Exhibit 10.2

STOCK PURCHASE AGREEMENT

by and between

BIOVAIL LABORATORIES INCORPORATED

and

DEPOMED, INC.

Dated as of May 28, 2002

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

ARTICLE I

 

 

 

 

 

DEFINITIONS

 

 

 

 

SECTION 1.01.

Definitions

1

 

 

 

 

ARTICLE II

 

 

 

 

 

ISSUE OF SHARES AND GRANT OF OPTION

 

 

 

 

SECTION 2.01.

Purchase and Sale of New Shares

7

SECTION 2.02.

Purchaser’s Option

7

SECTION 2.03.

Delivery

10

 

 

 

 

ARTICLE III

 

 

 

 

 

RIGHTS OF PURCHASER

 

 

 

 

SECTION 3.01.

Rights Granted at Closing

10

SECTION 3.02.

Rights Granted Upon the Exercise of the Purchaser’s Option

14

SECTION 3.03.

Board Approval

15

 

 

 

 

ARTICLE IV

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

 

 

 

SECTION 4.01.

Organization and Qualification; Subsidiaries

16

SECTION 4.02.

Authority Relative to this Agreement

16

SECTION 4.03.

No Conflict; Required Filings and Consents

17

SECTION 4.04.

Brokers

18

SECTION 4.05.

Capitalization

18

SECTION 4.06.

SEC Reports and Financial Statements

20

SECTION 4.07.

Litigation

21

SECTION 4.08.

Compliance with Applicable Laws; Permits

22

SECTION 4.09.

Employee Benefit Plans

25

SECTION 4.10.

Intellectual Property

28

SECTION 4.11.

Environmental Matters

30

SECTION 4.12.

Material Adverse Change

32

SECTION 4.13.

Taxes

33

 

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SECTION 4.14.

Material Contracts

35

SECTION 4.15.

Insurance

36

SECTION 4.16.

Takeover Statutes

36

SECTION 4.17.

Private Offering

37

 

 

 

 

ARTICLE V

 

 

 

 

 

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

 

 

 

SECTION 5.01.

Organization and Qualification

37

SECTION 5.02.

Authority Relative to this Agreement

37

SECTION 5.04.

Financing

38

SECTION 5.05.

Brokers

38

SECTION 5.06.

Restricted Securities

38

 

 

 

 

ARTICLE VI

 

 

 

 

 

COVENANTS

 

 

 

 

SECTION 6.01.

Access to Information

39

SECTION 6.02.

Reasonable Efforts

40

SECTION 6.03.

Public Announcements

41

SECTION 6.04.

Notification of Certain Matters

42

SECTION 6.05.

Confidentiality of Board Proceedings

42

SECTION 6.06.

Reservation of Shares Issuable Upon Exercise of Purchaser’s Option

42

SECTION 6.07.

Rule 144 Reporting

43

SECTION 6.08.

Conditional Option

43

 

 

 

 

ARTICLE VII

 

 

 

 

 

CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS

 

 

 

 

SECTION 7.01.

Conditions to Each Party’s Obligation to Effect the Transactions

44

SECTION 7.02.

Conditions to the Obligations of Purchaser

44

SECTION 7.03.

Conditions to the Obligations of the Company

45

 

 

 

 

ARTICLE VIII

 

 

 

 

 

TERMINATION

 

 

 

 

SECTION 8.01.

Termination

46

 

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SECTION 8.02.

Termination by Purchaser

47

SECTION 8.03.

Termination by the Company

47

SECTION 8.04.

Procedure for Termination

48

SECTION 8.05.

Extension; Waiver

48

 

 

 

 

ARTICLE IX

 

 

 

 

 

CLOSING

 

 

 

 

SECTION 9.01.

Time and Place

48

 

 

 

 

ARTICLE X

 

 

 

 

 

INDEMNIFICATION

 

 

 

 

 

ARTICLE XI

 

 

 

 

 

MISCELLANEOUS

 

 

 

 

SECTION 11.01.

Non-Survival of Representations and Warranties

51

SECTION 11.02.

Entire Agreement; Assignment

51

SECTION 11.03.

Validity

51

SECTION 11.04.

Notices

51

SECTION 11.05.

Governing Law; Jurisdiction

52

SECTION 11.06.

Descriptive Headings

53

SECTION 11.07.

Counterparts

53

SECTION 11.08.

Parties in Interest

53

SECTION 11.09.

Remedies

53

SECTION 11.10.

EIS Right of Participation

53

 

 

ANNEX I—

Form of Registration Rights Agreement

 

ANNEX II

Form of Nominee Voting Commitment

 

ANNEX III

Committed Voters

 

 

 

 

 

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STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT dated as of May 28, 2002, by and between Biovail
Laboratories Incorporated, a corporation organized under the laws of Barbados
(“Purchaser”), and Depomed, Inc., a California corporation (the “Company”).

WHEREAS, Purchaser wishes to subscribe for and the Company wishes to issue, sell
and transfer to Purchaser 2,465,878 shares of Company Common Stock (the “New
Shares”) to Purchaser at a subscription price of US$5.00 per share, in cash (the
“Initial Share Consideration”); and

WHEREAS, in connection with and conditioned upon the aforementioned sale,
transfer and issuance, the Company wishes to grant and Purchaser wishes to
accept the Purchaser’s Option and, subject to the terms hereof, the Conditional
Option and the Company and Purchaser each wish to enter into the Registration
Rights Agreement; and

WHEREAS, Purchaser and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated herein and in the other Transaction Documents and also to prescribe
various conditions to each such transaction;

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Purchaser and the Company agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.  DEFINITIONS.  FOR ALL PURPOSES OF THIS AGREEMENT, EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED OR UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS
DEFINED IN THIS ARTICLE HAVE THE MEANINGS ASSIGNED TO THEM IN THIS ARTICLE:

“affiliate”, as applied to any person, means any other person directly or
indirectly controlling, controlled by, or under common control with, that
person.  For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as applied to any person, means the possession,

 

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directly or indirectly, of the power to direct or cause the direction of the
management and policies of that person, whether through the ownership of voting
securities, by contract or otherwise.

“Bankruptcy Exceptions” has the meaning set forth in Section 4.02(a).

“Business Day” means any day on which commercial banks are not required or
authorized to close in the City of New York or the City of Toronto.

“Closing” has the meaning set forth in Section 9.01.

“Closing Date” has the meaning set forth in Section 9.01.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Company” has the meaning set forth in the recitals hereto.

“Company Articles of Incorporation” has the meaning set forth in Section
4.03(b).

“Company Balance Sheet” has the meaning set forth in Section 4.06(c).

“Company Change of Control” means an event whereby (1) any person or group (as
defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act has become the
direct or beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
more than 50% of the voting stock of the Company, (ii) the Company is merged
with or into or amalgamated or consolidated with another corporation and,
immediately after giving effect to the merger, amalgamation or consolidation,
less than 50% of the outstanding voting stock of the surviving or resulting
entity are then beneficially owned (within the meaning of Rule 13d-3 of the
Exchange Act) in the aggregate by (x) the stockholders of the Company
immediately prior to such merger, amalgamation or consolidation, or (y) if the
record date has been set to determine the stockholders of the Company entitled
to vote on such merger, amalgamation or consolidation, the stockholders of
Company as of such a record date, (iii) the sale, lease, transfer, conveyance or
other distribution (other than by way of merger, amalgamation or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets

 

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of the Company and its Subsidiaries, taken as a whole, to any Person or group of
related persons for purposes of Section 13(d) of the Exchange Act, or (iv) the
adoption of a plan relating to the liquidation or dissolution of the Company
(which for the avoidance of doubt shall not include the adoption of any plan
relating to an internal restructuring of the Company or a change in the
jurisdiction of organization of the Company).

“Company Common Stock” means the common stock, no par value, of the Company.

“Company Disclosure Statement” has the meaning set forth in the preamble to
Article IV.

“Conditional Option” shall have the meaning set forth in Section 6.08.

“Confidentiality Agreement” has the meaning set forth in Section 11.02(a).

“Consent” has the meaning set forth in Section 4.03(a).

“Convertible Note” has the meaning set forth in Section 4.05.

“Designee” shall mean a person designated by the Purchaser that is reasonably
acceptable to the Company.

“Environmental Laws” has the meaning set forth in Section 4.11.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FDA” means the U.S. Food and Drug Administration.

“GAAP” has the meaning set forth in Section 4.06(b).

“Governmental Entity” has the meaning set forth in Section 4.03(a).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Initial Share Consideration” has the meaning set forth in the recitals hereto.

 

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“Intellectual Property” has the meaning set forth in Section 4.10(b).

“knowledge” shall mean the actual knowledge or such knowledge as would exist
after reasonable inquiry directed to employees who would reasonably be expected
to have knowledge of relevant matters, with respect to the Company, the
Company’s executive officers and, with respect to Purchaser, Purchaser’s
executive officers.

“Law” has the meaning set forth in Section 4.08(b).

“Lien” has the meaning set forth in Section 4.05.

“Material Adverse Effect on the Company” means any change in, or effect on, the
business, results of operations, assets, financial condition or prospects of the
Company or any of the Subsidiaries that is or would reasonably be expected to be
materially adverse to the Company and the Subsidiaries taken as a whole, other
than any change or effect (i) relating to the economy in general or (ii)
relating to the industry in which the Company operates in general and not
specifically relating to the Company.

“Material Contracts” means (i) agreements of the Company or any of the
Subsidiaries containing an unexpired covenant not to compete applying to the
Company or any of the Subsidiaries; (ii) employment or consulting agreements, or
arrangements; (iii) collective bargaining agreements; (iv) interest rate,
currency or commodity hedging, swap or similar derivative transactions to which
the Company or any of the Subsidiaries is a party; (v) material agreements
providing for payment based on revenues, sales or profits; (vi) agreements
between the Company or any of the Subsidiaries, on the one hand, and any
affiliate of the Company, on the other hand; (vii) other material agreement not
entered into in the ordinary course of business or; (viii) other contracts or
amendments thereto that would be required to be filed and have not been filed as
a exhibit to a Form 10-K filed by the Company with the SEC as of the date of
this Agreement.

“New Shares” has the meaning set forth in the recitals hereto.

“Option Delivery Date” has the meaning set forth in Section 2.03.

 

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“Permitted Encumbrance” means such of the following as to which no enforcement,
collection, execution, levy or foreclosure proceeding shall have been commenced:
(a) liens for taxes, assessments and governmental charges or levies not yet due
and payable which are not in excess of $50,000 in the aggregate; (b) Liens
imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and
repairmen’s liens and other similar liens arising in the ordinary course of
business securing obligations that (i)are not overdue for a period of more than
30 days and (ii) are not in excess of $5,000 in the case of a single property or
$50,000 in the aggregate at any time; (c) pledges or deposits to secure
obligations under workers’ compensation laws or similar legislation or to secure
public or statutory obligations; and (d) minor survey exceptions, reciprocal
easement agreements and other customary Liens on title to real property that (i)
were not incurred in connection with any indebtedness, (ii) do not render title
to the property encumbered thereby unmarketable and (iii) do not, individually
or in the aggregate, materially adversely affect the value or use of such
property for its current and anticipated purposes.

“person” shall include individuals, corporations, partnerships, trusts, other
entities and groups (which term shall include a “group” as such term it defined
in Section 13(d)(3) of the Exchange Act).

“Purchaser” has the meaning set forth in the recitals hereto.

“Purchaser Nominees” has the meaning set forth in Section 3.02.

“Purchaser’s Option” has the meaning set forth in Section 2.02.

“Registration Rights Agreement” means the Registration Rights Agreement, to be
dated the Closing Date, between Purchaser and the Company, a form of which is
attached hereto as Annex I.

“Regulatory Law” means the Sherman Act, as amended, the Clayton Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other
federal, state and non-U.S., if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate (i) non-U.S. investment or (ii)
actions having the purpose or

 

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effect of monopolization or restraint of trade or lessening of competition.

“SEC” means the Securities and Exchange Commission.

“SEC Reports” has the meaning set forth in Section 4.06(a).

“Securities Act” means the Securities Act of 1933, as amended.

“Subsidiary” or “Subsidiaries” has the meaning set forth in Section 4.01.

“subsidiary” or “subsidiaries” means, with respect to any party, any person of
which such party (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the votes for the
election of the board of directors or other governing body of such person.

“Tax” means (i) all federal, state, provincial, local or non-U.S. taxes,
charges, fees, imposts, levies or other assessments, including, without
limitation, all income, alternative minimum, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
taxing authority in connection with any item described in clause (i), and (iii)
all transferee, successor, joint and several, contractual or other liability
(including, without limitation, liability pursuant to Treas. Reg. § 1.1502-6 (or
any similar state, local or non-U.S. provision)) in respect of any items
described in clause (i) or (ii).

“Tax Return” means all returns, declarations, reports, estimates, information
returns and statements filed or required to be filed in respect of any Taxes.

“Transaction Documents” has the meaning set forth in Section 4.02.

“Warrants” has the meaning set forth in Section 4.05.

 

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ARTICLE II

ISSUE OF SHARES AND GRANT OF OPTION

SECTION 2.01.  PURCHASE AND SALE OF NEW SHARES.  SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH HEREIN, THE COMPANY AGREES THAT IT WILL SELL TO PURCHASER,
AND PURCHASER AGREES THAT IT WILL, AT THE CLOSING DATE, PURCHASE FROM THE
COMPANY, THE NEW SHARES AT THE INITIAL SHARE CONSIDERATION PER SHARE OF COMPANY
COMMON STOCK PURCHASED.

SECTION 2.02.  Purchaser’s Option.  (a) The Company hereby grants the Purchaser
or its Designee, subject to the Closing occurring on the Closing Date, the right
(the “Purchaser’s Option”) to purchase up to such number of additional shares of
Company Common Stock as shall cause the Purchaser (and its subsidiaries and its
Designee, if any, taken together) to (directly or indirectly) have purchased or
been granted pursuant to the provisions of this Agreement up to (but not
exceeding) 20.0% of the Company’s issued and outstanding Common Stock
(calculated immediately after exercise of the Purchaser’s Option). The option
exercise price shall be payable on the Option Delivery Date in accordance with
the provisions of Section 2.03.  The Purchaser’s rights to exercise the
Purchaser’s Option shall expire on the date that is three years from the Closing
Date.  Notwithstanding anything to the contrary herein, the Purchaser’s Option
(i) shall expire immediately upon any sale or transfer to a party other than a
Designeee or affiliate or other disposition by the Purchaser, Designee or any
affiliate of the Purchaser of any of the shares of Company Common Stock
purchased hereunder and (ii) may only be exercised once during the duration of
the Purchaser’s Option.

 

(B)           SUBJECT TO THE ADJUSTMENTS SET FORTH IN SUBSECTION (C) BELOW, THE
OPTION EXERCISE PRICE PER SHARE PURCHASED PURSUANT TO EXERCISE OF THE
PURCHASER’S OPTION SHALL EQUAL THE INITIAL SHARE CONSIDERATION PLUS, BEGINNING
ONE YEAR FROM THE DATE HEREOF, AN ADDITIONAL 20.0% PER ANNUM, COMPOUNDED
MONTHLY.

(C)(I)  IF, PRIOR TO THE EXPIRATION OF THE PURCHASER’S OPTION, THE COMPANY SHALL
ISSUE ANY COMPANY COMMON STOCK AS A SHARE DIVIDEND OR SUBDIVIDE THE NUMBER OF
OUTSTANDING SHARES OF COMPANY COMMON STOCK, THE OPTION EXERCISE PRICE PER SHARE
PURCHASABLE PURSUANT TO THE PURCHASER’S OPTION IN EFFECT AT THE TIME OF SUCH
ACTION SHALL BE PROPORTIONATELY REDUCED AND THE NUMBER OF SHARES OF

 

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COMPANY COMMON STOCK PURCHASABLE UPON EXERCISE OF THE PURCHASER’S OPTION SHALL
BE PROPORTIONATELY INCREASED.  IF THE COMPANY SHALL, AT ANY TIME DURING THE LIFE
OF THE PURCHASER’S OPTION, DECLARE A DIVIDEND PAYABLE IN CASH ON COMPANY COMMON
STOCK AND SHALL AT SUBSTANTIALLY THE SAME TIME OFFER TO ITS SHAREHOLDERS A RIGHT
TO PURCHASE NEW COMPANY COMMON STOCK FROM THE PROCEEDS OF SUCH DIVIDEND OR FOR
AN AMOUNT SUBSTANTIALLY EQUAL TO THE DIVIDEND, ALL COMPANY COMMON STOCK SO
ISSUED SHALL, FOR THE PURPOSE OF THE PURCHASER’S OPTION, BE DEEMED TO HAVE BEEN
ISSUED AS A SHARE DIVIDEND.  ANY DIVIDEND PAID OR DISTRIBUTED UPON COMPANY
COMMON STOCK IN SHARES OF ANY OTHER CLASS OF SECURITIES CONVERTIBLE INTO COMPANY
COMMON STOCK SHALL BE TREATED AS A DIVIDEND PAID IN COMPANY COMMON STOCK TO THE
EXTENT THAT COMPANY COMMON STOCK IS ISSUABLE UPON THE CONVERSION THEREOF.

                    (II)      If, prior to the expiration of the Purchaser’s
Option by exercise or by its terms, the Company desires to  recapitalize by
reclassifying the outstanding Company Common Stock, or the Company or a
successor corporation desires to consolidate or merge with or convey all or
substantially all of its or any successor corporation’s property and assets to
any other corporation or corporations (any such corporation being included
within the meaning of the term “successor corporation” used above in the event
of any consolidation or merger of any such corporation with, or the sale of all
or substantially all of the property of any such corporation, to another
corporation or corporations), then the Company shall deliver to the holder of
the Purchaser’s Option prior written notice from the Company stating that the
Company intends to engage in certain of the foregoing transactions set out in
this Section 2.02(C)(II), and the Purchaser shall have the right to exercise the
Purchaser’s Option within 30 days of receipt of the foregoing notice failing
which the Purchaser’s Option shall terminate.

                   (III)      If:  (i) the Company shall take a record of
holders of Company Common Stock for the purpose of entitling them to receive a
dividend payable otherwise than in cash, or any other distribution in respect of
the Company Common Stock (including cash), pursuant to, without limitation, any
spin-off, split-off, or distribution of the Company’s assets; or (ii) the
Company shall take a record of the holders of Company Common Stock for the
purpose of entitling them to subscribe for or purchase any shares of

 

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any class or to receive any other rights; or (iii) in the event of any
classification, reclassification or other reorganization of the securities which
the Company is authorized to issue, consolidation or merger by the Company with
or into another corporation, or conveyance of all or substantially all of the
assets of the Company; or (iv) in the event of any voluntary or involuntary
dissolution, liquidation or winding up of the Company; then, and in any such
case, the Company shall mail to the holder of the Purchaser’s Option, at least
15 days prior thereto, a notice stating the date or expected date on which a
record is to be taken for the purpose of such dividend, distribution or rights,
or the date on which such classification, reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up, as
the case may be, will be effected.  Such notice shall also specify the date or
expected date, if any is to be fixed, as to which holders of Company Common
Stock of record shall be entitled to participate in such dividend, distribution
or rights, or shall be entitled to exchange their Company Common Stock or
securities or other property deliverable upon such classification,
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up, as the case may be.

                   (IV)      If the Company, at any time while the Purchaser’s
Option shall remain unexpired, shall sell all or substantially all of its
property, dissolve, liquidate or wind up its affairs, the holder of the
Purchaser’s Option may thereafter receive upon exercise thereof, in lieu of each
Company Common Share which it would have been entitled to receive, the same kind
and amount of any securities or assets as may be issuable, distributable or
payable upon any such sale, dissolution, liquidation or winding up with respect
to each share of Company Common Stock purchased upon exercise of the Purchaser’s
Option.

                    (V)      The Company shall as promptly as practicable after
the occurrence of any of the events set forth in Section 2.02(c)(I)-(IV) notify
the Purchaser in writing of the occurrence of such event or events.

(D)  NO FRACTIONAL SHARES OR SCRIP REPRESENTING FRACTIONAL SHARES SHALL BE
ISSUED PURSUANT TO ANY PROVISION OF THIS AGREEMENT.  WITH RESPECT TO ANY
FRACTION OF A SHARE OF COMPANY COMMON STOCK CALLED FOR UPON EXERCISE OF THE
PURCHASER’S OPTION OR UPON EXERCISE OF THE RIGHTS GRANTED IN SECTION 3.01(D),
THE

 

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COMPANY SHALL ISSUE TO THE PARTY SO EXERCISING CASH IN LIEU OF SUCH FRACTIONAL
SHARE.

SECTION 2.03.  Delivery.  Delivery of the Company Common Stock constituting the
New Shares to be purchased by Purchaser pursuant to this Agreement shall be made
at the Closing, and delivery of the Company Common Stock to be issued upon
exercise of the Purchaser’s Option shall be made within three Business Days of
the Purchaser’s notice to the Company of any exercise of the Purchaser’s Option
(such date, the “Option Delivery Date”), by the Company delivering certificates
representing such Company Common Stock to the Purchaser or the Designee, as
applicable, against payment therefor in immediately available same day funds to
an account designated by the Company.  The Company will bear all expenses of
shipping such Company Common Stock (including, without limitation, insurance
expenses) to such places within the United States of America, Canada or Barbados
as Purchaser or the Designee, as applicable, shall specify.

ARTICLE III

RIGHTS OF PURCHASER

SECTION 3.01.  RIGHTS GRANTED AT CLOSING.  AT AND FROM THE CLOSING DATE:

(a)           So long as the Purchaser (together with its subsidiaries) holds,
directly or indirectly, not less than 10% of the of the issued and outstanding
shares of Company Common Stock, the Purchaser shall be entitled, but not
obligated, to have a non-voting observer (the “Purchaser Observer”) in
attendance at each meeting of the Board of Directors of the Company and each
meeting of any committee thereof (each such meeting, a “Board Meeting”).  The
Purchaser, and if the Purchaser has notified the Company that it has appointed a
Purchaser Observer, the Purchaser Observer, shall receive notice of each Board
Meeting at least five Business Days prior to such meeting.  Such notice shall
specify the time, date, location and purpose of such meeting.  The Purchaser,
and the Purchaser Observer, if any, shall also be provided with the same agenda
and other information provided to board or committee members, as the case may
be, in connection with such meeting and at the same time such materials are
provided to such board or committee members, as the case may be; the Purchaser
shall be entitled to appoint,

 

 

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dismiss or replace the Purchaser Observer at its sole discretion; provided,
however, that the Board of Directors of the Company may exclude the Purchaser
Observer from access to any meeting or portion thereof if the Company reasonably
believes, upon advice of counsel, that such exclusion is advisable:  (i) to
preserve attorney-client privilege, (ii) to protect such proprietary information
relating to DepoMed Development, Ltd. or (iii) due to a conflict of interest
between the Company and the Purchaser.

 

(B)           SO LONG AS THE PURCHASER (TOGETHER WITH ITS SUBSIDIARIES) HOLDS,
DIRECTLY OR INDIRECTLY, NOT LESS THAN 5% OF THE OF THE ISSUED AND OUTSTANDING
SHARES OF COMPANY COMMON STOCK (CALCULATED ON A FULLY DILUTED BASIS), WHETHER OR
NOT THE COMPANY IS SUBJECT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT, THE
COMPANY SHALL PROVIDE THE PURCHASER WITH AUDITED ANNUAL FINANCIAL INFORMATION
PREPARED IN ACCORDANCE WITH GAAP AND QUARTERLY FINANCIAL INFORMATION PREPARED ON
A BASIS SUBSTANTIALLY CONSISTENT WITH THE AUDITED ANNUAL FINANCIAL INFORMATION
AND PROVIDE THE PURCHASER WITH ACCESS TO EXECUTIVES OF THE COMPANY RESPONSIBLE
FOR THE PREPARATION OF SUCH FINANCIAL INFORMATION; SUCH INFORMATION SHALL BE
PROVIDED IN A TIMELY MANNER AND SHALL BE IN SUCH FORM AS WILL ALLOW THE
PURCHASER TO INCLUDE SUCH RELEVANT FINANCIAL INFORMATION REGARDING THE COMPANY
AS MAY BE REASONABLY NECESSARY FOR THE PURCHASER TO COMPLY WITH ANY AND ALL
REQUIREMENTS RELATED TO THE PURCHASER’S REGULATORY FILINGS OR FOR THE PURCHASER
TO DETERMINE ITS PRO RATA SHARE OF THE COMPANY’S INCOME OR LOSS, INCLUDING THE
AMOUNT, IF ANY, OF ADJUSTMENTS TO SUCH INCOME OR LOSS FOR THE PURCHASER TO APPLY
SAB 101 AND REFLECT AN IN-PROCESS RESEARCH AND DEVELOPMENT WRITE-OFF.

