS CONTEMPLATED BY SECTION 4.27 OR THIS SECTION 8.2
ARE UNAVAILABLE, UNENFORCEABLE OR ARE INSUFFICIENT TO PROVIDE THE
INDEMNIFICATION FOR LOSSES PROVIDED THEREIN, THEN EACH INDEMNIFYING PARTY SHALL
CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT
OF SUCH LOSSES IN SUCH PROPORTION AS IS APPROPRIATE TO REFLECT THE RELATIVE
FAULT OF THE INDEMNIFYING PARTY AND THE INDEMNIFIED PARTY FOR SUCH LOSSES AS
WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS.  THE RELATIVE FAULT OF SUCH
INDEMNIFYING PARTY AND INDEMNIFIED PARTY SHALL BE DETERMINED BY REFERENCE TO,
AMONG OTHER THINGS, THE FACTS AND CIRCUMSTANCES SURROUNDING ANY BREACH OR
VIOLATION GIVING RISE TO SUCH LOSSES AND, IF APPLICABLE, WHETHER THE UNTRUE
STATEMENT RELATES TO INFORMATION SUPPLIED BY SUCH INDEMNIFYING PARTY OR
INDEMNIFIED PARTY, AND THE PARTIES’ RELATIVE INTENT, KNOWLEDGE, ACCESS TO
INFORMATION AND OPPORTUNITY TO CORRECT OR PREVENT SUCH UNTRUE STATEMENT.  THE
PARTIES HERETO AGREE THAT, SHOULD THE INTENDED INDEMNIFICATION PURSUANT TO
SECTION 4.27 OR THIS SECTION 8.2 BE UNAVAILABLE, UNENFORCEABLE OR OTHERWISE
INSUFFICIENT, IT WOULD NOT BE JUST AND EQUITABLE IF CONTRIBUTION PURSUANT TO
THIS SECTION 8.2(E) WERE DETERMINED BY PRO RATA ALLOCATION OR BY ANY OTHER
METHOD OF ALLOCATION WHICH DOES NOT TAKE INTO ACCOUNT THE EQUITABLE
CONSIDERATIONS REFERRED TO IN THIS SECTION 8.2(E).  NOTWITHSTANDING THE
FOREGOING OR ANYTHING TO THE CONTRARY CONTAINED HEREIN, NO PERSON GUILTY OF
FRAUDULENT MISREPRESENTATION (WITHIN THE MEANING OF SECTION 11(F) OF THE
SECURITIES ACT) SHALL BE ENTITLED TO CONTRIBUTION FROM ANY PERSON WHO WAS NOT
GUILTY OF SUCH FRAUDULENT MISREPRESENTATION.

 

30

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IN NO EVENT SHALL THE CONTRIBUTION OBLIGATION OF A HOLDER OF REGISTRABLE
SECURITIES BE GREATER IN AMOUNT THAN THE DOLLAR AMOUNT OF THE PROCEEDS (NET OF
ALL EXPENSES PAID BY SUCH HOLDER IN CONNECTION WITH ANY CLAIM RELATING TO THIS
SECTION 8.2 AND THE AMOUNT OF ANY DAMAGES SUCH HOLDER HAS OTHERWISE BEEN
REQUIRED TO PAY BY REASON OF SUCH UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT)
RECEIVED BY IT UPON THE SALE OF THE REGISTRABLE SECURITIES GIVING RISE TO SUCH
CONTRIBUTION OBLIGATION.

 

(F)            SURVIVAL.  THE INDEMNIFICATION AND CONTRIBUTION OBLIGATIONS UNDER
THIS AGREEMENT SHALL BE AND REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF ANY
INVESTIGATION MADE BY OR ON BEHALF OF THE COMPANY, ANY PURCHASER, ANY OFFICER OR
EMPLOYEE OF THE COMPANY OR SUCH PURCHASER, ANY UNDERWRITER, ANY OFFICER OR
EMPLOYEE OF SUCH UNDERWRITER, OR ANY CONTROLLING PERSON OF ANY OF THE FOREGOING
AND SHALL SURVIVE THE TRANSFER AND REGISTRATION OF REGISTRABLE SECURITIES BY
SUCH PURCHASER.

