Document:

Exhibit 10.1

 

SUBLEASE

This Sublease is entered into this 19th day of November,
2004 between Electric Lightwave, LLC (“Sublessor”) and VantageMed Corporation (“Sublessee”).

 

Sublessor is the Tenant under a Lease from TrizecHahn
TBI Sacramento I LLC , Landlord, dated August 28, 2002 (the “Lease”).  The Lease covers property in the building
located at 11060 White Rock Road, Suite 210, Rancho Cordova, CA 95670.  A complete copy of the Lease is attached
hereto as Exhibit A.

 

Sublessee wishes to sublease from Sublessor, all or a
portion of the premises covered by the Lease.

 

NOW, THEREFORE, Sublessor hereby subleases the
premises described in the attached Exhibit B (the “Premises”), an area of
approximately 6,494 square feet, and Sublessee agrees to sublease the Premises
from Sublessor on the following terms:

 

	
  1.
  Term.

  	
  The term of this
  Sublease shall commence on January 1, 2005, and shall continue through and
  including September 30th, 2007.

  
	
   

  	
   

  
	
  2.
  Rent.

  	
  Sublessee shall
  pay to Sublessor Base Rent in the sum of $6,494.00 per month on the first day
  of each month of the lease term, commencing January 1, 2005. Base rent shall
  be escalated as follows:

  On October 1st, 2005, the Base Rent shall
  increase to $8,117.50.

  On October 1st, 2006, the Base Rent shall
  increase to $9,091.60.

  Sublessor shall
  pay to the Landlord under the Lease all Rent and other charges required to be
  paid by Sublessor under the Lease.

  
	
   

  	
   

  
	
  3.
  Sublease

  Consideration

  	
  Upon execution
  of the Sublease, Sublessee shall pay the sum of $15,585.60 as Sublease Consideration.
  The Sublease Consideration shall be comprised of the first and last months’
  rent. Sublessor may apply the last month’s portion of the Sublease
  Consideration to pay the cost of performing any obligation which Sublessee
  fails to perform within the time required by this Sublease, but such
  application by Sublessor shall not be the exclusive remedy for Sublessor’s
  default. If the Sublease Consideration is applied by Sublessor, Sublessee
  shall on demand pay the sum necessary to replenish the Sublease Consideration
  to its original amount. To the extent not applied by Sublessor to cure
  defaults by Sublessee, the Sublease Consideration shall be applied against
  the rent payable for the last month of the term. The Sublease Consideration
  shall not be refundable.

  
	
   

  	
   

  
	
  4.
  Obligations of

  Sublessee.

  	
  With the
  exception of paying Common Area Maintenance (CAM), Operating Expense, and
  Capital Expense pass through charges, Sublessee shall perform all of the
  obligations of Tenant under the Lease (except the obligation to pay Rent and
  other obligations inconsistent with this Sublease) as if Sublessee were the
  Tenant under the Lease and Sublessor was the Landlord under the Lease. The
  terms of the Lease are hereby expressly incorporated as part of this
  Sublease. In the event Sublessee fails to comply with such terms, or the
  terms of this Sublease, Sublessor shall be entitled to all of the remedies
  granted to Landlord in the Lease, together with any other rights Sublessor
  might otherwise have. All provisions in the Lease dealing with indemnity and
  liability shall be applicable as between Sublessor and the Landlord and
  Landlord’s managing agent under the Lease as named insured in the insurance
  policies it is required to obtain hereunder.

  
	
   

  	
   

  
	
  5. Representations
  of

  Sublessor.

  	
  Sublessor
  represents and warrants that the Lease is in good standing and that Sublessor
  has, to the best of its knowledge, complied with all of its obligations
  thereunder through the date hereof.

  
	
   

  	
   

  
	
  6.
  Condition of

  Premises.

  	
  Unless otherwise
  expressly provided herein, the Premises are leased as is in the condition now
  existing with no additional work to be performed by Sublessor or Landlord.
  Furniture listed in Exhibit “D” including the existing low voltage wiring,
  will remain in the Premises for the use of the Subtenant. Sublessor will have
  the option to sell the furniture to the Subtenant at the end of the Sublease
  Term for $1.00.

  
	
   

  	
   

  
	
  7.
  Notices.

  	
  With respect to
  notices between Sublessor and Sublessee, the addresses for notice shall be
  the addresses stated in this Sublease.

  
	
   

  	
   

  
	
  8.
  Waiver of

  Subrogation.

  	
  Neither
  Sublessor, Sublessee nor the Landlord under the Lease (nor Landlord’s
  managing 

  

 

	
  Please Initial

  
	
  DJM

  	
   

  	
  PDR

  
	
  Landlord

  	
   

  	
  Tenant

  

 

 

	
   

  	
  agent) shall
  have any claim against the other for any loss or damage of a type which is
  coverable by fire and extended coverage insurance, including water damage or
  sprinkler leakage, regardless of negligence.

  
	
   

  	
   

  
	
  9.
  Tenant

  Improvements.

  	
  Subtenant
  proposes to make improvements to the premises, at Subtenant’s sole cost and expense.
  These improvements are illustrated in Exhibit C, and described briefly as
  follows: a. Floor-to-ceiling partition wall dividing the break room with a
  four foot (4’) wide opening for exiting purposes, including balancing
  lighting, HVAC, and sprinkler systems to allow for appropriate lighting,
  ventilation, and fire protection of areas on either side of wall; b. One (1)
  floor-to-ceiling wall to divide the large conference room with the door to
  match existing finishes along the window wall, including balancing lighting,
  HVAC, and sprinkler systems to allow for appropriate lighting, ventilation,
  and fire protection of areas on either side of wall.

  The design of
  these improvements must be approved by Master Landlord and Sublessor in
  writing before the commencement of any improvements.

  
	
  10.
  Additional

  Provisions.

  	
  This Sublease
  incorporates the terms and conditions contained in the following Exhibits:

  Exhibit A – The Lease

  Exhibit B – Description of the Premises

  Exhibit C – Proposed Tenant Improvements

  Exhibit D – Furniture Inventory

  
	
  11.
  Option to

  Terminate.

  	
  Subtenant shall have
  the one-time option to terminate this Sublease by giving written notice to be
  received by Sublandlord no later than November 1, 2005 of Subtenant’s intent
  to terminate, together with the unearned portion of the commission paid to
  Brokers, and a penalty equal to one month’s rent of $8,117.50.

  
	
  12.
  Existing Furniture.

  	
  Sublandlord shall
  provide the use of Sublandlord’s existing furniture files, desks, chairs,
  tables, conference room tables, and systems furniture (office furniture),
  with certain exceptions. An inventory list of included furniture is attached
  as incorporated into this Sublease as Exhibit D. Sublandlord shall have the
  option of retaining ownership of the office furniture at the termination of
  the sublease, or offering it to Subtenant for $1.00.

  

 

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

 

	
  SUBLESSOR:

  	
  By:

  	
   

  	
   

  	
  By:

  	
   Daniel McCarthy

  	
   

  
	
  Address for
  notices:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
  Title:

  	
  COO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBLESSEE:

  	
  By:

  	
  Steve Curd

  	
   

  	
  By:

  	
  Philip Ranger

  	
   

  
	
  Address for
  notices:

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
											

 

	
  Please Initial

  
	
  DJM

  	
   

  	
  PDR

  
	
  Landlord

  	
   

  	
  Tenant

  

 

 

CONSENT

 

The undersigned Landlord under the Lease hereby
consents to the foregoing Sublease conditioned upon the following to which
Sublessor agrees:

 

1.               Sublessee’s agreement to perform
Sublessor’s obligations under the Lease during the Sublease term is for the
benefit of both Sublessor and Landlord.

 

2.               Sublessee’s agreement to perform such
obligations shall not relieve the Sublessor of its primary and unconditional
liability for payment of rental and other charges and performance of Sublessor’s
obligations as Tenant under the Lease during the full term of the Lease.

 

	
  LANDLORD:

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  SUBLESSOR

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

CONSULT YOUR ATTORNEY. THIS DOCUMENT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR REVIEW AND APPROVAL PRIOR TO SIGNING. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE PORTLAND METROPOLITAN ASSOCIATION OF BUILDING
OWNERS AND MANAGERS OR BY THE REAL ESTATE LICENSEES INVOLVED WITH THIS DOCUMENT
AS TO THE LEGAL SUFFICIENCY OR TAX CONSEQUENCES OF THIS DOCUMENT THIS FORM
SHOULD NOT BE MODIFIED WITHOUT SHOWING SUCH MODIFICATIONS BY REDLINING,
INSERTION MARKS, OR ADDENDA.

 

	
  Please Initial

  
	
   

  	
   

  	
   

  
	
  Landlord

  	
   

  	
  Tenant

  

 

 

SALE/LEASE DISCLOSURES

 

There
are many laws that may have an impact on (a) your decision to sell, buy, or
lease property; (b) the documents required or beneficial for your transaction;
and (c) your ownership or tenancy of the property.  We, as real estate brokers, are not
attorneys, engineers, surveyors, environmental consultants, architects,
appraisers, or tax advisors.  We
recommend that you seek the advice of other advisors to assist you with your
real estate transaction.

 

Examples
of some of the laws to consider are:

 

A.                                   The Americans with Disabilities Act:  In general, the ADA requires
employers and owners of property that is open to the public to make their
property and business establishments accessible to persons with
disabilities.  The ADA may require
modifications to the property that you are considering buying or leasing.

 

B.                                     Tax Laws:  Almost all real estate
transactions have tax consequences to the parties involved.  There is more than one way to structure a
sale or lease transaction, each of which may have different tax
consequences.  You should obtain
competent tax advice, especially if you want to defer the gain on the sale of
property through a tax-deferred exchange.

 

C.                                     Environmental Laws: 
Various laws require removal and clean up of hazardous materials on, in,
around, and under property.  The
responsibility for cleaning up hazardous materials may fall on owners or
tenants even if those owners or tenants were not the parties who actually
deposited those materials on the property. 
Various undesirable materials such as mold, asbestos, and contaminants
may be present that may cause liability to owners and tenants.  Inspections by experts are necessary to
detect whether hazardous or undesirable materials are present.  An attorney can advise you on the impact of
laws if those materials are found.

 

D.                                    Zoning Laws, Building Codes, Etc.:  You should determine whether the
use (or proposed use) of the property meets applicable zoning codes and that
the improvements on the property comply with applicable building codes.  An architect or other design professional can
help you with that analysis.

 

These
are only examples of some of the laws that may affect your transaction.  We will use our best skills as real estate
brokers to assist you.  We recommend that
you consult with other competent advisors as well to help you analyze the
condition of the property, the value of the property, and the impact of laws on
the property and your transaction in selling, buying, or leasing property.

 

 

	
  

  	
  121 SW Morrison
  Street, Suite 200, Portland, Oregon 97204, (503) 223-7181

  500 East
  Broadway, Suite 410, Vancouver, Washington 98660, (360) 699-7181

  777-108th Avenue NE, Suite 103, Bellevue, Washington 98004,
  (425) 451-8100

  

  

 

 

ORIGINAL VIA U.S. MAIL

Copy Via Fax - (360)
816-0800

 

December 8, 2004

 

Electric Lightware, Inc.

