Exhibit 10.3

 

STOCK UNIT AWARD AGREEMENT

 

(For Non-employee Directors; granted under the Psychemedics Corporation 2006
Incentive Plan)

 

1.           Award of Stock Unit Awards.   Psychemedics Corporation (hereinafter
the “Company”), in the exercise of its sole discretion pursuant to the
Psychemedics Corporation 2006 Incentive Plan, as amended (the “Plan”), does on
______________ (the “Award Date”) hereby award to _________________ (the
“Awardee”) _________ Stock Unit Awards (“SUAs”) upon the terms and subject to
the conditions hereinafter contained. Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Plan. SUAs represent the
Company’s unfunded and unsecured promise to issue shares of Common Stock at a
future date, subject to the terms of this Award Agreement and the Plan. Awardee
has no rights under the SUAs other than the rights of a general unsecured
creditor of the Company.

 

2.           Vesting Schedule and Conversion of SUAs.  

 

(a)          Subject to the terms of this Award Agreement and the Plan and
provided that Awardee continues to serve as a director of the Company throughout
the vesting periods set out below, the SUAs shall vest and be converted into an
equivalent number of shares of Common Stock that will be distributed to the
Awardee as follows; provided that fractional SUAs shall be converted into shares
of Common Stock as set out in Section 6 of this Award Agreement:

 

Vesting Date

  Percentage
of SUAs  [one year from date of grant]   50% [two years from date of grant] 
 50%

 

 

 

 

(b)          Notwithstanding the vesting schedule set forth in subsection (a)
above, if there is a Change in Control of the Company (as defined below), then
so long as the Awardee shall have continued to serve as a director of the
Company through the date which is one day prior to the actual closing date of
the transaction giving rise to such Change in Control (the “Acceleration Date”),
then all of the SUA’s that are unvested on the Acceleration Date shall become
vested in full on the Acceleration Date, subject, however, to the provisions of
Section 18 of this Award Agreement. For the purpose of this Agreement, a “Change
in Control” shall mean (i) the consummation of a reorganization, merger or
consolidation or sale or disposition of all or substantially all of the assets
of the Company (a “Business Combination”), unless, in each case following such
Business Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners of the Common Stock of the Company
immediately before the consummation of such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation that as a result of
the transaction owns the Company or all or substantially all of the assets of
the Company either directly or indirectly through one or more subsidiaries); and
(B) no person or group (as defined in Section 13(d) or 14(d)(2) of the
Securities Exchange Act of 1934) of the Company or the corporation resulting
from the Business Combination) beneficially owns, directly or indirectly, more
than 30% of the then outstanding shares of the common stock of the corporation
resulting from the Business Combination; (ii) Individuals who, as of the date of
this Agreement, constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board of
Directors of the Company, provided, however, that any individual's becoming a
director after the date of this Agreement whose election, or nomination for
election by the stockholders of the Company, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board will be
considered as though the individual were a member of the Incumbent Board, but
excluding, for this purpose, any individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board; or
(iii) any person (as defined in Section 13(d) or 14(d)(2) of the Securities
Exchange Act of 1934) shall become at any time or in any manner the beneficial
owner of capital stock of the Company representing more than 30% of the voting
power of the Company.

 

3.           Termination of Awardee’s Status as a Director.   Subject to the
provisions of Sections 4 and 5 below, in the event of termination, for any
reason, of Awardee’s status as a director of the Company, Awardee’s rights under
this Award Agreement in any unvested SUAs shall terminate.

 

4.           Disability or Retirement of Awardee.   Notwithstanding the
provisions of Section 3 above, in the event of termination of Awardee’s status
as a director of the Company as a result of disability (within the meaning of
Section 409A of the Internal Revenue Code, and hereinafter referred to as
“Disability”), or retirement, all of the SUA’s that are unvested on the date of
the Disability or such retirement shall become vested in full, subject, however,
to the provisions of Section 18 of this Award Agreement. For purposes of the
preceding sentence, the failure of the Awardee to be re-elected as a director of
the Company, for any reason, at any annual or special meeting of stockholders of
the Company, provided the Awardee continues to serve as a director of the
Company through the date of such annual or special meeting, shall be deemed to
be a termination on account of retirement.

