Exhibit 10
[FEBRUARY 16, 2007 LETTER AGREEMENT WITH PETER C. MONSON]
February 16, 2007
Peter C. Monson
Psychemedics Corporation
125 Nagog Park
Suite 200
Acton, MA 01720
Dear Peter:
          This letter will serve as an Agreement (the “Agreement” or “letter
Agreement”) between you and Psychemedics Corporation (the “Company”), concerning
the terms and conditions of your separation from employment.
          1. You and the Company have agreed that your employment with the
Company will terminate effective with the close of business on March 31, 2007
(the “Termination Date”).
          2. On or before the Termination Date the Company will pay you your
accrued salary and all accrued vacation through the Termination Date. Effective
on the Termination Date, provided that you have faithfully performed your
obligations as CFO of the Company through the Termination Date, including the
preparation execution and filing of the Company’s Form 10-K and Proxy Statement
and related certificates, the Company will begin to pay you severance in the
form of continuation of your current base salary for a period of fourteen weeks
through the week ending July 7, 2007. (The period from April 1, 2007 through
July 7, 2007 is hereafter sometimes referred to as the “Severance Period”). Such
payments will be made when the Company normally makes its payments of payroll
and shall be subject to all required tax withholding and withholding for any
permitted employee benefits in which you have chosen to participate. In
addition, the Company will continue to contribute its share of your health
insurance premiums during the Severance Period and will reimburse you for such
payments as you are required to make to maintain your existing coverage under
the Title X of the Consolidated Omnibus Budget Reconciliation Act of 1988 as
amended (COBRA) for the period from the expiration of the Severance Period
through September 30, 2007 (the “COBRA Reimbursement Period”). The Company will
provide to you the appropriate forms and instructions necessary to allow you,
effective as of the expiration of the Severance Period, to participate in the
continuation of benefit plans in accordance with the terms of COBRA. All
payments provided for in this Section 2, other than the payment for accrued
salary and vacation, are hereafter sometimes referred to as the “Severance
Benefits”.
          3. If, during the Severance Period or the COBRA Reimbursement Period,
you accept full time employment with health benefits from another employer, the
Company will no longer be obligated to maintain your coverage under the
Company’s health plan or to make payments of health insurance premiums on your
behalf. By signing this Agreement you represent to the Company that you will
promptly inform the Company, in the event that you accept such full time
employment with benefits. You acknowledge that your failure to so notify the
Company, may result in an action by the Company, to recover monies paid to you
in violation of the terms of this Agreement.
          4. In consideration of the promises made by the Company, to you in
this Agreement, you hereby fully and finally forever discharge the Company, from
any and all claims, causes of actions and/or liabilities of any type in law or
in equity arising out of any circumstances concerning your employment with the
Company, and/or termination of employment from the Company, whether known or
unknown and/or asserted or unasserted, including, but not limited to, claims
that have been or could have been asserted under Title VII of the Civil Rights
Act of 1964, The Age Discrimination in Employment Act, The Civil Rights Act of
1991, The Family and Medical Leave Act of 1993, The Employee Retirement Income
Security Act, The Rehabilitation Act of 1973, The Americans With Disabilities
Act of 1990 and/or any other state, federal or municipal employment