4400 N.E. 77th Avenue

Vancouver, Washington
98662

Attention: Real Estate
Department

 

Re:  VantageMed Corporation

 

Dear Dan:

 

This letter is to serve
as the approval by Hines VAP Capital Center L.P. (the
"Landlord") of Electric Lightwave, Inc. as a Subtenant of (the
"Tenant") in its premises on the 2nd Floor of the 11060 White Rock
Road Building in Rancho Cordova, California.

 

This approval is based
upon the terms and conditions of the lease (the "Lease") between TrizecHahn
TBI Sacramento I LLC (Landlord's predecessor in title) as Landlord, and Electric
Lightwave, Inc. as Tenant, dated August 28, 2002, and the
understanding that the proposed transaction is a sublease and not an assignment
of the Lease.  The sublease will be
subject to, and be limited by, the terms of the Lease, and the Landlord has not
agreed to any non-disturbance or similar rights for the Subtenant, nor has the
Landlord agreed to recognize the sublease or the Subtenant in the event of the
expiration or earlier termination of the Lease.

 

This approval is also
based on rent and other considerations realized by Tenant under such Sublease
in excess of the Rental payable under such Lease with Landlord, after
amortization of the reasonable subletting costs, which shall be divided as
defined in the Lease.

 

The obligations of the
Landlord under the Lease are for the benefit of the Tenant only and VantageMed
Corporation will not have any right to enforce the Lease against the
Landlord.  Any acceptance by the Landlord
of payments of Base Rental or other sums due under the Lease from VantageMed
Corporation shall be for the convenience of the Tenant and Subtenant only,
and shall not constitute an agreement by Landlord to recognize VantageMed
Corporation as a Tenant or otherwise be deemed to modify the matters set
forth in this letter.

 

This letter is an
approval of the Subtenant only, and does not constitute the consent of the
Landlord to the terms of the sublease, to any improvements which may be
contemplated in connection with the subleasing or the use of any contractor.

 

Should you have any
questions or comments regarding this letter, please do not hesitate to contact
me at (916) 635-1145.

 

Sincerely,

 

/s/ Dennis Smith

 

Dennis Smith

Property Manager

Capital Center II &
III

 

Cc:          Electric Lightwave, Inc.

                4400 N.E. 77th Avenue

                Vancouver, Washington 98662

                Attention: Legal Department

 

                Dan Norfleet - Electric Lightwave - Via Fax - (360)
816-0800

                Cameron Falconer - Hines - Via Fax - (415) 399-1623Exhibit
10.1

 

DEPOMED, INC.

 

MINIMUM:
2,222,223 SHARES

MAXIMUM:
5,036,000 SHARES

 

COMMON STOCK

(no par
value per share)

 

 

PLACEMENT AGENCY AGREEMENT

 

Dated January 6, 2005

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Agreement to Act
  as Placement Agent

  	
   

  
	
  2.

  	
  Payment
  and Delivery

  	
   

  
	
  3.

  	
  Representations
  and Warranties of the Company

  	
   

  
	
   

  	
  3.1

  	
  Effective
  Registration Statement

  	
   

  
	
   

  	
  3.2

  	
  Form S-3

  	
   

  
	
   

  	
  3.3

  	
  Contents
  of Registration Statement and Prospectus

  	
   

  
	
   

  	
  3.4

  	
  Financial
  Statements

  	
   

  
	
   

  	
  3.5

  	
  Taxes

  	
   

  
	
   

  	
  3.6

  	
  Exchange Act Compliance

  	
   

  
	
   

  	
  3.7

  	
  Due
  Incorporation

  	
   

  
	
   

  	
  3.8

  	
  Subsidiaries

  	
   

  
	
   

  	
  3.9

  	
  Placement Agency Agreement

  	
   

  
	
   

  	
  3.10

  	
  Capitalization

  	
   

  
	
   

  	
  3.11

  	
  Authorized
  Stock

  	
   

  
	
   

  	
  3.12

  	
  Validly Issued Shares

  	
   

  
	
   

  	
  3.13

  	
  No Breach

  	
   

  
	
   

  	
  3.14

  	
  No Conflict

  	
   

  
	
   

  	
  3.15

  	
  No Material Adverse
  Change

  	
   

  
	
   

  	
  3.16

  	
  Legal Proceedings;
  Exhibits

  	
   

  
	
   

  	
  3.17

  	
  Not an Investment
  Company

  	
   

  
	
   

  	
  3.18

  	
  Material
  Agreements

  	
   

  
	
   

  	
  3.19

  	
  Transactions with
  Affiliates

  	
   

  
	
   

  	
  3.20

  	
  Compliance with Laws

  	
   

  
	
   

  	
  3.21

  	
  No Environmental Costs

  	
   

  
	
   

  	
  3.22

  	
  No Registration Rights

  	
   

  
	
   

  	
  3.23

  	
  Cuban Business Statute

  	
   

  
	
   

  	
  3.24

  	
  Good Title to Properties

  	
   

  
	
   

  	
  3.25

  	
  Intellectual
  Property Rights and Licenses

  	
   

  
	
   

  	
  3.26

  	
  Governmental
  Regulations

  	
   

  
	
   

  	
  3.27

  	
  No
  Labor Disputes

  	
   

  
	
   

  	
  3.28

  	
  Insurance

  	
   

  
	
   

  	
  3.29

  	
  Accounting
  Controls

  	
   

  
	
   

  	
  3.30

  	
  Quotation of Common
  Stock

  	
   

  
	
   

  	
  3.31

  	
  Sarbanes-Oxley
  Act

  	
   

  
	
   

  	
  3.32

  	
  Price
  Stabilization and Manipulation

  	
   

  

 

i

 

	
   

  	
  3.33

  	
  Broker/Dealer

  	
   

  
	
   

  	
  3.34

  	
  Legal, Tax,
  Accounting Advice

  	
   

  
	
  4.

  	
  Covenants of the Company

  	
   

  
	
   

  	
  4.1

  	
  Furnish
  Copies of Registration Statement and Prospectus

  	
   

  
	
   

  	
  4.2

  	
  Notification
  of Amendments or Supplements

  	
   

  
	
   

  	
  4.3

  	
  Filings of
  Amendments or Supplements

  	
   

  
	
   

  	
  4.4

  	
  Blue Sky

  	
   

  
	
   

  	
  4.5

  	
  Earnings
  Statement

  	
   

  
	
   

  	
  4.6

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
  4.7

  	
  Transfer
  Agent

  	
   

  
	
   

  	
  4.8

  	
  Exchange Act Compliance

  	
   

  
	
   

  	
  4.9

  	
  Market Standoff Provision

  	
   

  
	
   

  	
  4.10

  	
  Administration
  of Segregated Account

  	
   

  
	
  5.

  	
  Conditions
  to the Placement Agent’s Obligations

  	
   

  
	
   

  	
  5.1

  	
  Effective
  Registration Statement

  	
   

  
	
   

  	
  5.2

  	
  Rule 462(b)
  Registration Statement

  	
   

  
	
   

  	
  5.3

  	
  Prospectus Filed
  with Commission

  	
   

  
	
   

  	
  5.4

  	
  No Stop Order

  	
   

  
	
   

  	
  5.5

  	
  No
  NASD Objection

  	
   

  
	
   

  	
  5.6

  	
  No Material Adverse
  Change

  	
   

  
	
   

  	
  5.7

  	
  Officer’s Certificate

  	
   

  
	
   

  	
  5.8

  	
  Opinion of Company Counsel

  	
   

  
	
   

  	
  5.9

  	
  Opinion of DDL Counsel

  	
   

  
	
   

  	
  5.10

  	
  Opinion of
  Placement Agent’s Counsel

  	
   

  
	
   

  	
  5.11

  	
  Accountant’s Comfort Letter

  	
   

  
	
   

  	
  5.12

  	
  Lock-Up Agreements

  	
   

  
	
   

  	
  5.13

  	
  Segregated Account

  	
   

  
	
   

  	
  5.14

  	
  Listing

  	
   

  
	
   

  	
  5.15

  	
  Additional Documents

  	
   

  
	
  6.

  	
  Expenses

  	
   

  
	
  7.

  	
  Indemnity and Contribution

  	
   

  
	
   

  	
  7.1

  	
  Indemnification
  of the Placement Agent by the Company

  	
   

  
	
   

  	
  7.2

  	
  Indemnification
  by the Placement Agent

  	
   

  
	
   

  	
  7.3

  	
  Indemnification Procedures

  	
   

  
	
   

  	
  7.4

  	
  Contribution Agreement

  	
   

  

 

ii

 

	
   

  	
  7.5

  	
  Contribution Amounts

  	
   

  
	
   

  	
  7.6

  	
  Survival of Provisions

  	
   

  
	
  8.

  	
  Effectiveness

  	
   

  
	
  9.

  	
  Termination

  	
   

  
	
  10.

  	
  Counterparts

  	
   

  
	
  11.

  	
  Headings; Table of Contents

  	
   

  
	
  12.

  	
  Notices

  	
   

  
	
  13.

  	
  Successors

  	
   

  
	
  14.

  	
  Partial Unenforceability

  	
   

  
	
  15.

  	
  Governing
  Law

  	
   

  
	
  16.

  	
  Consent to Jurisdiction

  	
   

  
	
  17.

  	
  Waiver of Immunity

  	
   

  
	
  18.

  	
  Entire
  Agreement

  	
   

  
	
  19.

  	
  Amendments

  	
   

  
	
  20.

  	
  Sophisticated Parties

  	
   

  

 

iii

 

PLACEMENT
AGENCY AGREEMENT

 

 

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California 94104

 

Ladies and Gentlemen:

 

Depomed, Inc., a California corporation (the “Company”),
proposes to issue and sell to certain investors (collectively, the “Investors”)
a minimum of 2,222,223 shares (the “Minimum Shares”) of its common stock, no
par value per share (the “Common Stock”), and up to a maximum of 5,036,000
shares of Common Stock (the “Maximum Shares”). 
The shares of Common Stock to be issued are hereinafter referred to as
the “Shares.”  The Company desires to
engage Thomas Weisel Partners LLC (the “Placement Agent”) as its exclusive
placement agent in connection with such issuance and sale.  The Shares are described in the Prospectus
Supplement that is referred to below.

 

The Company has prepared and filed, in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations thereunder (collectively, the “Act”), with the
Securities and Exchange Commission (the “Commission”) a registration statement
under the Act on Form S-3 (File No. 333-108973) (the “registration statement”).  The registration statement has been declared
by the Commission to be effective under the Act.  The Company will next file with the
Commission pursuant to Rule 424(b) under the Act a prospectus supplement
describing the offering of the Shares, in such form as has been provided to,
discussed with, and approved by the Placement Agent.  If the Company has elected to rely on Rule
462(b) under the Act, then the Company has filed, or promptly will file on the
date hereof, with the Commission pursuant to Rule 462(b) under the Act a
registration statement (the “Rule 462(b) Registration Statement”) to register $3,774,500
of Common Stock.