 

5.           Death of Awardee.   Notwithstanding the provisions of Section 3
above, in the event of the death of Awardee during the time that he is serving
as a member of the Board of Directors of the Company, all of the SUA’s that are
unvested on the date of the death shall become vested in full, subject, however,
to the provisions of Section 18 of this Award Agreement.

 

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6.           Conversion of SUAs to shares of Common Stock; Responsibility for
Taxes.  

 

(a)           Provided Awardee has satisfied the requirements of Section 6(b)
below, and subject, however, to the provisions of Section 18 of this Award
Agreement, on the vesting of any SUAs, such vested SUAs shall be converted into
an equivalent number of shares of Common Stock that will be distributed to
Awardee or, in the event of Awardee’s death, to Awardee’s legal representative,
as soon as practicable. An Awardee’s rights with respect to the SUA’s issued
under this Award Agreement shall terminate at the time such SUAs are converted
into shares of Common Stock. The distribution to the Awardee, or in the case of
the Awardee’s death, to the Awardee’s legal representative, of shares of Common
Stock in respect of the vested SUAs shall be evidenced by a stock certificate,
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company, or other appropriate means as determined by the Company.

 

(b)          Prior to the issuance of shares of Common Stock upon vesting of
SUAs as provided in Section 6(a) above, Awardee shall pay, or make adequate
arrangements satisfactory to the Company (in its sole discretion) to satisfy all
withholding obligations of the Company, to the extent applicable.

 

(c)           In lieu of issuing fractional shares of Common Stock, on the
vesting of a fraction of a SUA, the Company shall round the shares to the
nearest whole share and any such share which represents a fraction of a SUA will
be included in a subsequent vest date.

(d)          Until the distribution to Awardee of the shares of Common Stock in
respect to the vested SUAs is evidenced by a stock certificate, appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company, or other appropriate means, Awardee shall have no right to vote or
receive dividends or any other rights as a shareholder with respect to such
shares of Common Stock, notwithstanding the vesting of SUAs. Subject to the
provisions of Section 18 of this Award Agreement, the Company shall cause such
distribution to Awardee to occur promptly upon the vesting of SUAs. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date Awardee is recorded as the owner of the shares of Common
Stock, except as provided in Section 7 of the Plan.

 

7.          Non-Transferability of SUAs.   Awardee’s right in the SUAs awarded
under this Award Agreement and any interest therein may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner, other than by
will or by the laws of descent or distribution, prior to the distribution of the
shares of Common Stock in respect of such SUAs. SUAs shall not be subject to
execution, attachment or other process.

 

8.          Agreement of Awardee. By accepting the Award, Awardee agrees to
continue to serve as a director of the Company during the term for which he or
she was elected. By accepting the Award of SUAs evidenced by this Award
Agreement, Awardee agrees not to sell any of the shares of Common Stock received
on account of vested SUAs at a time when applicable laws or Company policies
prohibit a sale. This restriction shall apply so long as Awardee is a director
of the Company.

 

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9.           Acknowledgment of Nature of Plan and SUAs.   In accepting the
Award, Awardee acknowledges that:

 

(a)          the Plan is established voluntarily by the Company, it is
discretionary in nature and may be modified, amended, suspended or terminated by
the Company at any time, as provided in the Plan;

 

(b)          the Award of SUAs is voluntary and occasional and does not create
any contractual or other right to receive future awards of SUAs, or benefits in
lieu of SUAs even if SUAs have been awarded repeatedly in the past;

 

(c)          all decisions with respect to future awards, if any, will be at the
sole discretion of the Company;

 

(d)          Awardee’s participation in the Plan is voluntary;

 

(e)          the future value of the underlying shares of Common Stock is
unknown and cannot be predicted with certainty;

 

(f)          if Awardee receives shares of Common Stock, the value of such
shares of Common Stock acquired on vesting of SUAs may increase or decrease in
value;

 

(g)          Awardee acknowledges and agrees that, in the event of termination
of the Awardee’s service on the Company’s Board of Directors, regardless of the
reasons for such termination, Awardee has no right to, and will not bring any
legal claim or action for, (a) any damages for any portion of the SUAs that have
been vested and converted into Common Shares, or (b) termination of any unvested
SUAs under this Award Agreement.