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statutes (including but not limited to claims based on age, sex, attainment of
benefit plan rights, race, religion, handicap, retaliation, and veteran status),
and/or any other federal, state, or local statute, law, ordinance, regulation
and/or pursuant to any other theory whatsoever, including but not limited to
claims related to implied or expressed employment contracts, defamation, public
policy or tort claims, and common law claims, or pursuant to any other theory or
claim whatsoever, arising out of or related to your employment with the Company,
and/or your termination of employment from the Company, and/or any other
occurrence from the beginning of time to the date of this Agreement, whether
presently asserted or otherwise, and it is expressly understood that this
Agreement is a General Release of any and all claims that you may have against
the Company related to your employment or the termination thereof, except that
nothing in this General Release shall act as a release of any rights to
indemnification you may have under the Company’s By Laws, any rights under any
written pension or welfare plan or under any currently effective written stock
option agreement or as a release of any claims for breach of this Agreement.
          5. You agree that you are entering into this letter Agreement of your
own free will in order to receive the payments and benefits described above. You
understand that the Company would not provide Severance Benefits to you without
your voluntary consent to this letter Agreement and the fulfillment of the
promises contained herein.
          6. You agree not to make any statement, oral or written, publicly or
in private, which is reasonably foreseeable as harming the company’s reputation
as an employer, or impacts negatively on the Company’s business reputation or
its reputation in the community. Any violation of this paragraph will be deemed
a breach of this letter Agreement obligating you to return immediately all of
the Severance Benefits paid to you under the terms of this letter Agreement.
          7. You hereby represent that, on or before the Termination Date, you
will return all documents, records and property of any kind in your possession
or control that belong to the Company and will resign as CFO, Treasurer,
Assistant Secretary and from any other positions with the Company.
          8. You will be afforded at least twenty-one (21) days to consider the
meaning and effect of this letter Agreement. You may wish to consult with an
attorney and you acknowledge that you have had the opportunity to do so. Any
changes to the offer, whether material or otherwise, do not restart the running
of the 21-day consideration period.
          9. You may revoke this letter Agreement for a period of seven (7) days
following the day you execute this letter Agreement. Any revocation within this
period must be submitted, in writing, to me and must state, “I hereby revoke my
acceptance of the letter Agreement.” The revocation must be personally delivered
to me or mailed, postage prepaid, to me at Psychemedics Corporation, 125 Nagog
Park, Suite 200, Acton, MA 01720 and must be postmarked within seven (7) days
after the date on which you sign this letter Agreement. This letter Agreement
shall not become effective or enforceable until the revocation period has
expired. If the last day of the revocation period is a Saturday, Sunday, or
legal holiday in Massachusetts, then the revocation period shall not expire
until the next following day which is not a Saturday, Sunday, or legal holiday.
     10. You confirm that no claim, charge, complaint or action arising out of
the termination of your employment exists in any forum or form. In the event
that such claim, charge, complaint or action is filed, you shall not be entitled
to recover any relief or recovery there from, including costs and attorneys’
fees.
          11. This letter Agreement may not be modified, altered or changed
except upon signed written consent of both parties.
     12. This letter Agreement represents the complete Agreement between you and
the Company, and fully supersedes any prior Agreements or understandings between
the parties pertaining to the subject matter hereof. You acknowledge that you
remain subject to the non-disclosure obligations set forth in paragraphs 3 and 4
of the November 17, 2003 letter agreement between you and the Company. You
acknowledge that you have not relied on any representations, promises, or
Agreements of any kind made to you in connection with your decision to sign this
letter Agreement, except those set forth herein.
          13. This letter Agreement will be interpreted under the laws of the
Commonwealth of Massachusetts. If any provision of this letter Agreement is
declared illegal or unenforceable, excluding the

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general release language in paragraph 4, such provision shall immediately become
null and void, leaving the remainder of this letter Agreement in full force and
effect. However, if any portion of the general release language in paragraph 4
is ruled to be unenforceable for any reason, you shall return all of the
Severance Benefits paid to you under the terms of this letter Agreement
immediately to me or my designee at the Company.
          The Company, would like to extend to you its appreciation for your
past service, and its sincere hope for success in your future endeavors.

                  Very truly yours,           Psychemedics Corporation      
 
  By:   /s/ Raymond C. Kubaki, Jr.    
 
     
 
      Raymond C. Kubacki, Jr.    

I have been advised in writing that I have at least twenty-one (21) days to
consider this Agreement and to consult with an attorney prior to execution of
this letter Agreement.
I agree that any modifications, material or otherwise, made to this Agreement do
not restart or affect in any manner the original twenty-one (21) day
consideration period.
Having elected to execute this letter Agreement, to fulfill the promises set
forth herein, and to receive thereby the severance benefits set forth in
Paragraph No. 2 above, I freely and knowingly, and after due consideration,
enter into this letter Agreement intending to waive, settle and release all
claims I have or might have against Psychemedics Corporation.

             
Date: February 16, 2007
  Signature:   /s/ Peter C. Monson    
 
     
 
     Peter C. Monson    

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