Exhibit 10.2


 


2002 NONSTATUTORY STOCK
OPTION PLAN


OF


DEPOMED, INC.


1.             PURPOSES
OF THE PLAN


The purposes of the 2002
Nonstatutory Stock Option Plan (the “Plan”) of DepoMed, Inc., a California
corporation (the “Company”), are to: 
(a) encourage selected employees, directors and consultants to improve
operations and increase profits of the Company; (b) encourage selected
employees, directors and consultants to accept or continue employment or
association with the Company or its Affiliates; and (c) increase the interest
of selected employees, directors and consultants in the Company’s welfare
through participation in the growth in value of the common stock of the Company
(the “Common Stock”).


Options granted under
this Plan (“Options”) are “nonstatutory options” and are not intended to
satisfy the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”).


2.             ELIGIBLE
PERSONS


Every person who at the
date of grant is an employee of, consultant to, or non-employee director of,
the Company or any Affiliate (as defined below) of the Company is eligible to
receive Options under this Plan. The term “Affiliate” as used in the Plan means
a parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code. The term
“employee” includes an officer or director who is an employee, of the Company.
The term “consultant” includes persons employed by, or otherwise affiliated
with, a consultant.


3.             STOCK
SUBJECT TO THIS PLAN


Subject to the provisions of Section 6.1.1 of the
Plan, the total number of shares of stock which may be issued under options
granted pursuant to this Plan shall not exceed 1,306,811 shares of Common
Stock. The shares covered by the portion of any grant under the Plan which
expires unexercised shall become available again for grants under the Plan.


4.             ADMINISTRATION


4.1           This
Plan shall be administered by the Board of Directors of the Company (the
“Board”) or, either in its entirety or only insofar as required pursuant to
Section 4.2 hereof, by a committee (the “Committee”) of at least two Board
members to which administration of the Plan, or of part of the Plan, is
delegated (in either case, the “Administrator”).


4.2           Subject
to the other provisions of this Plan, the Administrator shall have the
authority, in its discretion: (i) to grant Options; (ii) to determine the fair
market value of the Common Stock subject to Options; (iii) to determine the
exercise price of Options granted; (iv)


 


 

















 


to determine the persons to whom, and the time or
times at which, Options shall be granted, and the number of shares subject to
each Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind
rules and regulations relating to this Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical), including but
not limited to, the time or times at which Options shall be exercisable; (viii)
with the consent of the optionee, to modify or amend any Option; (ix) to defer
(with the consent of the optionee) the exercise date of any Option; (x) to
accelerate the exercise date of any Option; (xi) to authorize any person to
execute on behalf of the Company any instrument evidencing the grant of an
Option; and (xii) to make all other determinations deemed necessary or
advisable for the administration of this Plan. The Administrator may delegate
nondiscretionary administrative duties to such employees of the Company as it
deems proper.


4.3           All questions of interpretation,
implementation, and application of this Plan shall be determined by the
Administrator. Such determinations shall be final and binding on all persons.


4.4           With
respect to persons subject to Section 16 of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), if any, transactions under this Plan are
intended to comply with the applicable conditions of Rule 16b-3, or any
successor rule thereto. To the extent any provision of this Plan or action by
the Administrator fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Administrator.
Notwithstanding the above, it shall be the responsibility of such persons, not
of the Company or the Administrator, to comply with the requirements of Section
16 of the Exchange Act; and neither the Company nor the Administrator shall be
liable if this Plan or any transaction under this Plan fails to comply with the
applicable conditions of Rule 16b-3 or any successor rule thereto, or if any
such person incurs any liability under Section 16 of the Exchange Act.


5.             GRANTING
OF OPTIONS; OPTION AGREEMENT


5.1           Options
may be granted under this Plan only in the event that the 1,306,811 share
increase in the number of shares of Common Stock reserved for issuance under
the Company’s Amended and Restated 1995 Stock Option Plan approved by the
Company’s Board of Directors on December 23, 2002 is not approved by the
Company’s shareholders at the Company’s 2003 Annual Meeting of Shareholders
(the “2003 Annual Meeting”).  In no
event may Options be granted under this Plan after ten years from the date of
adoption of this Plan by the Board.


5.2           Each
Option shall be evidenced by a written stock option agreement, in form
satisfactory to the Company, executed by the Company and the person to whom
such Option is granted; provided, however, that the failure by the Company, the
optionee, or both to execute such an agreement shall not invalidate the
granting of an Option, although the exercise of each option shall be subject to
Section 6.1.3.


