Exhibit 10.2

 

Separation Agreement and Release with Carl A. Pelzel

 

April 1, 2011

 

Carl A. Pelzel

[address]

 

Separation Agreement and Release

 

Dear Carl:

 

As we discussed, this letter confirms your separation from employment with
Depomed, Inc. (the “Company”).

 

Your employment with the Company will terminate or has terminated on April 3,
2011 as a result of your resignation.  The Company shall provide you with the
right to continue group health insurance coverage after your separation from
employment under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). 
The terms for that opportunity will be set forth in a separate written notice. 
The Company shall also reimburse you for any outstanding, reasonable business
expenses that you have incurred on the Company’s behalf through your separation
from employment, after the Company’s timely receipt of appropriate documentation
pursuant to the Company’s business expense reimbursement policy.

 

The remainder of this letter proposes an agreement (the “Agreement”) between you
and the Company.  The purpose of this Agreement is to establish an amicable
arrangement for ending your employment relationship, including releasing the
Company and related persons or entities from any claims and permitting you to
receive separation pay and related benefits.

 

If you agree to the terms of this Agreement, you acknowledge that you are
entering into this Agreement voluntarily.  It is customary in employment
separation agreements for the departing employee to release the employer from
any possible claims, even if the employer believes, as is the case here, that no
such claims exist.  By entering into this Agreement, you understand that neither
party is admitting in any way that it violated any legal obligation owed to the
other party.

 

With those understandings, you and the Company agree as follows:

 

1.                                                                                                                                      
Separation from Employment

 

This confirms that your employment with the Company will end or has ended on
April 3, 2011 (the “Separation Date”).  Effective on the Separation Date, it is
agreed that you have resigned as an employee, from your positions as President
and Chief Executive Officer and from the Company’s Board of Directors.

 

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2.                                                                                                                                      
Separation Benefits

 

a.  Severance Pay.  You will be paid a severance payment of $520,000, less all
applicable withholdings, which is equivalent to one year of your base pay. 
Payment will be made periodically, in accordance with the Company’s standard
payroll practice, beginning on the first payroll date that is thirty (30) days
from the date hereof.  Severance payments will be payable for one (1) year;
provided, that severance payments otherwise payable pursuant to this paragraph
will be reduced dollar for dollar by any compensation received by you in
connection with employment by another employer during the period of such
payments.  Self-employment, including consulting services provided by you that
are less than full time, will not constitute employment by another employer. 
You agree to immediately notify the Company of such compensation.  For purposes
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
each installment payment is a separate payment.  You agree that prior to the
execution of this Agreement you were not entitled to receive any further
monetary payments or benefits from the Company, and that the only payments and
benefits that you are entitled to receive from the Company in the future are
those specified in this Agreement.

 

b.  Company-Paid COBRA.  As stated above, you will receive information about
your right to continue your group health insurance coverage under COBRA after
the Separation Date.  In order to continue your coverage, you must file the
required election form.  If you sign this Agreement and elect to continue group
health insurance coverage, then the Company will pay the monthly premium to its
third party COBRA Administrator under COBRA, in an amount not to exceed the
monthly amount the Company currently contributes to your healthcare premiums,
for yourself and, if applicable, your dependents, until the earliest of
(a) September 30, 2012, (b) the expiration of your eligibility for continuation
coverage under COBRA or (c) the date when you become eligible for comparable
health insurance in connection with new employment.  You acknowledge that you
otherwise would not have been entitled to any continuation of Company-paid
health coverage.

 

3.                                                                                                                                      
Return of Property

 

You confirm that, to the best of your knowledge, you have returned to the
Company all Company property, including, without limitation, computer
equipment/laptop, software, keys and access cards, credit cards, files and any
documents (including computerized data and any copies made of any computerized
data or software) containing information concerning the Company, its business or
its business relationships (in the latter two cases, actual or prospective). 
You also commit to deleting and finally purging any duplicates of files or
documents that may contain Company information from any computer or other device
that remains your property.  In the event that you discover that you continue to
retain any such property, you shall return it to the Company immediately, except
that you may retain your company-issued laptop computer and mobile phone,
subject to your compliance with the other provisions of this Section.