(C)           SO LONG AS THE PURCHASER (TOGETHER WITH ITS SUBSIDIARIES) HOLDS,
DIRECTLY OR INDIRECTLY, NOT LESS THAN 10% OF THE OF THE ISSUED AND OUTSTANDING
SHARES OF COMPANY COMMON STOCK, IN THE EVENT THAT THE COMPANY RECEIVES A BONA
FIDE OFFER FROM ANY PERSON OTHER THAN THE PURCHASER RELATING TO THE SALE OF
SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS OR RELATING TO ANY AMALGAMATION,
MERGER OR BUSINESS COMBINATION WITH, OR RECAPITALIZATION OR RESTRUCTURING OR
SIMILAR TRANSACTION INVOLVING, THE COMPANY AND A PERSON UNAFFILIATED WITH THE
COMPANY (EACH, A “PROPOSED TRANSACTION”), OR WHERE THE COMPANY ELECTS TO
INITIATE A PROPOSED TRANSACTION, THEN, PRIOR TO THE COMPANY ENTERING INTO ANY
AGREEMENTS WITH RESPECT TO THE PROPOSED TRANSACTION, INCLUDING WITHOUT
LIMITATION ANY EXCLUSIVE NEGOTIATION AGREEMENT, LETTER OF INTENT OR DEFINITIVE
AGREEMENT PROVIDING FOR A PROPOSED TRANSACTION, THE COMPANY SHALL DELIVER TO THE
PURCHASER

 

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WRITTEN NOTICE OF SUCH PROPOSED TRANSACTION SETTING FORTH ALL OF THE TERMS AND
CONDITIONS OF THE PROPOSED TRANSACTION (AN “OFFER NOTICE”).  UPON RECEIPT OF THE
OFFER NOTICE, REPRESENTATIVES OF THE PARTIES SHALL MEET IN PERSON AS SOON IS
REASONABLY PRACTICABLE AND DISCUSS THE TERMS SET OUT IN THE OFFER NOTICE.  IF
THE PARTIES, ACTING REASONABLY, ARE UNABLE TO CONCLUDE A BINDING AGREEMENT
WITHIN 15 BUSINESS DAYS OF RECEIPT OF THE OFFER NOTICE WITH RESPECT TO THE
PROPOSED TRANSACTION MORE PARTICULARLY DESCRIBED IN THE OFFER NOTICE, OR IF THE
PURCHASER PROVIDES THE COMPANY WITH WRITTEN NOTICE THAT IT DOES NOT WISH TO
PURSUE THE PROPOSED TRANSACTION WITHIN THAT 15 BUSINESS DAY PERIOD, THEN THE
COMPANY SHALL BE FREE TO PURSUE THE PROPOSED TRANSACTION WITHOUT AGAIN PROVIDING
THE PURCHASER WITH FURTHER NOTICE SO LONG AS THE TERMS UPON WHICH THE COMPANY
CLOSES SUCH PROPOSED TRANSACTION ARE NOT LESS FAVOURABLE, TAKEN AS A WHOLE, THAN
THOSE, IF ANY, OFFERED TO THE COMPANY BY THE PURCHASER IN THE COURSE OF THE
DISCUSSIONS BETWEEN THE COMPANY AND THE PURCHASER CONTEMPLATED BY THIS SECTION
3.01(C); AND

(d) (1) until the date that is three (3) years from the Closing Date, at any
time that the Company offers for sale Company Common Stock or securities
convertible or exchangeable into, or exercisable for, Company Common Stock,
whether newly issued or not and whether registered pursuant the Securities Act
or not (such securities offered, the “Offered Securities”), the Purchaser or its
Designee shall be given the opportunity to participate in such offering, on
terms identical to those offered to other offerees of the Offered Securities,
and purchase, at its discretion, up to such number of Offered Securities that,
upon the completion of such offering, shall cause the Purchaser (taken together
with its subsidiaries and the Designee) to own the same percentage  of issued
and outstanding Company Common Stock (such percentage, the “Pre-Offering
Ownership Percentage”) purchased pursuant to any provision of this Agreement
(calculated on an issued and outstanding basis) as the Purchaser (and its
subsidiaries, taken together) owned immediately prior to the completion of such
offering;

 

(2) the foregoing rights set out in Section 3.01(d)(1) shall not apply to any: 
(i) offering or issuance of securities under an option plan or other stock plan;
(ii) asset or company acquisition paid for, in whole or in part, in shares of
stock; (iii) issuances of warrants to purchase shares of stock as part of an
equipment financing; (iv) underwritten or registered direct public offering of
securities of the Company; or (v) in connection with a strategic licensing
transaction (each, a “Qualified Offering”);

 

 

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(3) notwithstanding the issuance of stock or other securities pursuant to
Section 3.01(d)(2), in no event shall securities issued in any Qualified
Offering be included for the purposes of calculating the Pre-Offering Ownership
Percentage, provided that if the Company offers for sale or issuance further
securities in which the Purchaser is entitled to participate pursuant to Section
3.01(d)(1) (a “Post-Qualified Offering”) subsequent to a Qualified Offering, the
Purchaser shall be entitled to purchase in such Post-Qualified Offering a
sufficient number of securities to cause the Purchaser (taken together with its
subsidiaries and the Designee) to own the Pre-Offering Ownership Percentage as
the Purchaser (and its subsidiaries, taken together) owned by the Purchaser
immediately prior to the completion of such Qualified Offering;

 

(4) if the Purchaser is unable to purchase a sufficient number of securities in
a Post-Qualified Offering due to the number of shares offered for sale in such
offering in no event shall such Qualified Offering be included for the purposes
of calculating the Pre-Offering Ownership Percentage until such time as a
Post-Qualified Offering provides the Purchaser with a sufficient number of
securities to cause the Purchaser (taken together with its subsidiaries and the
Designee) to own the Pre-Offering Ownership Percentage as the Purchaser (and its
subsidiaries, taken together) owned by the Purchaser immediately prior to the
completion of such Qualified Offering; and

 

(5) where the Purchaser declines to purchase in a Post-Qualified Offering, or
where in a Post-Qualified Offering there are sufficient securities available to
cause the Purchaser (taken together with its subsidiaries and the Designee) to
own the Pre-Offering Percentage as the Purchaser (and its subsidiaries, taken
together) owned immediately prior to the completion of such Qualified Offering
and the Purchaser declines to purchase such securities (a “Non-Purchase Event”),
then immediately subsequent to the Non-Purchase Event the shares issued in the
Qualified Offering shall be included in calculating the Pre-Offering Ownership
Percentage.

 

(6) The Company shall give written notice to the Purchaser indicating the number
of Offered Securities available to the Purchaser pursuant to this Section
3.01(d) specifying the per share price and other terms upon which it proposes to
offer the Offered Shares and shall provide to the Purchaser the information
proposed to be supplied to any third party offeree.  Within 15 days of the
receipt of such notice, the Purchaser

 

 

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shall deliver a response notice to the Company.  If the Purchaser shall state in
such notice that it intends to participate in such offering, the parties shall
take all actions necessary to consummate the offering of the Offered Securities.

 

SECTION 3.02.  RIGHTS GRANTED UPON THE EXERCISE OF THE PURCHASER’S OPTION. 
(A)PROVIDED THAT THE PURCHASER HAS PURCHASED AT LEAST 2,400,000 NEW SHARES UNDER
THIS AGREEMENT, AS SOON AS REASONABLY PRACTICABLE, BUT IN NO EVENT LATER THAN 15
BUSINESS DAYS FOLLOWING, THE TIME OF THE EXERCISE OF THE PURCHASER’S OPTION BY
THE PURCHASER OR AN AFFILATE OF THE PURCHASER, THE COMPANY SHALL TAKE ALL ACTION
NECESSARY TO CAUSE TO BE APPOINTED TO THE BOARD OF DIRECTORS OF THE COMPANY SUCH
NUMBER OF DESIGNEES IDENTIFIED BY THE PURCHASER (THE “PURCHASER NOMINEES”) AS IS
SET FORTH IN THE TABLE BELOW.  AT EACH ANNUAL MEETING OF SHAREHOLDERS OF THE
COMPANY FOLLOWING THE EXERCISE OF THE PURCHASER’S OPTION:  IF AT THE TIME OF
SUCH NOMINATION THE PURCHASER (AND ITS SUBSIDIARIES, TAKEN TOGETHER) HOLDS,
DIRECTLY OR INDIRECTLY, NOT LESS THAN 20% OF THE OF THE ISSUED AND OUTSTANDING
SHARES OF COMPANY COMMON STOCK (CALCULATED ON AN ISSUED AND OUTSTANDING BASIS)
THE COMPANY SHALL NOMINATE THE PURCHASER NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS OF THE COMPANY SET FORTH IN THE FOLLOWING TABLE UNDER “NUMBER OF
PURCHASER NOMINEES AT 20.0% OR MORE”; AND (II) PURSUANT TO FOLLOWING TABLE:  IF
AT THE TIME OF SUCH NOMINATION THE PURCHASER (AND ITS SUBSIDIARIES, TAKEN
TOGETHER) HOLDS, DIRECTLY OR INDIRECTLY, NOT LESS THAN 10.0%, AND LESS THAN
20.0%, OF THE OF THE ISSUED AND OUTSTANDING SHARES OF COMPANY COMMON STOCK
(CALCULATED ON AN ISSUED AND OUTSTANDING BASIS), THE COMPANY SHALL NOMINATE THE
PURCHASER NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY SET
FORTH IN THE FOLLOWING TABLE UNDER “NUMBER OF PURCHASER NOMINEES AT 10% - 20%”:

NUMBER OF DIRECTORS

 

NUMBER OF PURCHASER
NOMINEES AT 20% OR MORE

 

NUMBER OF PURCHASER
NOMINEES AT 10% — 20%

 

1 — 4

 

1

 

1

 

5 — 9

 

2

 

1

 

10 — 15

 

3

 

2

 

FOR EACH ADDITIONAL 5
DIRECTORS BEYOND 15

 

1 ADDITIONAL DIRECTOR

 

1 ADDITIONAL DIRECTOR

 

 

(B)           PROVIDED THAT THE COMPANY FULFILLS ITS OBLIGATIONS UNDER SECTION
3.02(A), THE PURCHASER SHALL NOT, AND SHALL CAUSE ITS AFFILIATES NOT TO:  (I)
NOMINATE FOR ELECTION, OR SOLICIT PROXIES IN FAVOR OF THE ELECTION, TO THE BOARD
OF DIRECTORS

 

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OF THE COMPANY ANY PERSON OTHER THAN NOMINEES DESIGNATED BY THE BOARD OF
DIRECTORS OF THE COMPANY; OR (II) CUMULATE ITS VOTES IN THE ELECTION OF
DIRECTORS OF THE COMPANY AS PERMITTED BY THE COMPANY’S BY-LAWS EXCEPT IN FAVOR
OF PURCHASER NOMINEES.

(c)           The Board of Directors of the Company may exclude the Purchaser
Nominees from access to any meeting or portion thereof if the Company reasonably
believes, upon advice of counsel, that such exclusion is advisable:  (i) to
protect proprietary information relating to DepoMed Development, Ltd. or (ii)
due to a conflict of interest between the Company and the Purchaser.

SECTION 3.03.  BOARD APPROVAL.  THE PARTIES HERETO AGREE, THAT SO LONG AS AT
LEAST ONE PURCHASER NOMINEE IS A MEMBER OF THE BOARD OF DIRECTORS OF THE
COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY SHALL DULY APPROVE, EITHER AT A
MEETING OR BY UNANIMOUS WRITTEN CONSENT, EACH OF THE FOLLOWING CORPORATE
ACTIONS:

(a)           approval of capital expenditures by the Company or any of its
Subsidiaries in excess of $20 million;

(b)           approval of any incurrence of any material indebtedness or
material change in the capital structure of the Company;

(c)           approval of any sale, lease, exchange, other disposition of, or
the creation of any pledge, hypothecation, encumbrance or lien on, any material
asset of the Company or the Subsidiaries;

(d)           the execution or of any material licensing agreement with respect
to Intellectual Property of the Company or a Subsidiary;

(e)           the approval of a material acquisition of the of stock or assets
or the making of a material investment in another person;

(f)            the provision of financial assistance to a third party in an
amount in excess of $250,000;

(g)           the placement of loans or other incurrence of indebtedness in an
amount in excess of $250,000 not negotiated in an arms-length transaction,
including loans to directors and officers of the Company and its Subsidiaries;

 

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(h)           the adoption of a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of the Subsidiaries; or

(i)            a Company Change of Control (structured in a form that would
permit board approval).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Purchaser that except as set forth in the
section or subsection of the Company Disclosure Statement corresponding to the
section or subsection of this Article IV delivered to Purchaser prior to the
execution hereof (the “Company Disclosure Statement”):

SECTION 4.01.  ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.  THE COMPANY IS A
CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS
OF THE STATE OF CALIFORNIA.  EACH SUBSIDIARY OF THE COMPANY (TOGETHER, THE
“SUBSIDIARIES”) IS A CORPORATION DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS INCORPORATION.  THE COMPANY
AND EACH OF THE SUBSIDIARIES HAS THE REQUISITE CORPORATE POWER AND AUTHORITY TO
OWN, OPERATE OR LEASE ITS PROPERTIES AND TO CARRY ON ITS BUSINESS AS IT IS NOW
BEING CONDUCTED, AND IS DULY QUALIFIED OR LICENSED TO DO BUSINESS, AND IS IN
GOOD STANDING, IN EACH JURISDICTION IN WHICH THE NATURE OF ITS BUSINESS OR THE
PROPERTIES OWNED, OPERATED OR LEASED BY IT MAKES SUCH QUALIFICATION, LICENSING
OR GOOD STANDING NECESSARY, OTHER THAN SUCH JURISDICTIONS WHERE THE FAILURE TO
BE SO QUALIFIED OR LICENSED AND TO BE SO IN GOOD STANDING WOULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE
COMPANY.  THE COMPANY DOES NOT DIRECTLY OR INDIRECTLY OWN ANY EQUITY OR SIMILAR
INTEREST IN, OR ANY INTEREST CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR
ANY EQUITY OR SIMILAR INTEREST IN, ANY CORPORATION (OTHER THAN A SUBSIDIARY),
PARTNERSHIP, JOINT VENTURE OR OTHER BUSINESS ASSOCIATION OR ENTITY.

SECTION 4.02.  AUTHORITY RELATIVE TO THIS AGREEMENT.  (A)  THE COMPANY HAS THE
REQUISITE CORPORATE POWER AND AUTHORITY TO EXECUTE AND DELIVER EACH OF THIS
AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT (COLLECTIVELY, THE “TRANSACTION

 

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DOCUMENTS”) AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. 
THE EXECUTION AND DELIVERY OF EACH OF THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY HAVE BEEN DULY AND VALIDLY AUTHORIZED AND
APPROVED BY THE BOARD OF DIRECTORS OF THE COMPANY AND NO OTHER CORPORATE
PROCEEDINGS ON THE PART OF THE COMPANY ARE NECESSARY TO AUTHORIZE OR APPROVE
THIS AGREEMENT OR THE ANY OTHER TRANSACTION DOCUMENT OR TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  THIS AGREEMENT HAS BEEN, AND EACH
OTHER TRANSACTION DOCUMENT WILL BE UPON EXECUTION, DULY AND VALIDLY EXECUTED AND
DELIVERED BY THE COMPANY AND, ASSUMING THE DUE AND VALID AUTHORIZATION,
EXECUTION AND DELIVERY BY THE OTHER PARTIES THERETO, IF ANY, CONSTITUTES A VALID
AND BINDING OBLIGATION OF THE COMPANY ENFORCEABLE AGAINST THE COMPANY IN
ACCORDANCE WITH ITS TERMS, EXCEPT THAT SUCH ENFORCEABILITY (I) MAY BE LIMITED BY
BANKRUPTCY, INSOLVENCY, MORATORIUM OR OTHER SIMILAR LAWS AFFECTING OR RELATING
TO THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY (THE “BANKRUPTCY EXCEPTIONS”)
AND (II) IS SUBJECT TO GENERAL PRINCIPLES OF EQUITY.

(B)           THE BOARD OF DIRECTORS OF THE COMPANY, BY RESOLUTIONS DULY ADOPTED
BY UNANIMOUS VOTE OF THOSE VOTING AT A MEETING DULY CALLED AND HELD AND NOT
SUBSEQUENTLY RESCINDED OR MODIFIED IN ANY WAY (THE “COMPANY BOARD APPROVAL”),
HAS DULY APPROVED EACH OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY.

(C)           OTHER THAN AS SET FORTH ON SECTION 4.02 OF THE COMPANY DISCLOSURE
STATEMENT, THE COMPANY BOARD APPROVAL IS THE ONLY VOTE, APPROVAL OR CONSENT OF
ANY PERSON OR ENTITY NECESSARY TO APPROVE THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

SECTION 4.03.  NO CONFLICT; REQUIRED FILINGS AND CONSENTS.  (A)   NONE OF THE
EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, THE
CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
OR COMPLIANCE BY THE COMPANY WITH ANY OF THE PROVISIONS HEREOF OR THEREOF WILL
REQUIRE ANY CONSENT, WAIVER, APPROVAL, AUTHORIZATION OR PERMIT OF, OR
REGISTRATION OR FILING WITH OR NOTIFICATION TO (ANY OF THE FOREGOING BEING A
“CONSENT”), ANY GOVERNMENT, SUBDIVISION THEREOF, OR ANY ADMINISTRATIVE,
GOVERNMENTAL, REGULATORY OR SELF-REGULATORY AUTHORITY, AGENCY, COMMISSION,
TRIBUNAL OR BODY, DOMESTIC, NON-U.S. OR SUPRANATIONAL (A “GOVERNMENTAL ENTITY”)
OR PERSON WHO IS NOT A GOVERNMENTAL ENTITY, EXCEPT FOR (I) COMPLIANCE WITH ANY
APPLICABLE REQUIREMENTS OF

 

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THE EXCHANGE ACT, THE AMERICAN STOCK EXCHANGE, THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES “BLUE SKY” LAWS IN CONNECTION WITH THE REGISTRATION RIGHTS
GRANTED PURSUANT TO THE REGISTRATION RIGHTS AGREEMENT AND (II) COMPLIANCE WITH
THE HSR ACT, IF REQUIRED.

(B)           EXCEPT AS SET FORTH IN CLAUSE (A) OF THIS SECTION 4.03, NONE OF
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS
BY THE COMPANY, THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY OR COMPLIANCE BY THE COMPANY WITH ANY OF THE PROVISIONS
HEREOF OR THEREOF WILL (I) CONFLICT WITH OR VIOLATE THE ARTICLES OF
INCORPORATION OF THE COMPANY AS IN EFFECT ON THE DATE HEREOF (THE “COMPANY
ARTICLES OF INCORPORATION”) OR BY-LAWS OF THE COMPANY AS IN EFFECT ON THE DATE
HEREOF OR THE COMPARABLE ORGANIZATIONAL DOCUMENTS OF ANY OF THE SUBSIDIARIES,
(II) CONFLICT WITH OR VIOLATE ANY STATUTE, ORDINANCE, RULE, REGULATION, ORDER,
JUDGMENT OR DECREE APPLICABLE TO THE COMPANY OR THE SUBSIDIARIES, OR BY WHICH
ANY OF THEM OR ANY OF THEIR RESPECTIVE PROPERTIES OR ASSETS MAY BE BOUND OR
AFFECTED, OR (III) RESULT IN A VIOLATION OR BREACH OF, OR CONSTITUTE A DEFAULT
(OR AN EVENT WHICH WITH NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT)
UNDER, OR GIVE TO OTHERS ANY RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR
CANCELLATION OF, OR RESULT IN ANY LOSS OF ANY MATERIAL BENEFIT OR THE CREATION
OF ANY LIEN ON ANY OF THE PROPERTY OR ASSETS OF THE COMPANY OR ANY OF THE
SUBSIDIARIES (ANY OF THE FOREGOING REFERRED TO IN CLAUSE (II) OR THIS CLAUSE
(III) BEING A “VIOLATION”) PURSUANT TO, ANY NOTE, BOND, MORTGAGE, INDENTURE,
CONTRACT, AGREEMENT, LEASE, LICENSE, PERMIT, FRANCHISE OR OTHER INSTRUMENT OR
OBLIGATION TO WHICH THE COMPANY OR ANY OF THE SUBSIDIARIES IS A PARTY OR BY
WHICH THE COMPANY OR ANY OF THE SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
PROPERTIES MAY BE BOUND OR AFFECTED, EXCEPT, IN THE CASE OF CLAUSE (II) AND
(III), FOR ANY SUCH VIOLATION WHICH WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE,
HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

SECTION 4.04.  BROKERS.  NONE OF THE COMPANY, ANY OF THE SUBSIDIARIES OR ANY OF
THEIR RESPECTIVE OFFICERS, DIRECTORS OR EMPLOYEES HAS EMPLOYED ANY BROKER OR
FINDER OR INCURRED ANY LIABILITY FOR ANY BROKERAGE FEES, COMMISSIONS OR FINDER’S
FEES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 4.05.  CAPITALIZATION.  THE COMPANY HAS HERETOFORE MADE AVAILABLE TO
PURCHASER COMPLETE AND CORRECT COPIES OF THE COMPANY ARTICLES OF INCORPORATION
AND THE BY-LAWS, IN

 

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EFFECT ON THE DATE HEREOF, OF THE COMPANY.  THE AUTHORIZED CAPITAL STOCK OF THE
COMPANY AS OF THE DATE OF THIS AGREEMENT CONSISTS OF 13,973,309 SHARES OF
COMPANY COMMON STOCK AND 12,015 SHARES OF SERIES A PREFERRED STOCK, NO PAR VALUE
(“PREFERRED STOCK”).  AS OF THE CLOSE OF BUSINESS ON MAY 21, 2002 THERE WERE
(I) 13,973,309 SHARES OF COMPANY COMMON STOCK ISSUED AND OUTSTANDING, OF WHICH
NO SHARES WERE OWNED BY THE COMPANY OR A WHOLLY-OWNED SUBSIDIARY AND (II) 12,015
SHARES OF PREFERRED STOCK ISSUED AND OUTSTANDING, OF WHICH NO SHARES WERE OWNED
BY THE COMPANY OR A WHOLLY-OWNED SUBSIDIARY.  AS OF THE CLOSE OF BUSINESS ON MAY
21, 2002, THERE WERE ISSUED AND OUTSTANDING COMMON STOCK PURCHASE WARRANTS, NO
PAR VALUE (“WARRANTS”) TO PURCHASE 3,215,270 SHARES OF COMPANY COMMON STOCK WITH
A WEIGHTED AVERAGE EXERCISE PRICE OF $5.89.  THE COMPANY HAS NO CAPITAL STOCK
RESERVED FOR ISSUANCE, EXCEPT THAT, AS OF THE DAY PRIOR TO EXECUTION OF THIS
AGREEMENT, THERE WERE (I) 2,562,540 SHARES OF COMPANY COMMON STOCK RESERVED FOR
ISSUANCE PURSUANT TO OPTIONS OUTSTANDING ON THE DATE HEREOF PURSUANT TO THE
COMPANY’S  OPTION PLAN, (II) 3,215,270 SHARES OF COMPANY COMMON STOCK RESERVED
FOR ISSUANCE UPON EXERCISE OF WARRANTS, (III) 1,323,396 SHARES OF COMPANY COMMON
STOCK RESERVED FOR ISSUANCE UPON CONVERSION OF THE PREFERRED STOCK AND
(IV) 641,741 SHARES OF COMPANY COMMON STOCK RESERVED FOR ISSUANCE UPON
CONVERSION OF THE CONVERTIBLE PROMISSORY NOTE OF THE COMPANY DATED JANUARY 21,
2000 (THE “CONVERTIBLE NOTE”).  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 WARRANTS OR THE CONVERSION OF THE
OUTSTANDING PREFERRED STOCK OR THE OUTSTANDING CONVERTIBLE NOTE OUTSTANDING AS
OF SUCH DATE AND IN ACCORDANCE WITH THEIR TERMS.  THE  NEW SHARES AND THE
COMPANY COMMON STOCK TO BE ISSUED UPON EXERCISE OF THE PURCHASER’S OPTION HAVE
BEEN DULY AUTHORIZED AND, WHEN ISSUED, WILL BE VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE AND, WITH RESPECT TO (III), UPON EXERCISE, WILL BE VALIDLY
ISSUED, FULLY PAID AND NON-ASSESSABLE.  ALL THE OUTSTANDING COMPANY COMMON STOCK
AND PREFERRED STOCK ARE, AND ALL COMPANY COMMON STOCK WHICH MAY BE ISSUED
PURSUANT TO THE EXERCISE OF OUTSTANDING OPTIONS OR WARRANTS OR THE CONVERSION OF
THE OUTSTANDING PREFERRED STOCK OR THE OUTSTANDING CONVERTIBLE NOTE WILL BE,
WHEN ISSUED IN ACCORDANCE WITH THE RESPECTIVE TERMS THEREOF, 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 OR ANY OF THE SUBSIDIARIES ISSUED AND OUTSTANDING.  EXCEPT
AS STATED ABOVE, THERE ARE NO EXISTING OPTIONS, WARRANTS, CALLS, SUBSCRIPTIONS
OR OTHER

 

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RIGHTS, AGREEMENTS, ARRANGEMENTS OR COMMITMENTS OF ANY CHARACTER, RELATING TO
THE ISSUED OR UNISSUED CAPITAL STOCK OF THE COMPANY OR ANY OF THE SUBSIDIARIES,
OBLIGATING THE COMPANY OR ANY OF THE SUBSIDIARIES TO ISSUE, TRANSFER OR SELL OR
CAUSE TO BE ISSUED, TRANSFERRED OR SOLD ANY CAPITAL STOCK OR VOTING DEBT OF, OR
OTHER EQUITY INTEREST IN, THE COMPANY OR ANY OF THE SUBSIDIARIES OR SECURITIES
CONVERTIBLE INTO OR EXCHANGEABLE FOR SUCH SHARES OR EQUITY INTERESTS OR
OBLIGATIONS OF THE COMPANY OR ANY OF THE SUBSIDIARIES TO GRANT, EXTEND OR ENTER
INTO ANY SUCH OPTION, WARRANT, CALL, SUBSCRIPTION OR OTHER RIGHT, AGREEMENT,
ARRANGEMENT OR COMMITMENT.  THERE ARE NO OUTSTANDING CONTRACTUAL OBLIGATIONS OF
THE COMPANY OR ANY OF THE SUBSIDIARIES TO REPURCHASE, REDEEM OR OTHERWISE
ACQUIRE ANY CAPITAL STOCK OF THE COMPANY OR ANY OF THE SUBSIDIARIES AND THE
ISSUANCE OF COMPANY COMMON STOCK PURSUANT TO ANY PROVISION OF THIS AGREEMENT
WILL NOT GIVE RISE TO ANY PREEMPTIVE RIGHTS OR RIGHTS OF FIRST REFUSAL ON BEHALF
OF ANY PERSON, OTHER THAN AS SET FORTH IN SECTION 4.05 OF THE COMPANY DISCLOSURE
STATEMENT.  EACH OF THE OUTSTANDING CAPITAL STOCK OF EACH OF THE COMPANY’S
SUBSIDIARIES IS DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE,
AND SUCH SHARES OF THE SUBSIDIARIES AS ARE OWNED BY THE COMPANY OR BY A WHOLLY
OWNED SUBSIDIARY ARE FREE AND CLEAR OF ANY LIEN, CLAIM, OPTION, CHARGE, SECURITY
INTEREST, LIMITATION, ENCUMBRANCE AND RESTRICTION OF ANY KIND (ANY OF THE
FOREGOING BEING A “LIEN”), EXCEPT FOR PERMITTED ENCUMBRANCES.

SECTION 4.06.  SEC REPORTS AND FINANCIAL STATEMENTS.  (A)  THE COMPANY HAS FILED
WITH THE SEC ALL FORMS, REPORTS, SCHEDULES, REGISTRATION STATEMENTS AND
DEFINITIVE PROXY STATEMENTS REQUIRED TO BE FILED BY THE COMPANY WITH THE SEC
THROUGH THE DATE HEREOF (THE “SEC REPORTS”).  AS OF THEIR RESPECTIVE DATES AND
EXCEPT AS SUBSEQUENTLY AMENDED PRIOR TO THE DATE HEREOF, THE SEC REPORTS
COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE EXCHANGE ACT OR
THE SECURITIES ACT AND THE RULES AND REGULATIONS OF THE SEC PROMULGATED
THEREUNDER APPLICABLE, AS THE CASE MAY BE, TO SUCH SEC REPORTS, AND NONE OF THE
SEC REPORTS CONTAINED ANY UNTRUE STATEMENT OF A 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.

(B) (I)  THE BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 2001 AND THE RELATED
STATEMENTS OF OPERATIONS, SHAREHOLDERS’ EQUITY AND CASH FLOWS (INCLUDING THE
NOTES THERETO) FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2001
AND FOR THE PERIOD FROM INCEPTION (AUGUST 7, 1995) TO

 

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DECEMBER 31, 2001 (INCLUDING THE RELATED NOTES AND SCHEDULES THERETO) OF THE
COMPANY CONTAINED IN THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 2001 (THE “FORM 10-K”) INCLUDED IN THE SEC REPORTS
PRESENT FAIRLY THE FINANCIAL POSITION AND THE RESULTS OF OPERATIONS AND CASH
FLOWS OF THE COMPANY AS OF THE DATES OR FOR THE PERIODS PRESENTED THEREIN IN
CONFORMITY WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES APPLIED
ON A CONSISTENT BASIS AS OF AND DURING THE PERIODS INVOLVED (“GAAP”).

                     (II)      THE BALANCE SHEET AS OF DECEMBER 31, 2001 AND THE
RELATED STATEMENTS OF OPERATIONS, SHAREHOLDERS’ DEFICIT AND CASH FLOWS
(INCLUDING THE NOTES THERETO) FOR THE PERIOD FROM FORMATION (NOVEMBER 30, 1999)
TO DECEMBER 31, 2001 OF DEPOMED DEVELOPMENT, LTD. CONTAINED IN THE FORM 10-K
INCLUDED IN THE SEC REPORTS PRESENT FAIRLY THE FINANCIAL POSITION AND THE
RESULTS OF OPERATIONS AND CASH FLOWS OF DEPOMED DEVELOPMENT, LTD. AS OF THE
DATES OR FOR THE PERIODS PRESENTED THEREIN IN CONFORMITY WITH GAAP.

