Document:

Exhibit
10.1

 

DEPOMED,
INC.

SECURITIES
PURCHASE AGREEMENT

April 21,
2003

 

 

DEPOMED,
INC.

SECURITIES PURCHASE AGREEMENT

 

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

 

AGREEMENT

 

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

 

SECTION 1.         AUTHORIZATION OF SALE OF THE SECURITIES.

 

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

 

SECTION 2.         AGREEMENT TO SELL AND PURCHASE THE SECURITIES.

 

2.1           Sale
of Securities.  At the
Closing (as defined in Section 3), the Company will sell to each
Purchaser, and each Purchaser will severally, and not jointly, purchase from
the Company, the number of shares of Common Stock and Warrants, for the
aggregate purchase price, set forth opposite such Purchaser’s name on the
Schedule of Purchasers attached as Exhibit A hereto.

 

2.2           Separate
Agreement.  Each Purchaser
shall severally, and not jointly, be liable for only the purchase price of the Securities being
purchased by such Purchaser hereunder as set forth on Exhibit A
attached hereto.  The Company’s
agreement with each of the Purchasers is a separate agreement, and the sale of
the Securities to
each of the individual
Purchasers is a separate sale.  Except
as set forth in Section 7.5, the purchase obligations of each
respective Purchaser hereunder are independent and are not conditioned on the
purchase of any Securities by any or all of the other Purchasers. 
All obligations, agreements, representations and warranties of the
respective Purchasers hereunder are several, and not joint, in nature.

 

 

SECTION 3.                         CLOSING
AND DELIVERY.

 

3.1           Closing. 
The Closing of the purchase and sale of the Securities pursuant to this
Agreement (the “Closing”)
shall be held on April 21, 2003, at the offices of Heller Ehrman
White & McAuliffe, 275 Middlefield Road, Menlo Park, California
94025, or on such other date and at such other place as may be agreed by the
Company and the Purchasers. 
At or prior to the Closing, the Company and each Purchaser shall execute
and deliver (or cause the execution and delivery of) any related agreements or
other documents required to be executed and delivered at the Closing, dated as
of the date of the Closing (the “Closing Date”).

 

3.2           Delivery
of the Securities.  At the
Closing, the Securities purchased by each respective Purchaser will be issued
in the name of such Purchaser, and the name of such Purchaser will be
registered on the books of the Company as the record owner of such
Securities.  At the Closing, the Company
will provide to each Purchaser copies of the Securities purchased by such
Purchaser and issued at the Closing. 
Within two business days after the Closing, the Company will deliver to
each respective Purchaser stock certificates representing the shares of Common
Stock, and warrant certificates representing the Warrants, purchased by such
Purchaser pursuant hereto.

 

3.3           Delivery
of the Purchase Price for the Securities at the Closing.  In exchange for the Securities, each
Purchaser shall pay the amount set forth opposite such Purchaser’s name on Exhibit A
attached hereto by wire transfer of immediately available funds to the bank
account designated by the Company on Exhibit C attached hereto.

 

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

 

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

 

4.1           Organization
and Standing.  The Company is
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California and has full corporate power
and authority to own or lease its properties and conduct its business as
presently conducted.  The Company is
duly registered or qualified to do business as a foreign corporation, and is in
good standing, in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by the Company makes
such registration or qualification necessary, except where the failure to be so
qualified would not have a “Company Material Adverse Effect” (as defined
below).  Except as set forth in the
Schedule of Exceptions, the Company has no Subsidiary (as defined below) or any
equity or other ownership interest (including without limitation any interest
convertible into or exchangeable or exercisable for any equity or other
ownership interest) in any other entity, and is not a participant in any joint
venture or other similar arrangement.  “Company Material Adverse Effect”
or “Company Material
Adverse Change” means (i) any change in, or effect on, the
business, properties, prospects,

 

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results
of operations, assets or financial condition of the Company, or any change or
increase in the liabilities of the Company, that is or would individually or in
the aggregate reasonably be expected to be materially adverse to the Company,
other than (a) any such change or effect resulting from the public
announcement of the transactions contemplated by this Agreement, or
(b) any change or effect in the United States economy in general and not
specifically relating to the Company, including without limitation any such
change or effect reasonably related to the conflict between the United States
and the country of Iraq and/or terrorist activity against the United States or
its citizens, (ii)
any material adverse effect on the Company’s ability to consummate the transaction
contemplated hereby, including the issuance and sale of the Securities, and
(iii) any material adverse effect on the Company’s ability to perform its
obligations hereunder and under the Securities. 
“Subsidiary”
means any Person in which the Company directly or indirectly through
Subsidiaries or otherwise, beneficially owns at least 50% of either the equity
interest in, or the voting control of, such Person, whether or not existing on
the date hereof.  “Person” means any
individual, partnership, corporation, limited liability company, business
trust, joint stock company, trust, unincorporated association, joint venture or
other business entity.

 

4.2           Corporate
Power; Authorization.  The
Company has all requisite corporate right, power and authority to execute and
deliver this Agreement, to sell and issue the Securities hereunder and to carry
out and perform all of its obligations under this Agreement.  All corporate and other action on the part
of the Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Securities contemplated
herein and the performance of the Company’s obligations hereunder has been
taken or will be taken prior to the Closing. 
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except that (a) enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting the enforcement of creditors’ rights generally,
(b) enforceability may be limited by equitable principles generally, and
(c) enforceability of those provisions of Section 8.2 relating
to indemnity may be limited under applicable law or for reasons of public
policy.

 

4.3           No
Conflict.  The execution and
delivery of this Agreement does not, and the performance by the Company of its
obligations under this Agreement and the issuance, sale and delivery of the
Securities by the Company will not (i) conflict with, result in a breach
or violation of, or constitute a default under (with or without notice or lapse
of time or both) or (ii) result in the creation or imposition of any lien,
claim, option, charge, security interest, limitation, encumbrance or
restriction pursuant to the terms, conditions or provisions of:

 

(a)           the
Amended and Restated Articles of Incorporation or Bylaws of the Company or any
similar organizational document of any Subsidiary, in each case, as in effect
on the date hereof;

 

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(b)           any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject; or

 

(c)           any
decree, order, statute, law, rule, regulation or judgment applicable to the
Company.

 

4.4           Issuance
and Delivery of the Securities.  The shares of Common Stock to be issued at the Closing have been
duly authorized and, when issued and paid for in compliance with the provisions
of this Agreement, will be validly issued, fully paid and nonassessable.  The Warrants and the Additional Warrants,
when issued and paid for in compliance with the provisions of this Agreement,
will constitute a legal, valid and binding obligation of the Company,
enforceable in accordance with their terms, except that (a) enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the enforcement of creditors’ rights
generally, and (b) enforceability may be limited by equitable principles
generally.  The shares of Common Stock
issuable upon exercise of the Warrants and the Additional Warrants (the “Warrant Shares”) have
been duly authorized and, when issued in compliance with the Warrants and the
Additional Warrants, will be validly issued, fully paid and nonassessable.  The issuance and delivery of the Securities
and any Warrant Shares is not subject to preemptive, co-sale, right of first
refusal or any other similar rights of or in favor of any Person, group or
entity.

 

4.5           SEC
Documents; Financial Statements; No Material Misstatements.  The Company has filed in a timely manner all
documents required to be filed by it with the Securities and Exchange
Commission (the “Commission”
or the “SEC”)
under Sections 13, 14(a) or 15(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”).  Such documents are referred to collectively
herein as the “SEC
Documents.”  As of their
respective filing dates (or, if amended or supplemented prior to the date of
this Agreement, when so amended or supplemented), all SEC Documents complied in
all material respects with the requirements of the Exchange Act.  None of the SEC Documents as of its
respective date of filing contained any untrue statement of material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.  The
financial statements of the Company included in the SEC Documents (as restated
prior to the date of this Agreement, the “Financial Statements”) comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto.  The Financial Statements have been prepared
in accordance with United States generally accepted accounting principles (“GAAP”) consistently
applied for the periods presented and fairly present the financial position of
the Company at and as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end adjustments). 
None of the information or statements (including representations and
warranties) of or regarding the Company made in this Agreement or in any of the
investor presentation materials provided to the Purchasers by the Company and
identified in Section 4.5(A) of the Schedule of Exceptions contains any untrue
statement of material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which they were

 

4

 

made, not
misleading.  The copies of the documents
and filings set forth on Schedule 4.5(B) of the Schedule of Exceptions provided
to and relied on by the Purchasers in connection with assessing whether to
purchase the Securities are true, complete and correct copies of such documents
as entered into by the Company and the parties thereto or as filed by the
Company with the Secretary of State of the State of California, as the case may
be, and none of such documents or filings subsequently have been amended or
terminated, all such documents and filings remain in full force and effect in
accordance with their terms, there have been no breaches or violations thereof
by the Company or, to the Company’s knowledge, by any other party thereto.  None of the statements (including representations and
warranties) of the Company in this Agreement are materially inconsistent with
the information and statements contained in the Company’s Annual Report on Form 10-K
for the period ended December 31, 2002.

 

4.6           Intellectual
Property Rights and Licenses.

 

(a)           Definitions.  As used herein, the term “Intellectual Property”
means all intellectual property rights owned or licensed by the Company  arising from or associated with the
following, whether protected, created or arising under the laws of the United
States or any other jurisdiction: 
(i) trade names, trademarks and service marks (registered and
unregistered), domain names and other Internet addresses or identifiers, trade
dress and similar rights and applications (including intent to use
applications) to register any of the foregoing (collectively, “Marks”);
(ii) patents and patent applications, including continuation, divisional,
continuation-in-part, reexamination and reissue patent applications and any
patents issuing therefrom, and rights in respect of utility models or
industrial designs (collectively, “Patents”); (iii) copyrights and
registrations and applications therefor (collectively, “Copyrights”); (iv) non-public
know-how, inventions, discoveries, improvements, concepts, ideas, methods,
processes, designs, plans, schematics, drawings, formulae, technical data,
specifications, research and development information, technology and product
roadmaps, data bases and other proprietary or confidential information,
including customer lists, but excluding any Copyrights or Patents that may
cover or protect any of the foregoing (collectively, “Trade Secrets”); and
(v) any other proprietary, intellectual or industrial property rights of
any kind or nature that do not comprise or are not protected by Marks, Patents,
Copyrights, or Trade Secrets.

