Exhibit 10.3

AMENDMENT NO. 1 TO MANAGEMENT CONTINUITY AGREEMENT

THIS AMENDMENT NO. 1 TO MANAGEMENT CONTINUITY AGREEMENT (the “Amendment”) is
made and entered into as of August 24, 2007 by and between Depomed, Inc., a
California corporation (the “Company”), and Carl A. Pelzel (“Employee”).

BACKGROUND

A.            Employee and the Company are parties to a Management Continuity
Agreement, dated as of June 1, 2006 (the “Agreement”).  Capitalized terms used
herein without definition have the meanings given them in the Agreement.

B.            Employee and the Company desire to amend the Agreement as set
forth herein.

AGREEMENT

For good and valuable consideration, the receipt of which is acknowledged, the
parties agree as follows:

1.             AMENDMENT.  SECTION 2(B) OF THE AGREEMENT IS HEREBY AMENDED TO
READ IN ITS ENTIRETY AS FOLLOWS:

“(b) Severance. In the event that Employee suffers an Involuntary Termination at
any time within twelve months following the effective date of a Change of
Control, Employee will be entitled to receive severance benefits as follows: 
(A) severance payments during the period from the date of Employee’s termination
until the date 24 months after the effective date of the termination (the
“Severance Period”) equal to the base salary which Employee was receiving
immediately prior to the Change of Control, which payments shall be paid during
the Severance Period in accordance with the Company’s standard payroll
practices, (B) a lump sum payment as soon as practicable after the date of
termination of employment equal to two times the Bonus Amount (as defined
below); and (C) continuation of payment by the Company of its portion of the
health insurance benefits provided to Employee immediately prior to the Change
of Control pursuant to the terms of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”) or other applicable law through
the earlier of the end of the Severance Period or the date upon which Employee
is no longer eligible for such COBRA or other benefits under applicable law. In
addition, Employee will receive payment(s) for all salary, bonuses and unpaid
vacation accrued as of the date of Employee’s termination of

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employment.  For purposes of this Agreement, “Bonus Amount” means Employee’s
average annual bonus paid for the Company’s fiscal years (up to three)
immediately preceding the Company’s fiscal year in which the termination occurs;
provided, however, that (x) only annual bonuses paid to Employee in his capacity
as Chief Executive Officer of the Company shall be taken into account for
purposes of determining such average annual bonus, (y) any bonus for a partial
year shall be prorated for purposes of the determining such average annual bonus
(for example, if Employee’s bonus for the last four months of 2007 is $65,000,
and his bonus for 2008 is $150,000, the Bonus Amount will be equal to $161,290,
which is the quotient of (A) $215,000, divided by (B) 1.333); and (z) if the
effective date of a Change of Control occurs prior to the payment to Employee of
a bonus for 2007 related to his service as President and CEO in 2007, then the
Bonus Amount shall be determined in good faith by the Compensation Committee of
the Board of Directors, taking into account the methodology set forth above.”

2.             NO OTHER AMENDMENT.  EXCEPT AS EXPRESSLY AMENDED BY THIS
AMENDMENT, ALL OTHER PROVISIONS OF THE AGREEMENT REMAIN IN FULL FORCE AND
EFFECT.

3.             EFFECTIVE DATE.  THE EFFECTIVE DATE OF THIS AMENDMENT SHALL BE
AUGUST 27, 2007.

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

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Management
Continuity Agreement as of the date first above written.

EMPLOYEE

DEPOMED, INC.

 

 

/s/ Carl A. Pelzel

 

By:

/s/ Matthew M. Gosling

 

Carl A. Pelzel

 

Matthew M. Gosling

 

 

Vice President and General Counsel

 

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