exv10w2






Exhibit 10.2




July 10, 2008




CONFIDENTIAL




Michael I. Schaffer, Ph.D.

c/o Psychemedics Corporation

5832 Uplander Way

Culver City, CA 90230-6608




Dear Mike:




     This letter sets forth the agreements we have made regarding your employment with Psychemedics
Corporation (the “Company”).




	 	1.	 	If at any time after the effective date hereof and prior to the date which is
five (5) years following the date hereof, your employment is terminated by the Company
without “Cause” (as defined in paragraph 13 below), or you voluntarily terminate your
employment for “Good Reason” (as defined in paragraph 13 below), in either case at the
time of, or within twelve (12) months following, a “Change of Control of the Company”
(as defined in paragraph 13 below), then you will continue to be paid monthly an amount
equal to your average monthly compensation for the twelve full months preceding the
date of such termination (“Termination Pay”) for a period of twelve (12) months from
the date of such termination. For purposes of the foregoing sentence, average monthly
compensation shall be determined with reference to the aggregate base salary and cash
bonus compensation earned by you during such period, including any cash bonus
compensation accrued for such period or any portion of such period but not paid as of
the date of such termination). Your Termination Pay will be subject to normal
deductions for taxes, benefit plan contributions, other payroll deductions and any
amount due the Company as a result of cash advances. The Company agrees to continue to
make health insurance available to you under such health insurance plan as the Company
has in effect for so long as you are receiving Termination Pay and so long as you
contribute such portion of the premiums for such insurance as is required of employees
under such plan. You agree, however, that if you obtain health insurance coverage
through another employer while you are eligible to receive health insurance under this
Agreement, the Company shall no longer be required to make health insurance available
to you under this Agreement. You agree to give the Company at least fourteen




 









 












	 	 	 	(14) days prior written notice of the termination of your employment in the event of
your voluntary termination without Good Reason. You shall not be entitled to
Termination Pay as a result of termination by reason of your death or “Disability”
(as defined in paragraph 13 below) following a Change of Control of the Company.
	 
	 	2.	 	Notwithstanding any other provision of this Agreement, the Termination Pay
contemplated to be paid to you under certain circumstances set forth in this Agreement
shall only be paid in consideration of the execution and delivery by you of a release
reasonably satisfactory to the Company waiving all claims you, your heirs, or legal
representatives have or may have against the Company or any of its shareholders,
officers, directors, employees or agents with respect to your employment or the
termination thereof, or any other claim.
	 
	 	3.	 	You acknowledge that, as the Company’s Vice President, Laboratory Operations,
you are in possession of specialized information concerning the total operations,
conduct, management, and strategy of the Company, as well as proprietary information
concerning the Company’s products and services and that the applicability of your
knowledge of these matters is applicable to all geographic areas in which the Company
does business. You further acknowledge that the Company has a legitimate business
interest in protecting its hair testing business from unfair competition.
	 
	 	4.	 	You shall not, without the prior and express written approval of the Company,
either during or subsequent to the term of your employment, disclose or use or enable
another to disclose or use any secret, private or confidential information, trade
secret or other proprietary knowledge of the Company, or its subsidiaries, divisions,
employees or agents. Upon termination of your employment with the Company, you shall
deliver to the Company all equipment, records and copies of records, notes, data,
memoranda, prototypes, designs, customer lists and other information which is embodied
in physical media and documents belonging to the Company which are then in your
possession. You agree that all such information and documents shall be the property of
the Company and that the obligations set forth in this paragraph shall survive
termination of your employment.
	 
	 	5.	 	You agree that, if you or the Company shall terminate your employment in such a
manner as to entitle you to Termination Pay under paragraph 1, above, you shall not,
for so long as you are entitled to receive such Termination Pay:






(a) directly or indirectly own, manage, operate or control, or participate in the
ownership, management, operation or control of, or become associated in any capacity
with any business enterprise, firm, corporation



 









 







or company related to the field of testing for the detection of drug use, which is
in competition with the business of the Company, or directly or indirectly accept
employment with or render services on behalf of a competitor of the Company, or any
other third party, in any capacity which may reasonably be considered to be useful
to the competitor or such other third party to become a competitor, without
receiving the Company’s prior written approval; or




(b) induce or attempt to induce any employee, officer, consultant, or agent of the
Company to leave the employ thereof or in any way interfere with the relationship
between the Company and any employee, officer, consultant, or agent thereof; hire
directly or through another entity any person who was an employee of the Company at
any time during the six (6) months prior to the date such person is to be so hired;
or induce or attempt to induce any customer, client, supplier, licensee, or other
business relation of the Company to cease doing business with the Company or in any
way interfere with the relationship between any such customer, client, supplier,
licensee, or business relation and the Company (including, without limitation,
making any negative statements or communications concerning the Company).




	 	6.	 	You agree that your obligations under paragraphs 4 and 5 are special, unique,
and extraordinary and that any breach by you of such obligations shall be deemed
material, and shall be deemed to cause irreparable injury not properly compensable by
damages in an action at law, and the rights and remedies of the Company under
paragraphs 4 and 5 may, therefore, be enforced both at law and in equity, by injunction
or otherwise. For purposes of paragraphs 4 and 5, the term “Company” shall include any
and all subsidiaries or divisions of the Company.
	 
	 	7.	 	The five year period set forth in paragraph 1 above may be extended only with
the mutual written agreement of the parties.
	 