 

(b)           Company
Intellectual Property.  Section
4.6(b) of the Schedule of Exceptions sets forth an accurate and complete list,
as of the date hereof, of all Marks, Copyrights and
Patents owned (in whole or in part) or licensed by the Company that are used in
or relate to the business as currently conducted and as
currently anticipated to be conducted in the future by the Company
(collectively, “Company
Intellectual Property”).

 

(c)           Actions
to Protect Intellectual Property. 
The Company has taken reasonable steps to protect
its rights in the Company Intellectual Property and maintain the
confidentiality of all of the Trade Secrets of the Company.  Without limiting the foregoing, the Company
has and enforces a policy requiring each of the employees (other than
non-technical employees who have not contributed in any way to the development
or creation of any Company Intellectual Property), consultants and contractors
of the Company to enter into proprietary information, confidentiality and
assignment agreements which are substantially in the form

 

5

 

attached as Attachment
4.6(c) to the Schedule of Exceptions, and all current and former employees
(other than non-technical employees who have not contributed in any way to the
development or creation of any Company Intellectual Property or Trade Secrets),
consultants and contractors of the Company have executed such an
agreement.  Except as set forth in
Section 4.6(c) of the Schedule of Exceptions, the Company has not disclosed,
and is not under any contractual or other obligation to disclose, to another
Person any of its Trade Secrets, except pursuant to an enforceable
confidentiality agreement or undertaking, and, to the knowledge of the Company,
no Person has materially breached any such agreement or undertaking.

 

(d)           Adverse
Ownership Claims.  Except as set
forth in Section 4.6(d) of the Schedule of Exceptions, the Company owns
exclusively all right, title and interest in and to all of the Company
Intellectual Property and the Trade Secrets free and clear of any and all
liens, encumbrances or other adverse ownership claims (other than licenses
granted by the Company to another Person in the ordinary course of business
listed under Section 4.6(g) below), and the Company has not received any
notice or claim challenging the Company’s ownership of the Company Intellectual
Property or the Trade Secrets or suggesting that any other Person has any claim
of legal or beneficial ownership with respect thereto, nor to the knowledge of
the Company is there a reasonable basis for any claim that the Company does not
so own or license any of such Company Intellectual Property or the Trade
Secrets.

 

(e)           Validity
and Enforceability.  To the
Company’s knowledge, the Company Intellectual Property is valid, enforceable,
and subsisting.  The Company has not
received any notice or claim challenging or questioning the validity or
enforceability of any of the Company Intellectual Property or indicating an
intention on the part of any Person to bring a claim that any of the Company
Intellectual Property is invalid or unenforceable or has been misused, and,
with respect to the Patents contained within the Company Intellectual Property,
to the Company’s knowledge, the Company has disclosed relevant prior art in the
prosecution of its Patents in accordance with its obligations pursuant to 37
CFR 1.56.

 

(f)            Status
and Maintenance of Company Intellectual Property and Trade Secrets.  Except as set forth in Section 4.6(f) of the
Schedule of Exceptions: (i) to the Company’s knowledge, the Company has not
taken any action or failed to take any action (including the manner in which it
has conducted its business, or used or enforced, or failed to use or enforce,
any of the Company Intellectual Property or Trade Secrets) that would result in
the abandonment, cancellation, forfeiture, relinquishment, invalidation or
unenforceability of any of the Company Intellectual Property or in any of the
Trade Secrets not remaining proprietary to the Company; and (ii) all Company
Intellectual Property that has been registered or filed, to the Company’s
knowledge, has been registered or filed in accordance with all applicable legal
requirements (including, in the case of the Company’s Marks, the timely
post-registration filing of affidavits of use and incontestability and renewal
applications).  To the Company’s
knowledge, the Company has timely paid all filing, examination, issuance, post
registration and maintenance fees, annuities and the like associated with or
required with respect to any of the Company Intellectual Property.  The Company hereby
covenants and agrees that it shall not, prior to the Closing Date, sell,
assign, transfer, license, abandon, let lapse, disclose, misuse,
misappropriate, diminish, destroy or

 

6

 

otherwise
dispose of or encumber the Company Intellectual Property or the Trade Secrets
in any manner.

 

(g)           License
Agreements.  Section 4.6(g)(1) of
the Schedule of Exceptions sets forth a complete and accurate list of all
agreements currently in effect granting to the Company any right under or with
respect to any Company Intellectual Property or Trade Secrets other than
standard desktop software applications used generally in the Company’s
operations.  Section 4.6(g)(2) of the
Schedule of Exceptions sets forth a complete and accurate list of all license
agreements currently in effect under which the Company licenses or grants any
other rights under any Company Intellectual Property or Trade Secrets to
another Person, excluding non-exclusive internal use licenses granted by the
Company to end user customers that have purchased or licensed products.

 

(h)           Sufficiency
of the Company Intellectual Property. 
To the Company’s knowledge, the Company Intellectual Property and the
Trade Secrets together constitute all the material Intellectual Property rights
necessary for the conduct of the Company’s business as it is currently
conducted and reasonably anticipated to be conducted in the future.

 

(i)            No
Infringement by the Company or Third Parties; No Violations.  To the Company’s knowledge, none of the
products, processes, services, or other technology or materials, or any Company
Intellectual Property or Trade Secrets developed, used, leased, licensed, sold,
imported or otherwise distributed or disposed of, or otherwise commercially
exploited by or for the Company or any other activities or operations of the
Company infringes upon, misappropriates, violates, dilutes or constitutes the
unauthorized use of, any Intellectual Property of any third party, and the
Company has not received any notice or claim asserting or suggesting that any
such infringement, misappropriation, violation, dilution or unauthorized use is
or may be occurring or has or may have occurred, nor, to the knowledge of the
Company, is there any reasonable basis therefor.  No Company Intellectual Property or Trade Secrets are subject to
any outstanding order, judgment, decree, or stipulation restricting the use
thereof by the Company or, in the case of any Company Intellectual Property or
Trade Secrets licensed to others, restricting the sale, transfer, assignment or
licensing thereof by the Company to any Person.  To the Company’s knowledge, no third party is misappropriating,
infringing, diluting or violating in any material respect any Company
Intellectual Property or the Trade Secrets. 
To the Company’s knowledge, no product, technology, service or
publication of the Company violates any law or regulation.

 

(j)            Restrictions
on Employees.  To the knowledge of
the Company, no employee or independent contractor of the Company is obligated
under any agreement or subject to any judgment, decree or order of any court or
administrative agency, or any other restriction that would or may materially
interfere with such employee or contractor carrying out his or her duties for
the Company or that would materially conflict with the Company’s business as
presently conducted and proposed to be conducted.

 

4.7           Capitalization.  The authorized capital stock of the
Company as of the date of this Agreement consists of 100,000,000 shares of
Company Common Stock, 5,000,000 shares of

 

7

 

Preferred Stock, no par
value, of which 25,000 shares have been designated Series A Preferred Stock
(the “Series A Preferred”).  As of the close of business on March 31,
2003 there were (i) 16,460,566 shares of Common Stock issued and
outstanding, of which no shares were owned by the Company, (ii) 12,015
shares of Series A Preferred issued and outstanding, of which no shares were
owned by the Company, and (iii) no other shares of any other class or series of
capital stock of the Company issued or outstanding.  As of the close of business on March 31, 2003, there were issued
and outstanding Common Stock Purchase Warrants, no par value (the “Company Warrants”) to
purchase 1,818,629 shares of Common Stock with a weighted average exercise
price of $4.56.  The Company has no
capital stock reserved for issuance, except that, as of the day prior to
execution of this Agreement, there were (i) 3,325,217 shares of Common
Stock reserved for issuance pursuant to options outstanding on the date hereof
pursuant to the Company’s Amended and Restated 1995 Stock Option Plan,
(ii) 1,818,629 shares of Common Stock reserved for issuance upon exercise
of the Company Warrants, (iii) 1,404,102 shares of Common Stock reserved for
issuance upon conversion of the Series A Preferred, (iv) 981,975 shares of
Common Stock reserved for issuance upon conversion of the Convertible
Promissory Note of the Company dated January 21, 2000 (the “Convertible Note”),
(v) 821,959 shares of Common Stock reserved for issuance pursuant to an
option outstanding on the date hereof pursuant to the conditional option issued
to Biovail Laboratories Incorporated with an exercise price of $5.125 (the “Biovail Conditional Option”),
(vi) 210,835 shares of Common Stock reserved for issuance pursuant to an
option outstanding on the date hereof pursuant to the purchaser’s option issued
to Biovail Laboratories Incorporated with an exercise price of $5.707 (the “Biovail Option”); and
(vii) 3,240,745 shares reserved for issuance upon exercise of the
Warrants.  Since the day prior to
execution of this Agreement, the Company has not issued any options, warrants
or capital stock except pursuant to the exercise of options or Company Warrants
or the conversion of the outstanding Series A Preferred or the Convertible Note
outstanding as of such date and in accordance with their terms.  The Common Stock to be issued upon exercise
of the Warrants and the Additional Warrants have been duly authorized and
reserved for issuance and, when issued upon such exercise, will be validly
issued, fully paid and non-assessable. 
The shares of Common Stock issuable upon conversion of the Series A
Preferred referenced in clause (iii) above, have been duly authorized and reserved
for issuance and upon issuance upon conversion of the Series A Preferred, will
be validly issued, fully paid and non-assessable.  All the outstanding Common Stock and Series A Preferred are, and
all shares of Common Stock which may be issued pursuant to the exercise of
outstanding options or Company Warrants or the outstanding Biovail Conditional
Option or the outstanding Biovail Option or upon conversion of the outstanding
Convertible Note have been duly authorized and reserved for issuance and, when
issued in accordance with the respective terms thereof, will be duly
authorized, validly issued, fully paid and nonassessable.  Except for the Convertible Note, there are
no bonds, debentures, notes or other indebtedness having general voting rights
(or convertible into securities having such rights) (“Voting Debt”) of the
Company issued and outstanding.  Except
as stated above, there are no existing options, warrants, calls, subscriptions
or other rights, agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of the Company, obligating the
Company to issue, transfer, sell, redeem, purchase, repurchase or otherwise
acquire or cause to be issued, transferred, sold, redeemed, purchased,
repurchased or otherwise acquired any capital stock or Voting Debt of, or

 

8

 

other equity interest in,
the Company or securities or rights convertible into or exchangeable for such
shares or equity interests or obligations of the Company to grant, extend or
enter into any such option, warrant, call, subscription or other right, agreement,
arrangement or commitment.  The issuance
of Common Stock or other securities pursuant to any provision of this Agreement
or the Warrants or Additional Warrants will not give rise to any preemptive
rights or rights of first refusal on behalf of any Person or result in the
triggering of any anti-dilution or other similar rights, other than as set
forth in Section 4.7 of the Schedule of Exceptions.

