PLACEMENT AGENCY AGREEMENT

Exhibit 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

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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

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“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.,

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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.”

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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.

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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.

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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

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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,

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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

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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

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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.

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(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

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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

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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)