	 	8.	 	If at any time a controversy between you and the Company arises as to the
meaning or operation of this Agreement, such controversy shall be submitted to
arbitration by either party in Boston, Massachusetts, before an arbitrator to be named
by the President of the Boston Branch of the American Arbitration Association, provided
however, that the Company shall also have the rights set forth in paragraph 6 above.
Such arbitration proceedings shall be conducted in accordance with the rules and
procedures then in effect of the American Arbitration Association. The decision of the
arbitrator shall be binding upon the parties and judgment on any award made by the
arbitrator may be entered in any court having jurisdiction thereof. The costs of the
arbitrator shall be borne equally by you and the Company. Each party will bear his or
its own legal costs.




 









 












	 	9.	 	This Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Massachusetts without reference to principles of conflict of
laws.
	 
	 	10.	 	This Agreement contains the entire agreement of the parties in respect of this
transaction and supersedes any prior agreement or understanding relating to your
employment by the Company other than any existing nondisclosure or confidentiality
agreements you may have with the Company. No amendment or modification of any
provision of this Agreement will be valid unless in writing signed by both parties.
Any waiver must be in writing and signed by you or an authorized officer of the
Company, as the case may be.
	 
	 	11.	 	This Agreement shall be binding upon and inure to the benefit of: (a) the Company, and any successors or assigns of the Company, whether by way of a
merger or consolidation, or liquidation of the Company, or by way of the Company
selling all or substantially all of the assets and business of the Company to a
successor entity; and, subject to the Company’s right to terminate your employment
at any time, the Company agrees to require any successor entity to expressly assume
or unconditionally guarantee the Company’s obligations under this Agreement (unless
such obligations are assumed by operation of law); and (b) you and your heirs,
executors and administrators.







	 	12.	 	Any notice or other communication required hereunder shall be in writing, shall
be deemed to have been given and received when delivered in person, or, if mailed,
shall be deemed to have been given when deposited in the United States mail, first
class, registered or certified, return receipt requested, with proper postage prepaid,
and shall be deemed to have been received on the third business day thereafter, and
shall be addressed as follows:
	 
	 	 	 	If to the Company, addressed to:




Psychemedics Corporation

125 Nagog Park, Suite 200

Acton, MA 01720

Attn: President





	 	 	 	If to you, addressed to:





Michael I. Schaffer, Ph.D.

5832 Uplander Way

Culver City, CA 90230-6608




 









 







or such other address as to which any party hereto may have notified the other in
writing.




	 	13.	 	Definitions.






(a) “Cause” shall mean: (i) theft or embezzlement, or attempted theft or
embezzlement, by you of money or property of the Company, your perpetration or
attempted perpetration of fraud, or your participation in a fraud or attempted fraud
upon the Company; (ii) your unauthorized appropriation of, or attempt to
misappropriate, any tangible or intangible assets or property of the Company, or
your appropriation of, or attempt to appropriate, a business opportunity of the
Company, including but not limited to attempting to secure or securing any profit
for yourself or any of your family members or personal associates in connection with
any transaction entered into on behalf of the Company; (iii) any act or acts of
disloyalty, misconduct, or moral turpitude by you, including but not limited to
violation of the Company’s sexual harassment or non-harassment policy, any of which
the Board of Directors of the Company determines in good faith has been or is likely
to be materially injurious to the interest, property, operations, business, or
reputation of the Company, or its directors, employees or shareholders; (iv) any act
or omission constituting gross negligence in connection with the performance of your
duties on behalf of the Company which is materially injurious to the interest,
property, operations, business, or reputation of the Company; (v) your conviction of
a crime other than minor traffic violations or other similar minor offenses
(including pleading guilty or entering a plea of no contest), or your indictment for
a felony or its equivalent, or your being charged with a violent crime, a crime
involving moral turpitude, or any other crime for which imprisonment is a possible
punishment; (vi) your willful refusal or material failure (other than by reason of
Disability) to carry out reasonable and lawful instructions and directives from the
Board of Directors and your failure to cure or correct such refusal or failure
within ten (10) days after receiving written notice from the Board of Directors
describing such refusal or failure; or (vii) the material breach by you of your
obligations under paragraphs 4 or 5 hereof or under any other confidentiality,
non-compete, non-solicitation, non-disparagement or similar agreement with the
Company.




(b) “Change in Control of the Company” shall mean




(i) any person or group as defined in Rule 13d-3 under the Securities
Exchange Act of 1934 (the “Exchange Act”) shall own more than 30% of the
then outstanding shares of the outstanding Common Stock of the Company; or



 









 






(ii) 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) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Common Stock of the
Company; and (B) no person or group (as defined in Section 13(d) of the
Exchange Act) 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 or of the combined voting power of the then
outstanding voting securities of the corporation; or




(iii) 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.




(c) “Disability” shall mean your inability because of physical or mental incapacity
to perform your usual duties at the Company for a period of one hundred eighty (180)
days in any consecutive twelve (12) month period.



 









 






(d) “Good Reason” shall mean: (i) reduction in your base salary below $226,600 or
such higher base salary as is in effect immediately prior to such reduction; or (ii)
a material decrease in your duties or responsibilities.



     If this letter correctly sets forth our understanding and agreement, please indicate your
acceptance by signing both copies of this letter and returning one copy.



	 	 	 	 	 
	 	Very truly yours,





PSYCHEMEDICS CORPORATION

 	 
	 	By:  	/s/ Raymond C. Kubacki, Jr.
 	 
	 	 	Raymond C. Kubacki, Jr., President 	 
	 	 	 	 
	 



	 	 	 	 	 
	Agreed to: July 10, 2008

 	 
	/s/ Michael I. Schaffer
 	 
	Michael I. Schaffer, Ph.D.