(C)           THE COMPANY AND THE SUBSIDIARIES HAVE NO LIABILITIES OR
OBLIGATIONS OF ANY NATURE (WHETHER ABSOLUTE, ACCRUED, CONTINGENT, UNLIQUIDATED,
CONDITIONAL OR OTHERWISE) EXCEPT FOR LIABILITIES OR OBLIGATIONS (I) REFLECTED OR
RESERVED AGAINST ON THE BALANCE SHEET AS AT DECEMBER 31, 2001 INCLUDED IN THE
FORM 10-K (THE “COMPANY BALANCE SHEET”) OR (II) WHICH WOULD NOT, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

SECTION 4.07.  LITIGATION.  THERE IS NO SUIT, ACTION, PROCEEDING OR GOVERNMENTAL
INVESTIGATION BEFORE ANY COMMISSION OR OTHER ADMINISTRATIVE AUTHORITY PENDING
OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED AGAINST OR AFFECTING THE COMPANY
OR ANY OF THE SUBSIDIARIES, WITH RESPECT TO OR AFFECTING THE COMPANY’S OR ANY OF
THE SUBSIDIARIES’ OPERATIONS, BUSINESS, PRODUCTS, SALES PRACTICES OR FINANCIAL
CONDITION, EXCEPT FOR SUITS, ACTIONS AND PROCEEDINGS THAT, INDIVIDUALLY OR IN
THE AGGREGATE, WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY, NOR IS
THERE ANY JUDGMENT, DECREE, INJUNCTION OR ORDER OF ANY GOVERNMENTAL ENTITY OR
ARBITRATOR OUTSTANDING AGAINST THE COMPANY OR ANY OF THE SUBSIDIARIES, EXCEPT
FOR JUDGMENTS, DECREES, INJUNCTIONS AND ORDERS THAT WOULD NOT, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.  THERE ARE NO
FACTS KNOWN TO THE COMPANY WHICH, IF KNOWN BY A POTENTIAL CLAIMANT OR ANY
GOVERNMENTAL ENTITY, WOULD REASONABLY GIVE RISE TO A CLAIM OR PROCEEDING WHICH,
IF ASSERTED OR CONDUCTED WOULD

 

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BE REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

SECTION 4.08.  COMPLIANCE WITH APPLICABLE LAWS; PERMITS.  (A)  THE COMPANY AND
THE SUBSIDIARIES ARE AND HAVE BEEN IN COMPLIANCE WITH ALL LAWS, REGULATIONS AND
ORDERS OF ANY GOVERNMENTAL ENTITY APPLICABLE TO THE COMPANY OR THE SUBSIDIARIES,
EXCEPT FOR SUCH FAILURES SO TO COMPLY WHICH, INDIVIDUALLY OR IN THE AGGREGATE,
WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.  THE BUSINESS
OPERATIONS OF THE COMPANY AND THE SUBSIDIARIES HAVE NOT BEEN CONDUCTED IN
VIOLATION OF ANY LAW, ORDINANCE OR REGULATION OF ANY GOVERNMENTAL ENTITY, EXCEPT
FOR POSSIBLE VIOLATIONS WHICH, INDIVIDUALLY OR IN THE AGGREGATE, WOULD NOT HAVE
A MATERIAL ADVERSE EFFECT ON THE COMPANY.

(b)           Each of the Company and the Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity, including,
without limitation, the FDA, the United States Drug Enforcement Administration
(the “DEA”), and similar authorities in any U.S. and non-U.S. jurisdictions,
necessary for the Company or any Subsidiary to own, lease and operate its
properties or to produce, store, distribute and market its products or otherwise
to carry on its business as it is now being conducted (the “Company Permits”),
and, as of the date of this Agreement, no suspension or cancellation of any of
the Company Permits is pending or, to the knowledge of the Company, threatened,
except, with regard to any Company Permits about which a representation and
warranty is given by the Company in any other section in this Article IV and
such other representation and warranty expressly includes a qualification as to
Material Adverse Effect on the Company, where the failure to have, or the
suspension or cancellation of, such Company Permits would not individually or in
the aggregate have a Material Adverse Effect on the Company.  Neither the
Company nor any Subsidiary is in conflict with, or in default or violation of,
(i) any Law applicable to the Company or any Subsidiary or by which any property
or asset of the Company or any Subsidiary is bound or affected except for such
conflict, default or violation as would not individually or in the aggregate
have a Material Adverse Effect on the Company or (ii) any Company Permits.  As
used in this Agreement, “Law” means any federal, state or local statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of law of
the United States or any other U.S. or non-U.S. jurisdiction, including, without
limitation, the Federal Food, Drug, and Cosmetic

 

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Act (the “FDCA”), the Controlled Substances Act, and any other similar act or
law.

 

                     (C)      EXCEPT AS WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY:

                      (I)      ALL MANUFACTURING OPERATIONS OF THE COMPANY AND
THE SUBSIDIARIES ARE BEING CONDUCTED IN SUBSTANTIAL COMPLIANCE WITH APPLICABLE
GOOD MANUFACTURING PRACTICES;

                     (II)      ALL NECESSARY CLEARANCES OR APPROVALS FROM
GOVERNMENTAL AGENCIES FOR ALL DRUG AND DEVICE PRODUCTS WHICH ARE MANUFACTURED OR
SOLD BY THE COMPANY AND THE SUBSIDIARIES HAVE BEEN OBTAINED, AND THE COMPANY AND
THE SUBSIDIARIES ARE IN SUBSTANTIAL COMPLIANCE WITH THE MOST CURRENT FORM OF
EACH APPLICABLE CLEARANCE OR APPROVAL WITH RESPECT TO THE MANUFACTURE, STORAGE,
DISTRIBUTION, PROMOTION AND SALE BY THE COMPANY AND THE SUBSIDIARIES OF SUCH
PRODUCTS;

                    (III)      TO THE COMPANY’S KNOWLEDGE, ALL OF THE CLINICAL
STUDIES WHICH HAVE BEEN, OR ARE BEING, CONDUCTED BY OR FOR THE COMPANY AND THE
SUBSIDIARIES ARE BEING CONDUCTED IN SUBSTANTIAL COMPLIANCE WITH GENERALLY
ACCEPTED GOOD CLINICAL PRACTICES AND ALL APPLICABLE GOVERNMENT REGULATORY
REQUIREMENTS;

                    (IV)      AS OF THE DATE OF THIS AGREEMENT, NEITHER THE
COMPANY NOR ANY OF THE SUBSIDIARIES HAS RECEIVED WRITTEN NOTICE OF ANY PETITION
OR OTHER ATTEMPT BY A BRAND NAME DRUG COMPANY TO HAVE THE THERAPEUTIC
EQUIVALENCE RATING OF A PRODUCT OF THE COMPANY OR A SUBSIDIARY WITHHELD OR
ALTERED;

                     (V)      NONE OF THE COMPANY, THE SUBSIDIARIES OR, TO THE
KNOWLEDGE OF THE COMPANY, ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES OR AGENTS
(DURING THE TERM OF SUCH PERSON’S EMPLOYMENT BY THE COMPANY OR A SUBSIDIARY OR
WHILE ACTING AS AN AGENT OF THE COMPANY OR A SUBSIDIARY) HAS MADE ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR FRAUDULENT STATEMENT TO THE FDA OR ANY SIMILAR
GOVERNMENTAL AGENCY (INCLUDING, WITHOUT LIMITATION, NON-U.S. REGULATORY
AGENCIES), FAILED TO DISCLOSE A MATERIAL FACT REQUIRED TO BE DISCLOSED TO THE
FDA OR ANY SIMILAR GOVERNMENTAL AGENCY (INCLUDING, WITHOUT LIMITATION, NON-U.S.
REGULATORY AGENCIES), OR COMMITTED AN ACT, MADE A STATEMENT OR FAILED TO MAKE A
STATEMENT THAT COULD REASONABLY BE EXPECTED TO PROVIDE A BASIS FOR THE FDA OR
ANY SIMILAR GOVERNMENTAL

 

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AGENCY (INCLUDING, WITHOUT LIMITATION, NON-U.S. REGULATORY AGENCIES) TO INVOKE
ITS POLICY RESPECTING “FRAUD, UNTRUE STATEMENTS OF MATERIAL FACTS, BRIBERY, AND
ILLEGAL GRATUITIES” SET FORTH IN 56 FED. REG. 46191 (SEPTEMBER 10, 1991) OR
SIMILAR GOVERNMENTAL POLICY OR REGULATION (INCLUDING, WITHOUT LIMITATION,
NON-U.S. POLICIES OR REGULATIONS), RULE, REGULATION OR LAW;

                    (VI)      NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES
HAS RECEIVED ANY WRITTEN NOTICE THAT THE FDA OR ANY SIMILAR GOVERNMENTAL AGENCY
(INCLUDING, WITHOUT LIMITATION, NON-U.S. REGULATORY AGENCIES) HAS COMMENCED, OR
THREATENED TO INITIATE, ANY ACTION TO WITHDRAW ITS APPROVAL OR REQUEST THE
RECALL OF ANY PRODUCT OF THE COMPANY OR ANY OF THE SUBSIDIARIES, OR COMMENCED,
OR OVERTLY THREATENED TO INITIATE, ANY ACTION TO ENJOIN PRODUCTION AT ANY
FACILITY OF THE COMPANY OR ANY OF THE SUBSIDIARIES;

                   (VII)      AS TO EACH ARTICLE OF DRUG, DEVICE, COSMETIC OR
VITAMIN MANUFACTURED AND/OR DISTRIBUTED BY THE COMPANY OR ANY OF THE
SUBSIDIARIES, SUCH ARTICLE IS NOT ADULTERATED OR MISBRANDED WITHIN THE MEANING
OF THE FDCA OR ANY SIMILAR GOVERNMENTAL ACT OR LAW OF ANY JURISDICTION
(INCLUDING, WITHOUT LIMITATION, NON-U.S. JURISDICTIONS); AND

                  (VIII)      NONE OF THE COMPANY, THE SUBSIDIARIES OR, TO THE
KNOWLEDGE OF THE COMPANY, ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES OR AGENTS
(DURING THE TERM OF SUCH PERSON’S EMPLOYMENT BY THE COMPANY OR A SUBSIDIARY OR
WHILE ACTING AS AN AGENT OF THE COMPANY OR A SUBSIDIARY, SUBSIDIARIES OR
AFFILIATES HAS BEEN CONVICTED OF ANY CRIME OR ENGAGED IN ANY CONDUCT FOR WHICH
DEBARMENT OR SIMILAR PUNISHMENT IS MANDATED OR PERMITTED BY ANY APPLICABLE LAW.

(d)           As to each product subject to FDA’s jurisdiction under the FDCA
and the jurisdiction of the Drug Enforcement Agency under the Comprehensive Drug
Abuse Prevention and Control Act of 1970 (“CSA”) which is manufactured, tested,
distributed, held, and/or marketed by the Company, such product is being
manufactured, held and distributed in compliance with all applicable
requirements under the FDCA and the CSA, if applicable, including, but not
limited to, those relating to investigational use, premarket clearance, good
manufacturing practices, labeling, advertising, record keeping, filing of
reports, and security.

 

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(E)           NONE OF THE COMPANY, ANY OF THE SUBSIDIARIES OR ANY PRODUCT
MANUFACTURED, TESTED, DISTRIBUTED, HELD, DEVELOPED AND/OR MARKETED BY THE
COMPANY OR ANY OF THE SUBSIDIARIES IS SUBJECT TO THE JURISDICTION OF THE HEALTH
PROTECTION BRANCH OF THE MINISTRY OF HEALTH CANADA.

(F)            THE COMPANY WILL PROMPTLY PROVIDE PURCHASER WITH COPIES OF ANY
DOCUMENT THAT IS ISSUED, PREPARED, OR OTHERWISE BECOMES AVAILABLE FROM THE DATE
OF THIS AGREEMENT UNTIL THE CLOSING DATE WHICH BEARS ON THE REGULATORY STATUS
UNDER THE FDCA OR THE CSA OF THE COMPANY, ANY SUBSIDIARY OR ANY PRODUCT OF THE
COMPANY OR ANY SUBSIDIARY, INCLUDING, BUT NOT LIMITED TO, ANY DEFICIENCY LETTER,
WARNING LETTER, NON-APPROVABLE LETTER/ORDER, AND WITHDRAWAL LETTER/ORDER, EXCEPT
FOR DOCUMENTS REFLECTING SUCH MATTERS WHICH, INDIVIDUALLY OR IN THE AGGREGATE,
WOULD NOT HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

(G)           SECTION 4.08(G) OF THE COMPANY DISCLOSURE STATEMENT SETS FORTH A
COMPLETE AND ACCURATE LIST OF (A) EACH INVESTIGATIONAL NEW DRUG FILING MADE BY
THE COMPANY OR ANY OF THE SUBSIDIARIES WITH THE FDA OR SIMILAR U.S. OR NON-U.S.
GOVERNMENTAL AGENCY, (B) EACH CLINICAL TRIAL PROTOCOL SUBMITTED BY THE COMPANY
OR ANY OF THE SUBSIDIARIES TO THE FDA OR SIMILAR U.S. OR NON-U.S. GOVERNMENTAL
AGENCY, (C) EACH NEW DRUG APPLICATION AND ABBREVIATED OR SUPPLEMENTAL NEW DRUG
APPLICATION FILED BY THE COMPANY OR ANY OF THE SUBSIDIARIES PURSUANT TO THE
FDCA, OR ANY NON-U.S. EQUIVALENTS, (D) EACH PRODUCT LICENSE APPLICATION FILED BY
THE COMPANY OR ANY OF THE SUBSIDIARIES PURSUANT TO THE PUBLIC HEALTH SERVICE
ACT, AS AMENDED, OR ANY NON-U.S. EQUIVALENTS AND (E) EACH ESTABLISHMENT LICENSE
APPLICATION FILED WITH RESPECT TO ANY PRODUCT OF THE COMPANY OR ANY OF THE
SUBSIDIARIES UNDER THE PUBLIC HEALTH SERVICE ACT, AS AMENDED, OR ANY NON-U.S.
EQUIVALENTS.

SECTION 4.09.  EMPLOYEE BENEFIT PLANS.  (A)  EXCEPT AS SET FORTH IN SECTION
4.09(A) OF THE COMPANY DISCLOSURE STATEMENT THERE ARE NO “EMPLOYEE PENSION
BENEFIT PLANS” AS DEFINED IN SECTION 3(2) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”) (“PENSION PLANS”), “WELFARE BENEFIT
PLANS” AS DEFINED IN SECTION 3(1) OF ERISA (“WELFARE PLANS”) OR STOCK BONUS,
STOCK OPTION, RESTRICTED STOCK, STOCK APPRECIATION RIGHT, STOCK PURCHASE, BONUS,
INCENTIVE, DEFERRED COMPENSATION, SEVERANCE, OR VACATION PLANS, EMPLOYMENT OR
CONSULTING AGREEMENT, OR ANY OTHER EMPLOYEE BENEFIT PLAN, PROGRAM, POLICY OR
ARRANGEMENT, COVERING EMPLOYEES (OR FORMER EMPLOYEES) EMPLOYED IN THE UNITED
STATES, MAINTAINED OR CONTRIBUTED TO BY THE COMPANY OR ANY OF THE SUBSIDIARIES
OR ANY

 

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ERISA AFFILIATES (AS HEREINAFTER DEFINED), OR TO WHICH THE COMPANY OR ANY OF THE
SUBSIDIARIES OR ANY OF THEIR ERISA AFFILIATES CONTRIBUTES OR IS OBLIGATED TO
MAKE PAYMENTS THEREUNDER OR OTHERWISE MAY HAVE ANY LIABILITY (COLLECTIVELY, THE
“EMPLOYEE BENEFIT PLANS”).  FOR PURPOSES OF THIS AGREEMENT, “ERISA AFFILIATE”
SHALL MEAN ANY PERSON (AS DEFINED IN SECTION 3(9) OF ERISA) THAT IS OR HAS BEEN
A MEMBER OF ANY GROUP OF PERSONS DESCRIBED IN SECTION 414(B), (C), (M) OR (O) OF
THE CODE INCLUDING THE COMPANY OR A SUBSIDIARY.

(B)           THE COMPANY AND EACH OF THE SUBSIDIARIES, AND ANY PENSION PLANS
AND WELFARE PLANS, ARE IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH THE
APPLICABLE PROVISIONS OF ERISA, THE CODE AND OTHER APPLICABLE LAWS.

(C)           ALL CONTRIBUTIONS TO, AND PAYMENTS FROM, ANY PENSION PLANS THAT
ARE REQUIRED TO HAVE BEEN MADE IN ACCORDANCE WITH THE PENSION PLANS HAVE BEEN
TIMELY MADE.

(D)           ANY PENSION PLANS INTENDED TO QUALIFY UNDER SECTION 401 OF THE
CODE HAVE BEEN DETERMINED BY THE INTERNAL REVENUE SERVICE (“IRS”) TO BE SO
QUALIFIED AND NO EVENT HAS OCCURRED AND NO CONDITION EXISTS WITH RESPECT TO THE
FORM OR OPERATION OF SUCH PENSION PLANS THAT WOULD CAUSE THE LOSS OF SUCH
QUALIFICATION OR EXEMPTION THEREFROM OR THE IMPOSITION OF ANY MATERIAL
LIABILITY, PENALTY OR TAX UNDER ERISA OR THE CODE.

(E)           EACH PENSION PLAN THAT IS NOT QUALIFIED UNDER CODE SECTION 401(A)
OR 403(A) IS EXEMPT FROM PART 2, 3 AND 4 OF TITLE I OF ERISA AS AN UNFUNDED PLAN
THAT IS MAINTAINED PRIMARILY FOR THE PURPOSE OF PROVIDING DEFERRED COMPENSATION
FOR A SELECT GROUP OF MANAGEMENT OR HIGHLY COMPENSATED EMPLOYEES, PURSUANT TO
SECTIONS 201(2), 301(A)(3) AND 401(A)(1) OF ERISA.  NO ASSETS OF THE COMPANY ARE
ALLOCATED TO OR HELD IN A “RABBI TRUST” OR SIMILAR FUNDING VEHICLE.

(F)            THERE ARE (I) NO INVESTIGATIONS PENDING BY ANY GOVERNMENTAL
ENTITY (INCLUDING THE PENSION BENEFIT GUARANTY CORPORATION (“PBGC”)) INVOLVING
THE PENSION PLANS OR WELFARE PLANS, AND (II) NO PENDING OR THREATENED CLAIMS
(OTHER THAN ROUTINE CLAIMS FOR BENEFITS), SUITS OR PROCEEDINGS AGAINST ANY
PENSION PLAN OR WELFARE PLAN, AGAINST THE ASSETS OF ANY OF THE TRUSTS UNDER ANY
PENSION PLAN OR WELFARE PLAN OR AGAINST ANY FIDUCIARY OF ANY PENSION PLAN OR
WELFARE PLAN WITH RESPECT TO THE OPERATION OF SUCH PLAN OR ASSERTING ANY RIGHTS
OR CLAIMS TO BENEFITS UNDER ANY PENSION PLAN OR AGAINST THE ASSETS OF ANY TRUST
UNDER SUCH PLAN, NOR, TO THE KNOWLEDGE OF THE COMPANY,

 

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ARE THERE ANY FACTS THAT WOULD GIVE RISE TO ANY MATERIAL LIABILITY.

(G)           NONE OF THE COMPANY, ANY OF THE SUBSIDIARIES OR ANY EMPLOYEE OF
THE FOREGOING, NOR ANY TRUSTEE, ADMINISTRATOR, OTHER FIDUCIARY OR ANY OTHER
“PARTY IN INTEREST” OR “DISQUALIFIED PERSON” WITH RESPECT TO THE PENSION PLANS
OR WELFARE PLANS, HAS ENGAGED IN A “PROHIBITED TRANSACTION” (AS SUCH TERM IS
DEFINED IN SECTION 4975 OF THE CODE OR SECTION 406 OF ERISA) THAT COULD RESULT
IN A MATERIAL TAX OR PENALTY ON THE COMPANY OR ANY OF THE SUBSIDIARIES UNDER
SECTION 4975 OF THE CODE OR SECTION 502(I) OF ERISA.

(H)           NONE OF THE COMPANY, ANY OF THE SUBSIDIARIES, OR ANY OF THEIR
ERISA AFFILIATES MAINTAIN OR CONTRIBUTE TO, NOR HAVE THEY EVER MAINTAINED OR
CONTRIBUTED TO, ANY PENSION PLAN SUBJECT TO TITLE IV OF ERISA OR SECTIONS 412 OF
THE CODE OR 302 OF ERISA.

(I)            NEITHER THE COMPANY, ANY SUBSIDIARY OF THE COMPANY NOR ANY ERISA
AFFILIATE HAS INCURRED, OR IS REASONABLY LIKELY TO INCUR LIABILITY UNDER TITLE
IV OF ERISA.

(J)            NEITHER THE COMPANY NOR ANY ERISA AFFILIATES HAS LIABILITY
(INCLUDING ANY CONTINGENT LIABILITY UNDER SECTION 4204 OF ERISA) WITH RESPECT TO
ANY MULTIEMPLOYER PLAN, WITHIN THE MEANING OF SECTION 3(37) OF ERISA, COVERING
EMPLOYEES (OR FORMER EMPLOYEES) EMPLOYED IN THE UNITED STATES.

(K)           WITH RESPECT TO EACH OF THE EMPLOYEE BENEFIT PLANS, TRUE, CORRECT
AND COMPLETE COPIES OF THE FOLLOWING DOCUMENTS HAVE BEEN MADE AVAILABLE TO
PURCHASER:  (I) THE PLAN DOCUMENT AND ANY RELATED TRUST AGREEMENT, INCLUDING
AMENDMENTS THERETO, (II) ANY CURRENT SUMMARY PLAN DESCRIPTIONS AND OTHER
MATERIAL COMMUNICATIONS TO PARTICIPANTS RELATING TO THE EMPLOYEE BENEFIT PLANS,
(III) THE MOST RECENT FORMS 5500, IF APPLICABLE, (IV) THE MOST RECENT IRS
DETERMINATION LETTER, IF APPLICABLE AND (V) THE MOST RECENT ACTUARIAL REPORT OR
VALUATION WITH RESPECT TO EACH PENSION PLAN SUBJECT TO TITLE IV OF ERISA.

(L)            NONE OF THE WELFARE PLANS MAINTAINED BY THE COMPANY OR ANY OF THE
SUBSIDIARIES PROVIDE FOR CONTINUING BENEFITS OR COVERAGE FOR ANY PARTICIPANT OR
ANY BENEFICIARY OF A PARTICIPANT FOLLOWING TERMINATION OF EMPLOYMENT, EXCEPT AS
MAY BE REQUIRED UNDER SECTION 4980B OF THE CODE AND PART 6 OF SUBTITLE B OF
TITLE I OF ERISA (“COBRA”), OR EXCEPT AT THE EXPENSE OF THE PARTICIPANT OR THE
PARTICIPANT’S BENEFICIARY.  THE COMPANY, THE SUBSIDIARIES, AND ANY ERISA
AFFILIATES WHICH MAINTAIN

 

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A “GROUP HEALTH PLAN” WITHIN THE MEANING OF SECTION 5000(B)(1) OF THE CODE HAVE
COMPLIED IN ALL MATERIAL RESPECTS WITH THE “COBRA” NOTICE AND CONTINUATION
REQUIREMENTS.

(M)          AS OF THE CLOSING, THE COMPANY, THE SUBSIDIARIES AND ANY ENTITY
WITH WHICH THE COMPANY OR THE SUBSIDIARIES COULD BE CONSIDERED A SINGLE EMPLOYER
UNDER 29 U.S.C. SECTION 2101(A)(1) OR UNDER ANY RELEVANT CASE-LAW, HAS NOT
INCURRED ANY LIABILITY OR OBLIGATION UNDER THE WORKER ADJUSTMENT AND RETRAINING
NOTIFICATION ACT, AS IT MAY BE AMENDED FROM TIME TO TIME, AND WITHIN THE 90-DAY
PERIOD IMMEDIATELY FOLLOWING THE CLOSING, WILL NOT INCUR ANY SUCH LIABILITY OR
OBLIGATION IF, DURING SUCH 90-DAY PERIOD, ONLY TERMINATIONS OF EMPLOYMENT IN THE
NORMAL COURSE OF OPERATIONS OCCUR.

(N)           THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT WILL NOT RESULT IN AN INCREASE IN THE AMOUNT OF COMPENSATION OR
BENEFITS OR ACCELERATE THE VESTING OR TIMING OF PAYMENT OF ANY BENEFITS OR
COMPENSATION PAYABLE TO OR IN RESPECT OF ANY EMPLOYEE OF THE COMPANY OR ANY OF
THE SUBSIDIARIES.

(O)           THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT WILL NOT RESULT IN OR SATISFY A CONDITION TO THE PAYMENT OF
COMPENSATION THAT WOULD, IN COMBINATION WITH ANY OTHER PAYMENT, RESULT IN AN
“EXCESS PARACHUTE PAYMENT” WITHIN THE MEANING OF SECTION 280G(B) OF THE CODE.

(P)           THE COMPANY AND THE SUBSIDIARIES DO NOT MAINTAIN OR CONTRIBUTE TO
ANY PLAN, PROGRAM, POLICY, ARRANGEMENT OR AGREEMENT WITH RESPECT TO EMPLOYEES
(OR FORMER EMPLOYEES) EMPLOYED OUTSIDE THE UNITED STATES.