 

8.3           TERMINATION OF CONDITIONS AND OBLIGATIONS.  ALL CONDITIONS AND
RESTRICTIONS ON THE TRANSFERABILITY OF THE REGISTRABLE SECURITIES CONTAINED IN
OR IMPOSED UNDER THIS AGREEMENT SHALL CEASE AND TERMINATE WITH RESPECT TO
REGISTRABLE SECURITIES SOLD OR OTHERWISE DISPOSED OF IN ACCORDANCE WITH OR AS
CONTEMPLATED BY THIS AGREEMENT OR AT SUCH TIME AS AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY SHALL HAVE BEEN RENDERED TO THE EFFECT
THAT SUCH CONDITIONS ARE NOT NECESSARY IN ORDER TO COMPLY WITH THE SECURITIES
ACT.

 

8.4           INFORMATION AVAILABLE.  SO LONG AS THE REGISTRATION STATEMENT IS
EFFECTIVE COVERING THE RESALE OF REGISTRABLE SECURITIES OWNED BY THE PURCHASERS
(OR THEIR PERMITTED TRANSFEREES OR ASSIGNEES), THE COMPANY WILL FURNISH ONE COPY
OF THE FOLLOWING DOCUMENTS TO EACH PURCHASER AS SOON AS PRACTICABLE, BUT IN NO
EVENT LATER THAN 10 BUSINESS DAYS AFTER THE DATE OF FILING WITH THE COMMISSION:

 

(A)           THE COMPANY’S ANNUAL REPORT TO SHAREHOLDERS (WHICH ANNUAL REPORT
SHALL CONTAIN FINANCIAL STATEMENTS AUDITED IN ACCORDANCE WITH GAAP CERTIFIED BY
A NATIONAL FIRM OF CERTIFIED PUBLIC ACCOUNTANTS AND OTHERWISE COMPLY AS TO FORM
WITH ALL APPLICABLE REQUIREMENTS UNDER THE EXCHANGE ACT);

 

(B)           THE COMPANY’S ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS,
UNLESS SPECIFICALLY REQUESTED);

 

(C)           THE COMPANY’S QUARTERLY REPORTS ON FORM 10-Q (EXCLUDING EXHIBITS,
UNLESS SPECIFICALLY REQUESTED);

 

(D)           THE COMPANY’S DEFINITIVE PROXY STATEMENT; AND

 

(E)           EACH OF THE COMPANY’S CURRENT REPORTS ON FORM 8-K, IF ANY.

 

8.5           CHANGES IN PURCHASER INFORMATION.  EACH PURCHASER AGREES TO
PROMPTLY NOTIFY THE COMPANY OF ANY MATERIAL CHANGES IN THE INFORMATION SET FORTH
IN THE REGISTRATION STATEMENT REGARDING SUCH PURCHASER OR SUCH PURCHASER’S PLAN
OF DISTRIBUTION AS SPECIFIED BY THE PURCHASER AND SET FORTH IN SUCH REGISTRATION
STATEMENT.

 

31

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SECTION 9.         BROKER’S FEE.

 

The Company and each Purchaser (severally and not jointly) hereby represent and
warrant that, except for amounts to be paid to the Placement Agent by the
Company as set forth in Section 4.16 of Exhibit D, there are no brokers or
finders entitled to finder’s fees or other compensation in connection with the
sale of the Securities, and each party hereto hereby agrees to indemnify each
other party hereto for any such fees for which the first party is responsible
but for which any other party becomes liable.

 

SECTION 10.       NOTICES.