 

The term “Registration Statement” as used in
this Agreement means collectively: (i) the registration statement at the time
it became effective and as supplemented or amended prior to the execution of
this Agreement, including all financial schedules and exhibits thereto and all
documents incorporated by reference or deemed to be incorporated by reference
therein; and (ii) the Rule 462(b) Registration Statement from and after the
date and time of its filing with the Commission, including all financial
schedules and exhibits thereto and all documents incorporated by reference or
deemed to be incorporated by reference therein. 
The term “Basic Prospectus” as used in this Agreement means the
prospectus dated as of October 2, 2003 that is part of the registration
statement.  The term “Prospectus
Supplement” as used in this Agreement means the final prospectus supplement specifically
relating to the Shares, in the form filed with or transmitted for filing to,
the Commission pursuant to Rule 424(b) under the Act.  The term “Prospectus” as used in this
Agreement means the Basic Prospectus together with the Prospectus Supplement
except that if such Basic Prospectus is amended or supplemented on or prior to
the date on which the Prospectus Supplement was first filed pursuant to Rule
424(b), the term 

 

1

 

“Prospectus” shall refer to the Basic Prospectus as so amended or
supplemented and as supplemented by the Prospectus Supplement.  Any reference herein to the registration
statement, the Registration Statement, the Basic Prospectus, any Prospectus
Supplement or the Prospectus shall be deemed to refer to and include (i) the
documents incorporated by reference therein pursuant to Form S-3 (the “Incorporated
Documents”) and (ii) the copy of the Registration Statement, the Basic
Prospectus, the Prospectus Supplement, the Prospectus or the Incorporated
Documents filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system (“EDGAR”) and, in the case of the Basic
Prospectus, the Prospectus Supplement and the Prospectus, such document in the
form first delivered to the Placement Agent for use in connection with the
offering of the Shares.  Any reference
herein to the terms “amend,” “amendment” or “supplement” with respect to the
Registration Statement, the Basic Prospectus, the Prospectus Supplement or the
Prospectus shall be deemed to refer to and include the filing of any document
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “Exchange Act”) after the effective
date of the Registration Statement (in the case of the Registration Statement
and the Basic Prospectus) or the date of the Prospectus Supplement (in the case
of the Prospectus Supplement and the Prospectus), as the case may be, deemed to
be incorporated therein by reference.  As
used herein, “business day” shall mean a day on which the New York Stock
Exchange (the “NYSE”) is open for trading.

 

The Company hereby confirms its agreement
with the Placement Agent as follows:

 

1.                                       Agreement to
Act as Placement Agent.  Upon
the basis of the representations and warranties of the Company and subject to
the terms and conditions set forth in this Agreement, the Company engages the
Placement Agent to act as its exclusive placement agent, on a best efforts
basis, in connection with the offer and sale by the Company of Shares to the
Investors.  Subject to the terms and
conditions set forth herein, offers for the purchase of Shares may be solicited
by the Placement Agent as agent for the Company at such times and in such
amounts as the Placement Agent shall deem advisable.  The Company shall have the sole right to
accept offers to purchase the Shares and may reject any such offer, in whole or
in part.

 

As compensation for services rendered, at the
time of purchase (as defined below) the Company shall pay to the Placement
Agent, by federal funds wire transfer to an account or accounts designated by
the Placement Agent, an amount equal to six percent (6%) of the gross proceeds
received by the Company in respect of the sale of the Shares (the “Fee”).  The Shares are being sold at a price of $4.50 per share.

 

This Agreement shall not give rise to any
commitment by the Placement Agent or any of its affiliates to underwrite or
purchase any of the Shares or otherwise provide any financing, and the Placement
Agent shall have no authority to bind the Company in respect of the sale of any
Shares.  The sale of the Shares shall be
made pursuant to purchase agreements in the form included as Exhibit A
hereto (the “Purchase Agreements”).

 

2.                                        Payment
and Delivery.  Subject to the
terms and conditions hereof, delivery of the Shares shall be made at the office
of Heller Ehrman White & McAuliffe LLP (“HEWM”) located at 4350 La Jolla
Village Drive, 7th Floor, San Diego, California 92122 (or at such other place
as shall be agreed upon by the Placement Agent and the Company), at or about
10:00 a.m.,

 

2

 

New York City time, on January 12, 2005 (unless another time or
date shall be agreed to by the Placement Agent and the Company) (the “Closing
Date”).

 

The Company will, on (or prior to) the date
hereof, establish or cause to be established a non-interest bearing segregated
trust account (the “Segregated Account”) maintained and administered by
HEWM.  Funds deposited into the Segregated
Account shall be held therein, for all Investors that deposit funds into the
Segregated Account, pending the closing of the offering of the Shares pursuant
to the terms of this Agreement.  The
Company acknowledges that the Placement Agent may rely on the establishment and
use of the Segregated Account, as set forth in this Agreement and as described
in the Prospectus, with respect to the Placement Agent’s fulfillment of its
duties under Rule 15c2-4 under the Exchange Act to the extent applicable to the
transactions contemplated by this Agreement, which duties relate to the
transmission or maintenance of funds received from the Investors.  The Company will promptly notify the
Placement Agent if, by 5:00 p.m., New York City time, on the calendar day prior
to the Closing Date, cleared funds sufficient for the purchase of the Minimum
Shares have not been received into the Segregated Account.

 

All funds received from Investors pursuant to
Purchase Agreements shall be deposited in the Segregated Account.  If funds sufficient for the sale of the
Minimum Shares are not received into the Segregated Account, under the terms of
this Agreement and the Prospectus, by 5:00 p.m., New York City time, on January 11,
2005, the Offering shall be automatically terminated, in which event no fees or
commissions shall be payable to the Placement Agent and all funds paid by the
Investors into the Segregated Account in connection with the Offering shall be
promptly returned to the Investors, without interest, in accordance with the
amounts each such investor paid into the Segregated Account.  If funds sufficient for the sale of the
Minimum Shares are received into the Segregated Account, under the terms of
this Agreement and the Prospectus, by 5:00 p.m., New York City time, on January 11,
2005, then on the Closing Date and upon joint instruction from the Company and
the Placement Agent all funds received into the Segregated Account, less
commissions and fees of the Placement Agent payable pursuant to the terms of
this Agreement, shall be paid to the Company, and the commissions and fees of
the Placement Agent payable pursuant to the terms of this Agreement shall be
paid to the Placement Agent in accordance with the terms of Section 1
hereof.

 

Subject to the terms and conditions hereof,
payment of the purchase price for the Shares shall be made into the Segregated
Account by federal funds wire transfer
pursuant to the terms of the Purchase Agreements, against delivery of the
Shares, through the facilities of The Depository Trust Company (“DTC”), to such
persons, and shall be registered in such name or names and shall be in such
denominations, as the Placement Agent may request prior to the time of purchase
(as defined below) and provided that such request is not inconsistent with the
Purchase Agreements.  Notwithstanding
anything herein or in any Purchase Agreement to the contrary, no Shares which
the Company has agreed to sell pursuant to this Agreement or any Purchase
Agreement shall be deemed to have been purchased and paid for, or sold by the
Company, until such Shares shall have been delivered to the purchaser thereof
and payment of the purchase price therefore has been received by the
Company.  The Closing Date is sometimes
herein referred to as “the time of purchase.”

 

3

 

Delivery of the documents described in Section 5
hereof with respect to the purchase of the Shares shall be made at the office
of HEWM located at 4350 La Jolla Village Drive, 7th Floor, San Diego,
California 92122 at 9:00 a.m., New York City time, on the Closing Date (unless
another time shall be agreed to by the Placement Agent and the Company).

 

3.                                       Representations
and Warranties of the Company. 
The Company represents and warrants to and agrees with the Placement
Agent, as of the date hereof, that:

 

3.1                                 Effective
Registration Statement.  The
Registration Statement has become effective under the Act; no stop order
suspending the effectiveness of the Registration Statement is in effect; and no
proceedings for such purpose are pending before or, to the knowledge of the
Company, threatened by the Commission.

 

3.2                                 Form S-3.  The Company met, at the
time it filed the Registration Statement with the Commission, and at all times
from such date through the Closing Date has met, the requirements for use of
Form S-3 under the Act.

 

3.3                                 Contents of Registration Statement and Prospectus.  (i) The
Registration Statement, when it became effective, did not contain and, as
amended or supplemented, did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) the
Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
the Exchange Act and the applicable rules and regulations of the Commission
thereunder, (iii) the Registration Statement meets the applicable requirements
set forth in Rule 415(a)(1)(x) and, in the case of the Rule 462(b) Registration
Statement, Rule 462(b) under the Act, and (iv) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to
Placement Act furnished to the Company in writing by such Placement Agent
expressly for use therein.

 

3.4                                 Financial Statements.  The
financial statements of the Company, together with related notes and schedules,
included in the Registration Statement and the Prospectus (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 Commission with respect thereto.  The Financial Statements have been prepared
in accordance with United States generally accepted accounting principles
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).  The summary financial information included in
the Registration Statement and the Prospectus presents fairly the information
shown therein and such information has been compiled on a basis consistent with
the financial statements presented therein and the books and records of the
Company.

 

4

 

3.5                                 Taxes.  The
Company and its subsidiaries have filed all federal, state, local and foreign
income tax returns which have been required to be filed and have paid all taxes
indicated by such returns and all assessments received by them or any of them
to the extent that such taxes have become due. 
All tax liabilities have been adequately provided for in the financial
statements of the Company.

 

3.6                                 Exchange Act Compliance.  The
documents incorporated or deemed to be incorporated by reference in the
Registration Statement and the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all material
respects with the requirements of the Exchange Act, and, when read together
with the other information in the Prospectus, at the time the Registration
Statement and any amendments thereto become effective through and including the
Closing Date will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.

 

3.7                                 Due Incorporation.  The Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

 

3.8                                 Subsidiaries.  Each
subsidiary of the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole. 
Except as disclosed in the Prospectus, all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned directly
by the Company, free and clear of all liens, encumbrances, equities or claims.

 

3.9                                 Placement Agency Agreement.  The Company
has full legal right, power and authority to enter into and perform this
Agreement and to consummate the transactions contemplated herein.  This Agreement has been duly authorized,
executed and delivered by the Company, and is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as rights to
indemnification or contribution may be limited by applicable law and except as
the enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.

 

5

 

3.10                           Capitalization.  The information set forth under the
caption “Capitalization” in the Prospectus is true and correct in all material
respects.  All of the Shares conform to
the description thereof contained in the Registration Statement and the
Prospectus.  The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company’s
incorporation.

 

3.11                           Authorized Stock.  The shares of Common Stock outstanding
prior to the issuance of the Shares to be sold by the Company have been duly
authorized and are validly issued, fully paid and non-assessable.

 

3.12                           Validly Issued Shares.  The Shares to be sold by the Company
have been duly authorized and, when issued and delivered in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any preemptive or
similar rights.