SECTION 4.10.  INTELLECTUAL PROPERTY.  (A)  EXCEPT AS WOULD NOT, INDIVIDUALLY OR
IN THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY, (I) THE COMPANY
AND EACH OF THE SUBSIDIARIES OWNS, HAS THE RIGHT TO ACQUIRE OR IS LICENSED OR
OTHERWISE HAS THE RIGHT TO USE AND HAS MAINTAINED IN GOOD STANDING (IN EACH
CASE, CLEAR OF ANY LIENS OF ANY KIND OTHER THAN PERMITTED ENCUMBRANCES), ALL
INTELLECTUAL PROPERTY USED IN OR NECESSARY FOR THE CONDUCT OF ITS BUSINESS AS
CURRENTLY CONDUCTED; (II) NO CLAIMS ARE PENDING OR, TO THE KNOWLEDGE OF THE
COMPANY, THREATENED THAT THE COMPANY OR ANY OF THE SUBSIDIARIES IS INFRINGING ON
OR OTHERWISE VIOLATING THE RIGHTS OF ANY PERSON WITH REGARD TO ANY INTELLECTUAL
PROPERTY; (III) TO THE KNOWLEDGE OF THE COMPANY, NO PERSON IS INFRINGING ON OR
OTHERWISE VIOLATING ANY RIGHT OF THE COMPANY OR ANY OF THE SUBSIDIARIES

 

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WITH RESPECT TO ANY INTELLECTUAL PROPERTY OWNED BY AND/OR LICENSED TO THE
COMPANY OR THE SUBSIDIARIES; (IV) TO THE KNOWLEDGE OF THE COMPANY, NO OTHER
FIRM, CORPORATION, ASSOCIATION OR PERSON CLAIMS THE RIGHT TO USE IN CONNECTION
WITH SIMILAR OR CLOSELY RELATED GOODS AND IN THE SAME GEOGRAPHIC AREA, ANY MARK
WHICH IS IDENTICAL OR CONFUSINGLY SIMILAR TO ANY OF THE INTELLECTUAL PROPERTY;
(V) THE COMPANY HAS NO KNOWLEDGE OF ANY CLAIM THAT ANY THIRD PARTY ASSERTS
OWNERSHIP RIGHTS IN ANY OF THE INTELLECTUAL PROPERTY; (VI) THE COMPANY HAS NO
KNOWLEDGE OF ANY CLAIM OR KNOWLEDGE OF ANY FACTS THAT WOULD GIVE THE COMPANY ANY
REASON TO REASONABLY BELIEVE THAT THE COMPANY’S OR THE SUBSIDIARIES’ USE OF ANY
INTELLECTUAL PROPERTY INFRINGES ANY RIGHT OF ANY THIRD PARTY OR WOULD RESULT IN
THE BREACH OF ANY CONTRACT OR OTHER OBLIGATION TO WHICH THE COMPANY OR ANY
SUBSIDIARY IS A PARTY; (VII) THE COMPANY HAS NO KNOWLEDGE AND THERE ARE NO FACTS
KNOWN TO THE COMPANY THAT WOULD GIVE THE COMPANY ANY REASONABLE BASIS TO BELIEVE
THAT ANY THIRD PARTY IS INFRINGING ON ANY OF THE COMPANY’S OR THE SUBSIDIARIES’
RIGHTS IN ANY OF THE INTELLECTUAL PROPERTY; (VIII) THE COMPANY HAS NO KNOWLEDGE
AND THERE ARE NO FACTS KNOWN TO THE COMPANY THAT WOULD GIVE THE COMPANY ANY
REASONABLE BASIS TO BELIEVE THAT ANY OF ITS ACTIONS OR THE ACTIONS OF THE
SUBSIDIARIES HAS INFRINGED OR IS INFRINGING ON ANY THIRD PARTY’S INTELLECTUAL
PROPERTY RIGHTS; (IX) TO THE KNOWLEDGE OF THE COMPANY, THERE ARE NO UNDISCLOSED
GOVERNMENT RESTRICTIONS, DOMESTIC OR NON-U.S., WHICH SPECIFICALLY LIMIT THE
MANNER IN WHICH ANY OF THE INTELLECTUAL PROPERTY MAY BE USED OR LICENSED; (X) TO
THE KNOWLEDGE OF THE COMPANY, NONE OF THE COMPANY, THE SUBSIDIARIES OR ANY OF
THEIR RESPECTIVE OFFICERS OR DIRECTORS HAS DISCLOSED ANY CONFIDENTIAL
INFORMATION OF THE COMPANY OR ANY OF THE SUBSIDIARIES WHICH WOULD CONSTITUTE
TRADE SECRETS, EXCEPT IN THE ORDINARY COURSE OF BUSINESS OF THE COMPANY AND THE
SUBSIDIARIES OR WITH THE AUTHORITY OF THE COMPANY OR THE SUBSIDIARIES; AND (XI)
TO THE KNOWLEDGE OF THE COMPANY, NONE OF THE COMPANY, THE SUBSIDIARIES OR ANY OF
THEIR RESPECTIVE OFFICERS OR DIRECTORS HAS USED ANY CONFIDENTIAL INFORMATION OR
TRADE SECRETS OF ANY THIRD PARTY IN ANY MANNER OR ANY PURPOSE NOT PERMITTED BY
THAT THIRD PARTY.

(B)           FOR PURPOSES OF THIS AGREEMENT, “INTELLECTUAL PROPERTY” SHALL MEAN
ALL INVENTIONS, WHETHER PATENTABLE OR NOT AND WHETHER PATENTED OR UNPATENTED,
PATENTS, COPYRIGHTS, TRADEMARKS (REGISTERED OR UNREGISTERED), SERVICE MARKS,
BRAND NAMES, TRADE DRESS, TRADE NAMES, COMPUTER SOFTWARE PROGRAMS AND
APPLICATIONS (INCLUDING IMBEDDED SOFTWARE), AND REGISTRATIONS IN ANY
JURISDICTION OF, AND APPLICATIONS IN ANY JURISDICTION TO REGISTER, THE
FOREGOING; TRADE SECRETS AND RIGHTS IN ANY JURISDICTION TO LIMIT THE USE OR
DISCLOSURE THEREOF BY ANY PERSON; ALL

 

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TECHNICAL ADVANCES AND OTHER IMPROVEMENTS MADE BY OR USED IN THE OPERATION OR
BUSINESS OF THE COMPANY; AND, WITH RESPECT TO PRODUCTS UNDER DEVELOPMENT AND ALL
INTERMEDIATES USEFUL IN THE MANUFACTURE OF THOSE PRODUCTS, ALL UNPATENTED
KNOW-HOW, FORMULAE, FORMULATIONS, TEST PROCEDURES AND PROTOCOLS, PROCESSES, TEST
RESULTS AND DATA, AND CLINICAL DATA.

SECTION 4.11.  ENVIRONMENTAL MATTERS.  EXCEPT AS WOULD NOT, INDIVIDUALLY OR IN
THE AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY, (I) NO HAZARDOUS
MATERIALS ARE PRESENT AT, ON OR UNDER ANY REAL PROPERTY OR FACILITY CURRENTLY,
OR TO THE KNOWLEDGE OF THE COMPANY, FORMERLY OWNED, LEASED OR OPERATED BY THE
COMPANY OR ANY SUBSIDIARY WHICH NOW REQUIRE INVESTIGATION, RESPONSE, OR OTHER
CORRECTIVE ACTION BY THE COMPANY OR ANY SUBSIDIARY OR FOR WHICH THE COMPANY OR
ANY SUBSIDIARY IS FINANCIALLY RESPONSIBLE, OR THAT WOULD REASONABLY BE EXPECTED
TO RESULT IN LIABILITY OF, OR COSTS TO, THE COMPANY OR ANY OF THE SUBSIDIARIES,
IN EACH CASE UNDER ANY ENVIRONMENTAL LAW; (II) THERE IS CURRENTLY NO CIVIL,
CRIMINAL OR ADMINISTRATIVE ACTION, SUIT, DEMAND, HEARING, PROCEEDING, NOTICE OF
VIOLATION, INVESTIGATION, NOTICE OR DEMAND LETTER, OR REQUEST FOR INFORMATION
PENDING OR TO THE KNOWLEDGE OF THE COMPANY, THREATENED, UNDER ANY ENVIRONMENTAL
LAW AGAINST THE COMPANY OR ANY OF THE SUBSIDIARIES; (III) THE COMPANY AND THE
SUBSIDIARIES HAVE NOT RECEIVED ANY WRITTEN CLAIMS OR NOTICES ALLEGING LIABILITY
UNDER ANY ENVIRONMENTAL LAW CURRENTLY PENDING, AND THE COMPANY HAS NO KNOWLEDGE
OF ANY CIRCUMSTANCES THAT WOULD REASONABLY BE EXPECTED TO RESULT IN SUCH CLAIMS
OR NOTICES; (IV) TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY AND EACH OF THE
SUBSIDIARIES ARE CURRENTLY IN COMPLIANCE, AND WITHIN THE PERIOD OF APPLICABLE
STATUTES OF LIMITATION HAVE COMPLIED, WITH ALL, AND HAVE NO LIABILITY UNDER ANY,
APPLICABLE ENVIRONMENTAL LAWS; (V) TO THE KNOWLEDGE OF THE COMPANY, NO PROPERTY
OR FACILITY CURRENTLY OR FORMERLY OWNED, LEASED OR OPERATED BY THE COMPANY OR
ANY OF THE SUBSIDIARIES OR ANY OF THEIR RESPECTIVE PREDECESSORS-IN-INTEREST, OR
AT WHICH HAZARDOUS MATERIALS HAVE BEEN MANUFACTURED, HANDLED, TESTED,
FORMULATED, PREPARED, ENCAPSULATED, PACKAGED, BOTTLED OR STORED FOR THE COMPANY
OR ANY OF THE SUBSIDIARIES, OR AT WHICH HAZARDOUS MATERIALS OF THE COMPANY OR
ANY OF THE SUBSIDIARIES HAVE BEEN STORED, TREATED OR DISPOSED OF, IS LISTED OR
PROPOSED FOR LISTING ON THE NATIONAL PRIORITIES LIST OR THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY INFORMATION SYSTEM, BOTH
PROMULGATED UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, AS AMENDED, OR ON ANY COMPARABLE LIST ESTABLISHED UNDER
ANY ENVIRONMENTAL LAW; (VI) THE EXECUTION, DELIVERY AND PERFORMANCE OF THIS
AGREEMENT

 

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AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY WILL NOT AFFECT THE
VALIDITY OF ANY ENVIRONMENTAL PERMITS HELD BY THE COMPANY OR ANY OF THE
SUBSIDIARIES, AND WILL NOT REQUIRE ANY FILING, NOTICE, OR REMEDIATION UNDER ANY
ENVIRONMENTAL LAW; (VII) TO THE KNOWLEDGE OF THE COMPANY, NO FRIABLE ASBESTOS IS
PRESENT IN, ON, OR AT ANY PROPERTY, FACILITY OR EQUIPMENT OF THE COMPANY OR ANY
OF THE SUBSIDIARIES; (VIII) TO THE KNOWLEDGE OF THE COMPANY, THERE ARE NO PAST
OR PRESENT EVENTS, CONDITIONS, ACTIVITIES, OR PRACTICES, INCLUDING, WITHOUT
LIMITATION, THE DISPOSAL, EMISSION OR RELEASE OF ANY HAZARDOUS MATERIALS, WHICH
WOULD REASONABLY BE EXPECTED TO PREVENT THE COMPANY’S AND THE SUBSIDIARIES’
COMPLIANCE WITH ANY ENVIRONMENTAL LAW, OR WHICH WOULD REASONABLY BE EXPECTED TO
GIVE RISE TO ANY LIABILITY OF THE COMPANY OR ANY OF THE SUBSIDIARIES UNDER ANY
ENVIRONMENTAL LAW; (IX) NO LIEN HAS BEEN ASSERTED OR RECORDED, OR TO THE
KNOWLEDGE OF THE COMPANY THREATENED, UNDER ANY ENVIRONMENTAL LAW WITH RESPECT TO
ANY ASSETS, FACILITY, INVENTORY, OR PROPERTY CURRENTLY OWNED, LEASED OR OPERATED
BY THE COMPANY OR ANY OF THE SUBSIDIARIES; (X) NEITHER THE COMPANY NOR ANY OF
THE SUBSIDIARIES HAS ASSUMED BY CONTRACT, AGREEMENT OR OTHERWISE ANY LIABILITIES
OR OBLIGATIONS ARISING UNDER ANY ENVIRONMENTAL LAW, OR IS CURRENTLY PERFORMING
ANY INVESTIGATION, RESPONSE OR OTHER CORRECTIVE ACTION UNDER ANY ENVIRONMENTAL
LAW; (XI) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES HAS ENTERED INTO OR
AGREED TO ANY JUDGMENT, DECREE OR ORDER BY ANY JUDICIAL OR ADMINISTRATIVE
TRIBUNAL OR AGENCY AND NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES IS
SUBJECT TO ANY JUDGMENT, DECREE ORDER OR AGREEMENT, IN EACH CASE RELATING TO
COMPLIANCE WITH ANY ENVIRONMENTAL LAW OR REQUIRING THE COMPANY OR ANY OF THE
SUBSIDIARIES TO CONDUCT ANY INVESTIGATION, RESPONSE, CORRECTIVE OR OTHER ACTION
UNDER ANY ENVIRONMENTAL LAW; AND (XII) TO THE KNOWLEDGE OF THE COMPANY, THERE
ARE NO UNDERGROUND STORAGE TANKS OR RELATED PIPING, OR IMPOUNDMENTS, AT ANY REAL
PROPERTY OWNED, OPERATED OR LEASED BY THE COMPANY OR ANY OF THE SUBSIDIARIES,
AND ANY FORMER SUCH TANKS, PIPING, OR IMPOUNDMENTS, ON ANY SUCH PROPERTY WHICH
HAVE BEEN REMOVED OR CLOSED, HAVE BEEN REMOVED OR CLOSED IN ACCORDANCE WITH
APPLICABLE ENVIRONMENTAL LAWS.

For purposes of this Agreement, the term “Environmental Laws” means the common
law and all applicable federal, state, local and non-U.S. Laws, decrees,
judgments or injunctions issued, promulgated, approved or entered thereunder
relating to pollution or protection of human health safety or the environment
(including, without limitation, ambient air, indoor air, surface water, ground
water, land surface, subsurface strata, and natural resources such as wetlands,
flora, fauna),

 

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including without limitation, laws relating to experimental use of animals or
disposal of animal carcasses, emissions, discharges, releases or threatened
releases of Hazardous Materials into the environment, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.  For purposes of this
Agreement, the term “Hazardous Materials” means any pollutant, contaminant,
substance, constituent or waste, including without limitation, medical,
biohazardous, or infectious waste, animal carcass, any toxin, virus, infectious
disease or disease-causing agent, or any other chemical, compound or material,
including without limitation, petroleum or any petroleum product, including
crude oil or any fraction thereof, subject to regulation or that can give rise
to liability under any Environmental Law.  For purposes of this Agreement, the
term “Environmental Permit” means any permit, license, approval, consent or
other authorization provided or issued by any Governmental Entity pursuant to an
Environmental Law.

The Company has made available to Purchaser all records and files, including,
but not limited to, all assessments, reports, studies, audits, analyses, and
data in the possession, custody or control of the Company or any Subsidiary
relating to the existence of Hazardous Materials at facilities or properties
currently or formerly owned, operated, leased or used by the Company or any of
the Subsidiaries or concerning compliance by the Company and any Subsidiaries
with, or liability of any of them under, any Environmental Law.

SECTION 4.12.  MATERIAL ADVERSE CHANGE.  (A)  SINCE MARCH 31, 2002, THERE HAS
NOT BEEN ANY CHANGE, OR ANY DEVELOPMENT THAT IS REASONABLY LIKELY TO RESULT IN A
CHANGE, THAT WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.  SINCE
MARCH 31, 2002, THE COMPANY AND THE SUBSIDIARIES HAVE CONDUCTED THEIR BUSINESSES
ONLY IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICES AND THERE
HAS NOT BEEN, DIRECTLY OR INDIRECTLY:

                      (I)      ANY DECLARATION, SETTING ASIDE OR PAYMENT OF ANY
DIVIDEND OR OTHER DISTRIBUTION WITH RESPECT TO ANY CAPITAL STOCK OF THE COMPANY;

                     (II)      ANY SPLIT, COMBINATION OR RECLASSIFICATION OF ANY
OF ITS CAPITAL STOCK OR ANY ISSUANCE OR THE AUTHORIZATION OF ANY ISSUANCE OF ANY
OTHER SECURITIES IN RESPECT

 

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OF, IN LIEU OF OR IN SUBSTITUTION FOR THE COMPANY’S CAPITAL STOCK;

                    (III)      ANY PAYMENT OR GRANTING BY THE COMPANY OR ANY OF
THE SUBSIDIARIES OF ANY INCREASE IN COMPENSATION TO ANY DIRECTOR, OFFICER OR,
OTHER THAN IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE,
EMPLOYEE OF THE COMPANY OR ANY OF THE SUBSIDIARIES;

                    (IV)      ANY GRANTING BY THE COMPANY OR ANY OF THE
SUBSIDIARIES TO ANY DIRECTOR, OFFICER OR, OTHER THAN IN THE ORDINARY COURSE OF
BUSINESS CONSISTENT WITH PAST PRACTICE, EMPLOYEE OF ANY INCREASE IN SEVERANCE OR
TERMINATION PAY;

                     (V)      ANY ENTRY BY THE COMPANY OR ANY OF THE
SUBSIDIARIES INTO ANY EMPLOYMENT, CONSULTING, SEVERANCE OR TERMINATION AGREEMENT
WITH ANY SUCH DIRECTOR OR OFFICER, OTHER THAN IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE;

                    (VI)      ANY ADOPTION OR INCREASE IN PAYMENTS TO OR
BENEFITS UNDER ANY PROFIT SHARING, BONUS, DEFERRED COMPENSATION, SAVINGS,
INSURANCE, PENSION, RETIREMENT OR OTHER EMPLOYEE BENEFIT PLAN FOR OR WITH ANY
EMPLOYEES OF THE COMPANY OR ANY OF THE SUBSIDIARIES;

                   (VII)      ANY CHANGE IN ACCOUNTING METHODS, PRINCIPLES OR
PRACTICES BY THE COMPANY OR ANY OF THE SUBSIDIARIES, EXCEPT INSOFAR AS MAY HAVE
BEEN REQUIRED BY CHANGES IN GAAP;

                  (VIII)      ANY CANCELLATION OF ANY MATERIAL CONTRACT BY ANY
PERSON A PARTY THERETO;

                    (IX)      ANY RESIGNATION OF ONE OR MORE KEY EMPLOYEES OF
THE COMPANY;

                     (X)      ANY MATERIAL LITIGATION INSTITUTED AGAINST THE
COMPANY OR THE SUBSIDIARIES; OR

                    (XI)      ANY AGREEMENT TO DO ANY OF THE THINGS DESCRIBED IN
THE PRECEDING CLAUSES (I) THROUGH (X).

SECTION 4.13.  TAXES.  (A)  EXCEPT AS DISCLOSED IN SECTION 4.13 OF THE COMPANY
DISCLOSURE STATEMENT, (I) THE COMPANY AND EACH OF THE SUBSIDIARIES HAVE PREPARED
AND TIMELY FILED WITH THE APPROPRIATE GOVERNMENTAL AGENCIES ALL TAX RETURNS
REQUIRED TO BE FILED ON OR BEFORE THE DATE HEREOF, TAKING INTO ACCOUNT ANY
EXTENSION OF TIME TO FILE GRANTED TO OR OBTAINED

 

 

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ON BEHALF OF THE COMPANY AND/OR THE SUBSIDIARIES, AND EACH SUCH TAX RETURN IS
COMPLETE AND ACCURATE IN ALL MATERIAL RESPECTS; (II) THE COMPANY AND EACH OF THE
SUBSIDIARIES HAVE TIMELY PAID ALL TAXES DUE AND PAYABLE BY THEM THROUGH THE DATE
HEREOF AND HAVE MADE ADEQUATE ACCRUALS FOR ANY TAXES ATTRIBUTABLE TO ANY TAXABLE
PERIOD OR PORTION THEREOF OF THE COMPANY AND/OR THE SUBSIDIARIES ENDING ON OR
PRIOR TO THE DATE HEREOF THAT ARE NOT YET DUE AND PAYABLE; (III) ALL ASSERTED
TAX DEFICIENCIES OR TAX ASSESSMENTS AGAINST THE COMPANY OR ANY OF THE
SUBSIDIARIES HAVE BEEN PAID OR FINALLY SETTLED AND NO ISSUE PREVIOUSLY RAISED BY
ANY TAXING AUTHORITY REASONABLY COULD BE EXPECTED TO RESULT IN A PROPOSED
DEFICIENCY OR ASSESSMENT FOR ANY PRIOR, PARALLEL OR SUBSEQUENT PERIOD (INCLUDING
PERIODS SUBSEQUENT TO THE CLOSING DATE); (IV) NO TAX AUDIT OR TAX EXAMINATION OF
THE COMPANY OR ANY OF THE SUBSIDIARIES IS IN PROGRESS OR PENDING OR, TO THE
KNOWLEDGE OF THE COMPANY, THREATENED BY ANY TAXING AUTHORITY; (V) NO EXTENSION
OF THE PERIOD FOR ASSESSMENT OR COLLECTION OF ANY TAX OF THE COMPANY OR ANY OF
THE SUBSIDIARIES IS CURRENTLY IN EFFECT AND NO EXTENSION OF TIME WITHIN WHICH TO
FILE ANY TAX RETURN HAS BEEN REQUESTED, WHICH TAX RETURN HAS NOT SINCE BEEN
FILED; (VI) NO LIENS HAVE BEEN FILED WITH RESPECT TO ANY TAXES OF THE COMPANY OR
ANY OF THE SUBSIDIARIES OTHER THAN IN RESPECT OF PROPERTY TAXES THAT ARE NOT YET
DUE AND PAYABLE; (VII) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES HAS MADE,
OR IS OR WILL BE REQUIRED TO MAKE, ANY CHANGE IN ITS ACCOUNTING METHODS FOR ANY
PERIOD (OR PORTION THEREOF) ENDING ON OR BEFORE THE CLOSING DATE THAT WOULD
RESULT IN AN ADJUSTMENT FOR ANY PERIOD (OR PORTION THEREOF) ENDING ON OR AFTER
THE CLOSING DATE UNDER SECTION 481 OF THE CODE (OR ANY SIMILAR PROVISION OF
STATE, PROVINCIAL, LOCAL OR NON-U.S. LAW); (VIII) THE COMPANY AND EACH OF THE
SUBSIDIARIES HAVE MADE TIMELY PAYMENTS OF ALL TAXES REQUIRED TO BE DEDUCTED AND
WITHHELD FROM THE WAGES PAID TO THEIR EMPLOYEES AND FROM ALL OTHER AMOUNTS PAID
TO THIRD PARTIES; (IX) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES IS A
PARTY TO ANY TAX SHARING, TAX MATTERS, TAX INDEMNIFICATION OR SIMILAR AGREEMENT;
(X) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES OWNS ANY INTEREST IN ANY
“CONTROLLED FOREIGN CORPORATION” (WITHIN THE MEANING OF SECTION 957 OF THE CODE)
OR “PASSIVE FOREIGN INVESTMENT COMPANY” (WITHIN THE MEANING OF SECTION 1296 OF
THE CODE); (XI) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES HAS MADE AN
ELECTION UNDER SECTION 341(F) OF THE CODE; (XII) NEITHER THE COMPANY NOR ANY OF
THE SUBSIDIARIES IS A PARTY TO ANY AGREEMENT OR ARRANGEMENT THAT PROVIDES FOR
THE PAYMENT OF ANY AMOUNT, OR THE PROVISION OF ANY OTHER BENEFIT, THAT COULD
CONSTITUTE A “PARACHUTE PAYMENT” WITHIN THE MEANING OF SECTION 280G OF THE CODE;
(XIII) NO CLAIM HAS EVER BEEN MADE IN WRITING BY A TAXING

 

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AUTHORITY IN A JURISDICTION WHERE THE COMPANY OR ANY OF THE SUBSIDIARIES DOES
NOT FILE TAX RETURNS THAT SUCH ENTITY IS OR MAY BE SUBJECT TO TAXATION BY THAT
JURISDICTION; (XIV) NONE OF THE ASSETS OF THE COMPANY OR ANY OF THE SUBSIDIARIES
IS “TAX-EXEMPT USE PROPERTY” (AS DEFINED IN SECTION 168(H)(1) OF THE CODE),
“TAX-EXEMPT BOND FINANCED PROPERTY” (AS DEFINED IN SECTION 168(G)(5) OF THE
CODE) OR MAY BE TREATED AS OWNED BY ANY OTHER PERSON PURSUANT TO
SECTION 168(F)(8) OF THE INTERNAL REVENUE CODE OF 1954 (AS IN EFFECT IMMEDIATELY
PRIOR TO THE ENACTMENT OF THE TAX REFORM ACT OF 1986); (XV) THE COMPANY IS NOT
AND WILL NOT BE AT THE CLOSING DATE A “UNITED STATES REAL PROPERTY HOLDING
CORPORATION,” WITHIN THE MEANING OF SECTION 897 OF THE CODE; (XVI) NEITHER THE
COMPANY NOR ANY OF THE SUBSIDIARIES HAS MADE ANY ELECTIONS UNDER SECTIONS 108,
168, 338, 441, 472, 1017, 1033 OR 4977 OF THE CODE; (XVII) NEITHER THE COMPANY
NOR ANY OF THE SUBSIDIARIES HAS ACCOUNTED OR IS ACCOUNTING FOR ANY TRANSACTION
PURSUANT TO SECTION 467 OF CODE; (XVIII) THERE ARE NO “EXCESS LOSS ACCOUNTS” (AS
DEFINED IN TREAS. REG. § 1.1502-19) WITH RESPECT TO ANY STOCK OF ANY SUBSIDIARY;
AND (XIX) NEITHER THE COMPANY NOR ANY OF THE SUBSIDIARIES HAS ANY (A) DEFERRED
GAIN OR LOSS (1) ARISING FROM ANY DEFERRED INTERCOMPANY TRANSACTIONS (AS
DESCRIBED IN TREAS. REG. §§ 1.1502-13 AND 1.1502-13T PRIOR TO AMENDMENT BY
TREASURY DECISION 8597 (ISSUED JULY 12, 1995)) OR (2) WITH RESPECT TO THE STOCK
OR OBLIGATIONS OF ANY OTHER MEMBER OF ANY AFFILIATED GROUP (AS DESCRIBED IN
TREAS. REG. §§ 1.1502-14 AND 1.1502-14T PRIOR TO AMENDMENT BY TREASURY DECISION
8597) OR (B) ANY GAIN SUBJECT TO TREAS. REG. § 1.1502-13, AS AMENDED BY TREASURY
DECISION 8597.

(B)           DEPOMED DEVELOPMENT, LTD. OPERATES ONLY IN BERMUDA AND IS NOT
SUBJECT TO U.S. TAXATION.

SECTION 4.14.  MATERIAL CONTRACTS.    ASSUMING EACH MATERIAL CONTRACT
CONSTITUTES A VALID AND BINDING OBLIGATION OF EACH OTHER PARTY THERETO, EACH
MATERIAL CONTRACT IS A VALID AND BINDING OBLIGATION OF THE COMPANY OR THE
APPLICABLE SUBSIDIARY, AS THE CASE MAY BE.  TO THE KNOWLEDGE OF THE COMPANY,
EACH MATERIAL CONTRACT IS A VALID AND BINDING OBLIGATION OF EACH OTHER PARTY
THERETO, AND EACH SUCH MATERIAL CONTRACT IS IN FULL FORCE AND EFFECT AND IS
ENFORCEABLE BY THE COMPANY OR THE APPLICABLE SUBSIDIARY IN ACCORDANCE WITH ITS
TERMS, EXCEPT AS SUCH ENFORCEMENT MAY BE LIMITED BY THE BANKRUPTCY EXCEPTIONS
AND SUBJECT TO GENERAL PRINCIPLES OF EQUITY.  TO THE KNOWLEDGE OF THE COMPANY,
THERE ARE NO EXISTING DEFAULTS (OR CIRCUMSTANCES OR EVENTS THAT, WITH THE GIVING
OF NOTICE OR LAPSE OF TIME OR BOTH WOULD BECOME DEFAULTS) OF THE COMPANY, ANY
SUBSIDIARY OR ANY THIRD PARTY UNDER ANY OF THE MATERIAL CONTRACTS.  NEITHER THE

 

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COMPANY NOR ANY OF THE SUBSIDIARIES IS A PARTY TO, OR BOUND BY ANY UNEXPIRED,
UNDISCHARGED OR UNSATISFIED WRITTEN OR ORAL CONTRACT, AGREEMENT, INDENTURE,
MORTGAGE, DEBENTURE, NOTE OR OTHER INSTRUMENT UNDER THE TERMS OF WHICH
PERFORMANCE BY THE COMPANY OR THE SUBSIDIARIES ACCORDING TO THE TERMS OF THIS
AGREEMENT WILL BE A DEFAULT OF A MATERIAL PROVISION UNDER OR AN EVENT OF
ACCELERATION, OR GROUNDS FOR TERMINATION, OR WHEREBY TIMELY PERFORMANCE BY THE
COMPANY OF THIS AGREEMENT MAY BE PROHIBITED OR DELAYED.

