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SUBSCRIPTION AGREEMENT
  
    DEPOMED, INC.    
  


 
 

2,300,000
  SHARES OF COMMON STOCK    
  


	To:
	DepoMed, Inc.




        This
Subscription Agreement (this "Agreement") is made between DepoMed, Inc., a California corporation (the
"Company"), and the undersigned prospective purchaser who is subscribing hereby for shares of the Company's common stock, no par value (the
"Common Stock"), on the terms and subject to the conditions set forth herein. The Company desires to offer and sell (the
"Offering") up to 2,300,000 shares of Common Stock (the "Shares") at a purchase price per share equal to
$            (the "Purchase Price"). 



        The
undersigned agrees and represents as follows: 


	A.
	Subscription



        (1)  The
undersigned hereby irrevocably subscribes for and agrees to purchase Shares in the amount indicated on the signature page hereto (the
"Subscription Amount"). The undersigned shall deliver the Subscription Amount within five (5) business days of the date of this Agreement by wire
transfer as set forth in Paragraph (2) below. The undersigned hereby acknowledges that the actual number of Shares which the undersigned will receive will be equal to the Subscription Amount
divided by the Purchase Price, rounded down to the nearest whole number of Shares. 



        (2)  The
undersigned understands that all payments of the Subscription Amount shall be delivered by wire transfer in accordance with the wire transfer instructions set forth
on Exhibit A attached hereto. Such payment will be deposited as soon as practicable for the undersigned's benefit in a non-interest
bearing escrow account. The payment will be returned promptly, without interest or deduction, if the undersigned's subscription is rejected. The Company may hold a closing of the Offering (the
"First Closing") at any time during the period beginning after one or more subscriptions have been accepted and ending on or before March 15,
2002 (the "Termination Date"); provided, however, that the Termination Date may be extended to a date not later than April 15, 2002 upon the
mutual agreement of the Company and Fahnestock & Co. Inc., the placement agent for this Offering (the "Placement Agent"). Subsequent
closings may be held at any time after the First Closing and on or before the Termination Date (each, a "Subsequent Closing") without regard to the
aggregate amount of subscriptions for Shares received by the Company. The Company may, in its discretion, accept subscriptions for an aggregate number of less than 2,300,000 Shares. 



        (3)  Upon
receipt by the Company of the requisite payment for all Shares to be purchased by the subscribers whose subscriptions are accepted (each, a
"Purchaser" and, collectively, the "Purchasers") at the First Closing or any Subsequent Closing, the
Company shall: (i) issue to each Purchaser stock certificates representing the Shares purchased; (ii) deliver to each Purchaser a certificate stating that the representations and
warranties made by the Company in Section C hereof were true and correct in all material respects when made and are true and correct in all material respects on the date of the First Closing or
Subsequent Closing, as applicable; and (iii) cause to be delivered to each Purchaser an opinion of Heller Ehrman White & McAuliffe llp
("HEWM") in the form of Exhibit B attached hereto. 


        (4)  The
undersigned hereby agrees to be bound hereby upon the (i) execution and delivery to the Company, in care of HEWM, of the signature page to this Agreement, and
(ii) acceptance at the First Closing or any Subsequent Closing by the Company of the undersigned's subscription. 


        (5)  The
undersigned agrees that the Company may, in its sole and absolute discretion, reduce the undersigned's subscription to any number of Shares that in the aggregate
does not exceed the number of Shares hereby applied for without any prior notice to or further consent by the undersigned. If such a reduction occurs, the part of the Subscription Amount attributable
to the reduction shall be returned, without interest or deduction. 





 
	B.
	Representations and Warranties of the Purchaser



The
Purchaser hereby represents and warrants to the Company and the Placement Agent, and agrees with the Company as follows: 



        (1)  The
Purchaser has been furnished with and has carefully read the Company's Confidential Private Placement Memorandum dated February 15, 2002, the exhibits thereto
and the supplement thereto dated March 5, 2002 (collectively, the "Memorandum") and this Agreement (collectively referred to herein as the
"Offering Documents"), and is familiar with and understands the terms of the Offering. The Purchaser has carefully considered and has, to the extent the
Purchaser believes such discussion necessary, discussed with the Purchaser's professional legal, tax, accounting and financial advisors the suitability of an investment in the Shares for the
Purchaser's particular tax and financial situation and has determined that the Shares being subscribed for by the Purchaser are a suitable investment for the Purchaser. 


        (2)  The
Purchaser acknowledges that (i) the Purchaser has had the right to request copies of any documents, records, and books pertaining to this investment and
(ii) any such documents, records and books which the Purchaser requested have been made available for inspection by the Purchaser, the Purchaser's attorney, accountant or advisor(s). 


        (3)  The
Purchaser and/or the Purchaser's advisor(s) has/have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf
of the Company concerning the Offering and all such questions have been answered to the full satisfaction of the Purchaser. 


        (4)  The
Purchaser is not subscribing for the Shares as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at any seminar or meeting. 


        (5)  If
the Purchaser is a natural person, the Purchaser has reached the age of majority in the state in which the Purchaser resides, has adequate means of providing for the
Purchaser's current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Shares for an indefinite period of time, has no need for liquidity in such
investment and, at the present time, could afford a complete loss of such investment. 


        (6)  The
Purchaser has had such knowledge and experience in financial, tax and business matters so as to enable the Purchaser to utilize the information made available to the
Purchaser in connection with the Offering to evaluate the merits and risks of an investment in the Shares and to make an informed investment decision with respect thereto. 


