Exhibit 10.2


 


NON QUALIFIED STOCK OPTION AGREEMENT


 


NON QUALIFIED STOCK OPTION AGREEMENT
made this ___ day of ___________, 20__ between PSYCHEMEDICS CORPORATION, a Delaware corporation (hereinafter called the
Corporation), and ____________________, an employee, director, or independent contractor of the Corporation or one or more
of its subsidiaries (hereinafter called the Optionee).


 


The Corporation desires, by affording the
Optionee an opportunity to purchase shares of its Common Stock, $.005 par value (hereinafter called the Common Stock), as hereinafter
provided, to carry out the purpose of the Corporation's 2006 Incentive Plan, as amended (the Plan).


 


NOW, THEREFORE, in consideration of the
mutual covenants hereinafter set forth and for other good and valuable consideration, the parties hereto have agreed, and do hereby
agree as follows:


 


1. Grant of Option. The Corporation
hereby irrevocably grants to the Optionee the right and option (hereinafter called the Option) to purchase all or any part of an
aggregate of __________ shares of the Common Stock (such number being subject to adjustment as provided in paragraph 7 hereof)
on the terms and conditions herein set forth. The Option is not intended by the parties hereto to be, and shall not be treated
as, an incentive stock option (as such term is defined under Section 422 of the Internal Revenue Code of 1986 (hereinafter called
the Code)).


 


2. Purchase Price. The purchase price
of the shares of the Common Stock covered by the Option shall be $_____ per share.


 


3. Term of Option; Exercisability.
The term of the Option shall be for a period of ten (10) years from the date hereof, subject to earlier termination as provided
in paragraph 6 hereof. Except as otherwise provided in paragraph 6 hereof, the Option shall become exercisable with respect to
20% of the total number of shares subject to the Option on the first anniversary date of the date hereof, and with respect to an
additional 20% of such total number of shares at the end of each twelve-month period thereafter during the succeeding four years,
provided however, that the Corporation may, at any time during the period in which the Option is not then exercisable in full,
accelerate the exercisability of the Option subject to such terms as the Corporation deems necessary and appropriate. The purchase
price of the shares as to which the Option shall be exercised shall be paid at the time of exercise as provided in paragraph 8
hereof.


 


4. Non-transferability. The Option
shall not be transferable otherwise than by will or the laws of descent and distribution, or pursuant to a qualified domestic relations
order as defined in the Code, or Title I of the Employee Retirement Income Security Act of 1974, as amended or the regulations
thereunder. Subject to the foregoing, the Option may be exercised, during the lifetime of the Optionee, only by him. More particularly
(but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above),
pledged, or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment,
or similar process. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment, or similar process upon the Option shall be null and void and without
effect.


 




    


     


    

 


5. Registration of Shares. The Corporation
may, in its discretion, require as conditions to the right to exercise this Option that (a) a Registration Statement under the
Securities Act of 1933, as amended, shall be in effect and current with respect to the shares issuable upon exercise of this Option,
or (b) the Optionee has given to the Corporation prior to the purchase of any shares pursuant hereto, assurances satisfactory to
it that such shares are being purchased for the purpose of investment and not with a view to or for sale in connection with any
distribution thereof, including without limitation, a written agreement of the Optionee that the shares will not be transferred
unless registered under the Securities Act of 1933, as amended, or unless counsel for the Corporation gives a written opinion that
such transfer is permissible under Federal and State law without registration.


 


6. Termination of Business Relationship.
Except as otherwise provided in this paragraph, the Option shall terminate and be canceled on the first to occur of the expiration
date of this Option as set forth in paragraph 3 hereof or the date which is three (3) months following the date on which the Optionee
ceases to be an employee, director or independent contractor of the Corporation or one or more of its subsidiaries (the “Business
Relationship”). The Option shall be exercisable during such three month period to the extent it was exercisable on the date
of such termination. In the event that the Business Relationship shall be terminated on account of the Optionee's death, retirement
(at the age 65 or earlier as may be permitted by the Corporation), or permanent disability (as such term is defined in Section
22(e)(3) of the Code), the Option may be exercised in full, without regard to any installments under Section 3 hereof, by the Optionee
or, by his heirs, legatees, or legal representatives, as the case may be, during its specified term prior to one (1) year after
the date of death, permanent disability, or retirement, but in any event not later than ten (10) years from the date hereof. For
purposes of the preceding sentence, in the event the Optionee is a non-employee director of the Corporation at the time of the
grant of this Option, the failure of the Optionee to be re-elected as a director of the Corporation, for any reason, at any annual
or special meeting of stockholders of the Corporation, provided the Optionee continues to serve as a director of the Corporation
through the date of such annual or special meeting, shall be deemed to be a termination on account of retirement. So long as the
Business Relationship shall continue, the Option shall not be affected by any change of duties or position. Nothing in this Option
Agreement shall confer upon the Optionee any right to continue the Business Relationship or interfere in any way with the right
of the Corporation or any such subsidiary to terminate the Business Relationship at any time.