5.3           The
Administrator may approve the grant of Options under this Plan to persons who
are expected to become employees, directors or consultants of the Company, but
are not employees, directors or consultants at the date of approval.


 


2

















 


6.             TERMS
AND CONDITIONS OF OPTIONS


Each Option granted under
this Plan shall be subject to the terms and conditions set forth in Section
6.1.


6.1.          Terms
and Conditions to Which All Options are Subject.


All Options granted under this Plan shall be subject
to the following terms and conditions:


6.1.1.       Changes in Capital Structure.  Subject to Section 6.1.2, if the stock of
the Company is changed by reason of a stock split, reverse stock split, stock
dividend, or recapitalization, combination or reclassification, appropriate
adjustments shall be made by the Board in (a) the number and class of shares of
stock subject to this Plan and each Option outstanding under this Plan, and (b)
the exercise price of each outstanding Option; provided, however, that the
Company shall not be required to issue fractional shares as a result of any
such adjustments. Each such adjustment shall be subject to approval by the
Board in its sole discretion.


6.1.2.                     Change in Control.


(a)  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each optionee at
least 30 days prior to such proposed action. 
To the extent not previously exercised, all Options will terminate
immediately prior to the consummation of such proposed action.


(b)           In the event of a “change in control”
of the Company, options granted pursuant to the Plan shall automatically be
accelerated in full so as to become completely vested and fully
exercisable.  In such event, the Administrator
shall notify each optionee at least 30 days prior to such proposed action that
the options shall be fully exercisable for a period of 30 days from the date of
such notice, and options shall terminate upon the expiration of such 30-day
period.  In the event of a “change in control”
of the Company, any right of repurchase pursuant to Section 6.1.8 shall expire.


For purposes of the
foregoing, a change in control means the occurrence of either of the following:


(i)            any “person” (as used in Section
13(d) of the Securities Exchange Act of 1934 and the rules promulgated
thereunder) becomes the “beneficial owner” (as defined in Rule 13d-3) of
securities representing a majority of the voting power of the then outstanding
securities of the Company; or


(ii)           a sale of assets involving all or
substantially all of the assets of the Company, or a merger or consolidation of
the Company in which the holders of securities of the Company immediately prior
to such event hold in the aggregate less than a majority of the


 


3

















 


securities of the Company immediately after such
event.


6.1.3.       Time of Option Exercise.  Subject to Section 5, Options granted under
this Plan shall be exercisable (a) immediately as of the effective date of the
stock option agreement granting the Option, or (b) in accordance with a
schedule related to the date of the grant of the Option, the date of first
employment, or such other date as may be set by the Administrator (in any case,
the “Vesting Base Date”) and specified in the written stock option agreement
relating to such Option. In any case, no Option shall be exercisable until a
written stock option agreement in form satisfactory to the Company is executed
by the Company and the optionee.


6.1.4.       Option Grant Date.  Except in the case of advance approvals
described in Section 5.3, the date of grant of an Option under this Plan shall
be the date as of which the Administrator approves the grant.


6.1.5.       Nonassignability of Option Rights.  Except as otherwise determined by the Administrator,
no Option granted under this Plan shall be assignable or otherwise transferable
by the optionee except by will or by the laws of descent and distribution.
During the life of the optionee, except as otherwise determined by the
Administrator and expressly set forth in the Option Agreement, an Option shall
be exercisable only by the optionee.


6.1.6.       Payment.  Except as provided below, payment in full, in cash, shall be made
for all stock purchased at the time written notice of exercise of an Option is
given to the Company, and proceeds of any payment shall constitute general
funds of the Company. At the time an Option is granted or exercised, the
Administrator, in the exercise of its absolute discretion after considering any
tax or accounting consequences, may authorize any one or more of the following
additional methods of payment:


(a)           With respect only to optionees who
are not directors of the Company or “officers” of the Company within the
meaning of Rule 16a-1 adopted under the Exchange Act (each such officer, an
“Officer”), acceptance of the optionee’s full recourse promissory note for all
or part of the Option price, payable on such terms and bearing such interest
rate as determined by the Administrator (but in no event less than the minimum
interest rate specified under the Code at which no additional interest would be
imputed and in no event more than the maximum interest rate allowed under
applicable usury laws), which promissory note may be either secured or
unsecured in such manner as the Administrator shall approve (including, without
limitation, by a security interest in the shares of the Company); and


