Exhibit 10.2

August 24, 2007

Mr. Carl Pelzel

Dear Carl:

On behalf of the Board of Directors, I am very pleased to extend to you this
offer to become Depomed’s President and Chief Executive Officer, and a member of
Depomed’s Board of Directors, effective on Monday, August 27, 2007.

Your initial rate of pay as President and CEO will be $400,000 per year.  Your
salary will be reviewed periodically consistent with the company’s compensation
policies.  You will receive no additional compensation for your service as a
Director.

In connection with your appointment as President and Chief Executive Officer,
the Compensation Committee of the Board of Directors has approved, effective
upon your acceptance of this offer, the grant to you of the following stock
options under the company’s 2004 Equity Incentive Plan:  (a) an option to
purchase 400,000 shares of common stock with an exercise price equal to today’s
closing sale price of the common stock on the Nasdaq Global Market (the “August
24, 2007 Closing Price”) that vests in equal monthly installments over four
years, such that the option will be fully vested and exercisable on August 24,
2011; and (b) an option to purchase 37,500 shares of common stock with an
exercise price equal to the August 24, 2007 Closing Price that vests upon the
earlier to occur of (x) the achievement of one or more objective performance
conditions related to the Company’s 2008 performance, which conditions will be
developed by the Compensation Committee in consultation with you not later than
December 31, 2007 (the “Performance Milestone”), and (y) August 24, 2011.  In
addition, provided that your service as the Company’s President and CEO
continues through December 31, 2007, as soon as reasonably practicable after
January 1, 2008, and in no event later than March 31, 2008, the Compensation
Committee of the Board of Directors will grant to you a nonstatutory option to
purchase 62,500 shares of common stock with an exercise price equal to the
August 24, 2007 Closing Price that vests upon the earlier to occur of (x) the
achievement of the Performance Milestone, and (y) August 24, 2011.  Each of the
options will be subject to the terms and conditions set forth in the Company’s
2004 Equity Incentive Plan and the Management Continuity Agreement between you
and Depomed dated as of June 1, 2006 (as may be amended, the “Management
Continuity Agreement”).

You will continue to be entitled to participate in Depomed’s Bonus Plan, with a
bonus target of 50% of your pay from and after your appointment as President and
CEO, subject to the achievement of corporate and personal goals.  Accordingly,
your cash bonus for 2007 will be determined as follows:  (a) for the period
beginning on January 1, 2007 and ending on August 26, 2007, your bonus target
will be 40% of your pay for that period, based on corporate goals

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and personal goals associated with your service as Executive Vice President and
Chief Operating Officer during that time; and (b) for the period beginning on
August 27, 2007 and ending on December 31, 2007, your bonus target will be 50%
of your pay for that period, based on corporate goals and personal goals
established by the Compensation Committee that are associated with your service
as President and CEO.

In addition, Section 2(b) of your Management Continuity Agreement will be
amended to increase the post-termination severance period during which you are
eligible to receive continued payments of your base salary and COBRA benefits,
and to increase the lump sum payment you are eligible to receive in respect of
your pre-termination annual bonus, each as set forth in the amendment to the
Management Continuity Agreement presented to you along with this letter.

You will continue to participate in the company’s complete benefits package.

This offer will expire at 5:00 p.m. local time on August 24, 2007.  If you elect
to accept this offer, please sign and return one copy of this letter to me by
fax.

On behalf of the Board of Directors,

 

/s/ Julian N. Stern

 

Julian N. Stern

 

 

 

This letter correctly sets forth our agreement:

 

 

 

 

 

/s/ Carl A. Pelzel

 

 

Carl A. Pelzel

 

 

 

Date: August 24, 2007

 

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