 

4.8           Litigation.  There is no pending or, to the Company’s
knowledge, threatened, legal, administrative or governmental action, suit or
other proceeding to which the Company is a party or to which it or its property
or assets are or reasonably may be subject.

 

4.9           Governmental
Consents.  No (a) consent,
approval, order or authorization of, or (b) registration, qualification,
designation, declaration or filing with, any federal, state, or local
administrative, regulatory or governmental authority (each, a “Governmental Authority”)
or any other Person (including without limitation the approval or consent of
any shareholders of the Company (“Shareholder Approval”) pursuant to any rule,
regulation or requirement of the American Stock Exchange (“AMEX”) or under the
California General Corporation Law) is required in connection with the
execution and delivery of this Agreement, the issuance and sale of the
Securities, the consummation of the other transactions contemplated hereby, or
the performance by the Company of its obligations hereunder except for
(i) compliance with the requirements of the AMEX (which, for avoidance of
doubt, does not require Shareholder Approval), (ii) compliance with the notice
filing required by Rule 506 under Regulation D of the Securities Act of 1933,
as amended (the “Securities
Act”), and any securities and blue sky laws in the states and
other jurisdictions in which shares of Common Stock are offered and/or sold,
which compliance will be timely effected in accordance with such requirements
and laws and (iii) the filing of a registration statement and all
amendments thereto with the SEC, and causing such registration statement to
become and remain effective, as contemplated by Section 8.1 of this
Agreement.

 

4.10         No
Company Material Adverse Change. 
Since December 31, 2002, there has not been a Company Material Adverse Change or any
event, condition or occurrence which could reasonably be expected to have a
Company Material Adverse Change.

 

4.11         Listing;
Maintenance of Listing.  The
Common Stock is traded on AMEX.  The
Company has obtained listing approval from the AMEX (and any other securities
exchange upon which the Common Stock is listed) for the listing of the Common
Stock purchased hereunder (and all Warrant Shares).  All such securities will be approved for listing on the AMEX (and
any other securities exchange upon which the Common Stock is listed)
immediately upon the effectiveness of the Registration Statement required to be
filed by the Company pursuant to Section 8 hereof (the “Registration Statement”).  For so long as the Company is obligated to
keep and maintain the effectiveness of the Registration Statement, the Company
will use its reasonable best efforts to maintain its listing on the AMEX; provided,
however, that this Section 4.11
shall not prohibit the Company from listing the Common Stock on the Nasdaq
National Market, provided, that
the Company takes appropriate actions to ensure that all shares

 

9

 

of Common Stock purchased
hereunder (and the Warrant Shares) also are listed on the Nasdaq National
Market upon and at all times during the effectiveness of the Registration
Statement.

 

4.12         Board
Matters.

 

(a)           MDS
Nominee.  For so long as the MDS
Parties (as defined below) are the “beneficial owners” (as defined in Rule 13d-3
of the Exchange Act) of a number of shares of Common Stock equal to at least
25% of the aggregate number of shares of Common Stock purchased by the MDS
Parties (as defined below) at the Closing (as adjusted for stock splits, stock
dividends and other similar transactions affecting the Common Stock of the
Company which occur after the Closing Date), the MDS Parties (as defined below)
then holding the Securities shall be entitled to designate one nominee for
director (the “MDS
Nominee”) for election to the Company’s Board of Directors.  In connection with the foregoing, the
Company will use its best efforts to effect such election to be effective one
day after the Closing Date and to cause the MDS Nominee to continue as a member
of the Company’s Board of Directors for so long as the MDS Parties, together
with their respective Affiliates and subsidiaries, holds at least the minimum
number of shares of Common Stock specified in the preceding sentence, including
the inclusion of the designated MDS Nominee on the recommended slate of
directors presented at each regular or special meeting of the shareholders of
the Company at which directors of the Company are to be elected.  The initial MDS Nominee shall be Michael
Callaghan.  For purposes hereof, “MDS Parties” means,
collectively, (i) MDS Capital Corp., an Ontario corporation (“MDS”), (ii) any
Affiliate of MDS or any other MDS Party, and (iii) any Person which is an
investment fund to which MDS or any of its Affiliates provides investment
management and/or advisory services, which for greater certainly currently
includes MDS Life Sciences Technology Fund II NC Limited Partnership, MDS Life
Sciences Technology Fund II Quebec Limited Partnership, MLII Co-Investment Fund
NC Limited Partnership and SC Biotechnology Development Fund LP and “MDS Party” means any
one of the MDS Parties.  “Affiliate” means,
with respect to any Person, any other Person which, directly or indirectly, is
in control of, is controlled by, or is under common control with, such Person;
a Person shall be deemed to control another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause the direction
of the management and policies of such other Person, whether through the
ownership of equity interest in such other Person, by contract, or otherwise.

 

(b)           Company
Nominee.  For so long as the
Purchasers and the MDS Parties, together with their Affiliates and
subsidiaries, collectively are the “beneficial owners” (as defined in
Rule 13d-3 of the Exchange Act) of a number of shares of Common Stock
equal to at least 25% of the aggregate number of shares of Common Stock of the
Company purchased by the Purchasers at the Closing (as adjusted for stock
splits, stock dividends and other similar transactions affecting the Common
Stock of the Company which occur after the Closing Date), the Company and the
MDS Parties then holding Securities shall jointly designate a nominee for
election to the Company’s Board of Directors an individual (the “Company Nominee”) who
is an “independent director” and has extensive experience in pharmaceutical
development.  For purposes of this Section
4.12, a person who meets all of the following criteria shall be deemed to
be an “independent
director”: any person who (i) has not been employed by the
Company or any of its subsidiaries for the current year or any of the past
three years; (ii) has not accepted any

 

10

 

compensation from the
Company or any of its subsidiaries in excess of $60,000 during the previous
fiscal year, other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation; (iii) is not
a member of the immediate family of an individual who is, or has been in any of
the past three years, employed by the Company or any of its subsidiaries as an
executive officer (“immediate
family” includes a person’s spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person’s home); (iv) is not a
partner in, or a controlling shareholder or an executive officer of, any
for-profit business organization to which the corporation made, or from which
the Company received, payments (other than those arising solely from
investments in the corporation’s securities) that exceed the greater of (A) 5%
of the corporation’s or business organization’s consolidated gross revenues for
that year and (B) $200,000 in any of the past three years; (v) is not employed
as an executive of another entity where any of the Company’s executives serve
on that entity’s compensation committee; and (vi) is not an employee, director,
officer, partner, member, principal or founder of any entity that provides
legal, accounting or other professional services to the Company or its
subsidiaries.  In connection with the
foregoing, the Company will use its best efforts to effect such appointment as
promptly as reasonably practicable after the Closing Date but in any event within
six months after the Closing Date, and to cause the Company Nominee to continue
as a member of the Company’s Board of Directors for so long as the Purchasers
and the MDS Parties, together with their respective Affiliates or subsidiaries,
collectively hold at least the minimum number of shares of Common Stock
specified in the first sentence of this Section 4.12(b), including the
inclusion of the designated Company Nominee on the recommended slate of
directors presented at any regular or special meeting of the shareholders of
the Company at which directors of the Company are to be elected.  Prior to such election, the designated
Company Nominee shall be entitled to be an observer at the meetings of the
Company’s board of directors and shall be provided all materials provided to
the members of the board of directors with respect to such meetings reasonably
in advance of each such meeting.  The
Company Nominee shall be subject to the approval of the holders of a majority
of the Securities, such approval not to be unreasonably delayed, conditioned or
withheld.

 

(c)           Voting
Commitments.  In order to accomplish
the purpose and intent of the preceding subparagraphs (a) and (b), namely
that the MDS Nominee and the Company Nominee shall be elected to the Company’s
Board of Directors and continue to hold such positions for the entire time the
MDS Parties, or the Purchasers, as the case may be (together with their
respective Affiliates and subsidiaries) hold the minimum number of shares of
Common Stock specified in the first sentences of such subparagraphs, the
Company shall cause the execution and delivery of a Nominee Voting Commitment
in the form attached hereto as Exhibit G by each of the Persons
named therein.  The Purchasers, together
with the Persons named herein as signatories to the Nominee Voting Commitments,
collectively own or control at least 42.0% of the outstanding voting stock of
the Company as of the date hereof. 
Further, each of the Purchasers hereby unconditionally and irrevocably
covenants and agrees to vote all shares of voting stock of the Company now or
at any time owned or controlled by such Purchaser at any regular or special
meeting of the shareholders of the Company at which directors of the Company
are to be elected (or pursuant to any written consent to effect the same) to
cause the elections of the MDS Nominee and the Company Nominee.

 

11

 

(d)           D&O
Insurance; Director Fees and Expenses. 
For so long as the MDS Nominee or the Company Nominee serve on the
Company’s Board of Directors, the Company shall indemnify the MDS Nominee and
the Company Nominee to the full extent of California and any other applicable
law and shall maintain a policy of Directors and Officers Insurance with
coverage amounts and scope of coverage comparable to the coverage amounts and
scope of coverage of the Company’s current Directors and Officers Insurance
Policy, and underwritten by a financially sound, nationally recognized
insurance company.  In addition, the MDS
Nominee and the Company Nominee shall be entitled to receive the same
compensation for serving as directors as is afforded to other members of the
Board of Directors and shall be reimbursed for the reasonable costs and
expenses incurred in preparing for, traveling to and attending meetings of the
Board of Directors and otherwise serving in such capacity.