(b)           Delivery by the optionee of Common
Stock already owned by the optionee for all or part of the Option price,
provided the value (determined as set forth in Section 6.1.11) of such Common
Stock is equal on the date of exercise to the Option price, or such portion
thereof as the optionee is authorized to pay by delivery of such stock;
provided, however, that if an optionee has exercised any portion of any Option
granted by the Company by delivery of Common Stock, the optionee may not,
within six months following such exercise, exercise any Option granted under
this Plan by delivery of Common Stock without the consent of the Administrator.


 


4

















 


(c)           Exercise of an Option may be made
pursuant to a “cashless exercise/sale” procedure pursuant to which funds to pay
for exercise of the Option are delivered to the Company by a broker upon
receipt of stock certificates from the Company, or pursuant to which optionees
obtain margin loans from brokers to fund the exercise of the Option; provided,
however, that if the Company extends or arranges for the extension of credit to
an optionee under any such cashless exercise/sale procedure, no director of the
Company nor any Officer may participate in the procedure.


6.1.7.       Termination of Employment.  If for any reason other than death or
disability, an optionee ceases to be employed by the Company or any of its Affiliates
(such event being called a “Termination”), Options held at the date of
Termination (to the extent then exercisable) may be exercised in whole or in
part at any time within thirty days of the date of such Termination, or such
other period as is specified in the Option Agreement (but in no event after the
Expiration Date); provided, that if such exercise of the Option would result in
liability for the optionee under Section 16(b) of the Exchange Act, then such
one-month period automatically shall be extended until the tenth day following
the last date upon which optionee has any liability under Section 16(b) (but in
no event after the Expiration Date). If an optionee dies or becomes disabled
(within the meaning of Section 22(e)(3) of the Code) while employed by the
Company or an Affiliate or within the period that the Option remains
exercisable after  Termination, Options
then held (to the extent then exercisable) may be  exercised, in whole or in part, by the optionee, by the
optionee’s personal representative or by the person to whom the Option is
transferred by devise or the laws of descent and distribution, at any time
within twelve months after the death or twelve months after the disability of
the optionee, or such other period as is specified in the Option Agreement (but
in no event after the Expiration Date). For purposes of this Section 6.1.7,
“employment” includes service as a director or as a consultant. For purposes of
this Section 6.1.7, an optionee’s employment shall not be deemed to terminate
by reason of sick leave, military leave or other leave of absence approved by
the Administrator, if the period of any such leave does not exceed 90 days or,
if longer, if the optionee’s right to reemployment by the Company or any
Affiliate is guaranteed either contractually or by statute.


6.1.8.       Repurchase of Stock.  At the option of the Administrator, the
stock to be delivered pursuant to the exercise of any Option granted to an
employee, director or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any employee, or director or
consultant whose employment, or director or consulting relationship with the
Company is terminated.


Determination of the number of shares subject to any
such right of repurchase shall be made as of the date the employee’s employment
as an employee, consultant or director of the Company terminates, not as of the
date that any Option granted to such employee, director or consultant is
thereafter exercised.


6.1.9.       Withholding and Employment Taxes.  At the time of exercise of an Option or at
such other time as the amount of such obligations becomes determinable (the
“Tax Date”), the optionee shall remit to the Company in cash all applicable
federal and state withholding and


 


5

















 


employment taxes. If authorized by the Administrator
in its sole discretion after considering any tax or accounting consequences, an
optionee may elect to (i) deliver a promissory note on such terms as the Administrator
deems appropriate, provided that the optionee is not a director or Officer of
the Company, (ii) tender to the Company previously owned shares of Stock or
other securities of the Company, or (iii) have shares of Common Stock which are
acquired upon exercise of the Option withheld by the Company to pay some or all
of the amount of tax that is required by law to be withheld by the Company as a
result of the exercise of such Option.


Any securities tendered or withheld in accordance with
this Section 6.1.9 shall be valued by the Company as of the Tax Date.


6.1.10.  Other Provisions. Each Option granted
under this Plan may contain such other terms, provisions, and conditions not
inconsistent with this Plan as may be determined by the Administrator.