 


7. Changes in Capital Structure.
Adjustments and other matters relating to stock dividends, stock splits, recapitalizations, reorganizations, Corporate Events and
the like shall be made and determined in accordance with Section 7 of the Plan, as in effect on the date of this Agreement.


 




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8. Method of Exercising Option. Subject
to the terms and conditions of this Option Agreement, the Option may be exercised by written notice to the Corporation at its principal
business address attention of the Secretary. Such notice shall state the election to exercise the Option and the number of shares
in respect of which it is being exercised, and shall be signed by the person or persons so exercising the Option. At that time,
this Option Agreement shall be turned in to the Corporation for action by the Corporation to reduce the number of shares to which
it applies. Such notice shall be accompanied by payment in cash or by check, or by shares of the Common Stock, or by a combination
of these methods of payment. Payment may also be made by delivery of a notice of “net exercise” to the Corporation,
pursuant to which the Optionee shall receive the number of shares of Stock underlying the Option so exercised reduced by the number
of shares of Stock equal to the aggregate exercise price of the Option divided by the Fair Market Value on the date of exercise,
or by delivery (including delivery by facsimile transmission) to the Corporation or its designated agent of an executed irrevocable
option exercise form together with irrevocable instructions to a broker-dealer to sell a sufficient portion of the shares and deliver
the sale proceeds directly to the Corporation to pay for the exercise price. In the event that payment is made in shares of the
Common Stock, the per share value of the Common Stock shall be the Fair Market Value of such stock on the date of exercise. The
certificate or certificates for the shares as to which the Option shall have been so exercised shall be registered in the name
of the person or persons so exercising the Option, (or, if the Option shall be exercised by the Optionee and if the Optionee shall
so request in the notice exercising the Option, the certificate or certificates shall be registered in the name of the Optionee
and another person jointly, with the right of survivorship) and shall be delivered as provided above to or upon the written order
of the person or persons exercising the Option. In the event the Option shall be exercised by any person or persons other than
the Optionee (to the extent permitted under this Non-Qualified Stock Option Agreement), such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option.


 


9. General. The Corporation shall
at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient
to satisfy the requirements of this Non-Qualified Stock Option Agreement, shall pay all original issue taxes with respect to the
issue of shares pursuant hereto and all other fees and expenses necessarily incurred by the Corporation in connection therewith,
and will from time to time use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the
Corporation, shall be applicable thereto. The Corporation makes no representation or warranty that this Option or shares issued
pursuant hereto qualify under any Federal or State law for any special tax treatment. The terms of this Option Agreement shall
be construed to conform with, and shall be governed by the provisions of the Plan, as amended, and in the event of any inconsistency
between the provisions of this Non-Qualified Stock Option Agreement and the Plan, the provisions of the Plan shall control. Any
term used herein and not defined in this Agreement but defined in the Plan, shall have the meaning set forth in the Plan.


 


10.  Subsidiary.
As used herein, the term "subsidiary" shall mean any present or future corporation which would be a "subsidiary
corporation" of the Corporation, as the term is defined in Section 424 of the Code.


 




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11.  Section 409A of the Code.
This Agreement is intended to comply with the provisions of Section 409A of the Code to the extent they are applicable, and
shall be administered in a manner consistent with this intent. Without limiting the foregoing, any requirements imposed under the
Treasury Regulations promulgated under said Section 409A as finally adopted, in order for the Option granted hereunder to
remain in compliance with said Section 409A, are hereby incorporated by reference into this Agreement.


 


12.  Withholding Taxes.
If the Corporation in its discretion determines that it is obligated to withhold any tax in connection with the exercise of this
Option, or in connection with the transfer of, or the lapse of restrictions on, any Common Stock or other property acquired pursuant
to this Option, the Optionee hereby agrees that the Corporation may withhold from the Optionee’s remuneration the appropriate
amount of tax. At the discretion of the Corporation, the amount required to be withheld may be withheld in cash from such remuneration
or in kind from the Common Stock or other property otherwise deliverable to the Optionee on exercise of this Option. The Optionee
further agrees that, if the Corporation does not withhold an amount from the Optionee’s remuneration sufficient to satisfy
the withholding obligation of the Corporation, the Optionee will make reimbursement on demand, in cash, for the amount underwithheld.


 




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IN WITNESS WHEREOF, the Corporation
has caused this Non-Qualified Stock Option Agreement to be duly executed by its officer thereunto duly authorized, and the Optionee
has hereunto set his hand and seal all on the day and year first above written.


 


	 	PSYCHEMEDICS CORPORATION
	 	 	 
	 	By: 	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	 
	 	[name of Optionee]
	 	 
	 	 
	 	Address
	 	 
	 	 


 




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