 

All notices, requests, consents and other communications hereunder shall be in
writing, shall be sent by confirmed facsimile or mailed by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, and shall be deemed given when so sent in the case of
facsimile transmission, or when so received in the case of mail or courier, and
addressed as follows:

 

If to the Company, to:

 

DepoMed, Inc.
1360 O’Brien Drive
Menlo Park, California  94025
Attention:  Chief Financial Officer
Facsimile:  (650) 462-9993

 

with a copy to:

 

Heller Ehrman White & McAuliffe LLP
4350 La Jolla Village Drive
San Diego, California  92122
Attention:  Stephen C. Ferruolo, Esq.
Facsimile:  (858) 450-8499

 

or to such other person at such other place as the Company shall designate to
the Purchasers in writing.

 

If to the Purchasers, at the address set forth on the signature page of this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing.

 

SECTION 11.       MISCELLANEOUS.

 

11.1         WAIVERS AND AMENDMENTS.  NEITHER THIS AGREEMENT NOR ANY PROVISION
HEREOF MAY BE CHANGED, WAIVED, DISCHARGED, TERMINATED, MODIFIED OR AMENDED
EXCEPT UPON THE WRITTEN CONSENT OF THE COMPANY, THE MDS PARTIES THEN HOLDING THE
SECURITIES (PROVIDED THAT THE MDS PARTIES COLLECTIVELY HOLD NOT LESS THAN THE
NUMBER OF SHARES OF COMMON STOCK EQUAL TO AT LEAST 25% OF THE NUMBER OF SHARES
OF COMMON STOCK PURCHASED BY THE MDS PARTIES AT THE CLOSING)

 

32

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AND THE HOLDERS OF AT LEAST A MAJORITY OF THE SECURITIES.  NO FAILURE OR DELAY
BY ANY PARTY IN EXERCISING ANY RIGHT, POWER OR PRIVILEGE HEREUNDER SHALL OPERATE
AS A WAIVER NOR SHALL ANY SINGLE OR PARTIAL EXERCISE THEREOF  PRECLUDE ANY
OTHER, FURTHER OR FULLER EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT,
POWER OR PRIVILEGE.  THE RIGHTS AND REMEDIES HEREIN SHALL BE CUMULATIVE AND NOT
EXCLUSIVE OF ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO THE PARTIES EITHER
HEREUNDER OR IN A PROCEEDING AT LAW OR IN EQUITY.

 

11.2         HEADINGS.  THE HEADINGS OF THE VARIOUS SECTIONS OF THIS AGREEMENT
HAVE BEEN INSERTED FOR CONVENIENCE OF REFERENCE ONLY AND SHALL NOT BE DEEMED TO
BE PART OF THIS AGREEMENT.

 

11.3         SEVERABILITY.  IN CASE ANY PROVISION CONTAINED IN THIS AGREEMENT
SHOULD BE DEEMED INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, THE VALIDITY,
LEGALITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS CONTAINED HEREIN SHALL
NOT IN ANY WAY BE AFFECTED OR IMPAIRED THEREBY.

 

11.4         GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS
CONFLICTS OR CHOICE OF LAW PRINCIPLES; PROVIDED, HOWEVER, THAT ISSUES INVOLVING
THE CORPORATE GOVERNANCE OF THE COMPANY SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA.

 

11.5         COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED BY FACSIMILE
SIGNATURE AND IN TWO OR MORE COUNTERPARTS, EACH OF WHICH SHALL CONSTITUTE AN
ORIGINAL, BUT ALL OF WHICH, WHEN TAKEN TOGETHER, SHALL CONSTITUTE BUT ONE
INSTRUMENT.  THIS AGREEMENT SHALL BECOME EFFECTIVE WHEN ONE OR MORE COUNTERPARTS
HAVE BEEN SIGNED BY EACH PARTY HERETO AND DELIVERED TO THE OTHER PARTIES.

 

11.6         SUCCESSORS AND ASSIGNS.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, THE PROVISIONS HEREOF SHALL INURE TO THE BENEFIT OF, AND BE BINDING
UPON, THE SUCCESSORS, ASSIGNS, HEIRS, EXECUTORS AND ADMINISTRATORS OF THE
PARTIES HERETO.