        (7)  The
Purchaser will not sell or otherwise transfer the Shares without registration under the Securities Act of 1933, as amended (the "Securities
Act"), or applicable state securities laws or an exemption therefrom. None of the Shares have been registered under the Securities Act or under the securities laws of any
state. The Purchaser represents that the Purchaser is purchasing the Shares for the Purchaser's own account, for investment and not with a view toward resale or distribution. The Purchaser has not
offered or sold the Shares being acquired nor does the Purchaser have any present intention of selling, distributing or otherwise disposing of such Shares either currently or after the passage of a
fixed or determinable period of time or upon the occurrence or non-occurrence of any predetermined event or circumstances in violation of the Securities Act. The Purchaser is aware that
there is a limited market for the Shares. The Purchaser is aware that an exemption from the registration requirements of the Securities Act pursuant to Rule 144 promulgated thereunder is not
presently available; and the Company has no obligation to register the Shares subscribed for hereunder, except as provided in Section E hereof, or to make available an exemption from the
registration requirements pursuant to such Rule 144 or any successor rule for resale of the Shares. 


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        (8)  The
Purchaser recognizes that an investment in the Shares involves substantial risks, including loss of the entire amount of such investment. Further, the Purchaser has
carefully read and considered the Company's financial statements included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000 (the
"2000 Form 10-K"), the subsection of the 2000 Form 10-K entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations—Liquidity and Capital Resources", the section of the 2000 Form 10-K entitled "Item 1. Business," the unaudited financial
statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, and the section entitled "Risk Factors" in the Memorandum, and
has taken full cognizance of and understands all of the risks related to the purchase of the Shares. 



        (9)  The
Purchaser acknowledges that the certificate(s) representing the Shares shall be stamped or otherwise imprinted with a legend substantially in the following form:
"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 or otherwise disposed of except pursuant to an effective registration under such act or an exemption therefrom, which, in the opinion of
counsel for the holder, which counsel and opinion are reasonably satisfactory to counsel for this corporation, is available." 



        (10) If
this Agreement is executed and delivered on behalf of a partnership, corporation, trust or estate: (i) such partnership, corporation, trust or estate has the
full legal right and power and all authority and approval required (a) to execute and deliver, or authorize execution and delivery of, this Agreement and all other instruments executed and
delivered by or on behalf of such partnership, corporation, trust or estate in connection with the purchase of its Shares, and (b) to purchase and hold such Shares; (ii) the signature of
the party signing on behalf of such partnership, corporation, trust or estate is binding upon such partnership, corporation, trust or estate; and (iii) such partnership, corporation or trust
has not been formed for the specific purpose of acquiring such Shares, unless each beneficial owner of such entity is qualified as an accredited investor within the meaning of Rule 501(a) of
Regulation D promulgated under the Securities Act and has submitted information substantiating such individual qualification. 


        (11) If
the Purchaser is a retirement plan or is investing on behalf of a retirement plan, the Purchaser acknowledges that an investment in the Shares poses additional risks
including the inability to use losses generated by an investment in the Shares to offset taxable income. 


        (12) The
information contained in the questionnaire in the form of Exhibit C attached hereto delivered by the
Purchaser in connection with this Agreement (the "Questionnaire") is complete and accurate in all respects. The Purchaser shall indemnify and hold
harmless the Company and each officer, director or control person of any such entity, who is or may be a party or is or may be threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts or omission to
represent or state facts made or alleged to have been made by the Purchaser to the Company or omitted or alleged to have been omitted by the Purchaser, concerning the Purchaser or the Purchaser's
authority to invest or financial position in connection with the Offering, including, without limitation, any such misrepresentation, misstatement of omission contained in the Agreement or any other
document submitted by the Purchaser, against losses, liabilities and expenses for which the Company or any officer, director or control person of any such entity has not otherwise been reimbursed
(including attorney's fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by the Company or such officer, director or control person in connection with such action,
suit or proceeding. 


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	C.
	Representations and Warranties of the Company




Except
as set forth in the Company Disclosure Schedule to this Agreement, the Company hereby represents and warrants to and, where applicable, covenants and agrees with, the Purchaser and the
Placement Agent that: 


        (1)  Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary except
where the failure to be so qualified would not have a material adverse effect on the business, properties, prospects, financial condition or results of operations of the Company (a
"Material Adverse Effect"). 


        (2)  Capitalization. The authorized capital stock of the Company consists of 25,000,000 shares of Common Stock, no par value,
of which there were 11,673,309 shares issued and outstanding as of February 13, 2002, 5,000,000 shares of Preferred Stock, no par value, of which, 25,000 are designated as
Series A Convertible Exchangeable Preferred Stock and 12,015 shares were issued and outstanding as of February 13, 2002 and 4,975,000 shares of undesignated preferred stock, none of
which shares were issued and outstanding. The outstanding Series A Convertible Exchangeable Preferred Stock plus accrued dividends therein are convertible into 1,154,250 shares of Common Stock.
All outstanding shares of Common Stock and Series A Convertible Exchangeable Preferred Stock are duly authorized, validly issued, fully paid and non-assessable, free of any liens or
encumbrances and are not subject to preemptive rights. As of February 13, 2002, the Company had reserved 2,900,000 shares of Common Stock for issuance to employees, directors and consultants
pursuant to the Company's 1995 Stock Option Plan, of which 2,553,092 shares of Common Stock are subject to outstanding, unexercised options. As of February 13, 2002, the Company had reserved
3,172,460 shares of Common Stock subject to outstanding warrants, of which 1,200,000 shares were subject to warrants issued under the Company's 1997 initial public offering. As of February 13,
2002, the Company had reserved 483,366 shares of Common Stock subject to conversion of outstanding principal plus interest under a convertible promissory note issued in favor of Elan International
Services, Ltd. As of February 13, 2002, the Company had reserved 1,154,250 shares of Common Stock subject to conversion of Series A Convertible Exchangeable Preferred and
dividends accrued thereon. In addition, the Company has agreed to issue to the Placement Agent warrants (the "Placement Agent Warrants") to purchase a
number of shares of Common Stock equal to 5% of the number of Shares sold in the Offering pursuant to the Placement Agent Agreement, dated as of February 7, 2002, between the Company and the
Placement Agent (the "Placement Agent Agreement"). Other than as set forth above or as contemplated in this Agreement, there are no other options,
warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which either the Company is bound or obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. Since February 13, 2002, there have been no material changes to the Company's capitalization as described in this Section C(2). 