 

(e)           Director
Independence.  The Company shall use
its reasonable best efforts to take all action to cause a majority of the
members of the Company’s Board of Directors to be “independent directors” (as
defined in Section 4.12(b) above) as promptly as practicable after the Closing
Date, but in any event no later than six months after the Closing Date.  For the avoidance of doubt, in addition to
compliance with the provisions of this Section 4.12(e), the Company shall at
all times be in compliance with the rules and regulations of AMEX (or any other
securities exchange or quotation system on which the Common Stock is then
listed or quoted).  The parties hereby
agree that, following the appointment of the MDS Nominee to the Company’s Board
of Directors, the following directors will be considered independent directors
within the meaning of this Section 4.12(e):  G. Steven Burrill, W. Leigh
Thompson and the MDS Nominee, in each case for so long as such persons continue
to qualify under the standards set forth in the definition of “independent
director” specified above.

 

(f)            Board
Size.  The Company agrees that the
maximum size of the Company’s Board of Directors shall be seven members from
and  after the Closing, excluding:  (i) any directors nominated by Biovail
Laboratories Incorporated (“Biovail”) pursuant to Section 3.02 of the Stock
Purchase Agreement between Biovail and the Company dated as of May 28,
2002; (ii) any director nominated by Elan Corporation, plc (“Elan”) pursuant to
Clause 5.1.1. of the Subscription, Joint Development and Operating
Agreement by and among Elan, Elan Pharma International Limited, Elan
International Services, Ltd. and the Company and DepoMed Development, Ltd.;
(iii) any directors in excess of seven members to the extent necessary to
comply with SEC regulations or other regulatory requirements or stock exchange
listing standards applicable to the Company; and (iv) any directors in excess
of seven members approved by a majority of the Company’s independent directors
(as defined in Section 4.11(b) above) or by at least two-thirds of
the Company’s entire Board of Directors.

 

4.13         Investment
Company.  The Company is not
an “investment company” within the meaning of such term under the Investment
Company Act of 1940, as amended, and the rules and regulations promulgated
thereunder.

 

4.14         Indebtedness.  The SEC Reports filed on or prior to the
date hereof (and prior to the execution and delivery of this Agreement by the
parties hereto) set forth all outstanding secured and unsecured Indebtedness of
the Company, or for which the Company has any

 

12

 

commitments or payment
obligations.  For the purposes of this
Agreement, “Indebtedness” means:

 

(a)           any
liabilities for borrowed money or amounts owed in excess of $25,000 (other than
trade accounts payable incurred in the ordinary course of business);

 

(b)           all
guaranties, endorsements and other contingent obligations in respect of
indebtedness or payment obligations of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and

 

(c)           the
present value of any lease payments in excess of $25,000 due under leases
required to be capitalized in accordance with GAAP.

 

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

 

4.15         Certain
Fees.  Other than the fees
specified in Section 4.16 of Exhibit D payable by the Company
to Thomas Weisel Partners LLC (the “Placement Agent”), no brokers’, finders’ or
financial advisory fees or commissions are payable by the Company with respect
to the transactions contemplated by this Agreement.

 

4.16         Material
Agreements.  Except as set
forth in the SEC Reports filed on or prior to the date hereof (and prior to the
execution and delivery of this Agreement by the parties hereto), the Company is
not a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the SEC as an exhibit to Form 10-K, Form 10-Q or
Form 8-K or which is otherwise material to the Company (each, a “Material Agreement”).  The Company has timely observed and
performed all material obligations required to be observed and performed by it
under each such Material Agreement, has never received any notice alleging or
asserting a violation or breach thereof or default thereunder and, to the
Company’s knowledge, is not in breach of or default under any Material
Agreement now in effect, the result of which could reasonably be expected to
cause a Company Material Adverse Effect.

 

4.17         Transactions
with Affiliates.  Except as
set forth in the SEC Reports filed on or prior to the date hereof (and prior to
the execution and delivery of this Agreement by the parties hereto), there are
(i) no loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions with aggregate
obligations of any party exceeding $25,000 between (a) the Company or any
of its customers or suppliers, on the one hand, and (b) on the other hand,
any officer, employee, consultant or director of the Company, or any person who
would be covered by Item 404(a) of Regulation S-K, or any
company or other entity controlled by any such officer, employee, consultant,
director or person (collectively, “Covered Persons”),
and (ii) no transactions or contemplated transactions with any Covered Persons
that would be required to be disclosed pursuant to Item 404 of Regulation S-K.

 

13

 

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

 

4.19         Stabilization.  The Company has not taken, and the Company
will use its reasonable best efforts to cause each of its officers, directors
and Affiliates not to take, directly or indirectly, any action designed to or
which has constituted or which would reasonably be expected to cause or result
in, stabilization or manipulation under the Exchange Act of the price of any
capital stock of the Company.

 

4.20         Environmental
Matters.  All real property
at any time owned, leased or otherwise operated by Company is free of
contamination relating to the Company, its business or its use and occupation
thereof, from any substance, waste or material currently identified to be toxic
or hazardous pursuant to, within the definition of a substance which is toxic
or hazardous under, or which may result in liability under, any Environmental
Law, including, without limitation, any asbestos, polychlorinated biphenyls,
radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil
or petroleum or chemical liquids or solids, liquid or gaseous products, or any
other material or substance (“Hazardous Substance”) which has or could reasonably be
expected to cause or constitute a health, safety, or environmental hazard to
any Person or property or result in any environmental liabilities and costs in
excess of $100,000 in the aggregate. 
The Company has not caused or suffered to occur any release, spill,
migration, leakage, discharge, disposal, uncontrolled loss, seepage, or
filtration of Hazardous Substances which could reasonably be expected to result
in environmental liabilities and costs in excess of $100,000 in the
aggregate.  The Company has generated,
treated, stored and disposed of any Hazardous Substances in full compliance
with applicable Environmental Laws (as defined below), except for such
non-compliances which could not reasonably be expected to have a Company
Material Adverse Effect.  The Company
has obtained, or has applied for, and is in full compliance with and in good
standing under all permits required under Environmental Laws (except for such failures
which could not reasonably be expected to have a Company Material Adverse
Effect) and the Company has no knowledge of any proceedings to substantially
modify or to revoke any such permit. 
There are no investigations, proceedings or litigation pending or, to
the Company’s knowledge, threatened, affecting or against the Company or any of
its current or former facilities relating to Environmental Laws or Hazardous
Substances.  For purposes of this
Agreement, “Environmental
Laws” means all federal, national, state, regional and local

 

14

 

laws, statutes,
ordinances and regulations, in each case as amended or supplemented from time
to time, and any judicial or administrative interpretation thereof, including
orders, consent decrees or judgments relating to the regulation and protection
of human health, safety, the environment and natural resources.

 

4.21         Labor,
Employment and Benefit Matters.

 

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

 

(b)           The
Company is not, and during the five years preceding the date of this Agreement
was not, a party to any labor or collective bargaining agreement and there are
no labor or collective bargaining agreements which pertain to employees of the
Company.

 

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

 

(d)           The
Company has no liabilities, contingent or otherwise, including without
limitation, liabilities for retiree health, retiree life, severance or
retirement benefits, which are not fully reflected on the Company’s balance
sheet as of December 31, 2002 or fully funded. 
The term “liabilities” as used in the preceding sentence shall be
calculated in accordance with reasonable actuarial assumptions and also shall
include any obligation owed to a Governmental Authority for the purpose of
providing retiree health, retiree life, severance, retirement or other
benefits.

 

(e)           The
Company has not terminated any “employee pension benefit plan “ as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended and all rules and regulations promulgated thereunder (“ERISA”) or incurred
or expects to incur any outstanding liability under Title IV thereunder.

 

4.22         Compliance
with Law.

 

(a)           The
Company is in compliance in all material respects with all Applicable
Laws.  For purposes of this Agreement, “Applicable Laws”
includes, without limitation, all

 

15

 

applicable laws relating
to health care, the health care industry and the provision of health care
services, third party reimbursement (including Medicare and Medicaid), public
health and safety (including without limitation the Federal Food, Drug and
Cosmetics Act, the Controlled Substances Act and the Comprehensive Drug Abuse
Prevention and Control Act of 1970 and any other similar act or law to which
the Company is subject and the rules and regulations promulgated by the United
States Food and Drug Administration, the United States Drug Enforcement
Administration and similar authorities in any U.S. or non-U.S. jurisdiction
with jurisdiction over the Company) and wrongful death and medical malpractice.  The Company has not received any notice of,
nor does the Company have any knowledge of, any violation (or of any
investigation, inspection, audit or other proceeding by any Governmental
Authority involving allegations of any violation) of any Applicable Law involving
or related to the Company which has not been dismissed or otherwise disposed
of.  The Company has not received notice
and otherwise has no knowledge that the Company is charged with, threatened
with or under investigation with respect to, any violation of any Applicable
Law, and the Company has no knowledge of any proposed change in any Applicable
Law that would have a Company Material Adverse Effect.  The Company has not received any opinion or
memorandum or legal advice from legal counsel to the effect that it is exposed,
from a legal standpoint, to any liability, including, without limitation ,any
liability under any of the Material Agreements, which may be material to its
business, prospects, financial condition, operations, property or affairs or
result in a Company Material Adverse Effect. 
There is no existing law, rule, regulation or order, and the Company is
not aware of any proposed law, rule, regulation or order, whether federal,
state, county or local, which would prohibit the Company from, or otherwise
materially adversely affect the Company in conducting its business in any
jurisdiction in which it proposes to conduct business.

 

(b)           The
Company has, and, to the Company’s knowledge, all professional employees or
agents of the Company who are performing health care or health care related
functions on behalf of the Company have, all licenses, franchises, permits,
accreditations, provider numbers, authorizations, including certificates of
need, consents or orders of, or filings with, or other approvals from all
Governmental Authorities (“Approvals”)
necessary for the conduct of, or relating to the operation of, the business of
the Company and the occupancy and operation, for its present uses, of the real
and personal property which the Company owns or leases.  Neither the Company nor, to the Company’s
knowledge, its professional employees or agents (acting in such capacities) is
in violation of any such Approval in any material respect or any terms or conditions
thereof.  All such Approvals are in full
force and effect, have been issued to and fully paid for by the holder thereof
and no notice or warning from any Governmental Authority with respect to the
suspension, revocation or termination of any Approval has been, to the
knowledge of the Company, threatened or issued or given to the Company.  No such Approvals will in any way be
affected by, terminate or lapse by reason of the consummation of all or any
portion of the transactions contemplated by this Agreement.