 

11.7         ENTIRE AGREEMENT.  THIS AGREEMENT AND OTHER DOCUMENTS DELIVERED
PURSUANT HERETO, INCLUDING THE EXHIBITS, CONSTITUTE THE FULL AND ENTIRE
UNDERSTANDING AND AGREEMENT BETWEEN THE PARTIES WITH REGARD TO THE SUBJECTS
HEREOF AND THEREOF AND SUPERSEDE IN THEIR ENTIRETY ANY PRIOR OR CONTEMPORANEOUS
ORAL OR WRITTEN AGREEMENTS AND UNDERSTANDINGS BETWEEN OR AMONG THE PARTIES WITH
RESPECT TO SUCH SUBJECT MATTER.

 

11.8         PAYMENT OF FEES AND EXPENSES; ATTORNEY’S FEES.  EACH OF THE COMPANY
AND THE PURCHASERS SHALL BEAR ITS OWN EXPENSES AND LEGAL FEES INCURRED ON ITS
BEHALF WITH RESPECT TO THE NEGOTIATION, DOCUMENTATION, EXECUTION AND DELIVERY OF
THIS AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY;
PROVIDED, HOWEVER, THAT THE COMPANY SHALL REIMBURSE MDS FOR REASONABLE LEGAL
FEES AND EXPENSES OF GIBSON, DUNN & CRUTCHER LLP, COUNSEL TO MDS, INCURRED IN
CONNECTION WITH THE NEGOTIATION OF THIS AGREEMENT AND THE CLOSING OF THE
PURCHASE AND SALE OF THE SECURITIES CONTEMPLATED HEREBY AND THE COSTS AND
EXPENSES INCURRED BY MDS IN CONNECTION WITH ITS DUE DILIGENCE INVESTIGATION OF
THE COMPANY IN AN AMOUNT NOT TO EXCEED $60,000 IN THE AGGREGATE FOR ALL SUCH
LEGAL FEES AND EXPENSES AND DUE DILIGENCE COSTS AND EXPENSES UPON PRESENTATION
OF AN INVOICE OR OTHER REASONABLE SUPPORTING DOCUMENTATION THEREFOR; PROVIDED,
FURTHER, HOWEVER, THAT THE COMPANY ALSO SHALL BEAR THOSE FEES, COSTS AND
EXPENSES OF

 

33

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REGISTRATION REFERENCED IN SECTION 8.1(D), WHICH AMOUNTS SHALL BE IN ADDITION TO
AND SHALL NOT REDUCE ANY AMOUNTS PAYABLE PURSUANT TO THE PRECEDING PROVISO.  IF
ANY ACTION AT LAW OR IN EQUITY IS NECESSARY TO ENFORCE OR INTERPRET THE TERMS OF
THIS AGREEMENT, THE PREVAILING PARTY SHALL BE ENTITLED TO REASONABLE ATTORNEY’S
FEES, COSTS AND NECESSARY DISBURSEMENTS IN ADDITION TO ANY OTHER RELIEF TO WHICH
SUCH PARTY MAY BE ENTITLED.

 

11.9         JURISDICTION.  ANY ACTION, SUIT OR PROCEEDING SEEKING TO ENFORCE
ANY PROVISION OF, OR BASED ON ANY MATTER ARISING OUT OF OR IN CONNECTION WITH,
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT
EXCLUSIVELY IN THE FEDERAL OR STATE COURTS LOCATED IN THE STATE OF NEW YORK, AND
EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS (AND OF THE APPROPRIATE APPELLATE COURTS THEREFROM) IN ANY SUCH
SUIT, ACTION OR PROCEEDING AND HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH SUCH PARTY MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH COURT OR THAT ANY SUCH SUIT,
ACTION OR PROCEEDING WHICH IS BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.  PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE
SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE
JURISDICTION OF ANY SUCH COURT.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, EACH PARTY HERETO AGREES THAT SERVICE OF PROCESS ON SUCH PARTY AS
PROVIDED IN SECTION 10 SHALL BE DEEMED EFFECTIVE SERVICE OF PROCESS ON SUCH
PARTY.