SECTION 4.15.  INSURANCE.  THE COMPANY AND THE SUBSIDIARIES HAVE OBTAINED AND
MAINTAINED IN FULL FORCE AND EFFECT INSURANCE WITH RESPONSIBLE AND REPUTABLE
INSURANCE COMPANIES OR ASSOCIATIONS IN SUCH AMOUNTS, ON SUCH TERMS AND COVERING
SUCH RISKS, AS IS IN THE COMPANY’S JUDGMENT ADEQUATE TO INSURE AGAINST RISKS TO
WHICH THE COMPANY IS NORMALLY EXPOSED IN ITS DAY-TO-DAY OPERATIONS, CONSISTENT
WITH INDUSTRY PRACTICE FOR COMPANIES (I) ENGAGED IN SIMILAR BUSINESSES AND
(II) OF AT LEAST SIMILAR SIZE TO THAT OF THE COMPANY AND THE SUBSIDIARIES, AND
HAVE MAINTAINED IN FULL FORCE AND EFFECT PUBLIC LIABILITY INSURANCE, INSURANCE
AGAINST CLAIMS FOR PERSONAL INJURY OR DEATH OR PROPERTY DAMAGE OCCURRING IN
CONNECTION WITH ANY OF THE ACTIVITIES OF THE COMPANY OR THE SUBSIDIARIES OR ANY
OF THE PROPERTIES OWNED, OCCUPIED OR CONTROLLED BY THE COMPANY OR ANY OF THE
SUBSIDIARIES, IN SUCH AMOUNT AS REASONABLY DEEMED NECESSARY BY THE COMPANY.  TO
THE KNOWLEDGE OF THE COMPANY, EACH SUCH POLICY IS IN FULL FORCE AND EFFECT, NO
NOTICE OF TERMINATION, CANCELLATION OR RESERVATION OF RIGHTS HAS BEEN RECEIVED
WITH RESPECT TO ANY SUCH POLICY, THERE IS NO DEFAULT WITH RESPECT TO ANY
PROVISION CONTAINED IN ANY SUCH POLICY, AND THERE HAS NOT BEEN ANY FAILURE TO
GIVE ANY NOTICE OR PRESENT ANY CLAIM UNDER ANY SUCH POLICY IN A TIMELY FASHION
OR IN THE MANNER OR DETAIL REQUIRED BY ANY SUCH POLICY, EXCEPT FOR ANY SUCH
FAILURES TO BE IN FULL FORCE AND EFFECT, ANY SUCH TERMINATIONS, CANCELLATIONS,
RESERVATIONS OR DEFAULTS, OR ANY SUCH FAILURES TO GIVE NOTICE OR PRESENT CLAIMS
WHICH WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL ADVERSE
EFFECT ON THE COMPANY.  THE COMPANY BALANCE SHEET REFLECTS ADEQUATE RESERVES FOR
ANY INSURANCE PROGRAMS WHICH REQUIRE (OR HAVE REQUIRED) THE COMPANY OR ANY OF
THE SUBSIDIARIES TO RETAIN A PORTION OF EACH LOSS, INCLUDING, BUT NOT LIMITED
TO, DEDUCTIBLE AND SELF-INSURANCE PROGRAMS.

SECTION 4.16.  TAKEOVER STATUTES.  NO “FAIR PRICE,” “MORATORIUM,” “CONTROL SHARE
ACQUISITION” OR ANY OTHER ANTI-TAKEOVER OR SIMILAR STATUTE OR REGULATION ENACTED
UNDER THE LAWS OF ANY STATE OR THE FEDERAL LAWS OF THE UNITED STATES IS

 

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APPLICABLE TO ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER TRANSACTION DOCUMENTS, EXCEPT FOR SUCH STATUTES OR REGULATIONS AS TO WHICH
ALL NECESSARY ACTION HAS BEEN TAKEN BY THE COMPANY AND ITS BOARD OF DIRECTORS TO
PERMIT THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY IN ACCORDANCE
WITH THE TERMS HEREOF.

SECTION 4.17.  PRIVATE OFFERING.  ASSUMING THE REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER IN THIS AGREEMENT ARE TRUE AND ACCURATE AS OF THE DATE HEREOF, THE
OFFER, SALE AND ISSUANCE OF THE COMPANY COMMON STOCK AS CONTEMPLATED BY THIS
AGREEMENT ARE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
AND THE QUALIFICATION OR REGISTRATION REQUIREMENTS OF APPLICABLE BLUE SKY LAWS. 
NEITHER THE COMPANY NOR ANY AUTHORIZED AGENT ACTING ON BEHALF OF IT HAS OFFERED
OR WILL OFFER OR SELL ANY SECURITIES, OR HAS TAKEN OR WILL TAKE ANY OTHER ACTION
(INCLUDING ANY OFFERING OF ANY SECURITIES OF THE COMPANY UNDER CIRCUMSTANCES
THAT WOULD REQUIRED UNDER THE SECURITIES ACT, THE INTEGRATION OF SUCH OFFERING
WITH THE OFFERING AND SALE OF THE COMPANY COMMON STOCK BEING ACQUIRED
HEREUNDER),THAT WOULD CAUSE THE LOSS OF SUCH EXEMPTIONS.

ARTICLE V

REPRESENTATIONS AND WARRANTIES
OF PURCHASER

Purchaser represents and warrants to the Company as follows:

SECTION 5.01.  ORGANIZATION AND QUALIFICATION.  PURCHASER IS A CORPORATION DULY
ORGANIZED AND VALIDLY EXISTING UNDER THE LAWS OF BARBADOS.

SECTION 5.02.  AUTHORITY RELATIVE TO THIS AGREEMENT.  PURCHASER HAS ALL
NECESSARY CORPORATE POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT
AND THE OTHER TRANSACTION DOCUMENTS AND TO CONSUMMATE THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY.  THE EXECUTION AND DELIVERY OF THIS AGREEMENT
AND THE OTHER TRANSACTION DOCUMENTS BY PURCHASER AND THE CONSUMMATION BY
PURCHASER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY HAVE BEEN DULY AND
VALIDLY AUTHORIZED AND APPROVED BY THE BOARD OF DIRECTORS OF PURCHASER, AND NO
OTHER CORPORATE PROCEEDINGS ON THE PART OF PURCHASER ARE NECESSARY TO AUTHORIZE
OR APPROVE THIS AGREEMENT OR THE OTHER TRANSACTION

 

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DOCUMENTS OR TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. 
THIS AGREEMENT HAS BEEN, AND THE OTHER TRANSACTION DOCUMENTS AGREEMENT WILL,
UPON EXECUTION BE, DULY EXECUTED AND DELIVERED BY PURCHASER AND, ASSUMING THE
DUE AND VALID AUTHORIZATION, EXECUTION AND DELIVERY BY THE COMPANY, CONSTITUTE
VALID AND BINDING OBLIGATIONS OF PURCHASER ENFORCEABLE AGAINST EACH OF THEM IN
ACCORDANCE WITH THEIR TERMS, EXCEPT THAT SUCH ENFORCEABILITY (I) MAY BE LIMITED
BY THE BANKRUPTCY EXCEPTIONS AND (II) IS SUBJECT TO GENERAL PRINCIPLES OF
EQUITY.

SECTION 5.03.  NO CONFLICT; REQUIRED FILINGS AND CONSENTS.  (A)  BASED ON THE
REPRESENTATIONS AND WARRANTIES OF THE COMPANY SET OUT IN SECTION 4.03, NONE OF
THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS
BY PURCHASER, THE CONSUMMATION BY PURCHASER OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY OR COMPLIANCE BY PURCHASER WITH ANY OF THE PROVISIONS HEREOF
OR THEREOF WILL REQUIRE ANY CONSENT OF ANY GOVERNMENTAL ENTITY OR PERSON WHO IS
NOT A GOVERNMENTAL ENTITY, EXCEPT FOR COMPLIANCE WITH THE HSR ACT, IF REQUIRED.

SECTION 5.04.  FINANCING.  PURCHASER WILL HAVE AVAILABLE FUNDS SUFFICIENT TO
DELIVER THE INITIAL SHARE CONSIDERATION AND THE PURCHASER’S OPTION AT THE
CLOSING.

SECTION 5.05.  BROKERS.  EXCEPT FOR THE ENGAGEMENT OF LAZARD FRERES & CO. LLC,
NONE OF PURCHASER, ANY OF THE OTHER ITS SUBSIDIARIES OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS OR EMPLOYEES HAS EMPLOYED ANY BROKER OR FINDER OR INCURRED
ANY LIABILITY FOR ANY BROKERAGE FEES, COMMISSIONS OR FINDER’S FEES IN CONNECTION
WITH HE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 5.06.  RESTRICTED SECURITIES.

(A)           THE PURCHASER IS AN INVESTOR IN SECURITIES AND ACKNOWLEDGES THAT
IT IS ABLE TO FEND FOR ITSELF, CAN BEAR THE ECONOMIC RISK OF ITS INVESTMENT AND
HAS SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL OR BUSINESS MATTERS THAT IT IS
CAPABLE OF EVALUATING THE MERITS AND RISKS OF THE INVESTMENT IN THE COMPANY
COMMON STOCK.

(B)           THE PURCHASER IS AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF
SEC RULE 501 OF REGULATION D, AS PRESENTLY IN EFFECT.

(C)           THE PURCHASER UNDERSTANDS THAT THE SHARES OF COMPANY COMMON STOCK
IT IS PURCHASING ARE CHARACTERIZED AS “RESTRICTED

 

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SECURITIES” UNDER THE FEDERAL SECURITIES LAWS INASMUCH AS THEY ARE BEING
ACQUIRED FROM AN “AFFILIATE” (AS DEFINED IN SEC RULE 144) OF THE COMPANY IN A
TRANSACTION NOT INVOLVING A PUBLIC OFFERING AND THAT UNDER SUCH LAWS AND
APPLICABLE REGULATIONS SUCH COMPANY COMMON STOCK MAY BE RESOLD WITHOUT
REGISTRATION UNDER THE ACT ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT.  IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
COMMON STOCK OR AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE ACT, THE
COMMON STOCK MUST BE HELD INDEFINITELY.  IN THIS CONNECTION, SUCH INVESTOR
REPRESENTS THAT IT IS FAMILIAR WITH SEC RULE 144, AS PRESENTLY IN EFFECT, AND
UNDERSTANDS THE RESALE LIMITATIONS IMPOSED THEREBY AND BY THE ACT, INCLUDING
WITHOUT LIMITATION THE RULE 144 CONDITION THAT CURRENT INFORMATION ABOUT THE
COMPANY BE AVAILABLE TO THE PUBLIC.

(D)           THE PURCHASER UNDERSTANDS THAT THE CERTIFICATES EVIDENCING THE
COMPANY COMMON STOCK ACQUIRED PURSUANT TO THIS AGREEMENT MAY BEAR LEGENDS TO THE
FOLLOWING EFFECT, WHICH LEGENDS SHALL BE REMOVED, UPON THE REQUEST OF THE
PURCHASER AND TO THE EXTENT PERMITTED BY APPLICABLE SECURITIES LAWS, UPON THE
EFFECTIVENESS OF A REGISTRATION STATEMENT FILED WITH THE SEC PURSUANT TO THE
REGISTRATION RIGHTS AGREEMENT:

“The securities represented hereby have not been registered under the Securities
Act of 1933, as amended or any state securities laws and neither the securities
nor any interest therein may be  offered, sold, transferred, pledged,
hypothecated or otherwise disposed of except pursuant to an effective
registration under such act or an available exemption therefrom.”

ARTICLE VI

COVENANTS

SECTION 6.01.  ACCESS TO INFORMATION.  (A)  FROM AND AFTER THE DATE HEREOF AND
PROVIDED THAT THE PURCHASER (AND ITS SUBSIDIARIES, TAKEN TOGETHER) HOLDS,
DIRECTLY OR INDIRECTLY NOT LESS THAN 10% OF THE ISSUED AND OUTSTANDING COMPANY
COMMON STOCK (CALCULATED ON A FULLY DILUTED BASIS), THE COMPANY WILL, AND WILL
CAUSE THE SUBSIDIARIES, AND EACH OF ITS AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, COUNSEL, ADVISORS AND REPRESENTATIVES (COLLECTIVELY, THE
“COMPANY REPRESENTATIVES”)

 

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TO, PROVIDE PURCHASER AND ITS OFFICERS, EMPLOYEES, COUNSEL, ADVISORS AND
REPRESENTATIVES (COLLECTIVELY, THE “PURCHASER REPRESENTATIVES”) REASONABLE
ACCESS, DURING NORMAL BUSINESS HOURS AND UPON REASONABLE NOTICE, TO THE
OFFICERS, EMPLOYEES, OFFICES AND OTHER FACILITIES AND TO THE BOOKS AND RECORDS
OF THE COMPANY AND THE SUBSIDIARIES, AS WILL PERMIT PURCHASER TO MAKE
INSPECTIONS OF SUCH AS ANY OF THEM MAY REASONABLY REQUIRE AND WILL CAUSE THE
COMPANY REPRESENTATIVES AND THE SUBSIDIARIES TO FURNISH PURCHASER AND THE
PURCHASER REPRESENTATIVES TO THE EXTENT AVAILABLE WITH SUCH OTHER INFORMATION
WITH RESPECT TO THE BUSINESS, OPERATIONS AND PROSPECTS OF THE COMPANY AND THE
SUBSIDIARIES AS PURCHASER MAY FROM TIME TO TIME REASONABLY REQUEST; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL NOT BE REQUIRED TO PROVIDE THE PURCHASER OR THE
PURCHASER REPRESENTATIVES ACCESS TO ANY SUCH INFORMATION IF THE COMPANY
REASONABLY BELIEVES, UPON ADVICE OF COUNSEL, THAT NOT PROVIDING SUCH INFORMATION
TO THE PURCHASER OR THE PURCHASER REPRESENTATIVES IS ADVISABLE:  (I) TO PRESERVE
ATTORNEY-CLIENT PRIVILEGE, (II) TO PROTECT PROPRIETARY INFORMATION RELATING TO
DEPOMED DEVELOPMENT, LTD. OR (III) DUE TO A CONFLICT OF INTEREST BETWEEN THE
COMPANY AND THE PURCHASER.  IN THE EVENT OF TERMINATION OF THIS AGREEMENT FOR
ANY REASON, PURCHASER WILL, AND WILL CAUSE THE PURCHASER REPRESENTATIVES TO,
RETURN TO THE COMPANY OR DESTROY ALL COPIES OF WRITTEN INFORMATION FURNISHED BY
THE COMPANY OR ANY OF THE COMPANY REPRESENTATIVES TO PURCHASER OR THE PURCHASER
REPRESENTATIVES AND DESTROY ALL MEMORANDA, NOTES AND OTHER WRITINGS PREPARED BY
PURCHASER OR THE PURCHASER REPRESENTATIVES BASED UPON OR INCLUDING THE
INFORMATION FURNISHED BY THE COMPANY OR ANY OF THE COMPANY REPRESENTATIVES TO
PURCHASER OR THE PURCHASER REPRESENTATIVES (AND PURCHASER WILL CERTIFY TO THE
COMPANY THAT SUCH DESTRUCTION HAS OCCURRED).  SUBJECT TO SECTION 3.01(B) HEREOF,
PURCHASER SHALL, AND SHALL CAUSE THE PURCHASER REPRESENTATIVES TO, HOLD THE
INFORMATION PROVIDED BY THE COMPANY PURSUANT TO THIS SECTION 6.01 IN CONFIDENCE
IN ACCORDANCE WITH THE TERMS OF THE CONFIDENTIALITY AGREEMENT.

(B)           FROM THE DATE HEREOF UNTIL THE CLOSING DATE, PURCHASER WILL, AND
WILL CAUSE ITS SUBSIDIARIES, AND EACH OF THE PURCHASER REPRESENTATIVES TO,
PROVIDE THE COMPANY AND ANY COMPANY REPRESENTATIVES ACCESS TO PURCHASER’S
PUBLICLY AVAILABLE DOCUMENTS.

SECTION 6.02.  REASONABLE EFFORTS.  (A)  SUBJECT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT, EACH PARTY WILL USE COMMERCIALLY REASONABLE EFFORTS TO TAKE, OR
CAUSE TO BE TAKEN, ALL ACTIONS AND TO DO, OR CAUSE TO BE DONE, ALL THINGS
NECESSARY, PROPER OR ADVISABLE UNDER THIS AGREEMENT AND THE OTHER

 

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TRANSACTION DOCUMENTS AND APPLICABLE LAWS AND REGULATIONS TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AS SOON AS PRACTICABLE AFTER THE
DATE HEREOF, INCLUDING (I) PREPARING AND FILING AS PROMPTLY AS PRACTICABLE ALL
DOCUMENTATION TO EFFECT ALL NECESSARY APPLICATIONS, NOTICES, PETITIONS, FILINGS
AND OTHER DOCUMENTS AND TO OBTAIN AS PROMPTLY AS PRACTICABLE ALL CONSENTS,
WAIVERS, LICENSES, ORDERS, REGISTRATIONS, APPROVALS, PERMITS AND AUTHORIZATIONS
NECESSARY OR ADVISABLE TO BE OBTAINED FROM ANY THIRD PARTY AND/OR ANY
GOVERNMENTAL ENTITY IN ORDER TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS AND (II) TAKING ALL REASONABLE
STEPS AS MAY BE NECESSARY TO OBTAIN ALL SUCH MATERIAL CONSENTS, WAIVERS,
LICENSES, REGISTRATIONS, PERMITS, AUTHORIZATIONS, ORDERS AND APPROVALS. IN
FURTHERANCE AND NOT IN LIMITATION OF THE FOREGOING, (I) EACH PARTY HERETO AGREES
TO MAKE APPROPRIATE FILINGS AS REQUIRED PURSUANT TO THE HSR ACT AND ANY OTHER
REGULATORY LAW WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AS PROMPTLY
AS PRACTICABLE AFTER THE DATE HEREOF AND TO SUPPLY AS PROMPTLY AS PRACTICABLE
ANY ADDITIONAL INFORMATION AND DOCUMENTARY MATERIAL THAT MAY BE REQUESTED
PURSUANT TO THE HSR ACT AND ANY OTHER REGULATORY LAW AND TO TAKE ALL OTHER
ACTIONS NECESSARY TO CAUSE THE EXPIRATION OR TERMINATION OF THE APPLICABLE
WAITING PERIODS UNDER THE HSR ACT AS SOON AS PRACTICABLE AND (II) SUBJECT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT, THE COMPANY WILL USE COMMERCIALLY
REASONABLE EFFORTS TO TAKE, OR CAUSE TO BE TAKEN, ALL ACTIONS AND TO DO, OR
CAUSE TO BE DONE, ALL THINGS NECESSARY, PROPER OR ADVISABLE TO OBTAIN ALL
WAIVERS WITH RESPECT TO EACH AND EVERY PREEMPTIVE RIGHT AND RIGHT OF FIRST
REFUSAL TO WHICH THE ISSUANCE OF COMPANY COMMON STOCK PURSUANT TO THIS AGREEMENT
WOULD, IF NOT FOR SUCH WAIVERS, GIVE RISE.

SECTION 6.03.  PUBLIC ANNOUNCEMENTS.  (A)  SO LONG AS THIS AGREEMENT IS IN
EFFECT, PURCHASER AND THE COMPANY AGREE TO CONSULT WITH EACH OTHER BEFORE
ISSUING ANY PRESS RELEASE OR OTHERWISE MAKING ANY PUBLIC STATEMENT WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT EXCEPT AS MAY BE REQUIRED IN
SECURITIES REGULATORY FILINGS OR OTHERWISE REQUIRED BY LAW.

(B)           SO LONG AS THIS AGREEMENT IS IN EFFECT, THE COMPANY AGREES TO
PROVIDE PURCHASER UNDER AN OBLIGATION OF CONFIDENTIALITY AGREEMENT WITH NOTICE
AND COPIES OF ANY PRESS RELEASE OR ANY PUBLIC STATEMENT AT LEAST 24 HOURS PRIOR
TO ISSUANCE THAT INVOLVE DIRECTLY OR INDIRECTLY THE PURCHASER, UNLESS, ON THE
ADVICE OF COUNSEL, THE COMPANY HAS A LEGAL OBLIGATION TO ISSUE SUCH PRESS
RELEASE OR MAKE SUCH PUBLIC STATEMENT PRIOR TO

 

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THE EXPIRATION OF SUCH 24 HOUR PERIOD, IN WHICH CASE THE COMPANY AGREES TO
PROVIDE PURCHASER WITH SUCH NOTICE AND COPIES AT THE EARLIEST PRACTICABLE TIME. 
THE 24 HOUR PERIOD SHALL COMMENCE AT 8:00 A.M. NEW YORK TIME ON THE NEXT
BUSINESS DAY FOLLOWING THE DAY NOTICE WAS RECEIVED IF SUCH DAY WAS NOT A
BUSINESS DAY.  SUBJECT TO SECTION 3.01(B), PURCHASER SHALL, AND SHALL CAUSE THE
PURCHASER REPRESENTATIVES TO, HOLD THE INFORMATION PROVIDED BY THE COMPANY
PURSUANT TO THIS SECTION 6.03 IN CONFIDENCE IN ACCORDANCE WITH THE TERMS OF THE
CONFIDENTIALITY AGREEMENT.

SECTION 6.04.  NOTIFICATION OF CERTAIN MATTERS.  PURCHASER ON THE ONE HAND AND
THE COMPANY ON THE OTHER SHALL PROMPTLY NOTIFY EACH OTHER OF (A) THE OCCURRENCE
OR NON-OCCURRENCE OF ANY FACT OR EVENT WHICH WOULD (I) CAUSE ANY REPRESENTATION
OR WARRANTY CONTAINED IN THIS AGREEMENT TO BE UNTRUE OR INACCURATE IN ANY
MATERIAL RESPECT AT ANY TIME FROM THE DATE HEREOF TO THE CLOSING DATE OR
(II) CAUSE ANY COVENANT, CONDITION OR AGREEMENT HEREUNDER NOT TO BE COMPLIED
WITH OR SATISFIED IN ALL MATERIAL RESPECTS AND (B) ANY FAILURE OF THE COMPANY OR
PURCHASER, AS THE CASE MAY BE, TO COMPLY WITH OR SATISFY ANY COVENANT, CONDITION
OR AGREEMENT TO BE COMPLIED WITH OR SATISFIED BY IT HEREUNDER IN ANY MATERIAL
RESPECT; PROVIDED, HOWEVER, THAT NO SUCH NOTIFICATION SHALL AFFECT THE
REPRESENTATIONS OR WARRANTIES OF ANY PARTY OR THE CONDITIONS TO THE OBLIGATIONS
OF ANY PARTY HEREUNDER.

SECTION 6.05.  CONFIDENTIALITY OF BOARD PROCEEDINGS.  THE COMPANY SHALL USE
COMMERCIALLY REASONABLE EFFORTS TO ENSURE THAT ANY MEMBER OF, OR OBSERVER TO,
THE COMPANY’S BOARD OF DIRECTORS IS EXCLUDED FROM ACCESS TO ANY MEETING OR
PORTION THEREOF IF THE COMPANY REASONABLY BELIEVES, UPON ADVICE OF COUNSEL, THAT
EXCLUSION OF SUCH MEMBER OR OBSERVER IS ADVISABLE:  (X) WITH RESPECT TO ANY
BOARD MEMBER OR OBSERVER DESIGNATED BY THE PURCHASER, TO PROTECT PROPRIETARY
INFORMATION RELATING TO DEPOMED DEVELOPMENT, LTD. AND (Y) WITH RESPECT TO ANY
BOARD MEMBER OR OBSERVER DESIGNATED BY EIS OR ANY OF ITS AFFILIATES, TO PROTECT
PROPRIETARY INFORMATION RELATED TO THE COMPANY’S METFORMIN GR PRODUCT OR ANY
OTHER PROJECT OR BUSINESS BEING PURSUED BY THE COMPANY AND THE PURCHASER,
DESIGNEE, OR AN AFFILIATE OF PURCHASER.

SECTION 6.06.  Reservation of Shares Issuable upon Exercise of Purchaser’s
Option.  At all times until the expiration of the Purchaser’s Option, the
Company will reserve and keep available out of its authorized Company Common
Stock, solely for issuance upon exercise of the Purchaser’s Option

 

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such number of shares of Company Common Stock as may be issuable upon exercise
of the Purchaser’s Option.

SECTION 6.07.  Rule 144 Reporting.  With a view to making available to the
Purchaser the benefits of Rule 144 promulgated by the SEC under the Securities
Act, the Company agrees and covenants to:

(a)           make and keep adequate current public information with respect to
the Company available, as such terms are used within the meaning of Rule 144, at
all times after the Closing;

(b)           file with the SEC in a timely manner all reports and other
documents required of the Company under the Exchange Act, if any; and

(c)           furnish to the Purchaser promptly upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
and the Exchange Act, a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents of the Company as the
Purchaser may reasonably request in order to permit the Purchaser to avail
itself of any rule or regulation of the SEC allowing the Purchaser to sell its
shares of Company Common Stock without an effective registration statement.

SECTION 6.08.  Conditional Option. The Company hereby grants the Purchaser a
Conditional Option (the “Conditional Option”) to purchase additional Company
Common Stock in an amount equal to one third of the New Shares rounded up or
down, as the case may be, to the nearest whole share.  The exercise price of the
Conditional Option shall be equal to the Initial Share Consideration plus
$0.125.  All other terms of the Conditional Option with respect to, adjustments
in the exercise price and number of shares of Company Common Stock purchasable
pursuant to the Conditional Option shall be the same as set forth in the
Purchaser’s Option.  The Conditional Option shall be exercisable for 120 days
from the Closing Date.

SECTION 6.09.  Use of Proceeds.  The Company shall use the net proceeds from the
issuance of the New Shares in furtherance of its business as described in the
Form 10-K, including research and development of pharmaceutical products,
protection of intellectual property rights and compliance with obligations under
the Convertible Note.

 

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ARTICLE VII

CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS

SECTION 7.01.  CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE
TRANSACTIONS.  THE RESPECTIVE OBLIGATIONS OF EACH PARTY TO EFFECT THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT TO BE CONSUMMATED AT THE CLOSING
SHALL BE SUBJECT TO THE SATISFACTION OR WAIVER AT OR PRIOR TO THE CLOSING OF
EACH OF THE FOLLOWING CONDITIONS:

(a)           No Injunctions or Restraints; Illegality.  No laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect having the effect of making
the transactions contemplated hereby illegal or other wise prohibiting
consummation of the transactions contemplated hereby.

(b)           HSR Act.  To the extent applicable, the waiting period (and any
extension thereof) applicable to the transactions contemplated hereby under the
HSR Act shall have been terminated or shall have expired.

(c)           Approval in Authorized Share Increase.  The Company’s shareholders
shall have approved of an increase in the number of authorized shares of Company
Common Stock by 75,000,000 shares to 100,000,000 shares at the Company’s annual
meeting of shareholders to be held on May 30, 2002, or at any postponement or
adjournment thereof.

