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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