 

11.10       WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

11.11       SPECIFIC PERFORMANCE.  THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY
FAILURE OF ANY PARTY TO PERFORM ITS AGREEMENTS AND OBLIGATIONS HEREUNDER OR
CONTEMPLATED HEREBY WILL CAUSE IRREPARABLE INJURY TO THE OTHER PARTIES, FOR
WHICH DAMAGES, EVEN IF AVAILABLE, WILL NOT PROVIDE AN ADEQUATE REMEDY. 
ACCORDINGLY, EACH PARTY HEREBY CONSENTS TO THE ISSUANCE OF INJUNCTIVE RELIEF BY
ANY COURT OF COMPETENT JURISDICTION TO COMPEL PERFORMANCE OF SUCH PARTY’S
OBLIGATIONS AND TO THE GRANTING BY ANY COURT OF THE REMEDY OF SPECIFIC
PERFORMANCE OF ITS OBLIGATIONS HEREUNDER.

 

11.12       PUBLIC DISCLOSURE.  PRIOR TO MAKING ANY PUBLIC DISCLOSURE WITH
RESPECT TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, THE COMPANY
SHALL PROVIDE THE PURCHASERS WITH REASONABLE OPPORTUNITY TO COMMENT ON SUCH
DISCLOSURES AND EACH PURCHASER AGREES THAT IT WILL PROVIDE ITS COMMENTS ON SUCH
DISCLOSURE IN AN EXPEDITIOUS MANNER; PROVIDED, HOWEVER, THAT NOTHING CONTAINED
HEREIN SHALL RESTRICT THE ABILITY OF THE COMPANY TO COMPLY WITH DISCLOSURE
REQUIRED PURSUANT TO SECURITIES REGULATIONS OR OTHER LAWS (INCLUDING, WITHOUT
LIMITATION, ANY OBLIGATION TO DISCLOSE THE TAX TREATMENT OR TAX STRUCTURE OF THE
TRANSACTIONS CONTEMPLATED HEREBY).

 

11.13       JOINT DRAFTING; EXCULPATION AMONG PURCHASERS.  THE PARTIES HAVE
PARTICIPATED JOINTLY IN THE NEGOTIATION AND DRAFTING OF THIS AGREEMENT.  IN THE
EVENT AN AMBIGUITY OR QUESTION OF INTENT OR INTERPRETATION ARISES, THIS
AGREEMENT SHALL BE CONSTRUED AS IF DRAFTED JOINTLY BY THE PARTIES AND NO
PRESUMPTION OR BURDEN OF PROOF SHALL ARISE FAVORING OR DISFAVORING ANY PARTY BY
VIRTUE OF THE AUTHORSHIP OF ANY PROVISIONS OF THIS AGREEMENT.  EACH PURCHASER
ACKNOWLEDGES THAT

 

34

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IT IS NOT RELYING UPON ANY PERSON, FIRM OR CORPORATION, OTHER THAN THE COMPANY
AND ITS COUNSEL IN MAKING ITS INVESTMENT OR DECISION TO INVEST IN THE COMPANY.

 

[signature page follows]

 

35

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

 

 

 

DEPOMED, INC.

 

 

 

 

 

By:

     /s/ John W. Fara

 

 

Name:  John W. Fara

 

Title:  President and Chief Executive Officer

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

--------------------------------------------------------------------------------

 

 

MDS LIFE SCIENCES TECHNOLOGY FUND
II NC LIMITED PARTNERSHIP, by its
General Partner, MDS LSTF II (NCGP) INC.
(LSTIINC)

 

 

 

 

 

By:

        /s/ Gregory Gubitz

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

By:

        /s/ Graysanne Bedell

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

MDS LIFE SCIENCES TECHNOLOGY FUND
II QUEBEC LIMITED PARTNERSHIP, by its
General Partner, MDS LSTF II (QGP) INC.
(LSTIIQ)

 

 

 

 

 

By:

        /s/ Gregory Gubitz

 

 

Name:

 

 

 

Title:

 

 

 

 

 

By:

        /s/ Graysanne Bedell

 

 

Name:

 

 

 

Title:

 