 

3.13                           No Breach.  The
Company is not in breach of, or in default (nor has any even occurred which
with notice, lapse of time or both would result in any breach of, or constitute
a default) (i) under its articles of incorporation or bylaws or (ii) in the
performance or observance of any obligation, agreement, covenant or condition
contained in any license, indenture, mortgage, deed of trust, bank loan or
credit agreement or other evidence of indebtedness, or any lease, contract or
other agreement or instrument to which the Company is a party or by which it or
any of its properties is bound which, with respect to clause (ii) above, would
reasonably be expected to result in a material adverse effect on the Company
and its subsidiaries, taken as a whole.

 

3.14                           No Conflict.  The execution and delivery
by the Company of, and the performance by the Company of its obligations under,
this Agreement will not contravene any provision of applicable law or the
articles of incorporation or bylaws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is material
to the Company or its subsidiaries, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement or the
consummation of the transactions contemplated hereby, except such as may be
required by the securities or blue sky laws of the various states in connection
with the offer and sale of the Shares.

 

3.15                           No Material Adverse
Change.  Since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, (i) there has not been any material adverse change or any
development involving a prospective material adverse change in or materially
and adversely affecting the earnings, business, management, properties, assets,
rights, operations, financial condition or prospects of the Company or its
subsidiaries, whether or not occurring in the ordinary course of business, (ii)
there has not been any material transaction entered into or any material
transaction that is probable of being entered into by the Company or its
subsidiaries, other than transactions in the ordinary course of business and
changes and transactions described in the Registration Statement, (iii) the
Company has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of

 

6

 

any kind on its capital stock other than ordinary and customary
dividends, and (iv) there has not been any material change in the capital
stock, short-term debt or long-term debt of the Company and its subsidiaries,
except in each case as described in the Prospectus.  Neither the Company, nor its subsidiaries,
has any material contingent obligations which are not disclosed in the
Registration Statement.

 

3.16                           Legal Proceedings; Exhibits.

 

(a)                                  There are no legal or
governmental proceedings pending or, to the knowledge of the Company,
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described or incorporated by reference
in the Registration Statement or the Prospectus or to be filed or incorporated
by reference as exhibits to the Registration Statement that are not described
or filed or incorporated as required.

 

(b)                                 There are no
agreements or other documents, intellectual property rights, patents or patent
applications owned or licensed by, or licenses of patents or patent
applications held by, the Company or its subsidiaries of a character required
to be filed as an exhibit to the Registration Statement, to the Company’s
annual report on Form 10-K for fiscal 2003 or to the Company’s quarterly
reports on Form 10-Q for the first three fiscal quarters of 2004, or required
to be described in the Registration Statement or the Prospectus or in such Form
10-K or Forms 10-Q that are not so filed or described.

 

3.17                           Not an Investment Company.  The Company
is not and, after giving effect to the offering and sale of the Shares and the
application of the proceeds thereof as described in the Prospectus, will not be
an “investment company” as such term is defined in the Investment Company Act
of 1940, as amended.

 

3.18                           Material Agreements.  Except as set forth in reports on
Forms 10-K, 10-Q or 8-K filed with the Commission on or prior to the date
hereof, 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 as an exhibit to such report or, in the case of any
Form 8-K, the next due report on Form 10-K or 10-Q (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, individually
or in the aggregate, a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

3.19                           Transactions with Affiliates.  Except
as set forth in reports on Forms 10-K, 10-Q or 8-K filed with the Commission on
or prior to the date hereof, 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,

 

7

 

any officer, employee, consultant or director of the Company, or any
person who would be covered by Item 404(a) of Regulation S-K under
the Act, 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 under the Act.

 

3.20                           Compliance with Laws.

 

(a)                                  The
Company is in compliance in all material respects with all Applicable
Laws.  For purposes of this Agreement, “Applicable
Laws” includes, without limitation, any and all applicable foreign, federal,
state and local laws and regulations 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 “FDA”),
the United States Drug Enforcement Administration and similar authorities in
any U.S. or non-U.S. jurisdiction with jurisdiction over the Company), the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”) 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, individually or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole.  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 or any
Environmental Laws, which may be material to its business, prospects, financial
condition, operations, property or affairs or that would, individually or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.  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 

 

8

 

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.

 

3.21                           No Environmental Costs.  There
are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties) which would, individually or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

3.22                           No Registration Rights.  There are no contracts, agreements or
understandings between the Company or its subsidiaries and any person granting
such person the right to require the Company to file a registration statement
under the Act with respect to any securities of the Company (“Company Registration Rights Agreements”),
other than such Company Registration Rights Agreements as have been filed by
the Company with the Commission.  No
Company Registration Rights Agreement requires the Company to include
securities of the Company with the Shares registered pursuant to the
Registration Statement other than as have been waived in writing in connection
with the offering contemplated hereby or which the Company reasonably believes
are not applicable to the offering contemplated hereby.

 

3.23                           Cuban Business Statute.  The
Company has complied with all provisions of Section 517.075, Florida
Statutes relating to doing business with the Government of Cuba or with any
person or affiliate located in Cuba.

 

3.24                           Good Title to Properties.  The Company and its subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to
the business of the Company and its subsidiaries, in each case free and clear
of all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property and
do not interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries.

 

3.25                           Intellectual Property Rights and Licenses.

 

(a)                                  Definitions.  As used herein, the term “Company
Intellectual Property” means all intellectual property rights owned or licensed
by the Company and its subsidiaries currently employed by them in connection
with the business now operated by them and as currently anticipated to be
conducted in the future by them as described in the Prospectus, arising from or
associated with, and includes all of the following, whether protected, created
or

 

9

 

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)                                 Actions
to Protect Intellectual Property. 
The Company and its subsidiaries have taken all reasonable steps to
protect their 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
and its subsidiaries have and enforce a policy requiring each of their
respective 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 to enter into proprietary
information, confidentiality and assignment agreements, 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), consultants and contractors of the Company and its subsidiaries have
executed such an agreement.  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.

 

(c)                                  Adverse
Ownership Claims.  The Company owns
exclusively all right, title and interest in and to all of the Company
Intellectual Property free and clear of any and all liens, encumbrances or
other adverse ownership claims (other than (i) licenses granted by the Company
that are filed as exhibits to the Company’s Form 10-K for the fiscal year ended
December 31, 2003 or as an exhibit to the Company’s Current Report on Form
8-K filed with the Commission on May 4, 2004, (ii) licenses granted by the
Company or its subsidiaries in the ordinary course of business that are not
material to the operation of the Company’s business as currently conducted, or
(iii) that certain License and Distribution Agreement, effective as of August 20,
2004, by and between the Company and LG Life Sciences Ltd.), and the Company
has not received any notice or claim challenging the Company’s ownership of the
Company Intellectual Property 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.

 

10

 

(d)                                 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.

 

(e)                                  Status and Maintenance of Company Intellectual
Property and Trade Secrets.  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) 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.  In addition, 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
otherwise dispose of or encumber the Company Intellectual Property in any
manner.

 

(f)                                    Sufficiency
of the Company Intellectual Property. 
To the Company’s knowledge, the Company Intellectual Property
constitutes all the material intellectual property rights necessary for the
conduct of the Company’s business as it is currently conducted and as currently
anticipated to be conducted in the future by the Company as described in the
Prospectus; provided, however, that the Company makes no representation or
warranty with respect to the impact on the Company’s Gabapentin GR product
candidate of the litigation among Pfizer Inc. and companies seeking to market
formulations of gabapentin to the extent described in the Prospectus under “Risk
Factors - We may be unable to protect our intellectual property and may be
liable for infringing the intellectual property of others.”

 

(g)                                 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 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 neither the Company nor
any of its subsidiaries has 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 is subject
to any outstanding order, judgment, decree, or stipulation restricting the use
thereof by

 

11

 

the Company or, in the case of any Company Intellectual Property
licensed to others, restricting the sale, transfer, assignment or licensing
thereof by the Company to any Person. 
Except as disclosed by or on behalf of the Company in writing to the
Placement Agent as of the date hereof, to the Company’s knowledge, no third
party is misappropriating, infringing, diluting or violating in any material
respect any Company Intellectual Property. 
To the Company’s knowledge, no product, technology, service or
publication of the Company violates any law or regulation.

 

(h)                                 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.

 

3.26                           Governmental Regulations.

 

(a)                                  The
clinical trials and the human and animal studies conducted by or on behalf of
the Company or in which the Company has participated were and, if still
pending, are being conducted in accordance with standard medical and scientific
research procedures and any applicable rules, regulations and policies of the
FDA.

 

(b)                                 The
Company has operated and currently is in compliance in all material respects
with all applicable rules, regulations and policies of the FDA.

 

(c)                                  Except
as described in the Registration Statement and the Prospectus, the Company is
not required to file or obtain any registration, application, license, request
for exemption, permit or other regulatory authorization with the FDA in order
to conduct its business as described in the Registration Statement and the
Prospectus.

 

(d)                                 The
Company and its subsidiaries possess, and are operating in compliance in all
material respects with, all certificates, authorizations, permits, licenses,
consents, franchises and grants issued by the appropriate federal, state or
foreign governmental or regulatory authorities necessary to conduct their
respective business, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or modification
of any such certificate, authorization, permit, license, consent, franchise or
grant which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
Company.

 

(e)                                  The
Company has not received notification of the violation of any applicable
statute, rule, regulation or order administered or issued by the FDA.  To the knowledge of the Company, none of the Company’s
collaborative partners have received any such notification from the FDA or
equivalent foreign regulatory agency in connection with the subject matter of
any collaboration between the Company and any such collaborative partner.

 

3.27                           No Labor Disputes.  No
material labor dispute with the employees of the Company or any of its
subsidiaries exists, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor disturbance
by the

 

12

 

employees of any of its principal suppliers, manufacturers or
contractors that could have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

 

3.28                           Insurance.  The
Company and its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged; and neither the
Company nor any of its subsidiaries has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

 

3.29                           Accounting Controls.  The
Company and each of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance (a) that transactions
are executed in accordance with management’s general or specific
authorizations; (b) that transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (c) regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of the Company’s and its subsidiaries assets that could have a material effect
on the Company’s financial statements; (d) that pertain to the maintenance
of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company and its
subsidiaries; and (e) that the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.

 

3.30                           Quotation of Common Stock.  The
Common Stock (including the Shares) is registered pursuant to Section 12(g)
of the Exchange Act and is quoted on The Nasdaq National Market, and the
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from The Nasdaq National Market, nor has the Company
received any notification that the Commission, the National Association of
Securities Dealers, Inc. (the “NASD”) or The Nasdaq Stock Market has initiated
or is contemplating deregistration or delisting therefrom.   The Shares have been approved for quotation
on The Nasdaq National Market subject only to official notice of issuance.

 

3.31                           Sarbanes-Oxley Act.  There is not currently and has not in
the past been a failure on the part of the Company and any of its respective
directors or officers, in their capacities as such, to comply with any
provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith, including Sections 302, 402 and 906.