 

4.23         Certain
Regulatory Matters.  The
Company has not since inception received notice that the Company has been, or
to the Company’s knowledge will be, the subject of any investigative proceeding
before any federal or state regulatory authority or the agent of any such
authority, including, without limitation, federal and state health authorities.

 

16

 

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

 

4.25         Registration
Rights.  Except as specified
in Section 4.25 of Exhibit D or as provided in this Agreement,
the Company is not under any obligation to register under the Securities Act.
any of its presently outstanding securities or any securities which hereafter
may be issued.

 

4.26         Insurance.  The Company maintains insurance policies
which are in full force and effect and are in amounts and for coverage
customary and reasonably prudent for the industry in which Company operates and
in light of the value of the Company’s assets and properties and the hazards to
which they are subjected.

 

4.27         Indemnification.  The Company shall indemnify and hold
harmless each Purchaser, and each officer, director or Affiliate of such
Purchaser (each, an “Indemnified
Party”), from and against any and all claims, costs, losses,
damages, judgments, liabilities and expenses (including, without limitation,
reasonable fees and disbursements of counsel as incurred in connection with
investigating, preparing for, prosecuting and defending against any action,
suit or proceeding, referred to collectively as “Losses”) incurred or suffered by any
Indemnified Party arising out of any misrepresentation or material omission of
or relating to the Company contained herein or any breach of or failure to
observe, perform or comply with any representation, warranty, covenant or
agreement made or to be observed, performed or complied with by the Company
pursuant to this Agreement.  Such indemnification
shall, to the extent it relates to claims or causes of actions against an
Indemnified Party asserted by a third party or another Purchaser, be subject to
the procedures and provisions set forth in Sections 8.2(d), (e)
and (f) hereof, but shall not be subject to or interpreted or applied
with reference to any other subsection of Section 8.2.

 

4.28         S-3
Eligibility and 144 Availability. 
The Company currently is eligible to register its securities for resale
by selling shareholders under a Registration Statement on Form S-3 and the
Company is unaware of any facts or circumstances that reasonably might render
such form unavailable for use by the Company to register all Registrable
Securities as provided herein.  The
Company is not aware of any facts and circumstances relating to the Company or
its status as a reporting Company under the Exchange Act which would cause its
shareholders to be ineligible to sell securities pursuant to Rule 144 under the
Securities Act, assuming such shareholders comply with the volume, manner of
sale, timing and any other applicable requirements applicable to sales by such
shareholders under Rule 144.

 

17

 

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

 

5.1           Each Purchaser, severally as to
itself and its affairs only and not jointly with any other Purchaser,
represents and warrants to and, where applicable, covenants with the Company
that:

 

(a)           Purchaser,
taking into account the personnel and resources it can practically bring to
bear on the purchase of the Securities contemplated hereby, is sufficiently
knowledgeable, sophisticated and experienced in investment matters to evaluate
the merits and risks of purchasing and holding the Securities.

 

(b)           Purchaser
is acquiring the Securities for its own account for investment only and with no
present intention of reselling or distributing such Securities in violation of
the Securities Act.  Purchaser has no
arrangements or understandings with any other Person, group or entity regarding
the transfer, resale or distribution of any such Securities in violation of the
Securities Act.

 

(c)           Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the securities purchased hereunder except as permitted by
this Agreement and in compliance with the Securities Act, applicable blue sky
laws, and the rules and regulations promulgated there under.

 

(d)           Purchaser
is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act or a “Qualified
Institutional Buyer” within the meaning of Rule 144A promulgated under the
Securities Act.

 

(e)           Purchaser
has full right, power, authority and capacity to enter into this Agreement and
to consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement
in accordance with its terms.  Upon the
execution and delivery of this Agreement by each Purchaser, this Agreement
shall constitute a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms, except that
(i) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting the
enforcement of creditors’ rights generally, (ii) enforceability may be
limited by equitable principles generally, and (iii) enforceability of
those provisions of Section 8.2 relating to indemnity may be
limited under applicable law or for reasons of public policy.

 

5.2           Restrictions
on Transfer.  For so long as
the Company complies in all material respects with all of the provisions of Section
8.1 hereof, except as set forth below, during the period beginning on the date
hereof and ending on the date that the Registration Statement is declared
effective by the SEC, each Purchaser covenants and agrees not to, and will
cause its officers, directors and Affiliates not to, offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any of the
Securities, enter into a transaction which would have the same

 

18

 

effect, or enter into any
swap or other arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of any of the Securities, whether any such
aforementioned transaction is to be settled by delivery of the Securities or
such other securities, in cash or otherwise, or publicly disclose the intention
to make any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap or other arrangement; provided,
however, that the foregoing
covenants shall not restrict or prohibit (a) any of the Purchasers or their
respective Affiliates from entering into any hedging transaction with respect
to securities of the Company (“Company Securities”) or (b) transfers or assignments of
Company Securities between or among any of the MDS Parties or between or among
any of the Purchasers and their respective Affiliates, in each case subject
only to compliance with applicable law; provided,
further, however, that the foregoing restrictions
are expressly conditioned upon and subject to the requirement that the
directors and executive officers of the Company must agree to the same
restrictions and prohibitions with respect to any Company Securities owned by
them as those applicable to Purchaser set forth above, by executing and delivering
a written instrument, in form and substance reasonably satisfactory to
Purchaser, evidencing and effecting the same. 
For avoidance of doubt, nothing contained in this Section 5.2 shall
restrict or prohibit a Purchaser from (a) exercising Warrants or Additional
Warrants or (b) relinquishing Warrants or Additional Warrants pursuant to a
Cashless Exercise (as defined in the Warrants and Additional Warrants) thereof.

 

5.3           Legends. 
The Purchasers acknowledge and agree that the Securities may bear one or
more legends in substantially the following form and substance:

 

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

 

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

 

19

 

5.4           Restricted Securities.  Purchaser understands that the Securities
are characterized as “restricted securities” under the federal securities laws,
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such Securities may be resold without registration under the Securities Act
only in certain limited circumstances. 
In this connection, each Purchaser represents that it is familiar with
Commission Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.

 

5.5           No
Recommendation by Regulatory Authorities.  The Securities offered hereby have not been recommended by any
federal or state securities commission or regulatory authority.  Furthermore, the foregoing authorities have
not confirmed the accuracy or determined the adequacy of this Agreement.  Any representation to the contrary is a
criminal offense.

 

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

 

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

 

6.1           Receipt of Payment.  The Company shall have received payment, by
wire transfer of immediately available funds, in the full amount of the
purchase price for the number of Securities being purchased by each respective
Purchaser at the Closing as set forth opposite such Purchaser’s name on the
Schedule of Purchasers attached as Exhibit A.

 

6.2           Representations
and Warranties.  The
representations and warranties made by such Purchaser in Section 5
hereof shall be true and correct in all material respects when made and shall
be true and correct in all materials respects on the Closing Date.

 

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

 

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

 

7.1           Representations
and Warranties Correct; Compliance with Covenants.  The representations and warranties made by
the Company in Section 4 hereof shall be
true and correct when made and shall be true and correct on
the Closing Date.  The Company shall
have complied with all covenants required to have been performed
by it prior to the Closing
Date.

 

7.2           Compliance
Certificate.  Each Purchaser
shall have received a certificate signed by an appropriate officer of the
Company certifying to the fulfillment of the conditions set forth in this Section 7.

 

20

 

7.3           Opinion of Counsel.  The Purchasers shall have received an
opinion of Heller Ehrman White & McAuliffe LLP, counsel to the
Company, in the form attached hereto as Exhibit E.

 

7.4           Board
of Directors.  The MDS
Nominee shall have been appointed to the Company’s Board of Directors, such
appointment to take effect one business day after the Company’s receipt of the
purchase price for the Securities set forth opposite MDS Capital’s name on
Schedule of Purchasers attached as Exhibit A.

 

7.5           Minimum
Purchase Amount.  The Company
shall sell and issue a minimum of at least $15,000,000 aggregate purchase price
of Common Stock to the Purchasers collectively at the Closing, of which at
least 15% of the aggregate number of shares of Common Stock so sold and issued
at the Closing must be purchased by Biovail.

 

7.6           Officer
and Director Lock-Up Agreement. 
Each of the directors and executive officers of the Company shall have
executed and delivered the Lock-Up Agreement attached as Exhibit F.

 

7.7           Voting
Commitment.  John N. Shell,
John W. Shell and Orbimed Advisors LLC shall have executed and delivered
Nominee Voting Commitments in the form attached as Exhibit G.

 

7.8           Secretary’s Certificate.  The Company shall have delivered a
Certificate, executed on behalf of the Company by its Secretary, dated as of
the Closing Date, certifying the resolutions adopted by the Board of Directors
of the Company approving the transactions contemplated by this Agreement, the
issuance of the Securities, the reservation for issuance of any Warrant Shares
issuable upon exercise of the Warrants and Additional Warrants, certifying the
current versions of the Articles of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing this Agreement
and related documents on behalf of the Company.

 

7.9           No
Injunctions.  No judgment,
writ, order, injunction, award or decree of or by any court, or judge, justice
or magistrate, including any bankruptcy court or judge, or any order of or by
any governmental authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority, enjoining or
preventing the issuance and sale of the Securities and the consummation of the
other transactions contemplated hereby.

 

7.10         No
Stop Orders.  No stop order
or suspension of trading shall have been imposed by AMEX, the Commission or any
other governmental regulatory body with respect to public trading in the Common
Stock.

 

21

 

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

ACT.