SECTION 7.02.  CONDITIONS TO THE OBLIGATIONS OF PURCHASER.  THE OBLIGATION OF
PURCHASER TO PERFORM ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT TO BE PERFORMED
AT OR SUBSEQUENT TO THE CLOSING SHALL BE SUBJECT TO THE SATISFACTION AT OR PRIOR
TO THE CLOSING OF THE FOLLOWING ADDITIONAL CONDITIONS, ANY ONE OR MORE OF WHICH
MAY BE WAIVED BY PURCHASER:

(a)           Performance.  The Company shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.

 

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(b)           Representations and Warranties.  Each of the representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true and correct in all respects giving effect to such standard) at and as of
the Closing Date as if made at and as of such time or, if made as of a specified
date other than the date hereof, as of such date.

(c)           Consents, Waivers and Approval.  The Company shall have received
all consents, approvals and waivers necessary for the consummation of the
transactions contemplated hereby, including, without limitation, all waivers
with respect to each and every preemptive right, with the exception of the
preemptive right granted to EIS as set out in that certain EIS Securities
Purchase Agreement as more particularly described in Section 11.10 of this
Agreement, and right of first refusal to which the issuance of Company Common
Stock pursuant to this Agreement would, if not for such waiver, give rise.

(d)           Officer’s Certificate.  Purchaser shall have received a
certificate, dated the Closing Date, of the chief executive officer of the
Company to the effect that the conditions specified in paragraphs (a) through
(c) above have been satisfied.

(e)           Purchaser Nominees Approval Commitment.  The Purchaser shall have
received the written voting commitment (substantially in the form of Annex II
attached hereto) of each of the persons set forth in Annex III attached hereto.

(f)            Registration Rights Agreement.  The Company shall have executed
the Registration Rights Agreement for the benefit of the Purchasers.

(g) Listing of Company Common Stock. The Company shall have received approval
from the American Stock Exchange for listing of all Company Common Stock that
may be purchased by the Purchaser hereunder.

SECTION 7.03.  CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.  THE OBLIGATIONS OF
THE COMPANY UNDER THIS AGREEMENT TO EFFECT THE TRANSACTIONS CONTEMPLATED HEREBY
SHALL BE SUBJECT TO THE SATISFACTION ON OR BEFORE THE CLOSING DATE OF EACH OF

 

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THE FOLLOWING ADDITIONAL CONDITIONS, ANY ONE OR MORE OF WHICH MAY BE WAIVED BY
THE COMPANY:

(a)           Performance.  Purchaser shall have performed and complied in all
material respects with all agreements, obligations and conditions required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date except for those failures to so perform or comply that,
individually or in the aggregate, would not impair the ability of Purchaser to
consummate the transactions contemplated hereby.

(b)           Representations and Warranties.  Each of the representations and
warranties of Purchaser set forth in this Agreement shall be true and correct in
all material respects (except where any statements in a representation or
warranty expressly includes a standard of materiality, such statement shall be
true in all respects giving effect to such standard) at and as of the Closing
Date as if made at and as of such time or, if made as of a specified date other
than the date hereof, as of such date.

(c)           Officer’s Certificate.  The Company shall have received a
certificate, dated the Closing Date, of an executive officer of Purchaser to the
effect that the conditions specified in paragraphs (a) and (b) above are
fulfilled.

ARTICLE VIII

TERMINATION

SECTION 8.01.  TERMINATION.  THIS AGREEMENT MAY BE TERMINATED AND THE
TRANSACTIONS CONTEMPLATED HEREBY MAY BE ABANDONED ANY TIME PRIOR TO THE CLOSING
DATE:

(a)           by the written agreement of Purchaser and the Company duly
authorized by their respective boards of directors;

(b)           by either Purchaser or the Company if, without fault of such
terminating party, the Closing shall not have been consummated on or before July
31, 2002, which date may be extended by mutual consent of the parties hereto; or

 

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(c)           by either Purchaser or the Company, if any court of competent
jurisdiction or other governmental body shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby, and such order, decree, ruling or other action shall have become final
and nonappealable.

SECTION 8.02.  TERMINATION BY PURCHASER.  THIS AGREEMENT MAY BE TERMINATED AND
THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE ABANDONED BY ACTION OF THE BOARD OF
DIRECTORS OF PURCHASER, AT ANY TIME PRIOR TO THE CLOSING DATE, IF:

(a)           the Company shall have failed to perform in all material respects
its covenants or agreements contained in this Agreement which failure would have
a Material Adverse Effect on the Company or materially adversely affect (or
materially delay) the ability of Purchaser or the Company to consummate the
transactions contemplated hereby, and the Company has not cured such breach
within ten Business Days after notice by Purchaser thereof; or

(b)           the representations and warranties of the Company contained in
this Agreement shall not be true and correct in any respect that is reasonably
likely to have a Material Adverse Effect on the Company (or if such
representations and warranties are qualified by reference to materiality or a
Material Adverse Effect on the Company) and the Company has not cured such
breach within 10 Business Days after notice by Purchaser.

SECTION 8.03.  TERMINATION BY THE COMPANY.  THIS AGREEMENT MAY BE TERMINATED AND
THE TRANSACTIONS CONTEMPLATED HEREBY MAY BE ABANDONED AT ANY TIME PRIOR TO THE
CLOSING DATE BY ACTION OF THE BOARD OF DIRECTORS OF THE COMPANY, IF:

(a)           Purchaser shall have failed to perform in all material respects
its covenants or agreements contained in this Agreement which would materially
adversely affect (or materially delay) the ability of Purchaser or the Company
to consummate the transactions contemplated hereby, and Purchaser has not cured
such breach within 10 Business Days after notice by the Company thereof; or

(b)           the representations and warranties of Purchaser contained in this
Agreement shall not be true and correct in any respect, the effect of which is
that the consummation of the transactions contemplated is reasonably likely

 

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to have a Material Adverse Effect on the Company and Purchaser has not cured
such breach within 10 Business Days after notice by the Company.

SECTION 8.04.  PROCEDURE FOR TERMINATION.  IN THE EVENT OF TERMINATION AND
ABANDONMENT OF THE TRANSACTIONS CONTEMPLATED HEREIN BY PURCHASER OR THE COMPANY
PURSUANT TO THIS ARTICLE VIII, WRITTEN NOTICE THEREOF SHALL FORTHWITH BE GIVEN
TO THE OTHER.

SECTION 8.05.  EXTENSION; WAIVER.  AT ANY TIME PRIOR TO THE CLOSING DATE, THE
PARTIES HERETO MAY (I) EXTEND THE TIME FOR THE PERFORMANCE OF ANY OF THE
OBLIGATIONS OR OTHER ACTS OF ANY OTHER PARTY HERETO, (II) WAIVE ANY INACCURACIES
IN THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN BY ANY OTHER PARTY OR IN
ANY DOCUMENT, CERTIFICATE OR WRITING DELIVERED PURSUANT HERETO BY ANY OTHER
PARTY OR (III) WAIVE COMPLIANCE WITH ANY OF THE AGREEMENTS OF ANY OTHER PARTY OR
WITH ANY CONDITIONS TO ITS OWN OBLIGATIONS.  ANY AGREEMENT ON THE PART OF ANY
PARTY TO ANY SUCH EXTENSION OR WAIVER SHALL BE VALID ONLY IF SET FORTH IN AN
INSTRUMENT IN WRITING SIGNED ON BEHALF OF SUCH PARTY.

ARTICLE IX

CLOSING

SECTION 9.01.  TIME AND PLACE.  SUBJECT TO THE PROVISIONS OF ARTICLES VII AND
VIII, THE CLOSING OF THE TRANSACTIONS CONTEMPLATED HEREBY (THE “CLOSING”) SHALL
TAKE PLACE AT THE OFFICES OF HELLER EHRMAN WHITE & MCAULIFFE LLP, 275
MIDDLEFIELD ROAD, MENLO PARK, CALIFORNIA ON JUNE 3, 2002 OR ON SUCH DATE AND
TIME TO BE AGREED UPON BY THE PARTIES, BUT IN NO EVENT LATER THAN 9:00 A.M.,
LOCAL TIME, ON THE FIRST BUSINESS DAY AFTER THE DATE ON WHICH EACH OF THE
CONDITIONS SET FORTH IN ARTICLES VII AND VIII HAVE BEEN SATISFIED OR WAIVED BY
THE PARTY OR PARTIES ENTITLED TO THE BENEFIT OF SUCH CONDITIONS; OR AT SUCH
OTHER PLACE, AT SUCH OTHER TIME, OR ON SUCH OTHER DATE AS PURCHASER AND THE
COMPANY MAY MUTUALLY AGREE.  THE TIME AND DATE ON WHICH THE CLOSING ACTUALLY
OCCURS IS HEREIN REFERRED TO AS THE “CLOSING DATE.”

 

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ARTICLE X

INDEMNIFICATION

SECTION 10.01  Indemnification.  In addition to all rights and remedies
available to the parties hereto at law or in equity, the Company shall indemnify
the Purchaser, its stockholders, officers, directors, employees, agents,
representatives, successors and assigns, its affiliates, and it’s affiliates’
stockholders, officers, directors, employees, agents, representatives,
successors and assigns (collectively, the “Indemnified Persons”), and save and
hold each Indemnified Person harmless from and against and pay on behalf of or
reimburse each such Indemnified Person, as and when incurred, for any and all
loss, liability, demand, claim, action, cause of action, cost, damage,
deficiency, tax, penalty, fine or expense, whether or not arising out of any
claims by or on behalf of such Indemnified Person or any third party, including
interest, penalties, reasonable attorneys’ fees and expenses and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, “Losses”), that any such Indemnified Person may suffer, sustain
incur or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of:  (i) any misrepresentation or breach of warranty
on the part of the Company under this Agreement; or (ii) any nonfulfillment,
default or breach of any covenant or agreement on the part of the Company under
this Agreement or any of the other Transaction Documents.

 

10.02  Maximum Recovery.  Notwithstanding anything in this Agreement to the
contrary, in no event shall the Company be liable for indemnification under this
Article X in an amount in excess of the purchase price of the New Shares and the
shares of Company Common Stock issued upon exercise of the Purchaser’s Option
and the Conditional Option.

 

10.03  Exception.  Notwithstanding the foregoing, upon judicial determination
that is final and no longer appealable, that the act or omission giving rise to
the indemnification set forth above resulted primarily out of or was based
primarily upon the Indemnified Person’s negligence (unless such Indemnified
Person’s negligence was based upon the Indemnified Person’s reliance in good
faith upon any of the representations, warranties, covenants or promises made by
the Company herein or in any of the other Transaction Documents) the Company
shall not be responsible for any Losses sought to be indemnified

 

 

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in connection therewith, and the Company shall be entitled to recover from the
Indemnified Person all amounts previously paid in full or partial satisfaction
of such indemnity, together with all costs and expenses (including reasonable
attorneys fees) of the Company reasonably incurred in connection with the
Indemnified Persons claim for indemnity, together with interest at the rate per
annum publicly announced by Citibank, N.A. as its prime rate from the time of
payment of such amounts to the Indemnified Person until repayment to the
Company.

 

10.04  Investigation.  All indemnification rights hereunder shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby to the extent provided in Section 10.06 below,
irrespective of any investigation, inquiry or examination made for or on behalf
of, or any knowledge of the Indemnified Person or the acceptance of any
certificate or opinion.

 

10.05  Contribution.  If the indemnity provided for in this Section 10.01 shall
be, in whole or in part, unavailable to any Indemnified Person, due to Section
10.01 being declared unenforceable by a court of competent jurisdiction based
upon reasons of public policy, so that Section 10.01 shall be insufficient to
hold each such Indemnified Person harmless from Losses which would otherwise be
indemnified hereunder, then the Company and the Indemnified Person shall each
contribute to the amount paid or payable for such Loss in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
the one hand and the Indemnified Person on the other, but also the relative
fault of the Company and be in addition to any liability that the Company may
otherwise have.  The indemnity, contribution and expense reimbursement
obligations that the Company has under this Article X shall survive the
expiration of the Transaction Documents.  The parties hereto further agree that
the indemnification and reimbursement commitments set forth in this Agreement
shall apply whether or not the Indemnified Person is a formal party to any such
lawsuit, claims or other proceedings.

 

10.06       Limitation.  Except as set forth in Section 10.02 above with respect
to indemnification, this Article X is not intended to limit the rights or
remedies otherwise available to any party hereto with respect to this Agreement
or the other Transaction Documents.

 

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ARTICLE XI

MISCELLANEOUS

SECTION 11.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  OTHER THAN THE
REPRESENTATIONS AND WARRANTIES SET OUT IN SECTIONS 4.11 AND 4.13, THE
REPRESENTATIONS AND WARRANTIES MADE IN THIS AGREEMENT SHALL SURVIVE FOR A PERIOD
OF THREE YEARS BEYOND THE CLOSING DATE.  THE REPRESENTATIONS AND WARRANTIES SET
OUT IN SECTIONS 4.11 AND 4.13 SHALL UNTIL THE EXPIRATION OF THE APPLICABLE
STATUTORY PERIOD.

SECTION 11.02.  ENTIRE AGREEMENT; ASSIGNMENT.  (A)  THIS AGREEMENT (INCLUDING
THE DOCUMENTS AND THE INSTRUMENTS REFERRED TO HEREIN) AND THE CONFIDENTIALITY
AGREEMENT EXECUTED BY PURCHASER AND THE COMPANY DATED APRIL 5, 2001 AND THE
CONFIDENTIALITY PROVISION SET FORTH IN NUMBERED PARAGRAPH 8 OF THE LETTER
BETWEEN PURCHASER AND THE COMPANY DATED AUGUST 24, 2001 (TOGETHER, THE
“CONFIDENTIALITY AGREEMENT”) CONSTITUTE THE ENTIRE AGREEMENT AND SUPERSEDE ALL
PRIOR AGREEMENTS AND UNDERSTANDINGS, BOTH WRITTEN AND ORAL, AMONG THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF.

(B)           NEITHER THIS AGREEMENT NOR ANY OF THE RIGHTS, INTERESTS OR
OBLIGATIONS HEREUNDER WILL BE ASSIGNED BY ANY OF THE PARTIES HERETO (WHETHER BY
OPERATION OF LAW OR OTHERWISE) WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER
PARTIES; PROVIDED, HOWEVER, THAT PURCHASER MAY ASSIGN THIS AGREEMENT AND ANY OF
ITS RIGHTS, INTERESTS AND OBLIGATIONS HEREUNDER TO AN AFFILIATE OF SUCH PARTY
WITHOUT SUCH CONSENT.  SUBJECT TO THE PRECEDING SENTENCE, THIS AGREEMENT WILL BE
BINDING UPON, INURE TO THE BENEFIT OF AND BE ENFORCEABLE BY THE PARTIES AND
THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.

SECTION 11.03.  VALIDITY.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION
OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER
PROVISION OF THIS AGREEMENT, EACH OF WHICH SHALL REMAIN IN FULL FORCE AND
EFFECT.

SECTION 11.04.  NOTICES.  ALL NOTICES, REQUESTS, CLAIMS, DEMANDS AND OTHER
COMMUNICATIONS HEREUNDER SHALL BE IN WRITING AND SHALL BE DEEMED TO HAVE BEEN
DULY GIVEN WHEN DELIVERED IN PERSON, BY OVERNIGHT COURIER OR FACSIMILE (WITH
RECEIPT CONFIRMED) TO THE RESPECTIVE PARTIES AS FOLLOWS:

 

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If to Purchaser:

 

Biovail Laboratories Incorporated
Chelston Park, Building 2, Ground Floor, Collymore Rock, St. Michael, Barbados,
West Indies

and copies to:

 

Biovail Corporation
2488 Dunwin Drive
Mississauga, Ontario
Canada L5L 1J9
Attention:  General Counsel
Fax:  (416) 285-6499

 

Cahill Gordon & Reindel
80 Pine Street
New York, New York  10005
Attention:  Roger Andrus, Esq.
Fax:  (212) 269-5420

If to the Company:

 

Depomed, Inc.
1360 O’Brien Drive
Menlo Park, California  94025
Attention:  Chief Financial Officer
Fax:  (650) 462-9991

with a copy to:

 

Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, California 94025
Attention:  Julian N. Stern, Esq.
Fax:  (650) 324-0638

or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).

SECTION 11.05.  GOVERNING LAW; JURISDICTION.  (A)  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS THEREOF; PROVIDED, HOWEVER, THAT ISSUES

 

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INVOLVING THE CORPORATE GOVERNANCE OF ANY OF THE PARTIES HERETO SHALL BE
GOVERNED BY THEIR RESPECTIVE JURISDICTIONS.

(B)           IN ADDITION, EACH OF THE PARTIES HERETO AGREES THAT IT WILL NOT
BRING ANY ACTION RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY COURT OTHER THAN A FEDERAL OR STATE COURT SITTING IN
NEW YORK, NEW YORK.

SECTION 11.06.  DESCRIPTIVE HEADINGS.  THE DESCRIPTIVE HEADINGS HEREIN ARE
INSERTED FOR CONVENIENCE OF REFERENCE ONLY AND ARE NOT INTENDED TO BE PART OF OR
TO AFFECT THE MEANING OR INTERPRETATION OF THIS AGREEMENT.

SECTION 11.07.  COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED TO BE AN ORIGINAL, BUT ALL OF WHICH
SHALL CONSTITUTE ONE AND THE SAME AGREEMENT.

SECTION 11.08.  PARTIES IN INTEREST.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE SOLELY TO THE BENEFIT OF EACH PARTY HERETO, AND, EXCEPT WITH RESPECT TO
SECTIONS 2.02, 3.01(D), NOTHING IN THIS AGREEMENT, EXPRESS OR IMPLIED, IS
INTENDED TO CONFER UPON ANY OTHER PERSON ANY RIGHTS OR REMEDIES OF ANY NATURE
WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT.

SECTION 11.09.  REMEDIES.  EXCEPT AS SET FORTH BELOW, THE PARTIES HERETO AGREE
THAT IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF
THIS AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR
WERE OTHERWISE BREACHED, AND, ACCORDINGLY, IT IS AGREED THAT THE PARTIES SHALL
BE ENTITLED TO AN INJUNCTION OR INJUNCTIONS TO PREVENT SUCH BREACHES OF THIS
AGREEMENT AND TO ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF IN ANY
COURT OF THE UNITED STATES OR ANY STATE HAVING JURISDICTION, THIS BEING IN
ADDITION TO ANY OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.

SECTION 11.10     EIS Right of Participation.

 

(a)                                  The Purchaser and the Company acknowledge
that Elan International Services, Ltd. (“EIS”) may elect to purchase securities
of the Company on the same terms and subject to the same conditions as those set
forth herein in accordance with that certain Securities Purchase Agreement,
dated as of January 21, 2000, between the Company and EIS (the “EIS Securities
Purchase Agreement”).  In the event that Elan elects to exercise its preemptive
right under the EIS Securities Purchase

 

 

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Agreement, the Company shall enter into a Stock Purchase Agreement with EIS on
the same terms and conditions as those set forth herein; provided that the
number of shares of Company Common Stock to be purchased by EIS shall be no
greater than the number of shares of Common Stock which EIS is entitled to
purchase under the EIS Securities Purchase Agreement and the number of shares of
Company Common Stock subject to the Purchaser’s Option and Conditional Option
provided for in such agreement shall be proportionately adjusted as more
particularly described below. Any such agreement shall provide, with respect to
the restriction of access to proprietary information, that proprietary
information will include information relating to the Company’s Metformin GR
product or any other project or business being pursued by the Company and the
Purchaser, Designee, or an affiliate of Purchaser in lieu of proprietary
information relating to DepoMed Development, Ltd.

 

(b)                                 If pursuant to the EIS Securities Purchase
Agreement EIS chooses to exercise its pre-emptive right in respect of any
proposed issuances of Company Common Stock issued to the Purchaser pursuant to
the terms of this Agreement (the “Issuance”), then the number of Company Common
Stock to be issued by the Company to the Purchaser on such Issuance shall be
increased to the number of Company Common Stock that results in the Purchaser
owning the same percentage of (i) the total number of issued and outstanding
Company Common Stock immediately subsequent to the Issuance of Company Common
Stock to the Purchaser and to EIS; as (ii) the total number of issued and
outstanding Company Common Stock calculated as if EIS had not exercised its
pre-emptive right in respect of the Issuance of Company Common Stock to the
Purchaser.

 

(c)                                  If EIS chooses to exercise its pre-emptive
right in respect of the Issuance, the number of Company Common Stock to be
issued by the Company to the Purchaser will be calculated as the amount
determined as Y by the formulae in Part B-2 of Schedule 11.10, where:

 

(1)                                  B is the number of Company Common Stock
owned by the Purchaser prior to the Issuance;

 

 

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(2)                                  B% is the percentage of the issued and
outstanding Company Common Stock that the Purchaser would own upon the Issuance
(calculated without reference to any Company Common Stock that may be issued to
EIS should it exercise its pre-emptive right);

 

(3)                                  E is the number of Company Common Stock
owned by EIS prior to the Issuance;

 

(4)                                  E% is the percentage of issued and
outstanding Company Common Stock that EIS is entitled to own upon the
acquisition of Company Common Stock on the exercise of its pre-emptive right and
the Issuance; and

 

(5)                                  T is the total number of issued and
outstanding Company Common Stock prior to the Issuance and the issuance of any
Company Common Stock to EIS on the exercise of its pre-emptive right.

 

The number of shares to be issued to EIS on the exercise of its pre-emptive
right is the number determined as X by the formulae in Part B-2 of Schedule
11.10.

 

 

[The remainder of this page has been left intentionally blank]

 

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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its respective officer thereunto duly authorized, all as of the
day and year first above written.

 

BIOVAIL LABORATORIES INCORPORATED

 

 

 

By:

/s/ Eugene Melnyk

 

 

Name:  Eugene Melnyk

 

 

Title: President

 

 

 

DEPOMED, INC.

 

 

 

By:

/s/ John W. Fara

 

 

Name:  John W. Fara

 

 

Title: President

 

 

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ANNEX I

Form of Registration Rights Agreement

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of May   , 2002
by and between Depomed, Inc., a California corporation (“Depomed” or the
“Company”), and Biovail Laboratories Incorporated, a corporation organized under
the laws of Barbados (“Biovail”).

R E C I T A L S:

A.            Pursuant to a Stock Purchase Agreement dated as of May   , 2002 by
and between Depomed and Biovail (the “Purchase Agreement”), Biovail has agreed
to acquire or cause its designee to acquire, and may acquire in the future,
certain shares of common stock, no par value, of Depomed (the “Common Stock”).

B.            It is a condition to the closing of the transactions contemplated
by the Purchase Agreement that the parties execute and deliver this Agreement.

C.            The parties desire to set forth their agreement as to the terms
and conditions related to the granting of certain registration rights to the
Holders (as defined below) relating to the Common Stock held by such Holders.

A G R E E M E N T:

The parties hereto agree as follows:

1.             CERTAIN DEFINITIONS.  AS USED IN THIS AGREEMENT, THE FOLLOWING
TERMS SHALL HAVE THE FOLLOWING RESPECTIVE MEANINGS:

“Commission” shall mean the U.S. Securities and Exchange Commission.

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.

 

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“Holders” shall mean Biovail, any Person as a designee of Biovail who shall have
acquired Registrable Securities and any Person who shall have acquired
Registrable Securities from Biovail or its designee, in each case as permitted
herein, in a transaction pursuant to which registration rights are transferred
pursuant to Section 10 hereof.

“Person” shall mean an individual, a partnership, a company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a governmental or quasi-governmental entity, or any department, agency or
political subdivision thereof.

“Prospectus” shall mean the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
prospectus, including post-effective amendments, and all documents and materials
incorporated by reference in such prospectus.

“Registrable Securities” means (i) any shares of Common Stock acquired pursuant
to the Purchase Agreement, including, without limitation, the Purchaser’s Option
and Conditional Option (each as defined in the Purchase Agreement) contemplated
thereby, and (ii) any shares of Common Stock issued or issuable in respect of
the securities referred to in clause (i) above upon any stock split, stock
dividend, recapitalization, consolidation, merger, spin-off, split-off or
similar event; excluding in all cases, however, any Registrable Securities that
(a) have been sold, exchanged or otherwise transferred by a holder thereof
pursuant to an effective Registration Statement, (b) that are eligible to be
sold, exchanged or otherwise transferred without compliance with the
registration requirements of Rule 144 (including, without limitation, Rule
144(k)) promulgated under the Securities Act, as such rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission, and (c) Registrable Securities sold by a Person in a transaction
(including a transaction pursuant to a Registration Statement under this
Agreement and a transaction pursuant to Rule 144 promulgated under

 

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the Securities Act) in which registration rights are not transferred pursuant to
Section 10 hereof.

The terms “register,” “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act.

“Registration Expenses” shall mean all expenses, other than Selling Expenses,
incurred by the Company in complying with Sections 2 or 3 hereof, including,
without limitation, all registration, qualification and filing fees, exchange
listing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration.

“Registration Statement” shall mean any registration statement of the Company
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference in such registration statement.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Selling Expenses” shall mean all underwriting discounts, selling commissions
and stock transfer taxes and the costs, fees and expenses of any accountants,
attorneys or other experts retained by the Holders or Holder.

2.             DEMAND REGISTRATIONS.

(A)           REQUESTS FOR REGISTRATION.  IN THE EVENT THAT AT ANY TIME ON OR
AFTER THE DATE HEREOF THE COMPANY RECEIVES FROM THE HOLDER(S) A WRITTEN REQUEST
THAT THE COMPANY FILE A REGISTRATION STATEMENT ON FORM S-1 OR FORM S-3 (OR ANY
SUCCESSOR FORM OR SHORT FORM REGISTRATION STATEMENT) FOR A PUBLIC OFFERING OF
REGISTRABLE SECURITIES (A “DEMAND REGISTRATION”), THE REASONABLY ANTICIPATED
AGGREGATE PRICE TO THE PUBLIC OF WHICH, NET OF UNDERWRITING DISCOUNTS AND
COMMISSIONS, WOULD BE AT LEAST $3,000,000, WITHIN 5 DAYS AFTER RECEIPT OF ANY
SUCH REQUEST THE COMPANY WILL GIVE WRITTEN NOTICE OF SUCH REQUESTED REGISTRATION
TO ALL OTHER HOLDERS OF REGISTRABLE SECURITIES.  THE HOLDERS IN AGGREGATE WILL
BE ENTITLED TO REQUEST TWO DEMAND REGISTRATIONS HEREUNDER.  A

 

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REGISTRATION WILL NOT COUNT AS A DEMAND REGISTRATION UNTIL IT HAS BECOME
EFFECTIVE (UNLESS SUCH DEMAND REGISTRATION HAS NOT BECOME EFFECTIVE DUE SOLELY
TO THE FAULT OF THE HOLDERS REQUESTING SUCH REGISTRATION, INCLUDING A REQUEST BY
SUCH HOLDERS THAT SUCH REGISTRATION BE WITHDRAWN).  NOTWITHSTANDING ANYTHING IN
THIS SECTION 2 TO THE CONTRARY, THE RIGHTS OF THE HOLDERS UNDER THIS SECTION 2
SHALL BE SUBJECT TO THE PIGGYBACK REGISTRATION RIGHTS, INCLUDING RIGHTS OF
PRIORITY AND RIGHTS RELATED TO THE SELECTION OF UNDERWRITERS, OF CERTAIN
SECURITY HOLDERS OF THE COMPANY TO PURSUANT TO SECTION 3 OF THE REGISTRATION
RIGHTS AGREEMENT, DATED AS OF JANUARY 21, 2000 BETWEEN THE COMPANY AND ELAN
INTERNATIONAL SERVICES, INC., AS IN EFFECT AS OF THE DATE HEREOF (THE “EIS
REGISTRATION RIGHTS AGREEMENT”.