 

3.32                           Price Stabilization and Manipulation.  The Company
and each of its officers, directors and controlling persons has not taken, and
will not take, directly or indirectly, any action which is designed to or which
has constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale of the Shares or which is otherwise proscribed by
Regulation M under the Act.

 

3.33                           Broker/Dealer.  The Company (i) is not required to register
as a “broker” or “dealer” in accordance with the provisions of the Exchange Act
or the regulations

 

13

 

promulgated thereunder, and (ii) directly, or
indirectly through one or more intermediaries, does not control any member firm
of the NASD.

 

3.34                           Legal, Tax, Accounting Advice.  The Company
has not relied upon the Placement Agent or legal counsel to the Placement Agent
for any legal, tax or accounting advice in connection with the offering and
sale of the Shares.

 

4.                                       Covenants of
the Company.  In further
consideration of the agreements of the Placement Agent herein contained, the
Company covenants with the Placement Agent, as of the date hereof, as follows:

 

4.1                                 Furnish Copies of
Registration Statement and Prospectus.  The Company will furnish to you, without
charge, four (4) signed copies of the Registration Statement and each amendment
thereto (including exhibits thereto), and signed copies of all consents and
certificates of experts, and four (4) conformed copies of the Registration
Statement and each amendment thereto (without exhibits thereto) and furnish to
you in New York City, without charge; and prior to 5:00 p.m. New York City time
on the date of this Agreement, as many copies of the Prospectus and any
supplements and amendments thereto (including any documents incorporated or
deemed incorporated by reference therein or to the Registration Statement) as
you may reasonably request, in either paper or electronic form or both as you
may request.  The copies of the
Registration Statement, the Prospectus and all amendments or supplements
thereto will be identical to the copies thereof filed with the Commission,
except to the extent permitted by Regulation S-T under the Act.

 

4.2                                 Notification of
Amendments or Supplements. 
After the date hereof and prior to the time of purchase, before amending
or supplementing the Registration Statement or the Prospectus (including any
amendment or supplement through incorporation by reference of any report filed
under the Exchange Act), the Company will furnish to the Placement Agent a copy
of each such proposed amendment or supplement and will not file any such
proposed amendment or supplement to which the Placement Agent reasonably
objects.  The Company will file with the
Commission within the applicable period specified in Rule 424(b) under the Act
any prospectus required to be filed pursuant to such rule.

 

4.3                                 Filings of
Amendments or Supplements. 
If, during such period after the first date of the public offering of
the Shares as in the opinion of counsel for the Placement Agent the Prospectus
is required by law to be delivered in connection with sales facilitated by the
Placement Agent (the “Prospectus Delivery Period”), any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances when the Prospectus is delivered to an Investor, not misleading,
or if, in the reasonable opinion of counsel for the Placement Agent, it is
necessary to amend or supplement the Prospectus to comply with applicable law,
the Company will forthwith prepare, file with the Commission and furnish, at
its own expense, to the Placement Agent either amendments or supplements to the
Prospectus so that the statements in the Prospectus so amended or supplemented
will not, in light of the circumstances when the Prospectus is delivered to an
Investor, be misleading or so that the Prospectus, as amended or supplemented,
will comply with law.

 

14

 

4.4                                 Blue
Sky.  The Company will
endeavor to qualify the Shares for offer and sale under the securities or blue
sky laws of such jurisdictions as the Placement Agent shall reasonably request.

 

4.5                                 Earnings
Statement.  The Company will
make generally available to its security holders as soon as practicable, but in
any event not later than eighteen (18) months after the effective date of the
Registration Statement (as defined in Rule 158(c) under the Act), an earnings
statement of the Company (which need not be audited) complying with Section 11
(a) of the Act and the rules and regulations thereunder (including, at the
option of the Company, Rule 158).

 

4.6                                 Use
of Proceeds.  The Company
shall apply the net proceeds from the sale of the Shares in the manner
described under the caption “Use of Proceeds” in the Prospectus Supplement.

 

4.7                                 Transfer
Agent.  The Company shall
engage and maintain, at its expense, a registrar and transfer agent for the
Common Stock.

 

4.8                                 Exchange Act
Compliance.  During the
Prospectus Delivery Period, the Company shall file, on a timely basis, with the
Commission and The Nasdaq National Market all reports and documents required to
be filed under the Exchange Act.

 

4.9                                 Market Standoff
Provision.  The Company hereby
agrees that, without the prior written consent of Thomas Weisel Partners LLC,
it will not, during the 90 days after the date hereof, subject to extension of
up to 18 days at the option of Thomas Weisel Partners LLC, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock or (ii) enter into any swap or other arrangement or any
transaction that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise.  The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder, (B) the issuance by the Company of shares of
Common Stock or options to purchase Common Stock granted under the Company’s
stock incentive or stock purchase plans as currently in effect or as approved
by the Company’s board of directors prior to the date of this Agreement,
subject to the approval of the Company’s stockholders, or upon the exercise of
options or warrants or the conversion of a security outstanding on the date
hereof or the issuance by the Company of securities under its stockholder
rights plan as currently in effect, in each case, of which the Placement Agent
have been advised in writing and which is described in the Prospectus (C) the
issuance by the Company of any shares of Common Stock or other securities
issued in connection with, or as consideration for acquisitions, mergers,
consolidations, asset purchases or other business combinations, licenses or
strategic alliances or investments occurring after the date of this Agreement,
provided that each recipient of shares pursuant to this clause (C) agrees that
all such shares remain subject to restrictions substantially similar to those
contained in this Section 4.9, or (D) transactions by any person other
than the Company relating to shares of Common Stock or other securities
acquired in open market transactions after the completion of the offering of
the Shares.

 

15

 

4.10                           Administration
of Segregated Account.  The
Company shall, from and after the date hereof, take all reasonable actions to
cause the Segregated Account to be administered and maintained, including (but
not limited to) with respect to distributions therefrom, in accordance with the
terms of this Agreement and as described in the Prospectus.  The provisions of this paragraph shall remain
operative and in full force and effect regardless of any termination of this
Agreement.

 

5.                                       Conditions to
the Placement Agent’s Obligations. 
The obligations of the Placement Agent hereunder are subject to the
following conditions:

 

5.1                                 Effective
Registration Statement.  The
Registration Statement shall be effective.

 

5.2                                 Rule
462(b) Registration Statement. 
If the Company elects to rely upon Rule 462(b), the Company shall file a
Rule 462 Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 p.m., New York City time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Securities Act.

 

5.3                                 Prospectus Filed
with Commission.  The Company
shall have filed the Prospectus with the Commission in the manner and within
the time period required by Rule 424(b) under the Act.  The Company shall have made available to the
Placement Agent, no later than 5:00 p.m. New York City time on the date hereof
or as soon as practicable thereafter, copies of the Prospectus in electronic
form for delivery to the Investors who are party to the Purchase Agreements.

 

5.4                                 No
Stop Order.  No stop order
suspending the effectiveness of the Registration Statement or any
post-effective amendment to the Registration Statement, shall be in effect and
no proceedings for such purpose shall have been instituted or threatened by the
Commission.

 

5.5                                 No NASD Objection.  The NASD shall have raised no objection to
the fairness and reasonableness of the terms of and arrangements contemplated
by this Agreement.

 

5.6                                 No Material Adverse
Change.  There shall not have
occurred any change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or operations
of the Company from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement)
that, in the judgment of the Placement Agent, is a Material Adverse Effect and
that makes it, in the judgment of the Placement Agent, impracticable to market
the Shares on the terms and in the manner contemplated in the Prospectus.

 

5.7                                 Officer’s
Certificate.  The Placement
Agent shall have received at the time of purchase a certificate dated such date
and signed by the Chief Executive Officer or Chief Financial Officer of the
Company, to the effect that the conditions set forth in Sections 5.2, 5.3, 5.4
and 5.6 hereof have been or will be satisfied, as applicable, and to the effect
that the representations and warranties of the Company contained in this
Agreement are true and correct

 

16

 

as of the time of
purchase and that the Company has complied with all of the agreements and
satisfied all of the conditions on its part to be performed or satisfied
hereunder on or before the time of purchase.

 

5.8                                 Opinion of Company Counsel.  The Placement Agent shall have received at
the time of purchase an opinion of HEWM, counsel for the Company, dated such
date, in form and substance satisfactory to the Placement Agent.  The opinion shall be rendered to the
Placement Agent at the request of the Company and shall so state therein.

 

5.9                                 Opinion of DDL Counsel.  The Placement Agent shall have received at
the time of purchase an opinion of Conyers Dill & Pearman, counsel for
Depomed Development Ltd. (“DDL”), dated such date, in form and substance
satisfactory to the Placement Agent.  The
opinion shall be rendered to the Placement Agent at the request of the Company
and shall so state therein.  In addition,
Conyers Dill & Pearman shall have delivered a final draft of such opinion
to the Placement Agent on the date hereof.

 

5.10                           Opinion of Placement Agent’s Counsel.  The Placement Agent shall have received at
the time of purchase, an opinion of Morrison & Foerster LLP, counsel for
the Placement Agent, dated such date, in form and substance satisfactory to the
Placement Agent.

 

5.11                           Accountant’s Comfort Letter.  The Placement Agent shall have received, on
each of the date hereof and the time of purchase, a letter dated the date
hereof or the time of purchase, as the case may be, in form and substance
satisfactory to the Placement Agent, from Ernst & Young, registered public
accounting firm, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus; provided that the letter delivered
at the time of purchase shall use a “cut-off date” not earlier than the date
hereof.

 

5.12                           Lock-Up Agreements.  The “lock-up” agreements, each substantially
in the form of Exhibit B hereto, between you and each of the executive officers
and directors of the Company listed on Schedule A hereto, delivered to you
on or before the date hereof, shall be in full force and effect at the time of
purchase.

 

5.13                           Segregated Account.  The Company shall have established the
Segregated Account, and shall have delivered to the Placement Agent on or
before the Closing Date evidence of such establishment that is reasonably
satisfactory to the Placement Agent.

 

5.14                           Listing.  The
Shares shall have been accepted for quotation, subject to notice of issuance on
The Nasdaq National Market, and satisfactory evidence of such shall have been
provided to the Placement Agent.

 

5.15                           Additional Documents.  At the time of purchase, the Placement Agent
and counsel for the Placement Agent shall have received such information,
documents and opinions as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Shares as contemplated
herein, or in order to evidence the accuracy of any of the representations and
warranties, or the satisfaction of any of the conditions or agreements, herein
contained.