 

8.1           Registration
Procedures and Expenses.  The
Company hereby covenants and agrees to do the following:

 

(a)           The
Company shall prepare and file the Registration Statement with the Commission
as promptly as practicable, but in any event within ten business days, after
the Closing Date.  The Registration
Statement shall be a “shelf” registration statement on Form S-3 if
the Company is then eligible to use such form or, if not then eligible, another
form of registration statement then available to the Company appropriate for
the intended method or methods of disposition of the Common Stock purchased
hereunder and the Warrant Shares (collectively, the “Registrable Securities”),
including without limitation a registration statement on Form S-1.  The Registration Statement shall register
with the Commission the resale by the Purchasers, from time to time, of the
Registrable Securities through AMEX (or any other securities exchange or
quotation system on which the Common Stock is then listed or quoted) or in
privately-negotiated transactions, and shall not include any other securities
of the Company or any other holder without the prior written consent of MDS and
the holders of a majority of the Common Stock and Warrant Shares held by the
Purchasers, except pursuant to piggyback registration rights granted by the
Company to (i) Biovail pursuant to the Registration Rights Agreement dated as
of July 9, 2002 by and between the Company and Biovail, and (ii) Elan
International Services, Ltd. (“EIS”) pursuant to the Registration Rights Agreement
dated as of January 21, 2000 by and between the Company and EIS.  The Company shall use its reasonable best
efforts to cause such Registration Statement to be declared effective within
five business days after receipt of notification that the Registration
Statement will not be subject to SEC review, and within 60 days after the
Closing Date in the event of an SEC review.

 

(b)           In
connection with the Company’s registration obligations under this Section 8,
in addition to filing the Registration Statement as provided in Section 8.1(a),
the Company shall as promptly as practicable:

 

(i)            Prepare
and file with the SEC such amendments, (including without limitation such
amendments as may be necessary to register all Warrant Shares issuable upon
exercise of Additional Warrants and, if including all such Warrant Shares in
one amendment would cause the amended Registration Statement to not be
immediately effective upon filing by virtue of Rule 462 promulgated under the
Securities Act, the Company shall file successive amendments to accomplish such
registration such that all amendments include the maximum number of additional
Warrant Shares possible and are immediately effective upon filing) and
supplements to the Registration Statement and the prospectus included therein
as may be necessary to keep the Registration Statement and such prospectus
effective and to ensure that the statements made therein are not misleading in
any material respect (or void of any statement necessary to make the statements
made therein not misleading in light of the circumstances in which the
statements therein were made) until the earliest of (A) the date on which
all Registrable Securities have been sold thereunder; (B) such time as all
of the Registrable Securities held by each Purchaser can be sold within a given
three-month period pursuant to

 

22

 

Rule 144 under the
Securities Act; or (C) the date on which all Registrable Securities are freely
tradable without restriction under the Securities Act.  Notwithstanding the
foregoing, following the effectiveness of the Registration Statement, the
Company may request that the Purchasers refrain from selling Registrable
Securities under the Registration Statement for up to 30 days, as appropriate
(a “Suspension Period”),
by giving reasonable prior written notice to the Purchasers, if the Company’s
Board of Directors shall have determined in good faith that information
contained in the Registration Statement contains material misstatements or
omissions and correcting the same would require the Company to disclose any
material corporate development not otherwise required to be then disclosed
under applicable law and that disclosure of such information at the time would
not be in the best interests of the Company; provided, however, that this right
shall in no way minimize, mitigate or limit the Company’s obligations under
subsection 8.1(b)(iv) below to promptly prepare, file and deliver to the Purchasers
a prospectus supplement or amendment by no later than the 30th day after the
commencement of the Suspension Period or such shorter period as is reasonably
practicable and appropriate. 
Notwithstanding the foregoing, the Company may not give notice of a
Suspension Period more than twice during any twelve (12) month period, and in
each event the Company must use its reasonable best efforts to resolve the
underlying cause or reason for the Suspension Period as promptly as practicable
such that the Suspension Period is as short as practicable.  Each Purchaser agrees that, upon receipt of
any notice from the Company of a Suspension Period, such Purchaser will not
sell any Registrable Securities pursuant to the Registration Statement until
the earlier of (i) 30 days thereafter and (ii) the date that (A) such
Purchaser is advised in writing by the Company that the use of the applicable
prospectus may be resumed, (B) such Purchaser has received copies of any
additional or supplemental or amended prospectus, if applicable, and (C) such
Purchaser has received copies of any additional or supplemental filings which
are incorporated or deemed to be incorporated by reference in such prospectus.

 

(ii)           Furnish
to each Purchaser a draft of the selling shareholder table and plan of
distribution from the Registration Statement prior to its filing with the
Commission.  Each Purchaser shall
furnish to the Company such information regarding each such Purchaser’s
beneficial ownership of the Company’s Common Stock, as well as each Purchaser’s
proposed method of distribution of the Registrable Securities within three
business days of receipt of such draft of the selling shareholder table and
plan of distribution from the Registration Statement.

 

(iii)          Permit
special counsel to MDS and special counsel to Biovail to review any comments
made by the staff of the Commission and the Company’s responses thereto, within
a reasonable period of time prior to the filing thereof with the Commission
(or, in the case of comments made by the staff of the Commission, within a
reasonable period of time following the receipt thereof by the Company).

 

(iv)          Notify
each Purchaser, promptly after receiving notice thereof, when the Registration
Statement is declared effective by the Commission.

 

(v)           Furnish
to each Purchaser who is selling Registrable Securities the reasonable number
of copies of the Registration Statement, each amendment and supplement thereto
(in each case including all exhibits thereto but excluding all documents
incorporated by

 

23

 

reference therein, unless
specifically requested by such Purchaser), and the prospectus included in such
Registration Statement (including each preliminary prospectus and prospectus
supplement) as such Purchaser reasonably may request.

 

(vi)          File
any documents required of the Company for blue sky clearance in states
specified in writing by a Purchaser and take any and all such actions as may be
reasonably necessary or advisable to enable such Purchaser to consummate the
planned disposition of Registrable Securities in such jurisdictions; provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented.

 

(vii)         Notify
each Purchaser, at any time when a prospectus relating to the Registrable
Securities is required to be delivered under the Securities Act within the
period that the Company is required to keep the Registration Statement
effective, of any event as a result of which the prospectus included in the
Registration Statement (as then in effect) contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.  As promptly as practicable following any
such occurrence, the Company shall prepare and furnish to each Purchaser a
reasonable number of copies of a prospectus supplement or an amendment to such
prospectus as may be necessary so that, as thereafter delivered to subsequent
purchasers of the Registrable Securities, such prospectus (as so amended or
supplemented) shall meet the requirements of the Securities Act and relevant
state securities laws.  Each Purchaser
shall furnish to the Company such information regarding each such Purchaser and
its proposed method of distribution of the Registrable Securities as the
Company from time to time reasonably may request and as shall be required by
law to effect and maintain the registration of such Purchaser’s Registrable
Securities under the Securities Act and any state securities laws.

 

(viii)        Advise
each Purchaser, promptly after receiving notice thereof, of any stop order or
injunctive action issued or threatened by the SEC and use its reasonable best
efforts to take all actions required to prevent the entry of such stop order or
injunction, or to remove or release it if entered.

 

(ix)           Use
its reasonable best efforts to cause all Registrable Securities included in the
Registration Statement to be listed on each securities exchange or quotations
system on which the Common Stock is then listed or proposed to be listed on or
before the date of the first sale of Registrable Securities pursuant to the
Registration Statement.

 

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

 

24

 

(c)           If
the Company is notified by the Commission or any other Governmental Authority
of competent jurisdiction and authority (as determined in good faith after
consultation between counsel to the Company and the Purchasers) that sales of
Registrable Securities under the Registration Statement must be suspended,
delayed or halted because of a defect in the Registration Statement or the
prospectus included therein, each Purchaser agrees that, upon receipt of any
notice from the Company thereof, such Purchaser will not sell any Registrable
Securities pursuant to the Registration Statement until (i) such Purchaser
is advised in writing by the Company that the use of the applicable prospectus
may be resumed, (ii) such Purchaser has received copies of any additional
or supplemental or amended prospectus, if applicable, and (iii) such
Purchaser has received copies of any additional or supplemental filings which
are incorporated or deemed incorporated by reference in such prospectus.

 

(d)           All
fees and expenses associated with the registration of the Registrable
Securities pursuant to the Registration Statement (including, without
limitation, the costs of preparing, filing, amending and supplementing the
Registration Statement and the related prospectus, causing and maintaining the
effectiveness of the Registration Statement and the related prospectus and any
qualification of the Registrable Securities, printers’ fees, accounting fees,
fees and disbursements of counsel to the Company and other customary and
reasonably related expenses) shall be borne by the Company (exclusive of any
brokerage fees, underwriting discounts and commissions).  In addition, the Company
also shall pay the reasonable fees and expense of one special counsel to the
MDS Parties.

 

(e)           With
a view to making available to the Purchasers the benefits of Rule 144
promulgated under the Securities Act (“Rule 144”) and any other rule or
regulation of the SEC that may at any time permit a Purchaser to sell the
Registrable Securities to the public without registration or pursuant to
registration, the Company hereby covenants and agrees to:

 

(i)            make
and keep public information regarding the Company available, as those terms are
understood and defined in Rule 144, at all times until the earlier of
(A) the second anniversary of the Closing Date or (B) such date as
all Registrable Securities (including, without limitation, all Warrant Shares)
shall have been resold;

 

(ii)           file
with the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act, or, if the Company is not then subject to
Section 13(a) or 15(d) of the Exchange Act, which it would have been required
to file were it so subject; and

 

(iii)          furnish
to any Purchaser upon request, as long as the Purchaser owns any Registrable
Securities, (A) a written certification by the Company that it timely has
complied with all of the reporting requirements of the Exchange Act applicable
to the Company and upon which Rule 144 is conditioned, (B) a copy of
the most recent annual and quarterly report of the Company, and (C) such
other information and such other reports or documents as reasonably may be
requested in order to avail any Purchaser of any rule or regulation of the SEC
that permits the sale, transfer or other disposition of any Registrable
Securities without registration under the Securities Act.