 

4.                                                                                                                                      
Proprietary Information Agreement

 

You acknowledge and agree that you are bound by and will comply with the
Employee Confidentiality and Invention Assignment Agreement (the “Proprietary
Information

 

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Agreement”) that you have signed with the Company.  That Proprietary Information
Agreement shall remain in full force and effect to the extent not inconsistent
with this Agreement.

 

5.                                                                                                                                      
Stock Options

 

The Company has granted you options under the Company’s 2004 Equity Incentive
Plan.  Following the Effective Date, the vesting of any unvested options you
hold as of your termination date will be accelerated by three months, such that
the number of shares with respect to which your options will be exercisable will
be equivalent to the number of shares exercisable were your termination of
employment to occur on July 3, 2011.  You acknowledge that to the extent any of
the options subject to accelerated vesting constitute incentive stock options,
your acceptance of the accelerated vesting provided in the immediately preceding
sentence may cause the incentive stock options to be disqualified and be treated
as nonqualified stock options.

 

6.                                                                                                                                      
Release of Claims

 

In consideration for, among other terms, the Severance Benefits described in
Section 2 and the stock option acceleration and extended option exercise period
described in Section 5, to which you acknowledge you would otherwise not be
entitled, you voluntarily release and forever discharge the Company, its
affiliated and related entities, its and their respective predecessors,
successors and assigns, its and their respective employee benefit plans and
fiduciaries of such plans, and the current and former officers, directors,
shareholders, employees, attorneys, accountants and agents of each of the
foregoing in their official and personal capacities (collectively referred to as
the “Releasees”) generally from all claims, demands, debts, damages and
liabilities of every name and nature, known or unknown (“Claims”) that, as of
the date when you sign this Agreement, you have, ever had, now claim to have or
ever claimed to have had against any or all of the Releasees.  This release
includes, without limitation, all Claims:

 

·                  relating to your employment by and termination of employment
with the Company;

·                  of wrongful discharge;

·                  of breach of contract;

·                  of retaliation or discrimination under federal, state or
local law (including, without limitation, Claims of age discrimination or
retaliation under the Age Discrimination in Employment Act, Claims of disability
discrimination or retaliation under the Americans with Disabilities Act, and
Claims of discrimination or retaliation under Title VII of the Civil Rights Act
of 1964);

·                  under any other federal or state statute;

·                  of defamation or other torts;

·                  of violation of public policy;

·                  for wages, bonuses, incentive compensation, stock, stock
options, or any other benefits; and

·                  for damages or other remedies of any sort, including, without
limitation, compensatory damages, punitive damages, injunctive relief and
attorney’s fees;

 

provided, however, that this release shall not affect your rights under this
Agreement or any right to indemnification granted by any agreement or bylaw of
the Company, state or federal law, or policy of insurance.

 

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You agree that you shall not accept damages of any nature, other equitable or
legal remedies for your own benefit, attorney’s fees, or costs from any of the
Releasees with respect to any Claim released by this Agreement.  As a material
inducement to the Company to enter into this Agreement, you represent that you
have not assigned to any third party and you have not filed with any agency or
court any Claim released by this Agreement.

 

The Company is not currently aware of any matters that may give rise to a claim
against you.

 

7.                                                                                                                                      
Release of Unknown Claims

 

In granting the release herein, you understand that this Agreement includes a
release of all claims known or unknown.  In giving this release, which includes
claims which may be unknown to you at present, you acknowledge that you have
read and understand Section 1542 of the California Civil Code which reads as
follows:  “A general release does not extend to claims which the creditor does
not know or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
settlement with the debtor.”  You hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to the release of any unknown or unsuspected claims
you may have against the Company.

 

8.                                                                                                                                      
Nondisparagement

 

You agree not to make any disparaging statements concerning the Company
(including without limitation the Company’s products, its current or future
business plans or its prospects) or any of its affiliates or current or former
officers, directors, shareholders, employees or agents.  You further agree to
direct to the Company any inquiries concerning the Company from the Company’s
current or former employees, shareholders, business partners or vendors.  The
Company agrees to instruct its officers and directors not to make any
disparaging statements concerning you.  The obligations set forth in this
Section 8 shall not in any way affect anyone’s obligation to testify truthfully
in any legal proceeding.