 

17

 

6.                                       Expenses. 
Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, the Company agrees to pay or cause
to be paid all expenses incident to the performance of the its obligations
under this Agreement, including: (i) the fees, disbursements and expenses of
its counsel and its accountants in connection with the registration and
delivery of the Shares under the Act and all of their other respective fees or
expenses in connection with the preparation and filing of the Registration Statement,
the Basic Prospectus, each Prospectus Supplement, the Prospectus and any
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies thereof to
the Placement Agent and dealers, in the quantities hereinabove specified; (ii)
all costs and expenses related to the transfer and delivery of the Shares to
the Investors, including all transfer or other taxes payable thereon; (iii) the
cost of printing or producing any blue sky or legal investment memorandum in
connection with the offer and sale of the Shares under state securities laws
and all expenses in connection with the qualification of the Shares for offer
and sale under state securities laws as contemplated by Section 4.4
hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Placement Agent in connection with such qualification and in
connection with the blue sky or legal investment memorandum; (iv) all filing
fees, if any, and the reasonable fees and disbursements of counsel to the
Placement Agent incurred in connection with the review and qualification of the
offering of the Shares by the NASD; (v) the costs and charges of any transfer
agent, registrar or depositary; (vi) the costs and expenses of the Company
relating to investor presentations on any “road show” undertaken in connection
with the marketing of the offering of the Shares, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives of the Placement Agent and officers of
the Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show; (vii) all expenses in connection with any offer
and sale of the Shares outside of the United States, including filing fees and
the reasonable fees and disbursements of counsel for the Placement Agent in
connection with offers and sales outside of the United States; (viii) all other
costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section;
and (ix) documented out of pocket expenses of the Placement Agent incurred in
connection with performance of their obligations under this Agreement
(including, without limitation, the fees and disbursements of its counsel) in
an amount not to exceed fifty thousand dollars ($50,000); provided, that the
fees and disbursements of counsel to the Placement Agent incurred in accordance
with clauses (iii) and (iv) above, and any costs or expenses incurred in
accordance with Section 7.1 below, shall not be included in, or subject
to, such limitation.  It is understood,
however, that except as provided in this Section 6, Section 7
entitled “Indemnity and Contribution,” and the last paragraph of Section 9
below, the Placement Agent will pay all of its costs and expenses, including
fees and disbursements of its counsel, and any advertising expenses connected
with any offers it may make.

 

7.                                       Indemnity and Contribution.

 

7.1                                 Indemnification of the Placement
Agent by the Company.  The
Company agrees to indemnify and hold harmless the Placement Agent and each
person, if any, who controls the Placement Agent within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including,

 

18

 

without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) (i) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Placement Agent furnished to
the Company in writing by the Placement Agent expressly for use therein, or (ii)
arising out of or based, in whole or in part, upon any failure of the Company
to perform its obligations under any Purchase Agreement (other than as a result
of any failure on the part of the Placement Agent to deliver the Prospectus to
one or more Investors, provided that any such failure is not due to any act or
omission of the Company).

 

7.2                                 Indemnification by the Placement
Agent.  The Placement Agent
agrees to indemnify and hold harmless the Company, the directors of the
Company, the officers of the Company who signed the Registration Statement and
each person, if any, who controls the Company within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus, the Basic
Prospectus, any Prospectus Supplement or the Prospectus (in each case as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were made,
not misleading, but only with reference to information relating to the
Placement Agent furnished to the Company in writing by the Placement Agent
expressly for use in the Registration Statement, any preliminary prospectus,
the Basic Prospectus, any Prospectus Supplement, the Prospectus or any
amendments or supplements thereto.

 

7.3                                 Indemnification Procedures.  In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to this Section 7, such person
(the “Indemnified Party”) shall promptly notify the person against whom such
indemnity may be sought (the “Indemnifying Party”) in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding.  In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and

 

19

 

the Indemnified Party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them.  It is
understood that the Indemnifying Party shall not, in respect of the legal
expenses of any Indemnified Party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (i) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Placement Agent and all persons, if any, who control any Placement Agent within
the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act; and (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section of the Act or Exchange
Act, and that all such fees and expenses shall be reimbursed as they are
incurred.  In the case of any such
separate firm for the Placement Agent and such control persons of the Placement
Agent, such firm shall be designated in writing by Thomas Weisel Partners
LLC.  In the case of any such separate
firm for the Company, and such directors, officers and control persons of the
Company, such firm shall be designated in writing by the Company.  The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
the Indemnifying Party agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or judgment.  No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Party is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such proceeding.

 

7.4                                 Contribution Agreement.  To the extent the indemnification provided
for in this Section 7 is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the Indemnifying Party under such paragraph, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Indemnifying Party on the one hand and the
Indemnified Party on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law;
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other hand in
connection with the statements or omissions or other matters that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations.  The relative
benefits received by the Company on the one hand and the Placement Agent on the
other hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the total
placement fees received by the Placement Agent, in each case as set forth in
the table on the cover of the Prospectus Supplement, bear to the aggregate
public offering price of the Shares.  The
relative fault of the Company on the one hand and the Placement Agent on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to

 

20

 

information supplied by
the Company or by the Placement Agent and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

 

7.5                                 Contribution Amounts.  The Company and the Placement Agent agree that
it would not be just or equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in Section 7.4.  The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section 7, the Placement Agent shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares placed by it and distributed to the public were offered to the
public exceeds the amount of any damages that the Placement Agent has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. 
The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
Indemnified Party at law or in equity.

 

7.6                                 Survival of Provisions.  The indemnity and contribution provisions
contained in this Section 7 and the representations, warranties and other
statements of the Company contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any termination of this
Agreement; (ii) any investigation made by or on behalf of the Placement Agent
or any person controlling the Placement Agent or the Company, its officers or
directors or any person controlling the Company; and (iii) acceptance of and
payment for any of the Shares.

 

8.                                       Effectiveness. 
This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.

 

9.                                       Termination. 
This Agreement shall be subject to termination by notice given by the
Placement Agent to the Company, if (a) after the execution and delivery of this
Agreement and prior to the time of purchase (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the NASD, the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade; (ii) trading of any securities of the Company shall have been
suspended on any exchange, automatic quotation system or in any
over-the-counter market; (iii) a general moratorium on commercial banking
activities in New York, Delaware or California shall have been declared by
either federal or New York, Delaware or California state authorities; (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment,
is material and adverse; or (v) in the reasonable judgment of the Placement
Agent, there shall have occurred any Material Adverse Effect, or any
development that could reasonably be expected to result in a Material Adverse
Effect, to the Company, or (vi) there shall be any failure or refusal on the
part of the

 

21

 

Company to comply with
the terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, or (vii) a material disruption in securities settlement, payment or
clearance services in the United States shall have occurred, and (b) in the
case of any of the events specified in clauses 9(a)(i) through 9(a)(vii), such
event, individually or together with any other such event, makes it, in the
judgment of the Placement Agent, impracticable to market the Shares on the
terms and in the manner contemplated in the Prospectus.

 

If the sale of the Shares, as contemplated by this
Agreement, is not carried out by the Placement Agent for any reason permitted
under Sections 9(a)(ii), 9(a)(v) or 9(a)(vi) hereof (except in the case of Section 9(a)(vi)
hereof where the Company’s failure to satisfy such condition is due to the
default or omission of the Placement Agent or to one or more of the events
described in Sections 9(a)(i), 9(a)(iii), 9(a)(iv) or 9(a)(vii) of this
Agreement), the Company shall not be under any obligation or liability under
this Agreement (except to the extent provided in Section 6, Section 7
and the last paragraph of this Section 9 hereof), and the Placement Agent
shall be under no obligation or liability to the Company under this Agreement
(except to the extent provided in Section 7 hereof).

 

If this Agreement shall be terminated by the
Placement Agent pursuant to Sections 9(a)(ii), 9(a)(v) or 9(a)(vi) hereof or if
any sale of Shares is not consummated at the time of purchase because of any
refusal, inability or failure on the part of the Company to perform its
obligations under any Purchase Agreement or to comply with any provision of any
Purchase Agreement, then the Company shall reimburse the Placement Agent for
all out-of-pocket expenses (including the fees and disbursements of its
counsel) reasonably incurred by the Placement Agent in connection with this
Agreement or the offering contemplated hereunder (except where the
circumstances giving rise to any such termination, or any such failure, refusal
or inability on the part of the Company, is due to the default or omission of
the Placement Agent or to one or more of the events described in Sections
9(a)(i), 9(a)(iii), 9(a)(iv) or 9(a)(vii) hereof).

 

10.                                 Counterparts. 
This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.

 

11.                                 Headings; Table of Contents.  The headings of the sections of this
Agreement and the table of contents have been inserted for convenience of
reference only and shall not be deemed a part of this Agreement.

 

12.                                 Notices.  All
communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:

 

22

 

If to the Placement Agent:

 

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, CA 94104

Facsimile: (415) 364-2944

Attention: 
James P. Scopa

 

with a copy to:

 

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, CA 94104

Facsimile: (415) 364-2944

Attention: 
Jack Helfand, Esq.

 

If to the Company:

 

Depomed, Inc.

1360 O’Brien Drive

Menlo Park, CA 
94025

Facsimile: 
(650) 462-9991

Attention: 
John W. Fara, Ph.D.

 

with a copy to:

 

Heller Ehrman White & McAuliffe LLP

4350 La Jolla Village Drive, 7th Floor

San Diego, CA 92122

Facsimile: (858) 587-5930

Attention: 
Stephen C. Ferruolo, Esq.

 

Either
party hereto may change the address for receipt of communications by giving
written notice to the other.

 

13.                                 Successors. 
This Agreement will inure to the benefit of and be binding upon the
parties hereto and to the benefit of the officers and directors and controlling
persons referred to in Section 7, and in each case their respective
successors, and no other person will have any right or obligation
hereunder.  The term “successors” shall
not include any purchaser of the Shares as such merely by reason of such
purchase.

 

14.                                 Partial Unenforceability.  The invalidity or unenforceability of any
section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph or provision hereof.  If any section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to

 

23

 

be made such minor
changes (and only such minor changes) as are necessary to make it valid and
enforceable.

 

15.                                 Governing Law. 
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK. 
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLE OF CONFLICT OF LAWS.

 

16.                                 Consent to Jurisdiction.  Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby (“Related
Proceedings”) may be instituted in the federal courts of the United States of
America located in the City and County of San Francisco or the courts of the
State of California in each case located in the City and County of San
Francisco (collectively, the “Specified Courts”), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related Judgment”),
as to which such jurisdiction is non-exclusive) of such courts in any such
suit, action or proceeding.  Service of
any process, summons, notice or document by mail to such party’s address set
forth above shall be effective service of process for any suit, action or other
proceeding brought in any such court. 
The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.

 

17.                                 Waiver of Immunity.  With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law,
all immunity (whether on the basis of sovereignty or, otherwise) from
jurisdiction, service of process, giving of any relief in such legal action,
suit or proceeding, setoff or counterclaim, attachment (both before and after
judgment) and execution to which it might otherwise be entitled in the
Specified Courts, and with respect to any Related Judgment, each party waives
any such immunity in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity and consents to such relief and enforcement, at or in respect of any
such Related Proceeding or Related Judgment, including, without limitation, any
immunity pursuant to the United States Foreign Sovereign Immunities Act of
1976, as amended.

 

18.                                 Entire Agreement.  This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous agreements, understandings and negotiations with
respect to the subject matter hereof.