 

25

 

(f)            If
the Registration Statement:

 

(i)            is
not subject to SEC review and the Registration Statement is not declared
effective by the SEC within 90 days after the Closing Date (subject to
extension as provided in the last sentence of this subparagraph) for any reason
whatsoever; or

 

(ii)           is
subject to SEC review and the Company fails for any reason to respond to each
SEC comment letter relating to the Registration Statement within 10 business
days after receipt of each such comment letter and the Registration Statement
is not declared effective within 90 days after the Closing Date (subject to
extension as provided in the last sentence of this subparagraph) for any reason
whatsoever; or

 

(iii)          is
not declared effective by the SEC within 120 days after the Closing Date
(subject to extension as provided in the last sentence of this subparagraph)
for any reason whatsoever,

 

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

 

26

 

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

 

(g)           Transfer of Registrable Securities
After Registration.  Each Purchaser
agrees that such Purchaser will not effect any disposition of the Registrable
Securities that would constitute a sale within the meaning of the Securities
Act, except:

 

(i)            pursuant
to the Registration Statement;

 

(ii)           pursuant
to Rule 144; or

 

(iii)          in
another transaction exempt from registration under the Securities Act, in which
case such Purchaser shall, prior to effecting such disposition, submit to the
Company an opinion of counsel in form and substance reasonably satisfactory to
the Company to the effect that the proposed transaction is in compliance with
the Securities Act.

 

(iv)          Notwithstanding
the foregoing, or anything to the contrary contained herein, each MDS Party
shall be entitled to transfer or assign any Securities purchased hereunder and
any or Warrant Shares received upon exercise of the Warrants to any other MDS
Parties and each Purchaser shall be entitled to transfer or assign any
Securities purchased hereunder and any Warrant Shares received upon exercise of
the Warrants to any of its Affiliates or to any other Purchaser, in each case
subject only to compliance with applicable securities law.

 

(h)           Transfer
of Registration Rights.  The
registration rights granted to the Purchasers pursuant to this Section 8
may be assigned to any transferee or assignee of Registrable Securities
(including, for this purpose, any Warrants or Additional Warrants exercisable
for Registrable Securities) in connection with any transfer or assignment of
such securities; provided, however, that:

 

(i)            such
transfer or assignment is otherwise effected in accordance with applicable
securities law;

 

(ii)           if
not already a party hereto, the transferee or assignee agrees in writing prior
to such transfer to be bound in writing by the provisions of this Agreement
applicable to the transferring Purchaser; and

 

(iii)          the
transferring Purchaser shall act as agent and representative for the transferee
and assignee for the giving and receiving of notices hereunder.

 

8.2           Indemnification.

 

(a)           Definitions.  As used in this Section 8.2, the
following terms have the following respective meanings:

 

27

 

(i)            “Selling Shareholder”
means a Purchaser of Securities under this Agreement, any permitted transferee
or assignee of such Securities who is entitled to resell Registrable Securities
pursuant to the Registration Statement and each officer, director, member,
shareholder, partner, agent, representative or Affiliate of such Purchaser or
permitted transferee or assignee;

 

(ii)           “Registration Statement”
includes any final prospectus, exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in Section 8.1;
and

 

(iii)          “Untrue Statement”
includes any untrue statement or alleged untrue statement or any omission or
alleged omission to state in the Registration Statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

 

(b)           Company
Indemnification.  The Company hereby
unconditionally and irrevocably agrees to indemnify and hold harmless to the
maximum extent permitted by law each Selling Shareholder from and against any
and all Losses suffered or incurred by such Selling Shareholder or to which
such Selling Shareholder may become subject (under the Securities Act or
otherwise) insofar as such Losses (or actions or proceedings in respect
thereof) arise out of, or are based upon:

 

(i)            any
Untrue Statement on or after the effective date of the Registration Statement,
or on or after the date of any prospectus or prospectus supplement or the date
of any sale by Purchaser there under; or

 

(ii)           any
failure by the Company to observe or fulfill any undertaking included in the
Registration Statement or under federal or state securities law.

 

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

 

28

 

(c)           Purchaser
Indemnification.  Subject to the last
proviso in this Section 8.2(c), each Purchaser, severally and not
jointly, agrees to indemnify and hold harmless the Company (and each Person, if
any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs the Registration
Statement and each director of the Company) from and against any Losses to
which the Company (or any such officer, director or controlling Person) may
become subject (under the Securities Act or otherwise), insofar as such Losses
(or actions or proceedings in respect thereof) arise directly out of, or are
based primarily upon:

 

(i)            the
material breach by such Purchaser of its covenants and agreements contained in Section 8.1(c)
hereof respecting the sale of Registrable Securities; or

 

(ii)           any
Untrue Statement contained in the Registration Statement on or after the
effective date thereof, or in any prospectus supplement as of its issue date or
date of any sale by such Purchaser thereunder, if such Untrue Statement was
made in reliance upon and in conformity with information furnished by or on
behalf of such Purchaser in writing specifically for inclusion in the
Registration Statement.

 

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

 

(d)           Indemnification
Procedures.  Promptly after the
incurrence of any Losses or the receipt by any indemnified Person of a notice
of a claim or the beginning of any action in respect of Losses which indemnity
is to be sought against an indemnifying Person pursuant to Section 4.27
(with respect to indemnification by the Company only) or this Section 8.2,
such indemnified Person shall notify the indemnifying Person in writing of the
nature and amount of such Losses or the nature and estimated Losses associated
with such claim or of the commencement of such action; provided, however,
that no failure or delay in giving such notice shall release an indemnifying
party from any of its obligations under Section 4.27 or this Section 8.2,
unless, and then only to the extent that, such failure or delay actually
results in material damage or prejudice to the indemnifying party.  Subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified Person and such
indemnifying Person shall have been notified thereof, such indemnifying Person
shall be entitled

 

29

 

to participate therein
(at its own cost and expense, which shall not be deemed Losses for purposes
hereof), and, to the extent it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified Person.  After notice from the indemnifying Person to
such indemnified Person of its election to assume the defense thereof, such
indemnifying Person shall not be liable to such indemnified Person for any
legal expenses subsequently incurred by such indemnified Person in connection
with the defense thereof (beyond any reasonable fees, costs and expenses
incurred in properly transitioning the defense or representation to the
indemnifying Person’s counsel so selected or amounts incurred to date but not
yet presented for payment) if the indemnifying Person in fact promptly assumes
such defense; provided, however, that if there exists or shall
exist a conflict of interest that would make it inappropriate, in the opinion
of counsel to the indemnified Person, for the same counsel to represent both
the indemnified Person and such indemnifying Person or any Affiliate or
associate thereof, the indemnified Person shall be entitled to select and
retain its own independent counsel at the cost and expense of such indemnifying
Person; provided, however, that no indemnifying Person shall
be responsible for the fees and expenses of more than one separate counsel for
all indemnified parties (in addition to not more than one local counsel in each
relevant jurisdiction).  The indemnifying
party shall not be liable to indemnify an indemnified party for Losses
associated with any settlement, or consent to judgment, effected without the
indemnifying party’s prior consent (not to be unreasonably delayed, conditioned
or withheld).  Further, the indemnifying
party shall not consent to entry of any judgment or enter into any settlement
agreement with respect to any indemnified Losses which (i) contains any
admission of fault or liability of the indemnified party, (ii) does not include
an unconditional waiver and release of any further or additional claims by the
claimants or plaintiffs against the indemnified party, or (iii) obligates the
indemnified Person to take or refrain from taking any action (other than with
respect to any settled claim).

 

(e)           Contribution.  Each party hereto agrees that, if for any
reason the indemnification provisions contemplated by Section 4.27 or
this Section 8.2 are unavailable, unenforceable or are insufficient
to provide the indemnification for Losses provided therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and the
indemnified party for such Losses as well as any other relevant equitable
considerations.  The relative fault of
such indemnifying party and indemnified party shall be determined by reference
to, among other things, the facts and circumstances surrounding any breach or
violation giving rise to such Losses and, if applicable, whether the Untrue
Statement relates to information supplied by such indemnifying party or
indemnified party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such Untrue Statement.  The parties hereto agree that, should the
intended indemnification pursuant to Section 4.27 or this Section 8.2
be unavailable, unenforceable or otherwise insufficient, it would not be just
and equitable if contribution pursuant to this Section 8.2(e) were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in this Section 8.2(e).  Notwithstanding the foregoing or anything to
the contrary contained herein, no Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation.

 

30

 

In no event shall the
contribution obligation of a holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses paid by such
holder in connection with any claim relating to this Section 8.2 and the amount
of any damages such holder has otherwise been required to pay by reason of such
Untrue Statement or alleged Untrue Statement) received by it upon the sale of
the Registrable Securities giving rise to such contribution obligation.

 

(f)            Survival.  The indemnification and contribution
obligations under this Agreement shall be and remain in full force and effect
regardless of any investigation made by or on behalf of the Company, any
Purchaser, any officer or employee of the Company or such Purchaser, any underwriter,
any officer or employee of such underwriter, or any controlling Person of any
of the foregoing and shall survive the transfer and registration of Registrable
Securities by such Purchaser.

 

8.3           Termination
of Conditions and Obligations. 
All conditions and restrictions on the transferability of the
Registrable Securities contained in or imposed under this Agreement shall cease
and terminate with respect to Registrable Securities sold or otherwise disposed
of in accordance with or as contemplated by this Agreement or at such time as
an opinion of counsel reasonably satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to
comply with the Securities Act.

 

8.4           Information
Available.  So long as the
Registration Statement is effective covering the resale of Registrable
Securities owned by the Purchasers (or their permitted transferees or
assignees), the Company will furnish one copy of the following documents to
each Purchaser as soon as practicable, but in no event
later than 10 business days after the date of filing with the Commission:

 

(a)           the
Company’s Annual Report to Shareholders (which Annual Report shall contain
financial statements audited in accordance with GAAP certified by a national
firm of certified public accountants and otherwise comply as to form with all
applicable requirements under the Exchange Act);

 

(b)           the
Company’s Annual Report on Form 10-K (excluding exhibits, unless specifically
requested);

 

(c)           the
Company’s quarterly reports on Form 10-Q (excluding exhibits, unless
specifically requested);

 

(d)           the
Company’s Definitive Proxy Statement; and

 

(e)           each
of the Company’s current reports on Form 8-K, if any.

 

8.5           Changes
in Purchaser Information. 
Each Purchaser agrees to promptly notify the Company of any material
changes in the information set forth in the Registration Statement regarding
such Purchaser or such Purchaser’s plan of distribution as specified by the
Purchaser and set forth in such Registration Statement.

