Exhibit 10.1

 

INCENTIVE STOCK OPTION AGREEMENT

 

INCENTIVE STOCK OPTION AGREEMENT made this ___ day of _________, 20__ between
PSYCHEMEDICS CORPORATION, a Delaware corporation (hereinafter called the
Corporation), and ____________________, an employee of the Corporation or one or
more of its subsidiaries (hereinafter called the Employee).

 

The Corporation desires, by affording the Employee 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 Employee
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 intended by the parties hereto to be,
and shall 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 Employee, 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 Employee 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 Employee 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 Employment. 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 Employee ceases to be
an employee of the Corporation or one or more of its subsidiaries. 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 employment of
the Employee shall be terminated on account of the Employee'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 Employee 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. Notwithstanding the foregoing, the Employee
hereby acknowledges that in addition to other requirements, in order to be
entitled to favorable tax treatment under the Code with respect to the Option,
the Employee may not exercise the Option more than three months after the date
of termination of employment due to retirement. So long as the Employee shall
continue to be an employee of the Corporation or one or more of its
subsidiaries, the Option shall not be affected by any change of duties or
position. Nothing in this Option Agreement shall confer upon the Employee any
right to continue in the employ of the Corporation or of any of its subsidiaries
or interfere in any way with the right of the Corporation or any such subsidiary
to terminate his employment 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 (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
Employee and if the Employee shall so request in the notice exercising the
Option, the certificate or certificates shall be registered in the name of the
Employee 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 Employee (to the extent permitted under this
Incentive 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 Incentive 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 Incentive 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.

 

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.

 

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

 

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

 

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