Document:

Exhibit 10.1

 

DEPOMED, INC.

 

MANAGEMENT
CONTINUITY AGREEMENT

 

This
Management Continuity Agreement (the “Agreement”) is dated as of [date],
[year] by and between                
(“Employee”) and Depomed, Inc., a California corporation (the “Company”).

 

RECITALS

 

A.                                   It is expected that
another company may from time to time consider the possibility of
acquiring the Company or that a change in control may otherwise occur,
with or without the approval of the Company’s Board of Directors. The Board of
Directors recognizes that such consideration can be a distraction to Employee
and can cause Employee to consider alternative employment opportunities. The
Board of Directors has determined that it is in the best interests of the
Company and its shareholders to assure that the Company will have the continued
dedication and objectivity of the Employee, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company.

 

B.                                     The
Company’s Board of Directors believes it is in the best interests of the
Company and its shareholders to retain Employee and provide incentives to
Employee to continue in the service of the Company.

 

C.                                     The Board of
Directors further believes that it is imperative to provide Employee with
certain benefits upon certain termination of Employee’s employment in
connection with a Change of Control, which benefits are intended to provide
Employee with financial security and provide sufficient income and
encouragement to Employee to remain with the Company, notwithstanding the
possibility of a Change of Control.

 

D.                                    To accomplish the
foregoing objectives, the Board of Directors has directed the Company, upon
execution of this Agreement by Employee, to agree to the terms provided in this
Agreement.

 

Now therefore,
in consideration of the mutual promises, covenants and agreements contained
herein, and in consideration of the continuing employment of Employee by the
Company, the parties hereto agree as follows:

 

1.                                       At-Will Employment. The Company and
Employee acknowledge that Employee’s employment is and shall continue to be
at-will, as defined under applicable law, and that Employee’s employment with
the Company may be terminated by either party at any time for any or no
reason. If Employee’s employment terminates for any reason, Employee shall not
be entitled to any payments, benefits, damages, award or compensation other
than as provided in this Agreement or otherwise agreed to by the Company. The
terms of this Agreement shall terminate upon the earliest of: (i) the date
on which Employee ceases to be employed as an corporate officer of the Company,
other than as a result of an Involuntary Termination, (ii) the date that
all obligations of the parties hereunder have been satisfied (iii) one (1) year
after a Change of Control or (iv) the second anniversary of the Effective
Date (or, if later in the case of

 

 

subclause
(iv), the later to occur of (x) the termination of any Pending Change of
Control (as defined below) and (y) one year after the completion of any Pending
Change of Control). A termination of the terms of this Agreement pursuant to
the preceding sentence shall be effective for all purposes, except that such
termination shall not affect the payment or provision of compensation or
benefits on account of a termination of employment occurring prior to the
termination of the terms of this Agreement. The rights and duties created by
this Section 1 are contingent upon the Employee’s release of claims
against the Company (at the time of termination in a form reasonably
satisfactory to the Company) and may not be modified in any way except by
a written agreement executed by an officer of the Company upon direction from
the Board of Directors. The “Effective Date” for purposes of this
Agreement is May 15, 2006.

 

2.                                       Benefits Upon a Change of Control; Termination of Employment.

 

(a)                                  Treatment of Stock Options Upon a Change of Control.
In the event of Employee suffers an Involuntary Termination within twelve
months following the effective date of a Change of Control 100% of Employee’s  unvested Company option shares shall become
immediately vested on such termination date. Each such option shall be
exercisable in accordance with the provisions of the option agreement and plan
pursuant to which such option was granted.

 

(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 [insert “24 months” if the Employee is
the Chief Executive Officer] [insert “18 months” if the Employee is the Chief
Operating Officer] [insert “12 months” if the Employee is not the Chief
Executive Officer or Chief Operating Officer] 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 [insert “equal to two times” if the Employee is the
Chief Executive Officer] [insert “equal to one and one-half times” if the
Employee is the Chief Operating Officer] [insert “equal to” if the Employee is
not the Chief Executive Officer or Chief Operating Officer] 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
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
employment.

 

(c)                                  Termination for Cause. If Employee’s
employment is terminated for Cause at any time, then Employee shall not be
entitled to receive payment of any severance benefits or option acceleration. Employee
will receive payment(s) for all salary, bonuses and unpaid vacation accrued as
of the date of Employee’s termination of employment.

 

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(d)                                 Voluntary Resignation. If Employee
voluntarily resigns from the Company under circumstances which do not
constitute an Involuntary Termination, then Employee shall not be entitled to
receive payment of any severance benefits or option acceleration. Employee will
receive payment(s) for all salary, bonuses and unpaid vacation accrued as of
the date of Employee’s termination of employment.