        (3)  Issuance. The Shares when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. 


        (4)  Authorization; Enforceability. The Company has all corporate right, power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance
of this Agreement by the Company, the authorization, sale, 


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issuance and delivery of the Shares contemplated herein and the performance of the Company's obligations hereunder has been taken. This Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy. The issuance and sale of the
Shares contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person, with the exception of a preemptive right granted to Elan International
Services, Ltd., a wholly owned subsidiary of Elan Corporation, plc, to maintain its pro rata interest in the Company, which rights may or may not be exercised. 



        (5)  No Conflict; Governmental and Other Consents. 



        (a)  The
execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law,
statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company is bound, or of any provision of the Certificate of
Incorporation or Bylaws of the Company, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a
default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its
properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company. 


        (b)  No
consent, approval, authorization or other order of any governmental authority or other third-party is required to be obtained by the Company in connection with the
authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Shares, except such filings as may be required to be made with the Securities and Exchange
Commission (the "SEC"), the American Stock Exchange (the "AMEX") and with any state or foreign blue sky
or securities regulatory authority. 




        (6)  Litigation. There are no pending, or to the Company's knowledge threatened, legal or governmental proceedings against the
Company which could have a Material Adverse Effect on the Company. 


        (7)  Accuracy of Reports, Memorandum and Representations. All material reports required to be filed by the Company within the
two years prior to the date of this Agreement (the "SEC Reports") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), have been duly filed with the SEC, complied at the time of filing in all material respects with the requirements of their respective
forms and, except to the extent updated or superseded by any subsequently filed report, to the best of the Company's knowledge, were complete and correct in all material respects as of the dates at
which the information was furnished, and contained (as of such dates) no untrue statements of a material fact nor omitted to state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not misleading. The Memorandum and any of the documents or instruments attached thereto as Exhibits or incorporated therein by
reference, when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. 


        (8)  Financial Information. The Company's financial statements that appear in the SEC Reports have been prepared in all
material respects in accordance with United States generally accepted accounting principles (except that the financial statements that are not audited do not have notes thereto) applied on a
consistent basis throughout the periods indicated and with each other and that such financial statements fairly present, in all material respects, the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. 


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        (9)  Absence of Certain Changes. Since the date of the Company's financial statements in the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2001, there has not been any Material Adverse Effect on the assets, liabilities, condition (financial or otherwise) or results
of operations of the Company or any occurrence, circumstance or combination thereof that reasonably could be expected to result in such material adverse effect. 


        (10) Investment Company. The Company is not an "investment company" within the meaning of such term under the Investment
Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder. 


        (11) Indemnification. The Company shall indemnify and hold harmless the Purchaser, and each officer, director or control
person of such entity (each, an "Indemnified Party"), from any and all, liability and expense (including, without limitation, reasonable fees and
disbursements of counsel as incurred in connection with any action, suit or proceeding) incurred or suffered by any Indemnified Party arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the Company pursuant to this Agreement. 


        (12) Subsidiaries. The SEC Reports set forth each subsidiary of the Company, showing the jurisdiction of its incorporation or
organization and showing the percentage of each person's ownership of the outstanding stock or other interests of such subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
company or other entity of which at least 50% of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons
performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other subsidiaries. Except as set forth in the SEC Reports, none of such subsidiaries is a
"significant subsidiary" as defined in Regulation S-X. 


        (13) Indebtedness. The SEC Reports set forth as of the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has commitments. For the purposes of this Agreement, "Indebtedness" shall mean
(a) any liabilities for borrowed money or amounts owed in excess of $25,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties,
endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in
excess of $25,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any subsidiary is in default with respect to any Indebtedness. 


        (14) Certain Fees. Other than fees payable to the Placement Agent pursuant to the Placement Agent Agreement, no brokers',
finders' or financial advisory fees or commissions will be payable by the Company or any subsidiary with respect to the transactions contemplated by this Agreement. 


        (15) Material Agreements. Except as set forth in the SEC Reports, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the SEC as an exhibit to Form 10-K,
Form 10-Q or Form 8-K (each, a "Material Agreement"). The Company and each of its subsidiaries has in all material
respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and, to the best of the Company's knowledge are not
in default under any Material Agreement now in effect, the result of which could reasonably be expected to cause a Material Adverse Effect. 


        (16) Transactions with Affiliates. Except as set forth in the SEC Reports, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing transactions with aggregate obligations of any party exceeding $25,000 between (a) the Company, any subsidiary or
any of their respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its subsidiaries, or any 


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person who would be covered by Item 404(a) of Regulation S-K or any Company or other entity controlled by such officer, employee, consultant, director or person. 


        (17) Taxes. The Company and each of the subsidiaries has accurately prepared and filed all federal, state, local, foreign and
other tax returns for income, gross receipts, sales, use and other taxes and custom duties ("Taxes") required by law to be filed by it, has paid or made
provisions for the payment of all Taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the
subsidiaries for all current Taxes and other charges to which the Company or any subsidiary is subject and which are not currently due and payable, except for Taxes which, if unpaid, individually or
in the aggregate, do not and would not have a Material Adverse Effect on the Company or its subsidiaries. None of the federal income tax returns of the Company or any subsidiary for the past six years
has been audited by the Internal Revenue Service. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal, state, local or foreign) pending
or threatened against the Company or any subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency. 



        (18) Stabilization. Neither the Company nor any subsidiary has taken, and each of the Company and the subsidiaries will use
their respective reasonable best efforts to cause each of their respective officers, directors and affiliates not to take, directly or indirectly, any action designed to or which has constituted or
which would reasonably be expected to cause or result in, stabilization or manipulation under the Exchange Act of the price of any capital stock of the Company. 


