Subject: Confidential Early Retirement And Separation Agreement

Date: November 4, 1996


To: David B. Thomas


From: Ed Erickson


Subject: Confidential Early Retirement And Separation Agreement


Dear David:


Consistent with our discussions concerning your early retirement and separation from DepoTech Corporation (the "Company"), this letter will constitute the Confidential Early Retirement And Separation Agreement (the "Agreement") setting forth the terms of your employment from and after the date of this agreement, and separation of employment from the Company. By signing this Agreement, you will be agreeing to these terms. It is important that you understand clearly both what your benefits and obligations are and what is expected of you by the Company.


1. Transition Period: Commencing on the date of this Agreement, and
continuing through the date of the first commercial sale of DepoCyt in the
United States, (hereinafter referred to as the "Transition Period"), you
and the Company are in agreement on the future discontinuance of your
employment with the Company. Subject to the terms and conditions of this
Agreement, inclusive but not limited to, Section 6, during the Transition
Period, you shall remain a regular full-time employee and officer of the
Company. The parties may mutually agree in writing to extend the
Transition Period, but neither is under any obligation to do so
(hereinafter referred to as the "extended Transition Period").


On the date of the Company's first commercial sale of DepoCyt in the
United States, provided you have continued employment with the Company
through the date of such first commercial sale, you and the Company will
execute a Consulting Agreement as specified in Attachment A ("Consulting
Agreement").


2. Duties: During the Transition Period you will be responsible for
performing those assignments you currently perform and duties substantially
similar to such assignments, plus any other project assignments agreed
with the Chief Executive Officer (CEO) of the Company. In addition, you
will make yourself available to the Company for the purpose of
transitioning your work to other employees and to answer any questions
regarding matters assigned to you before the effective date of Separation,
as defined below. During the Transition Period, you will devote your full
energies, efforts and abilities to achieving FDA approval of DepoCyt,
toward making significant progress on and achieving milestones in other
key projects and to your employment with the Company.


3. Position Title and Salary: Effective as of August 27, 1996, your title
will be Senior Vice President, Quality Assurance and Regulatory Affairs.
In addition, the Company agrees to retroactively increase your base salary
to $14,167.00 per month. The "new base salary" will be subject to the
normal review of, and changes to, salaries of all SMC members, effective
January 1, 1997. All salary payments will be less customary and applicable
deductions for taxes and health and other benefits. All salary payments
during the Transition Period shall be made on or about the time of the
Company's normal bi-monthly pay cycle. 2 4. Benefits: During the Transition Period, the Company will continue your
current health benefits, Long Term Disability, Life Insurance, and
participation in the Company's 401(k) and ESPP plans.


5. Expiration of Transition Period/Early Retirement And Separation of
Employment: Your early retirement and separation of employment with the
Company will occur on the last day of the Transition Period, unless your
separation of employment occurs sooner pursuant to Section 6, or is
extended pursuant to Section 1, (the "Transition Period"). As part of
this, the Company agrees to provide you with the following additional
compensation and benefits package:


a. Cash Bonus: Upon issuance by the FDA, of an "Approvable Letter"
for DepoCyt, the Company will pay you a cash bonus of forty thousand
dollars ($40,000), providing such issuance occurs during the
Transition Period.


b. Accelerated Stock Option Grant Vesting: If you remain employed
with the Company until the FDA issues an "Provisional Approval Letter"
for DepoCyt, the Company agrees to accelerate the vesting of Stock
Options remaining unvested as of the date of such issuance, and
awarded in these quantities and on the following dates:


ISO GRANT 40,000 SHARES GRANTED 07-01-93
ISO GRANT 10,000 SHARES GRANTED 03-23-94
ISO GRANT 200 SHARES GRANTED 09-28-95
ISO GRANT 6,750 SHARES GRANTED 01-16-96


In addition, the Company confirms that the vesting of Stock Options
remaining will accelerate in their entirety by these terms in the
event of (1) a change of control of the Company and (2) disability
longer than three (3) months or death.


c. Management Incentive Bonus: During the Transition Period, you
will be eligible for 1996 Management Incentive Bonus consideration to
be paid out in 1997, based on the combination of your performance and
that of the Company during the 1996 fiscal year. The Management
Incentive Bonus target for 1996 is twenty percent (20%) of base
salary, however it can be as little as 0% or as high as 33% of base
salary depending on overall company and individual performance.


d. Extended Benefits: You and your eligible dependents will be
entitled to continue your medical coverage, pursuant to COBRA, for 18
months following the effective date of Separation at your own expense.
It is understood that the Company reserves the right to change health
plans at any time. All other employee benefits, including Long Term
Disability, Life Insurance, 401(k) and ESPP plan participation will
expire on the effective date of the Separation.


e. FTO Balance: The Company further agrees to pay you all earned but unused FTO pay as of the date of Separation.


In consideration for the above package, you will be required to sign a release agreement with the Company releasing it from any and all litigation or claims which is set for at Section 11 of this Agreement.


6. Termination: Either party may terminate your employment during the
Transition Period or any extended Transition Period, under the following
terms and conditions:


2 3
a. You may terminate your employment with the Company during the
Transition Period, for any reason, upon thirty (30) days written
notice to the Company. Upon such a termination, your employment
will be terminated and all compensation and benefits pursuant to
Sections 3 and 4 will end. If you resign, you will not be
entitled to any compensation or benefits described in Section 5
subsections (a-c).


b. The Company reserves the right to terminate your employment during
the Transition Period or any extended Transition Period "for
cause". "For cause" termination includes: (a) a material breach
of the terms of this Agreement; (b) refusal or failure to perform
the duties assigned to you pursuant to this Agreement, following
notice from the company of such refusal or failure and a
reasonable opportunity to cure; (c ) major infractions of the
Company's standards of conduct as set forth in Company policies,
following notice from the Company of such infractio ...