 

19.                                 Amendments. 
This Agreement may only be amended or modified in writing, signed by all
of the parties hereto, and no condition herein (express or implied) may be
waived unless waived in writing by each party whom the condition is meant to
benefit.

 

20.                                 Sophisticated Parties.  Each of the parties hereto acknowledges that
it is a sophisticated business person who was adequately represented by counsel
during negotiations regarding the provisions hereof, including, without
limitation, the indemnification and contribution provisions of Section 7,
and is fully informed regarding said provisions.  Each of the parties hereto further acknowledges
that the provisions of Section 7 hereto fairly allocate the

 

24

 

risks in light of the
ability of the parties to investigate the Company, its affairs and its business
in order to assure that adequate disclosure has been made in the Registration
Statement, any preliminary prospectus, the Basic Prospectus, the Prospectus
Supplement and the Prospectus (and any amendments and supplements thereto), as
required by the Act and the Exchange Act.

 

Remainder of page intentionally
left blank.

 

25

 

If the foregoing is in accordance with your
understanding of our agreement, kindly sign and return to the Company the
enclosed copies hereof, whereupon this instrument, along with all counterparts
hereof, shall become a binding agreement in accordance with its terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  DEPOMED, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John F. Hamilton

  	
   

  
	
   

  	
   

  	
  Name: John F. Hamilton

  
	
   

  	
   

  	
  Title:   VP & CFO

  

 

	
  Accepted as of the date hereof:

  	
   

  
	
   

  	
   

  
	
  Thomas Weisel Partners LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Jim Scopa

  	
   

  	
   

  
	
   

  	
  Name:  Jim Scopa

  	
   

  
	
   

  	
  Title:    Partner

  	
   

  
				

 

26

 

SCHEDULE A

 

Directors and Executive Officers

Subject to Lock-Up Agreements

 

John
W. Fara, Ph.D.

Bret
Berner, Ph.D.

John
F. Hamilton

John
N. Shell

G.
Steven Burrill

Gerald
T. Proehl

Craig
R. Smith, M.D.

Peter
D. Staple

Julian
N. Stern

John
W. Shell

 

27

 

EXHIBIT A

 

Form of Purchase Agreement

 

 

January    , 2005

 

[                                    ]

 

Ladies
and Gentlemen:

 

The undersigned,                                                                               
(the “Investor”), hereby confirms its agreement with you as follows:

 

1.                                       This Purchase Agreement (the “Agreement”) is
made as of January      , 2005 between Depomed,
Inc., a California corporation (the “Company”), and the Investor.

 

2.                                       As of the Closing (as defined below) and
subject to the terms and conditions hereof, the Company and the Investor agree
that the Investor will purchase from the Company and the Company will issue and
sell to the Investor                                 
shares of common stock, no par value (the “Shares”), of the Company, for a
purchase price of $4.50 per share, or an aggregate purchase price of $                          .  The Investor acknowledges that, to its
knowledge the offering of the Shares is not a firm commitment underwriting.

 

3.                                       The completion of the purchase and sale of
the Shares shall occur at a closing (the “Closing”) which is expected to occur
at or about 10:00 a.m., New York City time, on January 12, 2005 (unless
another time or date shall be agreed upon by the Company, Thomas Weisel
Partners LLC (the “Placement Agent”) and the Investor).  Upon the execution of this Agreement by the
Investor, the Investor shall remit to the Company by wire transfer to the trust
account (the “Segregated Account”) designated by the Company (such account
having been established and segregated for the Company and maintained and administered
by Heller Ehrman White & McAuliffe LLP, counsel to the Company, which funds
shall be held in the account for all investors that deposit funds therein,
pending the Closing pursuant to the terms of the Placement Agency Agreement
(defined below)) the amount of funds equal to the aggregate purchase price of
the Shares.  Unless otherwise requested
by the Investor and agreed to by the Company, the Shares purchased by the
Investor will be delivered by electronic book-entry at The Depository Trust
Company (“DTC”), registered in the Investor’s name and address as set forth
below, and will be released by Continental Stock Transfer and Trust Company,
the Company’s transfer agent (the “Transfer Agent”), to the Investor at the
Closing.  After the execution of this
Agreement by the Investor, the Investor shall direct the broker-dealer at which
the account or accounts to be credited with the Shares are maintained to set up
a deposit/withdrawal at custodian (“DWAC”) instructing the Transfer Agent to
credit such account or accounts with the Shares. The Shares shall be free of
restrictive legends.

 

4.                                       The offering and sale of the Shares are being
made pursuant to the Registration Statement and the Prospectus (as such terms
are defined below).  The Investor
acknowledges that the Company intends to enter into subscription agreements in
substantially the same form of this Agreement (and at a price per share no less
than the price per share to be paid by the Investor pursuant to this Agreement)
with certain other investors and intends to offer and sell (the “Offering”) up
to

 

A-1

 

5,036,000 shares of its
common stock pursuant to the Registration Statement and the Prospectus.  If funds sufficient for the sale of an
aggregate of at least 2,222,223 shares of the common stock of the Company (the “Minimum
Shares”) being offered in the Offering are not received from investors into the
Segregated Account by 5:00 p.m., New York City time, on January 11, 2005,
the Offering shall be automatically terminated, in which event all funds paid
by investors into the Segregated Account (including funds paid by the Investor
with respect to the Shares), shall be promptly (and, in any event, within one
business day) returned to such investors, without interest, in accordance with
the amounts each such investor paid into the Segregated Account.  If funds sufficient for the sale of the
Minimum Shares are received into the Segregated Account by 5:00 p.m., New York
City time, on January 11, 2005, then at the Closing and upon joint
instruction from the Company and the Placement Agent all funds received into
the Segregated Account will be distributed to the Company and the Placement
Agent, as applicable, and the Shares will be delivered as set forth herein.  In the event the
Offering terminates for any reason, this Agreement shall automatically
terminate without notice and without liability to any party, in which event any
funds received from the Investor intended for its purchase of Shares shall be
promptly (and, in any event, within one business day) returned without interest.

 

5.                                       The Company has delivered to the Investor and
shall file with the Securities and Exchange Commission (the “Commission”) a
prospectus and prospectus supplement (collectively the “Prospectus”) with
respect to the Registration Statement reflecting the offering of the Shares in
conformity with the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively, the “Act”), including Rule 424(b)
thereunder.  The Investor agrees that
such Prospectus may be delivered to it in electronic form.

 

6.                                       The Company has entered into a Placement
Agency Agreement (the “Placement Agency Agreement”) with the Placement Agent,
who will act as the Company’s exclusive placement agent with respect to the
Offering and receive a fee in connection with the sale of the Shares.  The Placement Agency Agreement will be
included as an exhibit to a Current Report on Form 8-K that the Company will file
with the Securities and Exchange Commission prior to the Closing and that will
be incorporated by reference into the Registration Statement.  In the event the Placement Agency Agreement
is terminated on or prior to the Closing, the Company shall have the right
immediately upon written notice to Investor to terminate this Agreement without
liability to the Investor.  In such
event, the Company shall promptly and, in any event within one business day, return,
without interest, any funds received from the Investor intended for its
purchase of the Shares.

 

7.                                       The Company hereby makes the following
representations, warranties and covenants to the Investor:

 

(a)                                  Each of the Company and the Subsidiaries (as
defined below) is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents, except where such violation would not,
individually or in the aggregate, have a material adverse effect on the
business, properties, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole, from that set forth in the
Registration Statement and the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the Closing date) or materially impair the Company’s
ability to perform its 

 

A-2

 

obligations under this
Agreement (a “Material Adverse Effect”). 
For purposes of this Agreement, (i) “Subsidiary” means collectively
Depomed Development Ltd. and any Person organized in the United States in which
the Company directly or indirectly owns 50% or more of the capital stock or
holds 50% or more of the equity or similar interest and (ii) “Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

 

(b)                                 The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder.  The execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company, its board
of directors or its shareholders.  This
Agreement has been (or upon delivery will be) duly executed by the Company and,
when delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as may be limited by any bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors’ rights generally or by general
principles of equity.

 

(c)                                  The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) subject to obtaining the Required Approvals (as defined below),
conflict with, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (iii) result in
a violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations) and the rules and regulations of any self-regulatory
organization to which the Company or its securities are subject, or by which
any property or asset of the Company or a Subsidiary is bound or affected,
except in each case of clauses (ii) and (iii), such as would not,
individually or in the aggregate, have a Material Adverse Effect.

 

(d)                                 Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of this Agreement, other
than (i) the required filing of the Prospectus and the Registration Statement,
(ii) applicable state securities law filings, (iii) the filing of a listing
application with The Nasdaq National Market with respect to the Shares, and
(iv) in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration would 

 

A-3

 

not, individually or in
the aggregate, have a Material Adverse Effect (collectively, the “Required
Approvals”).

 

(e)                                  The Shares are duly authorized and, when
issued and paid for in accordance with the terms hereof, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal. 
The Company has reserved a sufficient number of duly authorized shares
of common stock to issue all of the Shares. 
At the Closing, the Shares shall have been approved for quotation on The
Nasdaq National Market (the “Trading Market”).

 

(f)                                    The Company’s registration statement on Form
S-3 (File No. 333-108973) (including all information or documents incorporated
by reference therein, the “Initial Registration Statement”) was declared
effective by the Commission on October 2, 2003.  The Company’s registration statement on Form
S-3 that it may elect to file with the Commission on or before the date hereof
pursuant to Rule 462(b) under the Act (including all information or documents
incorporated by reference therein, the “Rule 462(b) Registration Statement”)
will, if filed, be effective upon its filing with the Commission pursuant to
Rule 462(b) under the Act and will remain effective on the date hereof.  The term “Registration Statement” as used in
this Agreement means collectively: (i) the Initial Registration Statement at
the time it became effective and as supplemented or amended prior to the
execution of this Agreement, including all financial schedules and exhibits
thereto and all documents incorporated by reference or deemed to be
incorporated by reference therein; and (ii) if the Company elects to file the
Rule 462(b) Registration Statement, the Rule 462(b) Registration Statement from
and after the date and time of its filing with the Commission, including all
financial schedules and exhibits thereto and all documents incorporated by
reference or deemed to be incorporated by reference therein.  The Registration Statement is effective on
the date hereof and the Company has not received notice that the Commission has
issued or intends to issue a stop order with respect to the Registration
Statement or that the Commission otherwise has suspended or withdrawn the
effectiveness of the Registration Statement, either temporarily or permanently,
or intends or has threatened in writing to do so.  The “Plan of Distribution” section in
the Prospectus describes the issuance and sale of the Shares.  The Registration Statement, as of the time it
was declared effective, and any amendments or supplements thereto, and any
prospectus included therein complied, and the Prospectus complies, in all
material respects with the requirements of the Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder
(collectively, the “Exchange Act”), as applicable, and none of such
Registration Statement or any such Prospectus contains or, at the time of
filing with the Commission contained any untrue statement of material fact or omits
or, at the time of filing with the Commission, omitted to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.  The offering, sale and issuance of the Shares
to the Investor are registered under the Act by the Registration
Statement.  The Shares are being issued
as described in the Registration Statement.