        (19) Environmental Matters. (a) Except as disclosed in the SEC Reports, all real property owned, leased or otherwise
operated by Company and its subsidiaries is free of contamination from any substance, waste or material currently identified to be toxic or hazardous pursuant to, within the definition of a substance
which is toxic or hazardous under, or which may result in liability under, any Environmental Law, including, without limitation, any asbestos, polychlorinated biphenyls, radioactive substance,
methane, volatile hydrocarbons, industrial solvents, oil or petroleum or chemical liquids or solids, liquid or gaseous products, or any other material or substance ("Hazardous
Substance") which has or could reasonably be expected to cause or constitute a health, safety, or environmental hazard to any Person or property or result in any environmental
liabilities and costs in excess of $100,000. Neither the Company nor any of its subsidiaries has caused or suffered to occur any release, spill, migration, leakage, discharge, disposal, uncontrolled
loss, seepage, or filtration of Hazardous Substances which could reasonably be expected to result in environmental liabilities and costs in excess of $100,000. The Company and each subsidiary has
generated, treated, stored and disposed of any Hazardous Substances in full compliance with applicable Environmental Laws, except for such non-compliances which could not reasonably be
expected to have a Material Adverse Effect. The Company and each subsidiary has obtained, or has applied for, and is in full compliance with and in good standing under all permits required under
Environmental Laws (except for such failures which could not reasonably be expected to have a Material Adverse Effect) and neither Company nor any of its subsidiaries has any knowledge of any
proceedings to substantially modify or to revoke any such permit. There are no investigations, proceedings or litigation pending or, to Company's or its subsidiaries' knowledge, threatened, affecting
or against Company, any of its subsidiaries or any of Company's or subsidiaries' facilities relating to Environmental Laws or Hazardous Substances. "Environmental Laws" shall mean all federal,
national, state, regional and local laws, statutes, ordinances and regulations, in each case as amended or supplemented from time to time, and any judicial or administrative interpretation thereof,
including orders, consent decrees or judgments relating to the regulation and protection of human health, safety, the environment and natural resources. 


        (20) Intellectual Property Rights and Licenses. The Company and its subsidiaries own or have the right to use any and all
information, know-how, trade secrets, patents, copyrights, trademarks, tradenames, software, formulae, methods, processes and other intangible properties that are necessary or customarily
used by them in their business ("Intangible Rights"). The Company (including its subsidiaries) has not received any notice that it is in conflict with
or infringing upon the asserted 


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intellectual property rights of others in connection with the Intangible Rights, and, to the Company's and its subsidiaries' knowledge, neither the use of the Intangible Rights nor the operation of
the Company's businesses is infringing or has infringed upon any intellectual property rights of others. All payments have been duly made that are necessary to maintain the Intangible Rights in force.
No claims have been made, and to the Company's and its subsidiaries knowledge, no claims are threatened, that challenge the validity or scope of any material Intangible Right of the Company or any of
its subsidiaries. The Company and each of its subsidiaries have taken reasonable steps to obtain and maintain in force all licenses and other permissions under Intangible Rights of third parties
necessary to conduct their businesses as heretofore conducted by them, and now being conducted by them, and as expected to be conducted, and neither the Company nor any of its subsidiaries is or has
been in material breach of any such license or other permission. The Company and each of its subsidiaries have obtained and maintained all necessary agreements providing for assignment to them of all
patentable inventions made by and copyright interest in works created by non-employees and employees for the Company and its subsidiaries. The Company and each of its subsidiaries have
used all commercially reasonable efforts to maintain the confidentiality of all trade secrets and other confidential information owned by them or in their possession and have no knowledge of any
misappropriation of any such trade secrets or other confidential information by any third party. 


        (21) Labor, Employment and Benefit Matters. 



        (a)  There
are no strikes or other labor disputes against Company or any of its subsidiaries pending or, to the Company's or its subsidiaries' knowledge, threatened. Hours
worked by and payment made to employees of the Company and its subsidiaries have been in compliance with the Fair Labor Standards Act or any other applicable labor or employment law (except such
non-compliance as could not reasonably be expected to have a Material Adverse Effect). There is no organizing activity involving employees of the Company or any of its subsidiaries pending
or, to the Company's or its subsidiaries' knowledge, threatened by any labor union or group of employees. There are no representation proceedings pending or, to the Company's or its subsidiaries'
knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Company or its subsidiaries has made a pending demand for recognition. There are
no complaints or charges against the Company or any of its subsidiaries pending or, to the Company's or its subsidiaries' knowledge, threatened, to be filed with any Governmental Authority or
arbitrator based on, arising out of or in connection with, or otherwise relating to, the employment or termination of employment by the Company or any of its subsidiaries of any individual. 



        (b)  Neither
the Company nor any of its subsidiaries is, or during the five years preceding the date of this Agreement was, a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or its subsidiaries. 


        (c)  Each
employee benefit plan is in compliance with all applicable law, except for such noncompliance which could not reasonably be expected to have a Material Adverse
Effect. 


        (d)  Neither
the Company nor any of its subsidiaries has any liabilities, contingent or otherwise, including without limitation, liabilities for retiree health, retiree life,
severance or retirement benefits, which are not fully reflected on the Balance Sheet or fully funded. The term "liabilities" used in the preceding sentence shall be calculated in accordance with
reasonable actuarial assumptions. Such term shall also include any obligation owed to a governmental authority for the purpose of providing retiree health, retiree life, severance, retirement or other
benefits. 


        (e)  None
of the Company nor any of its subsidiaries has terminated any "employee pension benefit plan "as defined in Section 3(2) of ERISA (as defined below) or has
incurred or expects to incur any outstanding liability under Title IV of the Employee Retirement Income Security Act of 1974, as amended and all rules and regulations promulgated thereunder
("ERISA"). 