 

3.                                       Definition of Terms. The following
terms referred to in this Agreement shall have the following meanings:

 

(a)                                  Change of Control; Pending Change of Control.
“Change of Control” shall mean any event so determined by the Board of
Directors pursuant to Section 10.4 of the Company’s 2004 Equity Incentive
Plan. “Pending Change of Control” shall mean any Change of Control with
respect to which the Company enters into a definitive agreement prior to the
second anniversary of the Effective Date which has not been completed or
terminated as of the second anniversary of the Effective Date. Pending Change
of Control shall include any Change of Control with respect to which the
Company enters into a binding agreement within thirty days after the
termination of any other Pending Change of Control.

 

(b)                                 Cause. “Cause” shall mean (i) gross
negligence or willful misconduct in the performance of Employee’s duties to the
Company where such gross negligence or willful misconduct has resulted or is
likely to result in substantial and material damage to the Company or its
subsidiaries (ii) repeated unexplained or unjustified absence from the
Company, (iii) a material and willful violation of any federal or state
law; (iv) commission of any act of fraud with respect to the Company or (v) conviction
of a felony or a crime involving moral turpitude causing material harm to the
standing and reputation of the Company, in each case as determined in good
faith by the Board of Directors.

 

(c)                                  Involuntary Termination. “Involuntary
Termination” shall include any termination by the Company other than for
Cause and Employee’s voluntary termination, upon 30 days prior written notice
to the Company, following (i) a material reduction or change in job
duties, responsibilities and requirements inconsistent with the Employee’s
position with the Company and the Employee’s prior duties, responsibilities and
requirements or a change in Employee’s reporting relationship; (ii) any
reduction of Employee’s base compensation (other than in connection with a
general decrease in base salaries for most officers of the successor
corporation); or (iii) Employee’s refusal to relocate to a facility or
location more than 30 miles from the Company’s current location.

 

4.                                       Limitation on Payments. In the event
that the severance and other benefits provided for in this Agreement to the
Employee (i) constitute “parachute payments” within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”) and (ii) but
for this Section, would be subject to the excise tax imposed by Section 4999
of the Code, then the Employee’s severance benefits under Sections 2(a) and
2(b) shall be payable either:

 

(a)                                  in
full, or

 

(b)                                 as
to such lesser amount which would result in no portion of such severance
benefits being subject to excise tax under Section 4999 of the Code,
whichever of the

 

3

 

foregoing
amounts, taking into account the applicable federal, state and local income
taxes and the excise tax imposed by Section 4999, results in the receipt
by the Employee on an after-tax basis, of the greatest amount of severance
benefits under Section 2(a) and 2(b), notwithstanding that all or
some portion of such severance benefits may be taxable under Section 4999
of the Code. Unless the Company and the Employee otherwise agree in writing,
any determination required under this Section 4 shall be made in writing
by independent public accountants selected by the Company (the “Accountants”),
whose determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required by
this Section 4, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable,
good faith interpretations concerning the application of Section 280G and
4999 of the Code. The Company and the Employee shall furnish to the Accountants
such information and documents as the Accountants may reasonably request
in order to make a determination under this Section. The Company shall bear all
costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 4.

 

5.                                       Conflicts. Employee represents that
Employee’s performance of all the terms of this Agreement will not breach any
other agreement to which Employee is a party. Employee has not, and will not
during the term of this Agreement, enter into any oral or written agreement in
conflict with any of the provisions of this Agreement. Employee further
represents that Employee is entering into or has entered into an employment
relationship with the Company of Employee’s own free will and that Employee has
not been solicited as an employee in any way by the Company.

 

6.                                       Successors. Any successor to the
Company (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this
Agreement in the same manner and to the same extent as the Company would be
required to perform such obligations in the absence of a succession. The
terms of this Agreement and all of Employee’s rights hereunder and thereunder
shall inure to the benefit of, and be enforceable by, Employee’s personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

 

7.                                       Notice. Notices and all other
communications contemplated by this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and postage prepaid. Mailed
notices to Employee shall be addressed to Employee at the home address which
Employee most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.

 

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8.                                       Miscellaneous Provisions.

 

(a)                                  No Duty to Mitigate. Employee shall not
be required to mitigate the amount of any payment contemplated by this
Agreement (whether by seeking new employment or in any other manner), nor shall
any such payment be reduced by any earnings that Employee may receive from
any other source.

 

(b)                                 Waiver. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by Employee and by an authorized
officer of the Company (other than Employee). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.

 

(c)                                  Whole Agreement. No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof. This
Agreement supersedes any agreement of the same title and concerning similar
subject matter dated prior to the Effective Date, and by execution of this
Agreement both parties agree that any such predecessor agreement shall be
deemed null and void.

 

(d)                                 Choice of Law. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of California without reference to conflict
of laws provisions.

 

(e)                                  Severability. If any term or provision
of this Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions of this Agreement or the application of such
terms and provisions to circumstances other than those as to which it is held invalid
or unenforceable, and a suitable and equitable term or provision shall be
substituted therefor to carry out, insofar as may be valid and
enforceable, the intent and purpose of the invalid or unenforceable term or
provision.