 

9.                                                                                                                                      
Legal Representation

 

This Agreement is a legally binding document and your signature will commit you
to its terms.  You acknowledge that you have been advised to discuss all aspects
of this Agreement with your attorney, that you have carefully read and fully
understand all of the provisions of this Agreement and that you are voluntarily
entering into this Agreement.

 

10.                                                                                                                                
Absence of Reliance

 

In signing this Agreement, you are not relying upon any promises or
representations made by anyone at or on behalf of the Company, except as may be
set forth in this Agreement.

 

11.                                                                                                                                
Enforceability

 

If any portion or provision of this Agreement (including, without limitation,
any portion or provision of any section of this Agreement) shall to any extent
be declared illegal or unenforceable by a court of competent jurisdiction, then
the remainder of this Agreement, or the

 

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application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

 

12.                                                                                                                                
Waiver

 

No waiver of any provision of this Agreement shall be effective unless made in
writing and signed by the waiving party.  The failure of any party to require
the performance of any term or obligation of this Agreement, or the waiver by
any party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.

 

13.                                                                                                                                
Governing Law; Interpretation

 

This Agreement shall be interpreted and enforced under the laws of the state of
California, without regard to conflict of law principles.  In the event of any
dispute, this Agreement is intended by the parties to be construed as a whole,
to be interpreted in accordance with its fair meaning, and not to be construed
strictly for or against either you or the Company or the “drafter” of all or any
portion of this Agreement.

 

14.                                                                                                                                
Attorneys’ Fees and Costs

 

In the event that either Party brings an action to enforce or effect its rights
under or relating to this Agreement, the prevailing Party shall be entitled to
recover its costs and expenses, including the costs of mediation, arbitration,
litigation, court fees, and reasonable attorneys’ fees incurred in connection
with such an action.

 

15.                                                                                                                                
Entire Agreement

 

This Agreement constitutes the entire agreement between you and the Company. 
This Agreement supersedes any previous agreements or understandings between you
and the Company, except for the Proprietary Information Agreement, which remains
in full force and effect, to the extent not inconsistent with this Agreement.

 

16.                                                                                                                                
Time for Consideration; Effective Date

 

You have the opportunity to consider this Agreement for twenty-one (21) days
before signing it.  To accept this Agreement, you must sign this Agreement no
earlier than the Separation Date and return a signed original of this Agreement
so that it is received by the undersigned at or before the expiration of this
twenty-one (21) day period.  If you sign this Agreement within less than
twenty-one (21) days of the date of its delivery to you, you acknowledge by
signing this Agreement that such decision was entirely voluntary and that you
had the opportunity to consider this Agreement for the entire twenty-one (21)
day period.  For the period of seven (7) days from the date when this Agreement
becomes fully executed, you have the right to revoke this Agreement by written
notice to the undersigned.  For such a revocation to be effective, it must be
delivered so that it is received by the undersigned at or before the expiration
of the seven (7) day revocation period.  This Agreement shall not become
effective or enforceable during the

 

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revocation period.  This Agreement shall become effective on the first business
day following the expiration of the revocation period (the “Effective Date”).

 

17.                                                                                                                                
Counterparts

 

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be taken to be an original, but all of which
together shall constitute one and the same document.

 

18.                                                                                                                                
Section 409A

 

Anything in this Agreement to the contrary notwithstanding, to the extent any
payment under this Agreement would be considered deferred compensation subject
to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code
as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such
payment will not be payable until the date that is the earlier of (A) six months
and one day after your separation from service or (B) your death. Any delayed
payments will be made in the seventh (7th) month after your separation from
service.

 

Please indicate your agreement to the terms of this Agreement by signing and
returning to me the original of this letter within the time period set forth
above.

 

Very truly yours,

 

 

 

 

 

Depomed, Inc.

 

 

 

 

 

 

 

 

By:

/s/ Peter D. Staple

 

 

 

Peter D. Staple

 

 

 

Chairman of the Board of Directors

 

 

 

 

 

 

 

 

The foregoing is agreed to and accepted by:

 

 

 

 

 

 

 

 

/s/ Carl A. Pelzel

 

April 1, 2011

Carl A. Pelzel

 

Date

 

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