(B)           PRIORITY ON DEMAND REGISTRATIONS.  IF A DEMAND REGISTRATION IS AN
UNDERWRITTEN OFFERING AND THE MANAGING UNDERWRITERS ADVISE THE COMPANY IN
WRITING THAT IN THEIR OPINION THE NUMBER OF REGISTRABLE SECURITIES REQUESTED TO
BE INCLUDED IN SUCH OFFERING EXCEEDS THE NUMBER OF REGISTRABLE SECURITIES WHICH
CAN BE SOLD IN SUCH OFFERING WITHOUT ADVERSELY AFFECTING THE MARKETABILITY OF
THE OFFERING, THE COMPANY WILL INCLUDE IN SUCH REGISTRATION (X) SUCH NUMBER OF
REGISTRABLE SECURITIES PRO RATA AMONG THE SELLING HOLDERS BASED UPON THE NUMBER
OF REGISTRABLE SECURITIES PROPOSED TO BE SOLD BY EACH SUCH HOLDER AND (Y) THEN,
ANY OTHER SHARES OF COMMON STOCK PROPOSED TO BE SOLD BY THE COMPANY OR OTHER
PERSONS.  NO SECURITIES OTHER THAN REGISTRABLE SECURITIES HEREUNDER SHALL BE
INCLUDED IN SUCH DEMAND REGISTRATION WITHOUT THE PRIOR WRITTEN CONSENT OF
BIOVAIL, OR, IN THE EVENT THAT BIOVAIL (TAKEN TOGETHER WITH ITS SUBSIDIARIES) AT
SUCH TIME HOLDS LESS THAN 25% OF THE REGISTRABLE SECURITIES, HOLDERS WHO
COLLECTIVELY HOLD REGISTRABLE SECURITIES REPRESENTING AT LEAST 50% OF THE
REGISTRABLE SECURITIES THEN OUTSTANDING.

(C)           RESTRICTIONS ON DEMAND REGISTRATION.  THE COMPANY MAY POSTPONE THE
FILING OR THE EFFECTIVENESS OF A REGISTRATION STATEMENT FOR A DEMAND
REGISTRATION ONE TIME FOR UP TO 90 DAYS IF THE COMPANY DETERMINES IN GOOD FAITH
THAT SUCH DEMAND REGISTRATION WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT ON ANY PROPOSAL OR PLAN BY THE COMPANY TO ENGAGE IN ANY
FINANCING, ACQUISITION OR DISPOSITION OF ASSETS (OTHER THAN IN THE ORDINARY
COURSE OF BUSINESS) OR ANY MERGER, CONSOLIDATION, TENDER OFFER OR SIMILAR
TRANSACTION OR WOULD REQUIRE DISCLOSURE OF ANY INFORMATION THAT THE BOARD OF
DIRECTORS OF THE COMPANY DETERMINES IN GOOD FAITH THE DISCLOSURE OF WHICH WOULD
BE DETRIMENTAL TO THE

 

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COMPANY; PROVIDED, THAT IN SUCH EVENT, THE HOLDERS INITIALLY REQUESTING SUCH
DEMAND REGISTRATION WILL BE ENTITLED TO WITHDRAW SUCH REQUEST AND, IF SUCH
REQUEST IS WITHDRAWN, SUCH DEMAND REGISTRATION WILL NOT COUNT AS A PERMITTED
DEMAND REGISTRATION HEREUNDER AND THE COMPANY WILL PAY ANY REGISTRATION EXPENSES
IN CONNECTION WITH SUCH REGISTRATION.

(D)           SELECTION OF UNDERWRITERS.  BIOVAIL, OR, IN THE EVENT THAT BIOVAIL
(TAKEN TOGETHER WITH ITS SUBSIDIARIES) AT SUCH TIME HOLDS LESS THAN 25% OF THE
REGISTRABLE SECURITIES, THE HOLDERS OF A MAJORITY OF THE REGISTRABLE SECURITIES
PARTICIPATING THEREIN, WILL HAVE THE RIGHT TO SELECT THE INVESTMENT BANKER(S)
AND MANAGER(S) TO ADMINISTER AN OFFERING PURSUANT TO THE DEMAND REGISTRATION,
SUBJECT TO THE COMPANY’S PRIOR WRITTEN APPROVAL, WHICH WILL NOT BE UNREASONABLY
WITHHELD OR DELAYED.

(E)           OTHER REGISTRATION RIGHTS.  EXCEPT AS PROVIDED IN THIS AGREEMENT,
SO LONG AS ANY HOLDER OWNS ANY REGISTRABLE SECURITIES, THE COMPANY WILL NOT
GRANT TO ANY PERSONS THE RIGHT TO REQUEST THE COMPANY TO REGISTER ANY EQUITY
SECURITIES OF THE COMPANY, OR ANY SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO OR
EXERCISABLE FOR SUCH SECURITIES, WHICH CONFLICTS WITH THE RIGHTS GRANTED TO THE
HOLDERS HEREUNDER, WITHOUT THE PRIOR WRITTEN CONSENT OF THE HOLDERS OF AT LEAST
50% OF THE REGISTRABLE SECURITIES.

3.             PIGGYBACK REGISTRATIONS.

(A)           RIGHT TO PIGGYBACK.  IF AT ANY TIME THE COMPANY SHALL PROPOSE TO
REGISTER COMMON STOCK UNDER THE SECURITIES ACT (OTHER THAN IN A REGISTRATION
STATEMENT ON FORM S-3 RELATING TO SALES OF SECURITIES TO PARTICIPANTS IN A
COMPANY DIVIDEND REINVESTMENT PLAN, OR FORM S-4 OR S-8 OR ANY SUCCESSOR FORM OR
IN CONNECTION WITH AN ACQUISITION OR EXCHANGE OFFER OR AN OFFERING OF SECURITIES
SOLELY TO THE EXISTING SHAREHOLDERS OR EMPLOYEES OF THE COMPANY), THE COMPANY
(I) SHALL GIVE PROMPT WRITTEN NOTICE TO ALL HOLDERS OF ITS INTENTION TO EFFECT
SUCH A REGISTRATION AND, (II) SUBJECT TO SECTION 3(B) AND THE OTHER TERMS OF
THIS AGREEMENT, WILL INCLUDE IN SUCH REGISTRATION ALL REGISTRABLE SECURITIES
WHICH ARE PERMITTED UNDER APPLICABLE SECURITIES LAWS TO BE INCLUDED IN THE FORM
OF REGISTRATION STATEMENT SELECTED BY THE COMPANY AND WITH RESPECT TO WHICH THE
COMPANY HAS RECEIVED WRITTEN REQUESTS FOR INCLUSION THEREIN WITHIN 15 DAYS AFTER
THE RECEIPT OF THE COMPANY’S NOTICE (EACH, A “PIGGYBACK REGISTRATION”).  A
HOLDER WILL BE PERMITTED TO WITHDRAW ALL OR ANY PART OF THE

 

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REGISTRABLE SECURITIES REQUESTED BY SUCH HOLDER TO BE INCLUDED THEREIN FROM A
PIGGYBACK REGISTRATION AT ANY TIME PRIOR TO THE EFFECTIVE DATE OF SUCH PIGGYBACK
REGISTRATION.  NOTWITHSTANDING ANYTHING IN THIS SECTION 3 TO THE CONTRARY, THE
RIGHTS OF THE HOLDERS UNDER THIS SECTION 3 SHALL BE SUBJECT TO THE RIGHTS,
INCLUDING RIGHTS OF PRIORITY AND RIGHTS RELATED TO THE SELECTION OF
UNDERWRITERS, OF CERTAIN SECURITY HOLDERS OF THE COMPANY TO CAUSE THE COMPANY TO
EFFECT A DEMAND REGISTRATION PURSUANT TO SECTION 2 OF THE EIS REGISTRATION
RIGHTS AGREEMENT, AS IN EFFECT AS OF THE DATE HEREOF.

(B)           PRIORITY ON PIGGYBACK REGISTRATIONS.  IF A PIGGYBACK REGISTRATION
IS TO BE AN UNDERWRITTEN OFFERING, AND THE MANAGING UNDERWRITERS ADVISE THE
COMPANY IN WRITING THAT IN THEIR OPINION THE NUMBER OF SECURITIES REQUESTED TO
BE INCLUDED IN SUCH REGISTRATION EXCEEDS THE NUMBER WHICH CAN BE SOLD IN SUCH
OFFERING WITHOUT ADVERSELY AFFECTING THE MARKETABILITY OF THE OFFERING, THE
COMPANY SHALL INCLUDE IN SUCH PIGGYBACK REGISTRATION, ONLY AS MAY BE PERMITTED
IN THE REASONABLE BUSINESS JUDGMENT OF THE MANAGING UNDERWRITERS FOR SUCH
PIGGYBACK REGISTRATION:

(I)            FIRST, UP TO THAT NUMBER OF SECURITIES THAT THE COMPANY PROPOSES
TO SELL FOR ITS OWN ACCOUNT, IF ANY;

(II)           SECOND, UP TO THAT NUMBER OF REGISTRABLE SECURITIES REQUESTED TO
BE INCLUDED IN SUCH REGISTRATION BY THE HOLDERS AND THAT NUMBER OF SECURITIES
REQUESTED TO BE INCLUDED IN SUCH REGISTRATION BY ANY OTHER PERSON WITH
REGISTRATION RIGHTS APPLICABLE TO SUCH PIGGYBACK REGISTRATION UNDER AGREEMENTS
EXISTING AS OF THE DATE HEREOF, PRO RATA AMONG THE HOLDERS OF SUCH REGISTRABLE
SECURITIES AND SUCH OTHER PERSONS, ON THE BASIS OF THE NUMBER OF SHARES OWNED;
AND

(III)          THIRD, UP TO THAT NUMBER OF OTHER SECURITIES REQUESTED TO BE
INCLUDED IN SUCH REGISTRATION.

The Holders of any Registrable Securities included in such an underwritten
offering must execute an underwriting agreement, in customary form and in form
and substance satisfactory to the managing underwriters.

(C)           RIGHT TO TERMINATE REGISTRATION.  IF, AT ANY TIME AFTER GIVING
WRITTEN NOTICE OF ITS INTENTION TO REGISTER ANY OF ITS SECURITIES AS SET FORTH
IN SECTION 3(A) AND PRIOR TO THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT
FILED IN CONNECTION

 

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WITH SUCH REGISTRATION, THE COMPANY SHALL DETERMINE FOR ANY REASON NOT TO
REGISTER SUCH SECURITIES, THE COMPANY MAY, AT ITS ELECTION, GIVE WRITTEN NOTICE
OF SUCH DETERMINATION TO EACH HOLDER AND THEREUPON BE RELIEVED OF ITS OBLIGATION
TO REGISTER ANY REGISTRABLE SECURITIES IN CONNECTION WITH SUCH REGISTRATION (BUT
NOT FROM ITS OBLIGATION TO PAY THE REGISTRATION EXPENSES IN CONNECTION THEREWITH
AS PROVIDED HEREIN).

(D)           SELECTION OF UNDERWRITERS.  THE COMPANY WILL HAVE THE RIGHT TO
SELECT THE INVESTMENT BANKER(S) AND MANAGER(S) TO ADMINISTER AN OFFERING
PURSUANT TO A PIGGYBACK REGISTRATION, SUBJECT TO THE APPROVAL OF BIOVAIL, OR, IN
THE EVENT THAT BIOVAIL (TAKEN TOGETHER WITH ITS SUBSIDIARIES) AT SUCH TIME HOLDS
LESS THAN 25% OF THE REGISTRABLE SECURITIES, THE HOLDERS OF A MAJORITY OF THE
REGISTRABLE SECURITIES, WHICH APPROVAL WILL NOT BE UNREASONABLY WITHHELD OR
DELAYED.

4.             EXPENSES OF REGISTRATION.  EXCEPT AS OTHERWISE PROVIDED HEREIN OR
AS MAY OTHERWISE BE PROHIBITED BY APPLICABLE LAW, ALL REGISTRATION EXPENSES
INCURRED IN CONNECTION WITH ALL REGISTRATIONS PURSUANT TO SECTIONS 2 AND 3 SHALL
BE BORNE BY THE COMPANY.  ALL SELLING EXPENSES RELATING TO SECURITIES REGISTERED
ON BEHALF OF THE HOLDERS SHALL BE BORNE BY SUCH HOLDERS.

5.             STANDSTILL AGREEMENTS.

(A)           THE COMPANY AGREES (I) NOT TO EFFECT ANY PUBLIC SALE OR
DISTRIBUTION OF ITS EQUITY SECURITIES, OR ANY SECURITIES CONVERTIBLE INTO OR
EXCHANGEABLE OR EXERCISABLE FOR SUCH SECURITIES, DURING THE SEVEN DAYS PRIOR TO
AND DURING THE 90-DAY PERIOD BEGINNING ON THE EFFECTIVE DATE OF ANY UNDERWRITTEN
DEMAND REGISTRATION OR ANY UNDERWRITTEN PIGGYBACK REGISTRATION (EXCEPT (X) AS
PART OF SUCH UNDERWRITTEN REGISTRATION, (Y) PURSUANT TO REGISTRATION STATEMENTS
ON FORM S-4 OR FORM S-8 OR ANY SUCCESSOR FORM OR (Z) AS REQUIRED UNDER ANY
EXISTING CONTRACTUAL OBLIGATION OF THE COMPANY), UNLESS THE UNDERWRITERS
MANAGING THE REGISTERED PUBLIC OFFERING OTHERWISE AGREE, AND (II) TO USE ITS
REASONABLE EFFORTS TO CAUSE EACH OFFICER AND DIRECTOR OF THE COMPANY AND EACH
HOLDER OF AT LEAST 5% (CALCULATED ON A FULLY-DILUTED BASIS) OF ITS OUTSTANDING
SHARES OF COMMON STOCK, OR ANY SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR SHARES OF COMMON STOCK, TO AGREE NOT TO EFFECT ANY SALE OR
DISTRIBUTION (INCLUDING SALES PURSUANT TO RULE 144) OF ANY SUCH SECURITIES
DURING SUCH PERIODS (EXCEPT AS PART OF SUCH UNDERWRITTEN REGISTRATION, IF
OTHERWISE

 

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PERMITTED), UNLESS THE UNDERWRITERS MANAGING THE REGISTERED PUBLIC OFFERING
OTHERWISE AGREE.

(B)           EACH HOLDER AGREES, IN THE EVENT OF A PUBLIC OFFERING BY THE
COMPANY OF COMMON STOCK UNDER A REGISTRATION STATEMENT ON FORM S-1, S-3 OR S-4,
NOT TO EFFECT ANY OFFER, SALE, DISTRIBUTION OR TRANSFER OF REGISTRABLE
SECURITIES, INCLUDING A SALE PURSUANT TO RULE 144 (OR ANY SIMILAR PROVISION THEN
EFFECT) UNDER THE SECURITIES ACT (EXCEPT AS PART OF SUCH UNDERWRITTEN
REGISTRATION), BEGINNING ON THE DATE OF RECEIPT OF A WRITTEN NOTICE FROM THE
COMPANY NOTIFYING THE HOLDERS OF THE INITIAL FILING OF SUCH REGISTRATION
STATEMENT WITH THE COMMISSION AND ENDING ON THE EARLIER OF (I) 180 DAYS FROM THE
DATE OF RECEIPT OF SUCH WRITTEN NOTICE OR (II) 90 DAYS FROM THE EFFECTIVE DATE
OF SUCH REGISTRATION STATEMENT; PROVIDED, THAT THE COMPANY AND EACH OF ITS
OFFICERS AND DIRECTORS AND EACH HOLDER OF NOT LESS THAN 5% (CALCULATED ON A
FULLY DILUTED BASIS) OF THE COMPANY’S OUTSTANDING COMMON STOCK IS SUBJECT TO THE
SAME RESTRICTIONS.

6.             REGISTRATION PROCEDURES.  WHENEVER THE HOLDERS HAVE REQUESTED
THAT ANY REGISTRABLE SECURITIES BE REGISTERED PURSUANT TO THIS AGREEMENT, THE
COMPANY WILL USE ITS REASONABLE EFFORTS TO EFFECT THE REGISTRATION AND THE SALE
OF SUCH REGISTRABLE SECURITIES IN ACCORDANCE WITH THE INTENDED METHOD OR METHODS
OF DISTRIBUTION THEREOF, AND PURSUANT THERETO THE COMPANY WILL AS EXPEDITIOUSLY
AS POSSIBLE:

(A)           SUBJECT TO SECTION 2(C) AND 3(A) HEREOF, PREPARE AND FILE WITH THE
COMMISSION A REGISTRATION STATEMENT ON ANY APPROPRIATE FORM FOR WHICH THE
COMPANY QUALIFIES WITH RESPECT TO SUCH REGISTRABLE SECURITIES AND USE ITS
REASONABLE EFFORTS TO CAUSE SUCH REGISTRATION STATEMENT TO BECOME EFFECTIVE
(PROVIDED THAT BEFORE FILING A REGISTRATION STATEMENT OR PROSPECTUS OR ANY
AMENDMENTS OR SUPPLEMENTS THERETO, THE COMPANY WILL (I) FURNISH TO THE COUNSEL
SELECTED BY THE HOLDERS COPIES OF ALL SUCH DOCUMENTS PROPOSED TO BE FILED, WHICH
DOCUMENTS WILL BE SUBJECT TO THE REVIEW OF SUCH COUNSEL, AND (II) NOTIFY EACH
HOLDER COVERED BY SUCH REGISTRATION OF ANY STOP ORDER ISSUED OR THREATENED BY
THE COMMISSION AGAINST ANY REGISTRATION STATEMENT OF THE COMPANY);

(B)           SUBJECT TO SECTION 2(C), 3(B) AND 6(E) HEREOF, PREPARE AND FILE
WITH THE COMMISSION SUCH AMENDMENTS AND SUPPLEMENTS TO SUCH REGISTRATION
STATEMENT AND THE PROSPECTUS USED IN CONNECTION THEREWITH AS MAY BE REASONABLY
NECESSARY

 

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TO KEEP SUCH REGISTRATION STATEMENT EFFECTIVE FOR A PERIOD EQUAL TO THE SHORTER
OF (I) 180 DAYS AND (II) THE TIME BY WHICH ALL SECURITIES COVERED BY SUCH
REGISTRATION STATEMENT HAVE BEEN SOLD, AND COMPLY WITH THE PROVISIONS OF THE
SECURITIES ACT WITH RESPECT TO THE DISPOSITION OF ALL SECURITIES COVERED BY SUCH
REGISTRATION STATEMENT DURING SUCH PERIOD IN ACCORDANCE WITH THE INTENDED
METHODS OF DISPOSITION BY THE SELLERS THEREOF SET FORTH IN SUCH REGISTRATION
STATEMENT;

(C)           FURNISH TO EACH SELLER OF REGISTRABLE SECURITIES SUCH NUMBER OF
COPIES OF SUCH REGISTRATION STATEMENT, EACH AMENDMENT AND SUPPLEMENT THERETO,
THE PROSPECTUS INCLUDED IN SUCH REGISTRATION STATEMENT (INCLUDING EACH
PRELIMINARY PROSPECTUS) AND SUCH OTHER DOCUMENTS AS SUCH SELLER MAY REASONABLY
REQUEST IN ORDER TO FACILITATE THE DISPOSITION OF THE REGISTRABLE SECURITIES
OWNED BY SUCH SELLER;

(D)           USE ITS REASONABLE EFFORTS TO REGISTER OR QUALIFY SUCH REGISTRABLE
SECURITIES UNDER THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTIONS AS ANY
SELLER REASONABLY REQUESTS AND DO ANY AND ALL OTHER ACTS AND THINGS WHICH MAY BE
REASONABLY NECESSARY OR ADVISABLE TO ENABLE SUCH SELLER TO CONSUMMATE THE
DISPOSITION IN SUCH JURISDICTIONS OF THE REGISTRABLE SECURITIES OWNED BY SUCH
SELLER (PROVIDED THAT NOTHING CONTAINED IN THIS PROVISION SHALL REQUIRE THE
COMPANY TO (I) QUALIFY GENERALLY TO DO BUSINESS IN ANY JURISDICTION WHERE IT
WOULD NOT OTHERWISE BE REQUIRED TO QUALIFY BUT FOR THIS SECTION 6(D), (II)
SUBJECT ITSELF TO TAXATION IN ANY JURISDICTION, OR (III) TAKE ANY ACTION THAT
WOULD SUBJECT IT TO GENERAL SERVICE OF PROCESS IN ANY SUCH JURISDICTION);

(E)           NOTIFY EACH SELLER OF SUCH REGISTRABLE SECURITIES, AT ANY TIME
WHEN A PROSPECTUS RELATING THERETO IS REQUIRED TO BE DELIVERED UNDER THE
SECURITIES ACT, OF THE HAPPENING OF ANY EVENT AS A RESULT OF WHICH THE
PROSPECTUS INCLUDED IN SUCH REGISTRATION STATEMENT CONTAINS AN UNTRUE STATEMENT
OF A MATERIAL FACT OR OMITS TO STATE A MATERIAL FACT REQUIRED TO BE STATED
THEREIN OR NECESSARY TO MAKE THE STATEMENTS THEREIN NOT MISLEADING IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, AND, AT THE REQUEST OF ANY SUCH
SELLER, THE COMPANY WILL PREPARE A SUPPLEMENT OR AMENDMENT TO SUCH PROSPECTUS SO
THAT, AS THEREAFTER DELIVERED TO THE PURCHASERS OF SUCH REGISTRABLE SECURITIES,
SUCH PROSPECTUS WILL NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR

 

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OMIT TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE
THE STATEMENTS THEREIN NOT MISLEADING; PROVIDED, HOWEVER, THAT THE COMPANY SHALL
NOT BE REQUIRED TO AMEND THE REGISTRATION STATEMENT OR SUPPLEMENT THE PROSPECTUS
FOR A PERIOD OF UP TO SIXTY DAYS IF THE BOARD OF DIRECTORS OF THE COMPANY
DETERMINES IN GOOD FAITH THAT TO DO SO WOULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT ON ANY PROPOSAL OR PLAN BY THE COMPANY TO ENGAGE IN ANY
FINANCING, ACQUISITION OR DISPOSITION OF ASSETS (OTHER THAN IN THE ORDINARY
COURSE OF BUSINESS) OR ANY MERGER, CONSOLIDATION, TENDER OFFER OR SIMILAR
TRANSACTION OR WOULD REQUIRE THE DISCLOSURE OF ANY INFORMATION THAT THE BOARD OF
DIRECTORS OF THE COMPANY DETERMINES IN GOOD FAITH THE DISCLOSURE OF WHICH WOULD
BE DETRIMENTAL TO THE COMPANY, IT BEING UNDERSTOOD THAT THE PERIOD FOR WHICH THE
COMPANY IS OBLIGATED TO KEEP THE REGISTRATION STATEMENT EFFECTIVE SHALL BE
EXTENDED FOR A NUMBER OF DAYS EQUAL TO THE NUMBER OF DAYS THE COMPANY DELAYS
AMENDMENTS OR SUPPLEMENTS PURSUANT TO THIS PROVISION.  UPON RECEIPT OF ANY
NOTICE PURSUANT TO THIS SECTION 6(E), THE HOLDERS SHALL SUSPEND ALL OFFERS AND
SALES OF SECURITIES OF THE COMPANY AND ALL USE OF ANY PROSPECTUS UNTIL ADVISED
BY THE COMPANY THAT OFFERS AND SALES MAY RESUME, AND SHALL KEEP CONFIDENTIAL THE
FACT AND CONTENT OF ANY NOTICE GIVEN BY THE COMPANY PURSUANT TO THIS SECTION
6(E);

(F)            CAUSE ALL SUCH REGISTRABLE SECURITIES TO BE LISTED ON EACH
SECURITIES EXCHANGE, IF ANY, ON WHICH SIMILAR SECURITIES ISSUED BY THE COMPANY
ARE THEN LISTED;

(G)           PROVIDE A TRANSFER AGENT AND REGISTRAR FOR ALL SUCH REGISTRABLE
SECURITIES NOT LATER THAN THE EFFECTIVE DATE OF SUCH REGISTRATION STATEMENT;

(H)           ENTER INTO SUCH CUSTOMARY AGREEMENTS (INCLUDING UNDERWRITING
AGREEMENTS IN CUSTOMARY FORM) AND TAKE ALL SUCH OTHER ACTIONS AS THE HOLDERS OF
A MAJORITY OF THE REGISTRABLE SECURITIES BEING SOLD OR THE UNDERWRITERS, IF ANY,
REASONABLY REQUEST IN ORDER TO EXPEDITE OR FACILITATE THE DISPOSITION OF SUCH
REGISTRABLE SECURITIES;

(I)            MAKE AVAILABLE FOR INSPECTION BY A REPRESENTATIVE OF THE HOLDERS
OF REGISTRABLE SECURITIES INCLUDED IN THE REGISTRATION STATEMENT, ANY
UNDERWRITER PARTICIPATING IN ANY DISPOSITION PURSUANT TO SUCH REGISTRATION
STATEMENT AND ANY ATTORNEY, ACCOUNTANT OR OTHER AGENT RETAINED BY ANY SUCH

 

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SELLER OR UNDERWRITER, ALL PERTINENT FINANCIAL AND OTHER RECORDS, PERTINENT
CORPORATE DOCUMENTS AND PROPERTIES OF THE COMPANY, AND CAUSE THE COMPANY’S
OFFICERS, DIRECTORS, EMPLOYEES AND INDEPENDENT ACCOUNTANTS TO SUPPLY ALL
INFORMATION REASONABLY REQUESTED BY ANY SUCH SELLER, UNDERWRITER, ATTORNEY,
ACCOUNTANT OR AGENT IN CONNECTION WITH SUCH REGISTRATION STATEMENT;

(J)            OTHERWISE USE ITS REASONABLE EFFORTS TO COMPLY WITH ALL
APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, AND MAKE AVAILABLE TO ITS
SECURITY HOLDERS, AS SOON AS REASONABLY PRACTICABLE, AN EARNINGS STATEMENT
COVERING THE PERIOD OF AT LEAST 12 MONTHS BEGINNING WITH THE FIRST DAY OF THE
COMPANY’S FIRST FULL CALENDAR QUARTER AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT, WHICH EARNINGS STATEMENT SHALL SATISFY THE PROVISIONS OF
SECTION 11(A) OF THE SECURITIES ACT AND RULE 158 THEREUNDER;

(K)           IN THE EVENT OF THE ISSUANCE OR THREAT OF ANY STOP ORDER
SUSPENDING THE EFFECTIVENESS OF A REGISTRATION STATEMENT, OR OF ANY ORDER
SUSPENDING OR PREVENTING THE USE OF ANY RELATED PROSPECTUS OR SUSPENDING THE
QUALIFICATION OF ANY SHARES COMMON STOCK INCLUDED IN SUCH REGISTRATION STATEMENT
FOR SALE IN ANY JURISDICTION, NOTIFY THE HOLDERS IN WRITING OF SUCH ISSUANCE OR
THREAT;

(L)            IN THE EVENT OF THE ISSUANCE OF ANY STOP ORDER SUSPENDING THE
EFFECTIVENESS OF A REGISTRATION STATEMENT, OR OF ANY ORDER SUSPENDING OR
PREVENTING THE USE OF ANY RELATED PROSPECTUS OR SUSPENDING THE QUALIFICATION OF
ANY SHARES COMMON STOCK INCLUDED IN SUCH REGISTRATION STATEMENT FOR SALE IN ANY
JURISDICTION, USE ITS REASONABLE EFFORTS TO PROMPTLY OBTAIN THE WITHDRAWAL OF
SUCH ORDER; AND

(M)          IF THE REGISTRATION IS AN UNDERWRITTEN OFFERING, USE ALL REASONABLE
EFFORTS TO OBTAIN A SO-CALLED “COLD COMFORT” LETTER FROM THE COMPANY’S
INDEPENDENT PUBLIC ACCOUNTANTS IN CUSTOMARY FORM AND COVERING SUCH MATTERS OF
THE TYPE CUSTOMARILY COVERED BY COLD COMFORT LETTERS.