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        (22) Compliance with Law. 



        (a)  The
Company is in compliance in all material respects with all Applicable Laws, except for such non-compliance which could not reasonably be expected to have
a Material Adverse Effect. The term "Applicable Laws" shall include, without limitation, all applicable laws relating to health care, the health care industry and the provision of health care
services, third party reimbursement (including Medicare and Medicaid), public health and safety and wrongful death and medical malpractice. The Company has not received any notice of, nor does the
Company have any knowledge of, any violation (or of any investigation, inspection, audit or other proceeding by any governmental entity involving allegations of any violation) of any Applicable Law
involving or related to the Company which has not been dismissed or otherwise disposed of. The Company has not received notice or otherwise has any knowledge that the Company is charged with,
threatened with or under investigation with respect to, any violation of any Applicable Law, or has any knowledge of any proposed change in any Applicable Law that would have a material adverse effect
on the Company. The Company has not received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability, including without
limitation any liability under any of the Material Agreements, which may be material to its business, prospects, financial condition, operations, property or affairs. There is no existing law, rule,
regulation or order, and the Company is not aware of any proposed law, rule, regulation or order, whether federal, state, county or local, which would prohibit the Company from, or otherwise
materially adversely affect the Company in conducting its business in any jurisdiction in which it proposes to conduct business. 


        (b)  The
Company has, and, to the Company's knowledge, all professional employees or agents of the Company who are performing health care or health care related functions on
behalf of the Company have, all licenses, franchises, permits, accreditations, provider numbers, authorizations, including certificates of need, consents or orders of, or filings with, or other
approvals from all Governmental Authorities ("Approvals") necessary for the conduct of, or relating to the operation of, the business of the Company and
the occupancy and operation, for its present uses, of the real and personal property which the Company owns or leases, except for such Approvals which could not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor, to the Company's knowledge, its professional employees or agents (acting in such capacities) is in violation of any such Approval in any material
respect or any terms or conditions thereof. All such Approvals are in full force and effect, have been issued to and fully paid for by the holder thereof and no notice or warning from any Governmental
Authority with respect to the suspension, revocation or termination of any Approval has been, to the knowledge of the Company, threatened by any Governmental Authority or issued or given to the
Company. No such Approvals will in any way be affected by, terminate or lapse by reason of the consummation of all or any portion of the transactions contemplated by this Agreement. 




        (23) Certain Regulatory Matters. The Company has not since inception received notice that the Company has been, or to the
Company's knowledge will be, the subject of any investigative proceeding before any federal or state regulatory authority or the agent of any such authority, including, without limitation, federal and
state health authorities which could reasonably be expected to result in a Material Adverse Effect. 



        (24) Ownership of Property. Each of Company and its subsidiaries has (i) good and marketable and insurable fee simple
title to its owned real property, free and clear of all liens, (ii) a valid and marketable leasehold interest in all leased real property, and each of such leases is valid and enforceable in
accordance with its terms and is in full force and effect, and, (iii) good and marketable title to, or valid leasehold interests in, all of its other properties and assets free and clear of all
liens, except as set forth in that certain Loan and Security Agreement, dated as of March 29, 2001, by and between the Company and GATX Ventures, Inc. 


9





 



        (25) Registration Rights. Except as set forth in the Offering Documents or as provided in this Agreement, neither the Company
nor any of its subsidiaries is under any obligation to register, under the Securities Act, any of its presently outstanding securities or any securities which may hereafter be issued. 


        (26) Insurance. The Company and its subsidiaries maintain insurance policies which are in full force and effect and are in
amounts and for coverage customary for the industry in which Company or such subsidiary operates. 


	D.
	Understandings



The
Purchaser understands, acknowledges and agrees with the Company as follows: 


        (1)  The
Company may terminate this Offering at any time in its sole discretion. The execution of this Agreement by the Purchaser or solicitation of the investment
contemplated hereby shall create no obligation of the Company to accept any subscription or complete the Offering. 



        (2)  Except
as set forth in Section D(1) above, the Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, that,
except as required by law, the Purchaser is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Purchaser hereunder and that this Agreement and such other agreements
shall survive the death or disability of the Purchaser and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives
and permitted assigns. If the Purchaser is
more than one person, the obligations of the Purchaser hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be
made by and be binding upon each such person and his/her heirs, executors, administrators, successors, legal representatives and permitted assigns. 


        (3)  No
federal or state agency has made any finding or determination as to the accuracy or adequacy of the Offering Documents or as to the fairness of the terms of this
offering for investment nor any recommendation or endorsement of the Shares. 


        (4)  The
Offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and the provisions of
Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Purchaser herein and in the Questionnaire. 



        (5)  There
can be no assurance that the Purchaser will be able to sell or dispose of the Shares. It is understood that in order not to jeopardize the Offering's exempt status
under Section 4(2) of the Securities Act and Regulation D, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder. 


        (6)  The
Purchaser acknowledges that the information contained in this Agreement is confidential and non-public and agrees that all such information shall be kept
in confidence by the Purchaser and neither used for the Purchaser's personal benefit (other than in connection with this subscription) nor disclosed to any third party for any reason, except to the
extent required by applicable law, rules or regulations, or by legal process; provided, however, that this confidentiality obligation shall not apply to any such information that (i) is part of
the public knowledge or literature and readily accessible at the date hereof, (ii) becomes part of the public knowledge or literature and readily accessible by publication (except as a result
of a breach of this provision) or (iii) is received from third parties (except third parties who disclose such information in violation of any confidentiality agreements or obligations,
including, without limitation, any Agreement entered into with the Company). 



        (7)  The
Purchaser acknowledges that the foregoing restrictions on the Purchaser's use and disclosure of any such confidential, non-public information contained
in the above-described documents 


10





 




restricts the Purchaser from trading in the Company's securities to the extent such trading is based on such confidential, non-public information. 