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

--------------------------------------------------------------------------------

 

 

MLII CO-INVESTMENT FUND NC LIMITED
PARTNERSHIP, by its General Partner, MLII
(NCGP) INC. (MLIINC)

 

 

 

 

 

By:

        /s/ Gregory Gubitz

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

By:

        /s/ Graysanne Bedell

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

SC BIOTECHNOLOGY DEVELOPMENT FUND LP

 

 

 

 

 

By:

      /s/ Eve Wilson     /s/ William Walmsley

 

 

Name:

Eve Wilson          William Walmsley

 

 

Title:

For and on behalf of Cardinal Investments

 

 

 

Limited, Director of SC (GP) Inc.

 

 

 

General Partner of SC Biotechnology

 

 

 

Development Fund L.P.

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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BIOVAIL LABORATORIES INCORPORATED

 

 

 

 

 

By:

       /s/ John A.R. McCleery

 

 

Name:

  John A.R. McCleery

 

 

Title:

    Vice President, General Manager

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.

 

 

 

 

By:

 

/s/ David M. Greenhouse

 

 

Name:

 

David M. Greenhouse

 

 

Title:

 

Managing Director

 

 

 

 

 

 

 

 

SPECIAL SITUATIONS CAYMAN FUND, L.P.

 

 

 

 

 

 

 

By:

 

/s/ David M. Greenhouse

 

 

Name:

 

David M. Greenhouse

 

 

Title:

 

Managing Director

 

 

 

 

 

 

 

 

SPECIAL SITUATIONS FUND III, L.P.

 

 

 

 

 

 

By:

 

/s/ David M. Greenhouse

 

 

Name:

 

David M. Greenhouse

 

 

Title:

 

Managing Director

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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H&Q HEALTHCARE INVESTORS

 

 

 

 

 

By:

 

/s/ Daniel R. Omstead

 

 

Name:

 

Daniel R. Omstead

 

 

Title:

 

President

 

 

 

 

 

 

The name H&Q Healthcare Investors is the designation of the Trustees for the
time being under an Amended and Restated Declaration of Trust dated April 12,
1987, as amended, and all persons dealing with H&Q Healthcare Investors must
look solely to the trust property for the enforcement of any claim against H&Q
Healthcare Investors, as neither the Trustees, officers nor shareholders assume
any personal liability for the obligations entered into on behalf of H&Q
Healthcare Investors.

 

 

 

H&Q LIFE SCIENCES INVESTORS

 

 

 

 

 

 

By:

 

/s/ Daniel R. Omstead

 

 

Name:

 

Daniel R. Omstead

 

 

Title:

 

President

 

 

 

 

 

 

The name H&Q Life Sciences Investors is the designation of the Trustees for the
time being under a Declaration of Trust dated February 20, 1992, as amended, and
all persons dealing with H&Q Life Sciences Investors must look solely to the
trust property for the enforcement of any claim against H&Q Life Sciences
Investors, as neither the Trustees, officers nor shareholders assume any
personal liability for the obligations entered into on behalf of H&Q Life
Sciences Investors.

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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EASTON HUNT CAPITAL PARTNERS, L.P.
By: EHC GP, LP Its General Partner
By: EHC Inc. Its General Partner

 

 

 

 

 

 

 

By:

 

/s/ Richard P. Schneider

 

 

Name:

 

Richard P. Schneider

 

 

Title:

 

Vice President & Secretary

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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QUOGUE CAPITAL, LLC

 

 

 

 

 

 

 

By:

 

/s/ Wayne Rothbaum

 

 

Name:

 

Wayne Rothbaum

 

 

Title:

 

Principal

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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PURCHASER:

 

 

 

HBM Bioventures (Cayman) Ltd.

 

 

 

 

 

By:

     /s/ John Arnold

 

 

Name:  John Arnold

 

Title:  Chairman and Managing Director

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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DONALD G. DRAPKIN

 

 

 

 

 

      /s/ Donald G. Drapkin

 

 

[Signature Page to DepoMed Securities Purchase Agreement]

 

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