7.             OBLIGATIONS OF HOLDERS.  WHENEVER THE HOLDERS SELL ANY
REGISTRABLE SECURITIES PURSUANT TO A DEMAND REGISTRATION OR A PIGGYBACK
REGISTRATION, SUCH HOLDERS SHALL BE OBLIGATED TO COMPLY WITH THE APPLICABLE
PROVISIONS OF THE SECURITIES ACT, INCLUDING

 

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THE PROSPECTUS DELIVERY REQUIREMENTS THEREUNDER, AND ANY APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.

8.             INDEMNIFICATION.

(A)           IN CONNECTION WITH ANY REGISTRATION STATEMENT FOR A DEMAND
REGISTRATION OR PIGGYBACK REGISTRATION IN WHICH A HOLDER IS PARTICIPATING, THE
COMPANY AGREES TO INDEMNIFY, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
EACH HOLDER, ITS OFFICERS AND DIRECTORS AND EACH PERSON WHO CONTROLS SUCH HOLDER
(WITHIN THE MEANING OF THE SECURITIES ACT) AGAINST ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES, EXPENSES OR ANY AMOUNTS PAID IN SETTLEMENT OF ANY LITIGATION,
INVESTIGATION OR PROCEEDING COMMENCED OR THREATENED (COLLECTIVELY, “CLAIMS”) TO
WHICH EACH SUCH INDEMNIFIED PARTY MAY BECOME SUBJECT UNDER THE SECURITIES ACT
INSOFAR AS SUCH CLAIM AROSE OUT OF (I) ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF
MATERIAL FACT CONTAINED, ON THE EFFECTIVE DATE THEREOF, IN ANY REGISTRATION
STATEMENT, PROSPECTUS OR PRELIMINARY PROSPECTUS OR ANY AMENDMENT THEREOF OR
SUPPLEMENT THERETO OR (II) ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A
MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING, EXCEPT INSOFAR AS THE SAME ARE CAUSED BY OR CONTAINED IN
ANY INFORMATION FURNISHED IN WRITING TO THE COMPANY BY SUCH HOLDER EXPRESSLY FOR
USE THEREIN BY SUCH HOLDER’S FAILURE TO DELIVER A COPY OF THE REGISTRATION
STATEMENT OR PROSPECTUS OR ANY AMENDMENTS OR SUPPLEMENTS THERETO AFTER THE
COMPANY HAS FURNISHED SUCH HOLDER WITH A SUFFICIENT NUMBER OF COPIES OF THE SAME
OR BY SUCH HOLDER’S FAILURE TO COMPLY WITH APPLICABLE SECURITIES LAWS.  IN
CONNECTION WITH AN UNDERWRITTEN OFFERING, THE COMPANY WILL INDEMNIFY THE
UNDERWRITERS, THEIR OFFICERS AND DIRECTORS AND EACH PERSON WHO CONTROLS THE
UNDERWRITERS (WITHIN THE MEANING OF THE SECURITIES ACT) TO THE SAME EXTENT AS
PROVIDED ABOVE WITH RESPECT TO THE INDEMNIFICATION OF THE HOLDERS.

(B)           IN CONNECTION WITH ANY REGISTRATION STATEMENTS IN WHICH A HOLDER
IS PARTICIPATING, EACH SUCH HOLDER WILL, FURNISH TO THE COMPANY IN WRITING SUCH
CUSTOMARY INFORMATION AS THE COMPANY REASONABLY REQUESTS FOR USE IN CONNECTION
WITH ANY SUCH REGISTRATION STATEMENT OR PROSPECTUS (THE “SELLER’S INFORMATION”)
AND, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, INDEMNIFY THE COMPANY,
ITS DIRECTORS AND OFFICERS AND EACH PERSON WHO CONTROLS THE COMPANY (WITHIN THE
MEANING OF THE SECURITIES ACT) AGAINST ANY AND ALL CLAIMS TO WHICH EACH SUCH
INDEMNIFIED PARTY MAY BECOME SUBJECT UNDER THE SECURITIES ACT INSOFAR AS SUCH
CLAIM

 

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AROSE OUT OF (I) ANY UNTRUE OR ALLEGED UNTRUE STATEMENT OF MATERIAL FACT
CONTAINED, ON THE EFFECTIVE DATE THEREOF, IN ANY REGISTRATION STATEMENT,
PROSPECTUS OR PRELIMINARY PROSPECTUS OR ANY AMENDMENT THEREOF OR SUPPLEMENT
THERETO (II) ANY OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT
REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS REGARDING
SELLER’S INFORMATION  THEREIN NOT MISLEADING OR (III) ANY FAILURE ON THE PART OF
THE HOLDER TO COMPLY WITH APPLICABLE SECURITIES LAWS OTHER THAN A FAILURE
ARISING OUT OF A MATERIAL MISSTATEMENT OR OMISSION IN THE PROSPECTUS OTHER THAN
SELLER’S INFORMATION; PROVIDED THAT WITH RESPECT TO A CLAIM ARISING PURSUANT TO
CLAUSE (I) OR (II) ABOVE, THE MATERIAL MISSTATEMENT OR OMISSION IS CONTAINED IN
SUCH SELLER’S INFORMATION; PROVIDED, FURTHER, THAT THE OBLIGATION TO INDEMNIFY
WILL BE INDIVIDUAL TO EACH SUCH HOLDER AND WILL BE LIMITED TO THE AMOUNT OF
PROCEEDS RECEIVED BY SUCH HOLDER FROM THE SALE OF REGISTRABLE SECURITIES
PURSUANT TO SUCH REGISTRATION STATEMENT.

(C)           ANY PERSON ENTITLED TO INDEMNIFICATION HEREUNDER WILL (I) GIVE
PROMPT WRITTEN NOTICE TO THE INDEMNIFYING PARTY OF ANY CLAIM WITH RESPECT TO
WHICH IT SEEKS INDEMNIFICATION (BUT THE FAILURE TO PROVIDE SUCH NOTICE SHALL NOT
RELEASE THE INDEMNIFYING PARTY OF ITS OBLIGATION UNDER PARAGRAPHS (A) AND (B)
UNLESS, AND THEN ONLY TO THE EXTENT THAT, THE INDEMNIFYING PARTY HAS BEEN
PREJUDICED BY SUCH FAILURE TO PROVIDE SUCH NOTICE) AND (II) UNLESS, IN SUCH
INDEMNIFIED PARTY’S REASONABLE JUDGMENT, BASED ON WRITTEN ADVICE OF COUNSEL, A
CONFLICT OF INTEREST BETWEEN SUCH INDEMNIFIED AND INDEMNIFYING PARTIES MAY EXIST
WITH RESPECT TO SUCH CLAIM, PERMIT SUCH INDEMNIFYING PARTY TO ASSUME THE DEFENSE
OF SUCH CLAIM WITH COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFIED PARTY.  AN
INDEMNIFYING PARTY WHO IS NOT ENTITLED TO, OR ELECTS NOT TO, ASSUME THE DEFENSE
OF A CLAIM WILL NOT BE OBLIGATED TO PAY THE FEES AND EXPENSES OF MORE THAN ONE
COUNSEL FOR ALL PARTIES INDEMNIFIED BY SUCH INDEMNIFYING PARTY WITH RESPECT TO
SUCH CLAIM IN ANY ONE JURISDICTION, UNLESS IN THE REASONABLE JUDGMENT OF ANY
INDEMNIFIED PARTY, BASED ON WRITTEN ADVICE OF COUNSEL, A CONFLICT OF INTEREST
MAY EXIST BETWEEN SUCH INDEMNIFIED PARTY AND ANY OTHER OF SUCH INDEMNIFIED
PARTIES WITH RESPECT TO SUCH CLAIM.

(D)           THE INDEMNIFYING PARTY SHALL NOT BE LIABLE TO INDEMNIFY AN
INDEMNIFIED PARTY FOR ANY SETTLEMENT, OR CONSENT TO JUDGMENT OF ANY SUCH ACTION
EFFECTED WITHOUT THE INDEMNIFYING PARTY’S WRITTEN CONSENT (BUT SUCH CONSENT WILL
NOT BE UNREASONABLY

 

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WITHHELD, DELAYED OR CONDITIONED).  FURTHERMORE, THE INDEMNIFYING PARTY SHALL
NOT, EXCEPT WITH THE PRIOR WRITTEN APPROVAL OF EACH INDEMNIFIED PARTY, CONSENT
TO ENTRY OF ANY JUDGMENT OR ENTER INTO ANY SETTLEMENT WHICH DOES NOT INCLUDE AS
AN UNCONDITIONAL TERM THEREOF THE GIVING BY THE CLAIMANT OR PLAINTIFF TO EACH
INDEMNIFIED PARTY OF A RELEASE FROM ALL LIABILITY IN RESPECT OF SUCH CLAIM OR
LITIGATION WITHOUT ANY PAYMENT OR CONSIDERATION PROVIDED BY EACH SUCH
INDEMNIFIED PARTY.

(E)           IF THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION 8 IS
UNAVAILABLE TO AN INDEMNIFIED PARTY UNDER CLAUSES (A) AND (B) ABOVE IN RESPECT
OF ANY LOSSES, CLAIMS, DAMAGES OR LIABILITIES REFERRED TO THEREIN, THEN EACH
INDEMNIFYING PARTY, IN LIEU OF INDEMNIFYING SUCH INDEMNIFIED PARTY, SHALL
CONTRIBUTE TO THE AMOUNT PAID OR PAYABLE BY SUCH INDEMNIFIED PARTY AS A RESULT
OF SUCH LOSSES, CLAIMS, DAMAGES OR LIABILITIES IN SUCH PROPORTION AS IS
APPROPRIATE TO REFLECT NOT ONLY THE RELATIVE BENEFITS RECEIVED BY THE COMPANY,
THE UNDERWRITERS, THE SELLERS OF REGISTRABLE SECURITIES AND ANY OTHER SELLERS
PARTICIPATING IN THE REGISTRATION STATEMENT FROM THE SALE OF SHARES PURSUANT TO
THE REGISTERED OFFERING OF SECURITIES FOR WHICH INDEMNITY IS SOUGHT BUT ALSO THE
RELATIVE FAULT OF THE COMPANY, THE UNDERWRITERS, THE SELLERS OF REGISTRABLE
SECURITIES AND ANY OTHER SELLERS PARTICIPATING IN THE REGISTRATION STATEMENT IN
CONNECTION WITH THE STATEMENT OR OMISSION WHICH RESULTED IN SUCH LOSSES, CLAIMS,
DAMAGES OR LIABILITIES, AS WELL AS ANY OTHER RELEVANT EQUITABLE CONSIDERATIONS. 
THE RELATIVE BENEFITS RECEIVED BY THE COMPANY (IF ANY), THE UNDERWRITERS, THE
SELLERS OF REGISTRABLE SECURITIES AND ANY OTHER SELLERS PARTICIPATING IN THE
REGISTRATION STATEMENT SHALL BE DEEMED TO BE BASED ON THE RELATIVE RELATIONSHIP
OF THE TOTAL NET PROCEEDS FROM THE OFFERING (BEFORE DEDUCTING EXPENSES) TO THE
COMPANY, THE TOTAL UNDERWRITING COMMISSIONS AND FEES FROM THE OFFERING (BEFORE
DEDUCTING EXPENSES) TO THE UNDERWRITERS AND THE TOTAL NET PROCEEDS FROM THE
OFFERING (BEFORE DEDUCTING EXPENSES) TO THE SELLERS OF REGISTRABLE SECURITIES
AND ANY OTHER SELLERS PARTICIPATING IN THE REGISTRATION STATEMENT.  THE RELATIVE
FAULT OF THE COMPANY, THE UNDERWRITERS, THE SELLERS OF REGISTRABLE SECURITIES
AND ANY OTHER SELLERS PARTICIPATING IN THE REGISTRATION STATEMENT SHALL BE
DETERMINED BY REFERENCE TO, AMONG OTHER THINGS, WHETHER THE UNTRUE OR ALLEGED
UNTRUE STATEMENT OF A MATERIAL FACT OR THE OMISSION OR ALLEGED OMISSION TO STATE
A MATERIAL FACT RELATES TO INFORMATION SUPPLIED BY THE COMPANY OR BY THE SELLERS
OF REGISTRABLE SECURITIES AND THE PARTIES’ RELATIVE

 

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INTENT, KNOWLEDGE, ACCESS TO INFORMATION AND OPPORTUNITY TO CORRECT OR PREVENT
SUCH STATEMENT OR OMISSION.

(F)            THE INDEMNIFICATION PROVIDED FOR UNDER THIS AGREEMENT WILL REMAIN
IN FULL FORCE AND EFFECT REGARDLESS OF ANY INVESTIGATION MADE BY OR ON BEHALF OF
THE INDEMNIFIED PARTY OR ANY OFFICER, DIRECTOR OR CONTROLLING PERSON OF SUCH
INDEMNIFIED PARTY AND WILL SURVIVE THE TRANSFER OF THE REGISTRABLE SECURITIES.

9.             PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.  NO HOLDER MAY
PARTICIPATE IN ANY REGISTRATION HEREUNDER WHICH IS UNDERWRITTEN UNLESS SUCH
HOLDER (A) AGREES TO SELL SUCH HOLDER’S SECURITIES ON THE BASIS PROVIDED IN ANY
UNDERWRITING ARRANGEMENTS APPROVED BY THE HOLDER OR HOLDERS ENTITLED HEREUNDER
TO APPROVE SUCH ARRANGEMENTS, (B) AS EXPEDITIOUSLY AS POSSIBLE NOTIFIES THE
COMPANY OF THE OCCURRENCE OF ANY EVENT AS TO IT AS A RESULT OF WHICH ANY
PROSPECTUS CONTAINS AN UNTRUE STATEMENT OF MATERIAL FACT OR OMITS TO STATE A
MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING AND (C) COMPLETES AND EXECUTES ALL QUESTIONNAIRES, POWERS
OF ATTORNEY, INDEMNITIES, UNDERWRITING AGREEMENTS AND OTHER DOCUMENTS REASONABLY
REQUIRED UNDER THE TERMS OF SUCH UNDERWRITING ARRANGEMENTS.

10.           TRANSFER OF REGISTRATION RIGHTS.  THE RIGHTS GRANTED TO ANY HOLDER
UNDER THIS AGREEMENT MAY BE ASSIGNED TO ANY TRANSFEREE OF REGISTRABLE SECURITIES
IN CONNECTION WITH ANY TRANSFER OR ASSIGNMENT OF REGISTRABLE SECURITIES BY A
HOLDER; PROVIDED, HOWEVER, THAT:  (A) SUCH TRANSFER IS OTHERWISE EFFECTED IN
ACCORDANCE WITH APPLICABLE SECURITIES LAWS, (B) IF NOT ALREADY A PARTY HERETO,
THE ASSIGNEE OR TRANSFEREE AGREES IN WRITING PRIOR TO SUCH TRANSFER TO BE BOUND
BY THE PROVISIONS OF THIS AGREEMENT APPLICABLE TO THE TRANSFEROR, AND (C)
BIOVAIL SHALL ACT AS AGENT AND REPRESENTATIVE FOR SUCH HOLDER FOR THE GIVING AND
RECEIVING OF NOTICES HEREUNDER.

11.           INFORMATION BY HOLDER.  EACH HOLDER SHALL FURNISH TO THE COMPANY
SUCH WRITTEN INFORMATION REGARDING SUCH HOLDER AND ANY DISTRIBUTION PROPOSED BY
SUCH HOLDER AS THE COMPANY MAY REASONABLY REQUEST IN WRITING IN CONNECTION WITH
ANY REGISTRATION, QUALIFICATION OR COMPLIANCE REFERRED TO IN THIS AGREEMENT AND
SHALL PROMPTLY NOTIFY THE COMPANY OF ANY CHANGES IN SUCH INFORMATION.

 

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12.           EXCHANGE ACT COMPLIANCE.  THE COMPANY SHALL COMPLY WITH ALL OF THE
REPORTING REQUIREMENTS OF THE EXCHANGE ACT THEN APPLICABLE TO IT AND SHALL
COMPLY WITH ALL OTHER PUBLIC INFORMATION REPORTING REQUIREMENTS OF THE
COMMISSION WHICH ARE CONDITIONS TO THE AVAILABILITY OF RULE 144 FOR THE SALE OF
THE REGISTRABLE SECURITIES.  THE COMPANY SHALL COOPERATE WITH EACH HOLDER IN
SUPPLYING SUCH INFORMATION AS MAY BE NECESSARY FOR SUCH HOLDER TO COMPLETE AND
FILE ANY INFORMATION REPORTING FORMS PRESENTLY OR HEREAFTER REQUIRED BY THE
COMMISSION AS A CONDITION TO THE AVAILABILITY OF RULE 144.

13.           TERMINATION OF REGISTRATION RIGHTS.  ALL REGISTRATION RIGHTS
GRANTED UNDER THIS AGREEMENT SHALL TERMINATE AND BE OF NO FURTHER FORCE AND
EFFECT, AS TO ANY PARTICULAR HOLDER, AT SUCH TIME AS ALL REGISTRABLE SECURITIES
HELD BY SUCH HOLDER ARE ELIGIBLE TO BE SOLD WITHOUT COMPLIANCE WITH THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO RULE 144 (INCLUDING
RULE 144(K)) PROMULGATED THEREUNDER OR HAVE BEEN RESOLD PURSUANT TO A
REGISTRATION STATEMENT HEREUNDER.

14.           MISCELLANEOUS.

(A)           NO INCONSISTENT AGREEMENTS.  THE COMPANY WILL NOT HEREAFTER ENTER
INTO ANY AGREEMENT WITH RESPECT TO ITS SECURITIES WHICH IS INCONSISTENT WITH OR
VIOLATES THE RIGHTS GRANTED TO THE HOLDERS IN THIS AGREEMENT WITHOUT THE PRIOR
WRITTEN CONSENT OF A MAJORITY IN INTEREST OF SUCH REGISTRABLE SECURITIES.

(B)           REMEDIES.  ANY PERSON HAVING RIGHTS UNDER ANY PROVISION OF THIS
AGREEMENT WILL BE ENTITLED TO ENFORCE SUCH RIGHTS SPECIFICALLY TO RECOVER
DAMAGES CAUSED BY REASON OF ANY BREACH OF ANY PROVISION OF THIS AGREEMENT AND TO
EXERCISE ALL OTHER RIGHTS GRANTED BY LAW.  THE PARTIES HERETO AGREE AND
ACKNOWLEDGE THAT MONEY DAMAGES MAY NOT BE AN ADEQUATE REMEDY FOR ANY BREACH OF
THE PROVISIONS OF THIS AGREEMENT AND THAT ANY PARTY MAY IN ITS SOLE DISCRETION
APPLY TO ANY COURT OF LAW OR EQUITY OF COMPETENT JURISDICTION (WITHOUT POSTING
ANY BOND OR OTHER SECURITY) FOR SPECIFIC PERFORMANCE AND FOR OTHER INJUNCTIVE
RELIEF IN ORDER TO ENFORCE OR PREVENT VIOLATION OF THE PROVISIONS OF THIS
AGREEMENT.

(C)           AMENDMENTS AND WAIVERS.  EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
PROVISIONS OF THIS AGREEMENT MAY BE AMENDED OR WAIVED ONLY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY AND HOLDERS OF AT LEAST 50% OF THE REGISTRABLE
SECURITIES AND, IF AT SUCH TIME BIOVAIL (TAKEN TOGETHER WITH ITS SUBSIDIARIES)
HOLDS AT

 

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LEAST 25% OF THE ORIGINAL REGISTRABLE SECURITIES, BIOVAIL; PROVIDED, THAT
WITHOUT THE PRIOR WRITTEN CONSENT OF ALL THE HOLDERS, NO SUCH AMENDMENT OR
WAIVER SHALL REDUCE THE FOREGOING PERCENTAGE REQUIRED TO AMEND OR WAIVE ANY
PROVISION OF THIS AGREEMENT.

(D)           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT AND ALL OF THE PROVISIONS
HEREOF SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES AND THEIR
RESPECTIVE SUCCESSORS AND PERMITTED ASSIGNS.  THIS AGREEMENT MAY BE TRANSFERRED
BY BIOVAIL TO ANY OF ITS AFFILIATES.  IN ADDITION, WHETHER OR NOT ANY EXPRESS
ASSIGNMENT HAS BEEN MADE, THE PROVISIONS OF THIS AGREEMENT WHICH ARE FOR THE
BENEFIT OF HOLDERS ARE ALSO FOR THE BENEFIT OF, AND ENFORCEABLE BY, ANY
PERMITTED TRANSFEREE OF SECURITIES OR REGISTRABLE SECURITIES, IN ACCORDANCE WITH
SECTION 10 HEREOF.

(E)           SEVERABILITY.  WHENEVER POSSIBLE, EACH PROVISION OF THIS AGREEMENT
WILL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE
LAW, BUT IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE INVALID, ILLEGAL OR
UNENFORCEABLE, THE VALIDITY, LEGALITY AND ENFORCEABILITY OF THE REMAINING
PROVISIONS SHALL NOT BE IN ANY WAY AFFECTED OR IMPAIRED THEREBY.

(F)            COUNTERPARTS AND FACSIMILE.  THIS AGREEMENT MAY BE EXECUTED IN
ANY NUMBER OF COUNTERPARTS, AND EACH SUCH COUNTERPART HEREOF SHALL BE DEEMED TO
BE AN ORIGINAL INSTRUMENT, BUT ALL SUCH COUNTERPARTS TOGETHER SHALL CONSTITUTE
ONE AGREEMENT.  THIS AGREEMENT MAY BE SIGNED AND DELIVERED TO THE OTHER PARTY BY
FACSIMILE TRANSMISSION; SUCH TRANSMISSION SHALL BE DEEMED A VALID SIGNATURE.

(G)           DESCRIPTIVE HEADINGS.  THE SECTION AND PARAGRAPH HEADINGS
CONTAINED IN THIS AGREEMENT ARE FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT
IN ANY WAY THE MEANING OR INTERPRETATION OF THIS AGREEMENT.

(H)           GOVERNING LAW; DISPUTES.  ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY DISPUTE UNDER
THIS AGREEMENT THAT IS NOT SETTLED BY MUTUAL CONSENT SHALL BE FINALLY
ADJUDICATED BY ANY FEDERAL OR STATE COURT SITTING IN THE CITY, COUNTY AND STATE
OF NEW YORK, AND EACH PARTY CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH
COURTS (OR ANY APPELLATE COURT THEREFROM) OVER ANY SUCH DISPUTE.

 

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(I)            NOTICES.  ALL NOTICES, DEMANDS AND REQUESTS OF ANY KIND TO BE
DELIVERED TO ANY PARTY IN CONNECTION WITH THIS AGREEMENT SHALL BE IN WRITING AND
SHALL BE DEEMED TO HAVE BEEN DULY GIVEN IF PERSONALLY OR HAND DELIVERED OR IF
SENT BY INTERNATIONALLY-RECOGNIZED OVERNIGHT COURIER OR BY REGISTERED OR
CERTIFIED AIRMAIL, RETURN RECEIPT REQUESTED AND POSTAGE PREPAID, OR BY FACSIMILE
TRANSMISSION, ADDRESSED AS FOLLOWS:

IF TO DEPOMED, TO:

Depomed, Inc.
1360 O’Brien Drive
Menlo Park, California  94025
Attention:  Chief Financial Officer
Fax:  (650) 462-9991

with a copy to:

 

Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, California 94025
Attention:  Julian N. Stern, Esq.
Fax:  (650) 324-0638

IF TO BIOVAIL, TO:

Biovail Laboratories Incorporated
[Address]

AND COPIES TO:

Biovail Corporation
2488 Dunwin Drive
Missisaugua, Ontario
Canada L5L 1J9
Attention:  Brian Crombie
Fax:  (416) 285-6499

 

Cahill Gordon & Reindel
80 Pine Street
New York, New York  10005
Attention:  Roger Andrus, Esq.
Fax:  (212) 269-5420

 

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or to such other address as the party to whom notice is to be given may have
furnished to the other party hereto in writing in accordance with provisions of
this Section 14(i).  Any such notice or communication shall be deemed to have
been effectively given (i) in the case of personal or hand delivery, on the date
of such delivery, (ii) in the case of an internationally-recognized overnight
delivery courier, on the second business day after the date when sent, (iii) in
the case of mailing, on the fifth business day following that day on which the
piece of mail containing such communication is posted and (iv) in the case of
facsimile transmission, on the date of telephone confirmation of receipt.

(J)            ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE FULL AND ENTIRE
UNDERSTANDING AND AGREEMENT BETWEEN THE PARTIES WITH REGARD TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS AMONG THE
PARTIES WITH RESPECT THERETO.

[Signature page follows]

 

-19-

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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as of the date first written above.

 

DEPOMED, INC.

 

 

 

By: 

 

 

 

Name:

 

 

Title:

 

 

 

BIOVAIL LABORATORIES INCORPORATED

 

 

 

By: 

 

 

 

Name:

 

 

Title:

 

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ANNEX II

Form of Nominee Voting Commitment Letter

Reference is hereby made to the Stock Purchase Agreement, dated May [  ], 2002 
(the “Stock Purchase Agreement”), by and between Depomed, Inc., a California
corporation (the “Company”), and Biovail Laboratories Incorporated, a
corporation organized under the laws of Barbados (“Purchaser”).  This letter
shall be effective as of the Closing (as defined in the Stock Purchase
Agreement).

                In consideration of the Purchaser’s agreement to enter into the
Stock Purchase Agreement and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
commits to vote or cause to be voted all shares of Company Voting Stock owned or
beneficially owned by the undersigned in favor of the election of the Purchaser
Nominees (as defined in the Stock Purchase Agreement), if any, designated by the
Purchaser in accordance with Section 3.02 of the Stock Purchase Agreement as in
effect on the date hereof, to the Board of Directors of the Company at each
election of the Board of Directors of the Company with respect to which the
Purchaser is entitled to designate Purchaser Nominees.

                For purposes of this letter, “Company Voting Stock” means any
and all shares, interests, participations or other equivalents (however
designated) of corporate stock of the Company entitling the holders thereof to
vote in an election of the Board of Directors of the Company.

Signature:

 

 

 

 

 

Name of Shareholder:

 

 

 

 

 

Title of Signatory if

 

 

Shareholder is an entity:

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

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ANNEX III

 

Committed Voters

1.                                       Orbimed Advisors LLC

2.                                       Easton Hunt Capital Partners

3.                                       John W. Shell, Ph.D.

4.                                       John N. Shell

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