 

10.         Administration.   The authority to manage and control the operation
and administration of this Award Agreement shall be vested in the Committee (as
defined in Section 1 of the Plan), and the Committee shall have all powers and
discretion with respect to this Award Agreement as it has with respect to the
Plan. Any interpretation of the Award Agreement by the Committee and any
decision made by the Committee with respect to the Award Agreement shall be
final and binding on all parties.

 

11.         Plan Governs.   Notwithstanding anything in this Award Agreement to
the contrary, the terms of this Award Agreement shall be subject to the terms of
the Plan, and this Award Agreement is subject to all interpretations,
amendments, rules and regulations promulgated by the Committee from time to time
pursuant to the Plan.

 

12.         Notices.   Any written notices provided for in this Award Agreement
which are sent by mail shall be deemed received three business days after
mailing, but not later than the date of actual receipt. Notices shall be
directed, if to Awardee, at the Awardee’s address indicated by the Company’s
records and, if to the Company, at the Company’s principal executive office.

 

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13.         Electronic Delivery.   The Company may, in its sole discretion,
decide to deliver any documents related to SUAs awarded under the Plan or future
SUAs that may be awarded under the Plan by electronic means or request Awardee’s
consent to participate in the Plan by electronic means. Awardee hereby consents
to receive such documents by electronic delivery and agrees to participate in
the Plan through an on-line or electronic system established and maintained by
the Company or another third party designated by the Company.

 

14.         Acknowledgment.   By Awardee’s acceptance as evidenced below,
Awardee further acknowledges that Awardee has received and has read, understood
and accepted all the terms, conditions and restrictions of this Award Agreement
and the Plan. Awardee understands and agrees that this Award Agreement is
subject to all the terms, conditions, and restrictions stated in this Award
Agreement and the Plan, as the latter may be amended from time to time in the
Company’s sole discretion.

 

15.         Governing Law.   This Award Agreement shall be governed by the laws
of the State of Delaware, without regard to Delaware laws that might cause other
law to govern under applicable principles of conflicts of law.

 

16.         Severability.   If one or more of the provisions of this Award
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby and the invalid, illegal or
unenforceable provisions shall be deemed null and void; however, to the extent
permissible by law, any provisions which could be deemed null and void shall
first be construed, interpreted or revised retroactively to permit this Award
Agreement to be construed so as to foster the intent of this Award Agreement and
the Plan.

 

17.         Complete Award Agreement and Amendment.   This Award Agreement and
the Plan constitute the entire agreement between Awardee and the Company
regarding SUAs. Any prior agreements, commitments or negotiations concerning
these SUAs are superseded. This Award Agreement may be amended only by written
agreement of Awardee and the Company, without consent of any other person.
Awardee agrees not to rely on any oral information regarding this Award of SUAs
or any written materials not identified in this Section 17.

 

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18.         Section 409A. This Award Agreement is intended to be in compliance
with the provisions of Section 409A of the Internal Revenue Code, as amended
(the “Code”), and the regulations thereunder to the extent applicable. To the
extent that any provision of this Agreement is ambiguous as to its compliance
with Section 409A of the Code, the provision shall be read in such a manner so
that all payments hereunder comply with Section 409A of the Code. The parties
agree that this Agreement may be amended, as reasonably requested by either
party, and as may be necessary to fully comply with Section 409A of the Code and
all related rules and regulations in order to preserve the payments and benefits
provided hereunder without additional cost to either party. Solely for the
purposes of Section 409A of the Code, the share increments issuable on each
vesting date on Schedule A shall be considered a separate payment. The Company
makes no representation or warranty and shall have no liability to the Awardee
or any other person if any provisions of this Agreement are determined to
constitute deferred compensation subject to Section 409A of the Code but do not
satisfy an exemption from, or the conditions of, such Section.

 

 

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EXECUTED as of the day and year first above written.

 

  PSYCHEMEDICS CORPORATION             By:  

 

AWARDEE’S ACCEPTANCE:

 

I have read and fully understood this Award Agreement and I accept and agree to
the terms, conditions and restrictions contained in this Award Agreement and the
Plan.

 

    [name of non-employee director]  

 

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