 

(f)                                    Arbitration. Any dispute or controversy
arising under or in connection with this Agreement may be settled at the
option of either party by binding arbitration in the County of Santa Clara,
California, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator’s  award in any court having jurisdiction. Punitive
damages shall not be awarded.

 

(g)                                 Legal Fees and Expenses. The parties
shall each bear their own expenses, legal fees and other fees incurred in
connection with this Agreement.

 

(h)                                 No Assignment of Benefits. The rights
of any person to payments or benefits under this Agreement shall not be made
subject to option or assignment, either by voluntary or involuntary assignment
or by operation of law, including (without limitation)

 

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bankruptcy, garnishment, attachment or other creditor’s process, and
any action in violation of this Section 8(h) shall be void.

 

(i)                                     Employment Taxes. All payments made
pursuant to this Agreement will be subject to withholding of applicable income
and employment taxes.

 

(j)                                     Assignment by Company. The Company may assign
its rights under this Agreement to an affiliate, and an affiliate may assign
its rights under this Agreement to another affiliate of the Company or to the
Company. In the case of any such assignment, the term “Company” when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.

 

(k)                                  Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.

 

[SIGNATURE PAGE FOLLOWS]

 

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The parties
have executed this Agreement on the date first written above.

 

	
   

  	
  DEPOMED, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
  [                                ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

7Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT
(“Agreement”), made and entered into effective as of May 16, 2006, by and
among RUSH RIVER GROUP, LLC, a Minnesota limited liability company (“Seller”);
and WINMARK CORPORATION, a Minnesota corporation  (“Buyer”).

 

RECITALS

 

WHEREAS,
Seller desires to sell and Buyer desires to buy 420,000 shares of Winmark
Corporation common stock owned by Seller (“Shares”) on the terms and conditions
as contained herein.

 

NOW, THEREFORE,
in consideration of the mutual covenants, premises and agreements contained
herein, the parties agree as follows:

 

1.             Agreement to Sell and Purchase.

 

On the terms and conditions contained
herein, including the consideration set forth in Section 2 hereof, Seller
hereby agrees to sell the Shares to the Buyer and the Buyer hereby agrees to
purchase the Shares from the Seller.

 

2.                                      Purchase Price; Method of Payment.

 

The total purchase price for the Shares
is $9,891,000 (calculated by taking $23.55 per share and multiplying by the
Shares, defined herein as the “Purchase Price”).  The Purchase Price will be paid by wire
transfer on the Closing Date (hereinafter defined).

 

3.                                      Representations of the Seller.

 

The
Seller represents and warrants to the Buyer as follows:

 

a.                                       The
Seller has, and will on the Closing Date have, all necessary authority to enter
into this transaction and this Agreement, upon due execution and delivery by
the parties hereto, will be the valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms.

 

b.                                      The
Seller is, and on the Closing Date will be, the lawful owner of the Shares with
full right and authority to sell and deliver the same in accordance with this
Agreement.  The delivery of the Shares as
provided hereunder will transfer valid, good and marketable title thereto to
the Buyers, free and clear of all liens, charges, encumbrances, restrictions
and claims of every kind.

 

4.                                      Closing.

 

The
sale and purchase of the Shares shall take place via wire transfer on May 16,
2006, or such other place, date and time as shall be mutually agreed upon by
the Seller and the Buyer (“Closing Date”).

 

 

5.                                      Documents to be Delivered at Closing.

 

On
the Closing Date, the following documents shall be exchanged and delivered by
the parties:

 

a.                                       The
Seller shall deliver the stock certificate(s) representing the Shares, duly
endorsed for transfer to the Buyer in the denominations set forth above or
together with duly executed stock assignments or transfer powers sufficient to
transfer and assign to the Buyer all right, title and interest therein in the
denominations listed above.

 

b.                                      The
parties, at closing, and from time to time thereafter, shall enter into and
deliver such

 

other documents or instruments as may be
referred to in this Agreement or as may be reasonable or appropriate to
consummate the transactions referred herein.

 

6.                                      Survival of Representations.

 

All
covenants, representations or warranties contained in this Agreement shall be
deemed to survive the closing date.

 

7.                                      Entire Agreement.

 

This Agreement constitutes the entire Agreement
between the Buyer and the Seller with regard to the subject matter hereof, and
supersedes any other agreements, representations or understandings, oral or
written and express or implied, relating to the subject matter hereof.

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

 

	
  BUYER:

  	
  SELLER:

  
	
  WINMARK
  CORPORATION

  	
  RUSH
  RIVER GROUP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/Brett
  D. Heffes

  	
   

  	
  /s/Kirk
  A. MacKenzie

  	
   

  
	
  Brett
  D. Heffes, Chief Financial Officer

  	
  Kirk
  A. MacKenzie, Director and Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/John
  L. Morgan

  	
   

  
	
   

  	
  John
  L. Morgan, Director and Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Jack
  A. Norqual

  	
   

  
	
   

  	
  Jack
  A. Norqual, Director and Member

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