        (8)  The
representations, warranties and agreements of the Purchaser contained herein and in any other writing delivered in connection with the transactions contemplated
hereby shall be true and correct in all respects on and as of the sale of the Shares as if made on and as of such date and shall survive the execution and delivery of this agreement and the purchase
of the Shares. 


        (9)  Insofar
as indemnification for liabilities under the Securities Act may be permitted to directors, officers or controlling persons of the Company, the Company has been
informed that in the opinion of the SEC such indemnification is against public policy as expressed in such Act and therefore may be unenforceable to such extent. 


        (10) IN
MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED,
AND THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY CONTAINED HEREIN. THE COMMON STOCK OFFERED HEREBY HAS NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE OFFERING DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 


        (11) THE
SECURITIES OFFERED HEREBY MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 


	E.
	Registration Rights



        (1)  Registration of Securities. The Company shall use its reasonable best efforts to prepare for filing with the SEC, and
cause to be filed, a "shelf" registration statement on Form S-3 or other appropriate form (the "Shelf Registration") pursuant to
Rule 415 under the Securities Act providing for the sale by the Purchasers of the Shares and the shares of Common Stock issuable upon exercise of the Placement Agent Warrants and any shares of
capital stock issued with respect to any of the foregoing pursuant to a stock dividend, stock split, recapitalization, reorganization or similar event involving the Company (collectively, the
"Registrable Securities") within the later to occur of (a) 30 days after the date of the First Closing, or (b) 15 days after
the date of the final Subsequent Closing, if any (the "Required Filing Date"). The Company shall use its reasonable best efforts to cause the Shelf
Registration to be declared effective by the SEC as soon as practicable after it has been filed with the SEC, and in any event within 60 days of the Required Filing Date. The Company agrees to
use its reasonable best efforts to keep such Shelf Registration continuously effective for a period ending on the earliest of (a) the fifth anniversary of the effective date of such Shelf
Registration, (b) the date on which all such Registrable Securities have been sold thereunder, (c) such time as all of the Registrable Securities may be sold within a given three-month
period pursuant to Rule 144 under the Securities Act, or (d) the date upon which all such Registrable Securities are freely transferable without restriction under the Securities Act. For
the purpose of this Agreement, "reasonable best efforts" shall mean the best efforts of the Company consistent with sound and reasonable business practices and judgment. 


11





 



        (2)  Payments by the Company. 



        (a)  If
the Registration Statement covering the Registrable Securities is not filed in appropriate form with the SEC on or before the Required Filing Date, the Company will
make payment to the undersigned in such amounts and at such times as shall be determined pursuant to this Section E(2). 


        (b)  The
amount (the "Periodic Amount") to be paid by the Company to the undersigned shall be determined as of each
Computation Date (as defined below) and such amount shall be equal to (A) one percent (1.0%) of the Purchase Price paid by the undersigned for all Shares then purchased and outstanding pursuant
to this Agreement for the period from the date following the Required Filing Date to the first relevant Computation Date and (B) one and one-half percent (1.5%) to each Computation
Date thereafter. By way of illustration and not in limitation of the foregoing, if the Registration Statement is not filed with the SEC until one hundred (100) days after the Required Filing
Date, the Periodic Amount will aggregate two and one-half percent (2.5%) of the Purchase Price of the Shares (1.0% for days 60-90 plus 1.5% for days 90-100). 



        (c)  Each
Periodic Amount will be payable by the Company in cash or other immediately available funds to each of the undersigned within ten days of each Computation Date. 


        (d)  The
parties acknowledge that the damages which may be incurred by the Purchaser if the Registration Statement has not been filed by the Required Filing Date may be
difficult to ascertain. Therefore, the parties agree that the Periodic Amount represents a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such
damages and that the payment by Company of the Periodic Amount shall be deemed in complete and total satisfaction of all claims of undersigned against the Company for failure of Company to comply with
Section E(2)(a) above. 


        (e)  Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this provision shall not be payable to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a failure to act or to act timely by the undersigned or the undersigned's counsel, or in the event all of the Registrable Securities may be sold
pursuant to Rule 144 or another available exemption under the Act. 


        (f)    "Computation Date" means (i) the date which is the earlier of (A) thirty (30) days after the
Required Filing Date or (B) the date after the Required Filing Date on which the Registration Statement is filed
and (ii) each date which is the earlier of (A) thirty (30) days after the previous Computation Date or (B) the date after the previous Computation Date on which the
Registration Statement is filed. 




        (3)  Registration Procedures. In connection with the Company's obligations with respect to the Shelf Registration, the Company
shall use its reasonable best efforts to effect the registration in furtherance of the sale of the Registrable Securities by the holders thereof in accordance with the intended method or methods of
distribution thereof described in the Shelf Registration. In connection therewith, the Company shall, as promptly as may be practicable: 



        (a)  prepare
and file with the SEC a registration statement with respect to the Registrable Securities on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the disposition of the Registrable Securities in accordance with the intended method or methods of disposition thereof; 


        (b)  prepare
and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the applicable period specified in Paragraph (1) above; 



12





 




        (c)  furnish
to each Purchaser (the Placement Agent being considered a "Purchaser" for purposes of this Section E) who is selling Registrable Securities a copy of such
registration statement, each amendment and supplement thereto (in each case including all exhibits thereto but excluding all documents incorporated by reference therein unless specifically so
requested by such Purchaser) and such reasonable number of copies of the prospectus included in such registration statement (including each preliminary prospectus) as such Purchaser may reasonably
request; 


        (d)  use
its reasonable best efforts to register or qualify the Registrable Securities under such other securities laws or blue sky laws of such jurisdictions as the
Purchasers shall reasonably request, and take any and all such actions as may be reasonably necessary or advisable to enable the Purchasers to consummate the disposition in such jurisdictions of such
Registrable Securities; 