 

31

 

SECTION 9.         BROKER’S FEE.

 

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

 

SECTION 10.       NOTICES.

 

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

 

If to the Company, to:

 

DepoMed, Inc.

1360 O’Brien Drive

Menlo Park, California  94025

Attention:  Chief Financial Officer

Facsimile:  (650) 462-9993

 

with a copy to:

 

Heller Ehrman
White & McAuliffe LLP

4350 La Jolla Village Drive

San Diego, California  92122

Attention:  Stephen C. Ferruolo, Esq.

Facsimile:  (858) 450-8499

 

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

 

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

 

SECTION 11.       MISCELLANEOUS.

 

11.1         Waivers and Amendments.  Neither this Agreement nor any provision
hereof may be changed, waived,
discharged, terminated, modified or amended except upon
the written consent of the Company, the MDS Parties then holding the Securities
(provided that the MDS Parties collectively hold not less than the number of
shares of Common Stock equal to at least 25% of the number of shares of Common
Stock purchased by the MDS Parties at the Closing)

 

32

 

and the holders of at
least a majority of the Securities. 
No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver nor shall any single or partial
exercise thereof  preclude any other,
further or fuller exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein shall be cumulative and not exclusive of any other rights or remedies
available to the parties either hereunder or in a proceeding at law or in
equity.

 

11.2         Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.

 

11.3         Severability.  In case any provision contained in this
Agreement should be deemed invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

 

11.4         Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to its conflicts or choice of law principles; provided,
however, that issues involving
the corporate governance of the Company shall be governed by the laws of the
State of California.

 

11.5         Counterparts.  This Agreement may be executed by facsimile
signature and in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument.  This Agreement shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.

 

11.6         Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.

 

11.7         Entire
Agreement.  This Agreement
and other documents delivered pursuant hereto, including the exhibits,
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and supersede in their entirety
any prior or contemporaneous oral or written agreements and understandings
between or among the parties with respect to such subject matter.

 

11.8         Payment
of Fees and Expenses; Attorney’s Fees.  Each of the Company and the Purchasers shall bear its own
expenses and legal fees incurred on its behalf with respect to the negotiation,
documentation, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby; provided,
however, that the Company shall
reimburse MDS for reasonable legal fees and expenses of Gibson, Dunn &
Crutcher LLP, counsel to MDS, incurred in connection with the negotiation of
this Agreement and the closing of the purchase and sale of the Securities
contemplated hereby and the costs and expenses incurred by MDS in connection
with its due diligence investigation of the Company in an amount not to exceed
$60,000 in the aggregate for all such legal fees and expenses and due diligence
costs and expenses upon presentation of an invoice or other reasonable
supporting documentation therefor; provided,
further, however, that the Company also shall bear
those fees, costs and expenses of

 

33

 

registration referenced
in Section 8.1(d), which amounts shall be in addition to and shall
not reduce any amounts payable pursuant to the preceding proviso.  If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney’s
fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.

 

11.9         Jurisdiction.  Any action, suit or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall
be brought exclusively in the federal or state courts located in the State of
New York, and each party hereto hereby irrevocably consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and hereby unconditionally and
irrevocably waives, to the fullest extent permitted by law, any objection which
such party may now or hereafter have to the laying of venue in any such court
or that any such suit, action or proceeding which is brought in any such court
has been brought in an inconvenient forum. 
Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the jurisdiction of any
such court.  Without limiting the
generality of the foregoing, each party hereto agrees that service of process
on such party as provided in Section 10 shall be deemed effective
service of process on such party.

 

11.10       Waiver
of Jury Trial.  Each of the
parties hereto hereby unconditionally and irrevocably waives any and all rights
to a trial by jury in any legal proceeding arising out of or related to this
Agreement or the transactions contemplated hereby.

 

11.11       Specific
Performance.  The parties acknowledge
and agree that any failure of any party to perform its agreements and
obligations hereunder or contemplated hereby will cause irreparable injury to
the other parties, for which damages, even if available, will not provide an
adequate remedy.  Accordingly, each
party hereby consents to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of such party’s obligations and to
the granting by any court of the remedy of specific performance of its
obligations hereunder.

 

11.12       Public
Disclosure.  Prior to making
any public disclosure with respect to this Agreement and the transactions
contemplated hereby, the Company shall provide the Purchasers with reasonable
opportunity to comment on such disclosures and each Purchaser agrees that it
will provide its comments on such disclosure in an expeditious manner; provided, however, that nothing contained
herein shall restrict the ability of the Company to comply with disclosure
required pursuant to securities regulations or other laws (including, without
limitation, any obligation to disclose the tax treatment or tax structure of
the transactions contemplated hereby).

 

11.13       Joint
Drafting; Exculpation Among Purchasers.  The parties have participated jointly in the negotiation and
drafting of this Agreement.  In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.  Each Purchaser acknowledges that

 

34

 

it is not relying upon
any Person, firm or corporation, other than the Company and its counsel in
making its investment or decision to invest in the Company.

 

[signature page
follows]

 

35

 

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

 

 

	
   

  	
  DEPOMED,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  John W. Fara

  	
   

  
	
   

  	
  Name:  John W. Fara

  
	
   

  	
  Title:  President and Chief Executive Officer

  

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  MDS
  LIFE SCIENCES TECHNOLOGY FUND 

  II NC LIMITED PARTNERSHIP, by its

  General Partner, MDS LSTF II (NCGP) INC.

  (LSTIINC)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Gregory Gubitz

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Graysanne Bedell

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MDS
  LIFE SCIENCES TECHNOLOGY FUND

  II QUEBEC LIMITED PARTNERSHIP, by its

  General Partner, MDS LSTF II (QGP) INC.

  (LSTIIQ)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Gregory Gubitz

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Graysanne Bedell

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  MLII
  CO-INVESTMENT FUND NC LIMITED

  PARTNERSHIP, by its General Partner, MLII

  (NCGP) INC. (MLIINC)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Gregory Gubitz

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
          /s/
  Graysanne Bedell

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SC
  BIOTECHNOLOGY DEVELOPMENT FUND LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Eve Wilson     /s/ William Walmsley

  	
   

  
	
   

  	
  Name:

  	
  Eve Wilson          William Walmsley

  	
   

  
	
   

  	
  Title:

  	
  For and on behalf of
  Cardinal Investments

  	
   

  
	
   

  	
   

  	
  Limited, Director of SC
  (GP) Inc.

  	
   

  
	
   

  	
   

  	
  General Partner of SC
  Biotechnology

  	
   

  
	
   

  	
   

  	
  Development Fund L.P.

  	
   

  
							

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  BIOVAIL
  LABORATORIES INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  John A.R. McCleery

  	
   

  
	
   

  	
  Name:

  	
    John A.R.
  McCleery

  	
   

  
	
   

  	
  Title:

  	
      Vice
  President, General Manager

  	
   

  
						

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  SPECIAL
  SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ David M. Greenhouse

  	
   

  
	
   

  	
  Name:

  	
   

  	
  David M. Greenhouse

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS CAYMAN FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ David M. Greenhouse

  	
   

  
	
   

  	
  Name:

  	
   

  	
  David M. Greenhouse

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Managing Director

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS FUND III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ David M. Greenhouse

  	
   

  
	
   

  	
  Name:

  	
   

  	
  David M. Greenhouse

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Managing Director

  	
   

  
									

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  H&Q
  HEALTHCARE INVESTORS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Daniel R. Omstead

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Daniel R. Omstead

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
  H&Q
  LIFE SCIENCES INVESTORS

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Daniel R. Omstead

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Daniel R. Omstead

  	
   

  
	
   

  	
  Title:

  	
   

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

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

  
							

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  EASTON
  HUNT CAPITAL PARTNERS, L.P.

  By: EHC GP, LP Its General Partner

  By: EHC Inc. Its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Richard P.
  Schneider

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Richard P. Schneider

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Vice President &
  Secretary 

  	
   

  
							

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

 

	
   

  	
  QUOGUE
  CAPITAL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Wayne Rothbaum

  	
   

  
	
   

  	
  Name:

  	
   

  	
  Wayne Rothbaum

  	
   

  
	
   

  	
  Title:

  	
   

  	
  Principal 

  	
   

  
							

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  HBM Bioventures (Cayman) Ltd.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
       /s/
  John Arnold

  	
   

  
	
   

  	
  Name:  John Arnold

  
	
   

  	
  Title:  Chairman and Managing Director

  

 

[Signature
Page to DepoMed Securities Purchase Agreement]

 

 

	
   

  	
  DONALD
  G. DRAPKIN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
        /s/
  Donald G. Drapkin

  	
   

  

 

[Signature
Page to DepoMed Securities Purchase Agreement]Exhibit
10.2

 

FORM OF NOMINEE VOTING COMMITMENT

 

Reference is hereby made to the Securities Purchase
Agreement, dated April 21, 2003 (the “Securities Purchase Agreement”), by and
between DepoMed, Inc., a California corporation (the “Company”) and the
purchasers named on the Schedule of Purchasers attached as Exhibit A
thereto (the “Purchasers”).  This letter shall be effective as of the
Closing (as defined in the Securities Purchase Agreement).

 

In partial consideration of the Purchasers’ respective
agreements to enter into and perform their respective obligations under the
Securities Purchase Agreement and for other good and valuable consideration,
the receipt and sufficiency of which hereby are acknowledged, the undersigned
hereby covenants and commits to vote or cause to be voted all shares of Company
Voting Stock (as defined below) now or hereafter owned or beneficially owned or
controlled by the undersigned to elect the persons designated as the MDS
Nominee and the Company Nominee (each, as defined in the Securities Purchase
Agreement) pursuant to Section 4.12 of the Securities Purchase Agreement
to the Board of Directors of the Company at each regular or special stockholder
meeting, or in connection with any action taken by written consent, held or
taken to elect members of the Board of Directors of the Company.

 

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 page follows]

 

 

IN WITNESS WHEREOF, the undersigned has executed and
delivered this Nominee Voting Commitment as of the date set forth below, to be
effective as of the Closing.

 

	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name of Shareholder:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title of Signatory

  
	
   

  	
  if Shareholder is an entity:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
   

  	
  , 2003

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