 

(g)                                 The representations and warranties of the
Company set forth in Section 7(a) - (f), (h) and (i) shall not survive the
Closing.  Investor shall have no right or
remedy for any inaccuracy in the representations and warranties of the Company
contained in Section 7(a) - (f), (h) and (i) other than the Investor’s
right not to proceed with the purchase of the Shares pursuant to Section 9
below.

 

A-4

 

(h)                                 The Company shall (i) before the Trading
Market opens on the next trading day after the date of the Placement Agency
Agreement, issue a press release disclosing all material aspects of the
Offering, and (ii) make such other filings and notices in the manner and time
required by the Commission with the respect to the Offering.  The Company shall not identify the Investor
by name in any press release or public filing, or otherwise publicly disclose
the Investor’s name, without the Investor’s prior, written consent, unless
required by law or the rules and regulations of any self-regulatory
organization which the Company or its securities are subject.

 

(i)             The Company acknowledges and agrees
that the Investor is acting solely in the capacity of an arm’s length purchaser
with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and that any statement made by the Investor or any of its
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is
merely incidental to the Investor’s purchase of the Shares and has not been
relied upon by the Company, its officers or directors in any way.

 

8.                                       The Investor hereby makes the following
representations, warranties and covenants to the Company:

 

(a)                                  The Investor is purchasing the Shares for its
own account, in the ordinary course of its business and the Investor has no
arrangement with any Person to participate in the distribution of the
Shares.  The Investor represents that it
has received the Prospectus prior to or in connection with its receipt of this
Agreement.  In connection with its
decision to purchase the Shares, the Investor has relied only upon the
Prospectus and the documents incorporated by reference therein, and the
representations and warranties of the Company contained herein.

 

(b)                                 The Investor, together with its affiliates
(as that term is defined under Rule 405 of the Act), has not, prior to the date
of this Agreement, sold, offered to sell, solicited offers to buy, disposed of,
loaned, pledged or granted any right with respect to (collectively, a “Disposition”),
the Shares purchased in the Offering. 
Such prohibited hedging or other transactions would include, without
limitation, effecting any short sale or having in effect any short position
(whether or not such sale or position is against the box and regardless of when
such position was entered into) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to the
Shares purchased in the offering made by the Prospectus.

 

(c)                                  The Investor shall not issue any press
release or make any other public announcement relating to this Agreement unless
(i) the content thereof is mutually agreed to by the Company and the Investor,
or (ii) the Investor is advised by its counsel that such press release or
public announcement is required by law.

 

(d)                                 The Investor has the requisite power and authority
to enter into and to consummate the transactions contemplated by this Agreement
and otherwise to carry out its obligations hereunder.  The execution and delivery of this Agreement
by the Investor and the consummation by it of the transactions contemplated
hereunder have been duly authorized by all necessary action on the part of the
Investor.  This Agreement has been duly
executed by the Investor and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as may be
limited by any bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting the enforcement of creditors’ rights
generally or by general principles of equity.

 

(e)                                  The Investor understands that nothing in this
Agreement or any other materials presented to the Investor in connection with
the purchase or sale of the Shares constitutes legal, tax or investment
advice.  The Investor has consulted such
legal, tax or

 

A-5

 

investment advisors as
it, in its sole discretion, deems necessary or appropriate in connection with
its purchase of the Shares.

 

(f)            The
Investor hereby acknowledges that it is acting independently from any other
investor (and has engaged separate legal counsel) in connection with the
Offering, and that it is not acting as a member of a “group” (as such term is
defined in Rule 13d of the Exchange Act) with any other investor in connection
with the Offering.

 

9.                                       Performance of the parties’ respective
obligations hereunder shall be subject to the following conditions:

 

(a)                                  The Investor’s obligation to purchase the
Shares will be subject to the accuracy of the representations and warranties
made by the Company in Section 7 hereof as of the Closing.  Investor’s sole and exclusive remedy for any
inaccuracy in the representations and warranties made by the Company in Section 7
hereof as of the Closing shall be, pursuant to written notice to the Company,
to withdraw from proceeding with the Investor’s purchase of the Shares based on
the failure of the foregoing condition,
in which event any funds received from the Investor intended for its
purchase of Shares shall be promptly (and, in any event, within one business
day) returned without interest.

 

(b)                                 The Company’s obligation to sell and issue to
the Investor the Shares will be subject to the accuracy of the representations
and warranties made by the Investor in Section 8 hereof as of the
Closing.  In addition, the obligations of
the Company hereunder are subject to no change or development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its Subsidiaries, taken as
a whole, from that set forth in the Registration Statement and the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement) that, in the Company’s judgment, is a Material Adverse Effect
occurring on or prior to the Closing.

 

10.                                 This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without giving effect to the principles of conflicts of law.

 

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

 

Remainder of page intentionally
left blank.

 

A-6

 

Please confirm that the foregoing correctly sets
forth the agreement between us by signing in the space provided below for that
purpose.

 

	
   

  	
  Name of Investor:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Tax ID No.:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Contact Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name in which book-entry should be made (if

  different):

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
										

 

	
  AGREED AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
  Depomed, Inc.

  	
   

  
	
  a California corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

A-7

 

Depomed hereby directs that the purchase price for
the Shares of common stock being sold to the Investor pursuant to the Purchase
Agreement be wired to the following account:

 

	
   

  	
  Bank:

  
	
   

  	
  *

  
	
   

  	
   

  
	
   

  	
  ABA#:

  
	
   

  	
  Credit to:

  
	
   

  	
  Account No.:

  
	
   

  	
  Re: Depomed, Inc. Proposed Offering

  

 

*Complete address, if
needed:

 

A-8

 

EXHIBIT B

 

Form of Lock-Up Agreement

 

 

Thomas
Weisel Partners LLC

One
Montgomery Street, Suite 3700

San
Francisco, California  94104

 

Depomed,
Inc.

1360
O’Brien Drive

Menlo
Park, California 94025

 

December 17, 2004

 

Re:                             Lock-Up Agreement (the “Agreement”)

 

Ladies
and Gentlemen:

 

The undersigned is an owner of record or
beneficially of certain shares of common stock, no par value (the “Common Stock”),
of Depomed, Inc., a California corporation (the “Company”).  The undersigned understands that you, as
placement agent (the “Placement Agent”), propose to enter into a placement
agency agreement with the Company in connection with a public offering (the “Public
Offering”) of the Common Stock of the Company pursuant to a Prospectus
Supplement (the “Prospectus Supplement”) to the prospectus which forms a part
of the Company’s Registration Statement on Form S-3 that was originally filed
with the Securities and Exchange Commission on September 22, 2003.  The undersigned recognizes that the Public
Offering will be of benefit to the undersigned and will benefit the Company by,
among other things, raising additional capital for its operations.  The undersigned acknowledges that you are
relying on the representations and agreements of the undersigned contained in this
letter in carrying out the Public Offering and in entering into placement
arrangements with the Company with respect to the Public Offering.

 

To induce the Placement Agent to continue its
efforts in connection with the Public Offering, the undersigned hereby agrees
that, without the prior written consent of Thomas Weisel Partners LLC (which
consent may be withheld in its sole discretion), the undersigned will not,
during the period commencing on the date hereof and ending 90 days after the
effective date of the Prospectus Supplement (the “Lock-Up Period”),
(1) offer, pledge, sell, contract to sell (including any short sales),
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common
Stock, or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or such other
securities, in cash or 

 

B-1

 

otherwise.  In addition, the undersigned agrees that,
without the prior written consent of Thomas Weisel Partners LLC (which consent
may be withheld in its sole discretion), the undersigned will not, during the
Lock-Up Period, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.

 

For the purpose of allowing the Placement Agent to
comply with NASD Rule 2711(f)(4), if (1) during the period that begins on the
date that is 18 calendar days before the last day of the Lock-Up Period and
ends on the last day of the Lock-Up Period, (a) the Company issues an earnings
release, (b) the Company publicly announces material news or (c) a material
event relating to the Company occurs; or (2) prior to the expiration of the
Lock-Up Period, the Company announces that it will release earnings results
during the 16-day period beginning on the last day of the Lock-Up Period, then
the restrictions in this Agreement, unless otherwise waived by Thomas Weisel
Partners LLC in its sole discretion, shall continue to apply until the
expiration of the date that is 18 calendar days after the date on which (a) the
Company issues the earnings release, (b) the Company publicly announces
material news or (c) a material event relating to the Company occurs; provided,
however, that this paragraph will not apply to any research report
concerning the Company to be published or distributed by the Placement Agent
pursuant to Rule 139 promulgated under the Securities Act of 1933, as amended,
at a time when the Company’s shares of Common Stock are “actively traded
securities,” as defined in Regulation M, 17 C.F.R. 242.101(c)(1).

 

The foregoing restrictions are expressly agreed to
preclude the undersigned from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a sale or
disposition of the Common Stock even if such Common Stock would be disposed of
by someone other than the undersigned. 
Such prohibited hedging or other transactions would include, without
limitation, any short sale or any purchase, sale or grant of any right
(including, without limitation, any put option or put equivalent position or
call option or call equivalent position) with respect to any of the Common
Stock or with respect to any security that includes, relates to, or derives any
significant part of its value from such Common Stock.

 

Notwithstanding the foregoing, the undersigned may
transfer shares of Common Stock (i) as a bona fide
gift or gifts, provided that the donee or donees thereof agree to be bound by
the restrictions set forth herein or (ii) to any trust for the direct or
indirect benefit of the undersigned or the immediate family of the undersigned,
provided that each trustee of the trust agrees to be bound by the restrictions
set forth herein, and provided further that any such transfer shall not involve
a disposition for value.  For purposes of
this Agreement, “immediate family” shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin.

 

In addition, the undersigned hereby waives any and
all notice requirements and rights with respect to registration of securities
pursuant to any agreement, understanding or otherwise setting forth the terms
of any security of the Company held by the undersigned, including any
registration rights agreement to which the undersigned and the Company may be
party, provided that such waiver shall apply only to the Public Offering, and
any other action taken by the Company in connection with the Public
Offering.  The undersigned hereby agrees
that, to the extent that the 

 

B-2

 

terms of this Agreement
conflict with or are in any way inconsistent with any registration rights
agreement to which the undersigned and the Company may be a party, this
Agreement supersedes such registration rights agreement.

 

The undersigned understands that whether the Public
Offering actually occurs depends on a number of factors, including stock market
conditions.  The Public Offering will
only be made pursuant to a placement agency agreement, the terms of which are
subject to negotiation between the Company and the Placement Agent.

 

The undersigned agrees and consents to the entry of
stop transfer instructions with the Company’s transfer agent and registrar
against the transfer of shares of Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock held by the undersigned except
in compliance with the foregoing restrictions.

 

The undersigned hereby represents and warrants that
the undersigned has full power and authority to enter into this Agreement.  All authority herein conferred or agreed to
be conferred shall survive the death or incapacity of the undersigned and any
obligations of the undersigned shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Address:

  

 

B-3

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