        (e)  notify
each Purchaser, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the period that the Company is required
to keep the registration statement effective, of the happening of any event as a result of which the prospectus included in such registration statement (as then in effect) contains an untrue statement
of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading. As promptly as practicable following any such
occurrence, the Company shall prepare and furnish to each Purchaser a reasonable number of copies of a supplement or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to subsequent purchasers of the
Registrable Securities, such prospectus shall meet the requirements of the Securities Act and relevant state securities laws, provided that such obligation on the part of the Company shall be
suspended for such period of time as the Company considers reasonably necessary and in its best interest due to circumstances then existing (but not more than 30 days in any 180-day
period). Each Purchaser shall furnish to the Company such information regarding each such Purchaser and its proposed method of distribution of the Registrable Securities as the Company may from time
to time request and as shall be required by law to effect and maintain the registration of such Shares under the Securities Act and any state securities laws; 



        (f)    advise
each Purchaser, promptly after receiving notice thereof, of any stop order issued or threatened by the SEC and use its reasonable best efforts to take all actions
required to prevent the entry of such stop order, or to remove it if entered; 


        (g)  use
its reasonable best efforts to cause all Registrable Securities included in such registration statement to be listed, by the date of the first sale of Registrable
Securities pursuant to such registration statement, on each securities exchange (or Nasdaq) on which the Common Stock is then listed or proposed to be listed; and 



        (h)  otherwise
use its reasonable best efforts to comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities in
accordance with the intended methods of disposition by the Purchasers thereof set forth in such registration statement and to make generally available to its security holders, as soon as reasonably
practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. 




        (4)  Expenses. All expenses incident to the Company's performance of or compliance with the provisions of this
Section E (including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, fees and expenses incurred in connection with the
listing of the Registrable Securities to be registered on each securities exchange (or Nasdaq) on which similar securities issued by the Company are then listed, printing expenses, fees and
disbursements of separate counsels for each of the Company and the Purchaser, and fees and disbursements of all independent certified public accountants and other persons retained by the Company) will
be borne by the Company. Notwithstanding the foregoing, the Purchasers shall pay any and all underwriting fees, discounts or commissions attributable to the sale of Registrable Securities. 


13





 

        (5)  Indemnification. 



        (a)  Upon
the registration of Registrable Securities pursuant to Section E(1) of this Agreement, and in consideration of the agreements of the Purchasers contained
herein, the Company shall, and it hereby
agrees to, indemnify and hold harmless, to the maximum extent permitted by law, each of the Purchasers which holds Registrable Securities, its officers and directors, each underwriter of such
Registrable Securities, if any, and each person who controls such person (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses (including reasonable
attorneys' fees and expenses) to which such Purchaser, its officers, directors, each underwriter, or such controlling persons may become subject, insofar as such losses, claims, damages, liabilities
and expenses (or actions in respect thereof) arise out of or are based upon a breach of a representation, warranty or covenant in this Agreement or any untrue statement or alleged untrue statement of
material fact contained in any such registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or 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, and will reimburse each such Purchaser, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; except
(i) insofar as the same arise out of or are based upon an untrue statement or omission, or alleged untrue statement or omission, so made based upon information furnished by such Purchaser,
underwriter or controlling person in writing specifically for use in such registration statement or prospectus or (ii) insofar the same are caused by such Purchaser's or such underwriter's
failure to deliver a copy of such registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such Purchaser or such underwriter with a sufficient
number of copies of the same. 


        (b)  In
connection with any registration statement under which Registrable Securities are registered under the Securities Act and pursuant to which a Purchaser offers and
sells Registrable Securities, each such Purchaser shall, and it hereby agrees to, indemnify and hold harmless, to the maximum extent permitted by law, each of the Company, its officers and directors,
and each person who controls the Company (within the meaning of the Securities Act) and, if the offering is an underwritten offering, the underwriters, against all losses, claims, damages, liabilities
and expenses (including reasonable attorneys' fees and expenses) to which the Company, its officers and directors, underwriters, or controlling persons may become subject, insofar as such losses,
claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of material fact contained in any such
registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or 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 and will reimburse the Company and each such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, insofar as (i) the same arise out of or are based
upon any untrue statement or omission, or alleged untrue statement or omission, so made based upon information furnished by such Purchaser or controlling person of such Purchaser, in writing
specifically for use in such registration statement or prospectus or (ii) the same are caused by such Purchaser's failure to deliver a copy of such registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such Purchaser with a sufficient number of copies of the same and provided, further, that the liability of each Purchaser under this
Paragraph 4(b) shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of the Shares sold by
such Purchaser under such registration statement bears to the total public offering price of all securities sold thereunder, but not to exceed the amount of the proceeds 



14





 





received by such Purchaser from the sale of the Registrable Securities covered by such registration statement. 


        (c)  Any
person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks
indemnification (but the failure to give such notice will not affect the right to indemnification hereunder, unless the indemnifying party is materially prejudiced by such failure) and
(ii) unless in such indemnified party's reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party. If such defense is not assumed by the
indemnifying party or if the indemnifying party is not permitted to assume such defense then (x) the indemnified party shall select counsel, which counsel must be reasonably satisfactory to the
indemnifying party and (y) the indemnifying party will not be subject to any liability for any settlement made without its consent (which consent will not be unreasonably withheld). No
indemnifying party will 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 such
indemnified party of a full and complete release from all liability in respect of such claim or litigation. 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, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which case the indemnifying party
shall be obligated to pay the fees and expenses of one additional counsel, who must be reasonably satisfactory to the indemnifying party. 


        (d)  Each
party hereto agrees that, if for any reason the indemnification provisions contemplated by Paragraph 4(a) or Paragraph 4(b) are unavailable or are
insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses (or actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such indemnifying party or indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement
or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Paragraph 4(d) were determined by pro rata allocation (even if the Purchasers or
any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to in this
Paragraph 4(d). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. 