6.1.11.  Determination of Value. For purposes
of the Plan, the value of Common Stock or other securities of the Company shall
be determined as follows:


(a)           If the stock of the Company is listed
on any established stock exchange or a national market system, including
without limitation the American Stock Exchange and the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
System, its fair market value shall be the closing sales price for such stock
or the closing bid if no sales were reported, as quoted on such system or
exchange (or the largest such exchange) for the date the value is to be
determined (or if there are no sales for such date, then for the last preceding
business day on which there were sales), as reported in the Wall Street Journal
or similar publication.


(b)           If the stock of the Company is
regularly quoted by a recognized securities dealer but selling prices are not
reported, its fair market value shall be the mean between the high bid and low
asked prices for the stock on the date the value is to be determined (or if
there are no quoted prices for the date of grant, then for the last preceding
business day on which there were quoted prices).


(c)           In the absence of an established
market for the stock, the fair market value thereof shall be determined in good
faith by the Administrator, with reference to the Company’s net worth,
prospective earning power, dividend-paying capacity, and other relevant
factors, including the goodwill of the Company, the economic outlook in the
Company’s industry, the Company’s position in the industry and its management,
and the values of stock of other corporations in the same or a similar line of
business.


6.1.12.  Option Term.  No Option shall be exercisable more than ten
years after the date of grant, or such lesser period of time as is set forth in
the stock option agreement (the end of the maximum exercise period stated in
the stock option agreement is referred to in this Plan as the “Expiration
Date”).


 


6

















 


7.             MANNER
OF EXERCISE


7.1           An
optionee wishing to exercise an Option shall give written notice to the Company
at its principal executive office, to the attention of the officer of the
Company designated by the Administrator, accompanied by payment of the exercise
price as provided in Section 6.1.6. The date the Company receives written
notice of an exercise hereunder accompanied by payment of the exercise price
will be considered as the date such Option was exercised.


7.2           Promptly
after receipt of written notice of exercise of an Option, the Company shall,
without stock issue or transfer taxes to the optionee or other person entitled
to exercise the Option, deliver to the optionee or such other person a
certificate or certificates for the requisite number of shares of stock. An
optionee or permitted transferee of an optionee shall not have any privileges
as a stockholder with respect to any shares of stock covered by the Option
until the date of issuance (as evidenced by the appropriate entry on the books
of the Company or a duly authorized transfer agent) of such shares.


8.             EMPLOYMENT
OR CONSULTING RELATIONSHIP


Nothing in this Plan or any Option granted thereunder
shall interfere with or limit in any way the right of the Company or of any of
its Affiliates to terminate any optionee’s employment or consulting at any
time, nor confer upon any optionee any right to continue in the employ of, or
consult with, the Company or any of its Affiliates.


9.             CONDITIONS
UPON ISSUANCE OF SHARES


Shares of Common Stock
shall not be issued pursuant to the exercise of an Option unless the exercise
of such Option and the issuance and delivery of such shares pursuant thereto
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended (the “Securities Act”).


10.           NONEXCLUSIVITY
OF THE PLAN


The adoption of the Plan
shall not be construed as creating any limitations on the power of the Company
to adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options other than under the Plan.


11.           MARKET
STANDOFF


Each optionee, if so
requested by the Company or any representative of the underwriters in
connection with any registration of the offering of any securities of the
company under the Securities Act shall not sell or otherwise transfer any
shares of Common Stock acquired upon exercise of Options during the 180-day
period following the effective date of a registration statement of the company
filed under the Securities Act; provided, however, that such restriction shall
apply only to the first two registration statements of the Company to become
effective under the


 


7

















 


Securities Act which
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restriction until the end of such 180-day period.


12.           AMENDMENTS
TO PLAN


The Board may at any time
amend, alter, suspend or discontinue this Plan. Without the consent of an
optionee, no amendment, alteration, suspension or discontinuance may adversely
affect outstanding Options. No amendment, alteration, suspension or
discontinuance shall require stockholder approval unless the Board otherwise
concludes that stockholder approval is advisable.


13.           EARLY
TERMINATION


In the event that the
Company’s shareholders approve the 1,306,811 share increase in the number of
shares of Common Stock reserved for issuance under the 1995 Stock Option Plan
approved by the Company’s Board of Directors on December 23, 2002 or the 2003
Annual Meeting, this Plan shall automatically terminate, and no options shall
be granted hereunder.


 


Adopted by the Board of
Directors on December 23, 2002.


 


 


 


 


 


 


 


8