        (e)  The
indemnification and contribution obligations and each other provision set forth in this Paragraph 4 shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company, any Purchaser, any officer or employee of the Company or such Purchaser, any underwriter, any officer or employee of such underwriter, or any
controlling person of any of the foregoing and shall survive the transfer and registration of Registrable Securities by such Purchaser. 



15





 





        (6)  Rule 144 Reporting. With a view to making available to Purchasers the benefits of Rule 144 promulgated by
the SEC under the Securities Act, the Company agrees to use its reasonable best efforts to: 



        (a)  make
and keep adequate current public information with respect to the Company available, as those terms are used in Rule 144 under the Securities Act, at all
times after the First Closing and any Subsequent Closings; 


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



        (c)  furnish
to Purchasers 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 any Purchaser may reasonably request in order to permit such Purchaser
to avail itself of any rule or regulation of the SEC allowing such Purchaser to sell its Registrable Securities without registration. 




        (7)  Amendments and Waivers. Any provision of this Section E may be amended or waived if, but only if, in the case of
an amendment, such amendment is in writing and is signed by the Company and the Purchasers who are the holders of a two-thirds majority of the Registrable Securities or, in the case of a
waiver, such waiver is in writing and is signed by the party to be charged with having granted such waiver. No failure or delay by the Company or any Purchaser in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or
privilege. 


	F.
	Covenant of the Company




        The
Company hereby agrees that, for a period of 120 days after the First Closing, it shall not issue or sell any Common Stock of the Company, any warrants or other rights to
acquire Common Stock or any other securities that are convertible into Common Stock, for a purchase or exercise price less than the prevailing market price of the Common Stock, with the exception of
securities issued in connection with any Subsequent Closings, strategic alliances, product licensing transactions, pursuant to the Company's 1995 Stock Option Plan or upon exercise of warrants to
purchase Common Stock that are outstanding as of the date hereof. 


	G.
	Miscellaneous




        (1)  All
pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, singular or plural, as identity of the person or persons may
require. 


        (2)  Except
as set forth in Section A(4) herein, neither this Agreement nor any provision hereof shall be waived, modified, changed, discharged, terminated, revoked or
canceled except by an instrument in writing signed by the party effecting the same against whom any change, discharge or termination is sought. 


        (3)  Any
notice or other document required or permitted to be given or delivered to the Purchaser shall be in writing and sent (i) by fax if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid) or
(c) by a recognized overnight delivery service (with charges prepaid). 



        (a)  if
to the Company, at DepoMed, Inc., 1360 O'Brien Drive, Menlo Park, California 94025, Fax No.: (650) 462-9991 Attention: Chief Financial
Officer, or such other address as it shall have specified to the Purchaser in writing, with a copy (which shall not constitute notice) to Heller 



16





 


Ehrman White & McAuliffe LLP, 4350 La Jolla Village Drive, 7th Floor, San Diego, California 92122-1246, Fax. No.: (858) 450-8499, Attn: Stephen C.
Ferruolo; 




        or




        (b)  if
to the Purchaser, at its address set forth on the signature page to this Agreement, or such other address as it shall have specified to the Company in writing. 




        Notices
given under this Section G shall be deemed given only when actually received. 



        (4)  Failure
of the Company or the Purchaser to exercise any right or remedy under this Agreement or any other agreement between the Company and the Purchaser, or otherwise,
or delay by the Company or the Purchaser in exercising such right or remedy, will not operate as a waiver thereof. No waiver by the Company or the Purchaser will be effective unless and until it is in
writing and signed by the Company or the Purchaser. 


        (5)  This
Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, as such laws are applied by the New York
courts to agreements entered into and to be performed in New York by and between residents of New York, and shall be binding upon and inure to the benefit of the Purchaser, the Purchaser's heirs,
estate, legal representatives, successors and assigns and shall be binding upon and inure to the benefit of the Company, its successors and assigns; provided, however, that this Agreement shall be
governed by and construed under the General Corporation Law of California as to matters relating to the issuance or purchase of stock. If any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed modified to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provisions hereof. 


        (6)  The
parties understand and agree that money damages would not be a sufficient remedy for any breach of the Agreement by the Company or the Purchaser and that the party
against which such breach is committed shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be
the exclusive remedies for a breach by either party of the Agreement but shall be in addition to all other remedies available at law or equity to the party against which such breach is committed. 


        (7)  This
Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by writing executed by both
parties hereto. 


        (8)  Each
party hereto has had the opportunity to review this Agreement with its separate legal counsel. 


	H.
	Signature



        The
signature page of this Agreement is contained as part of the applicable subscription package, entitled "Signature Page". 


17







 
 

DEPOMED, INC.
  SIGNATURE PAGE    
  


The
Purchaser hereby subscribes for such number of Shares, rounded down to the nearest whole share, as shall equal the subscription amount as set forth below divided by the Purchase Price. 


PURCHASER


1.
Dated: 


2.
Subscription Amount: $                  



	

 Signature of Subscriber

(and title, if applicable)	
 	

 Taxpayer Identification or Social

Security Number
	

 Signature of Joint Purchaser

(if any)	
 	

 Taxpayer Identification or Social

Security Number
	

 Name (please print as name will appear on certificate)	
 	

 Name of Joint Purchaser (please print if any)
	

 Number and Street	
 	

 Number and Street
	

 City    State            Zip Code	
 	

 City    State            Zip Code
	

ACCEPTED BY:	
 	

 





	
DEPOMED, INC.	
 	

FAHNESTOCK & CO. INC.
	

By:	

	
 	

By:	


	Name:	
	 	Name:	

	Title:	
	 	Title:	

	

Dated:	

	
 	

Dated:	













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SUBSCRIPTION AGREEMENT DEPOMED, INC.

2,300,000 SHARES OF COMMON STOCK


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