Document:

exv10w4

 

Exhibit 10.4

Fiscal Year 2006 Bonus Plan Enhancement

Addendum to Fiscal Year 2006 Bonus Plan

Each bonus eligible associate of the Company will receive a one-time bonus enhancement applicable
to the associate’s Fiscal Year 2006 Annual Bonus Plan (but excluding Store Manager and Assistant
Store Manager level annual bonus plans, and other special project bonuses). Aaron Brothers
District Managers are on a quarterly bonus plan and will be eligible for an enhancement plan using
similar concepts as outlined below.

Purpose

The Company’s management team represents an important asset of the Company. This Bonus Plan
Enhancement will serve to provide retention value to employees during a year in which the Company
explores strategic alternatives to increase its stockholders’ value, encourage continued high
levels of performance, and to ensure focus on and continuity of the Company’s business operations.

Bonus Plan Enhancement Details

	 	1.	 	The eligibility provisions set forth in the associate’s FY 2006 Bonus Plan apply to
this Bonus Enhancement.
	 
	 	2.	 	The Company guarantees a bonus payment to the associate under the FY 2006 Bonus Plan at
a payout level of one step below Target (i.e., Plan 100%), to be paid in March 2007.
	 
	 	3.	 	In addition to the bonus payout outlined in the associate’s FY 2006 Bonus Plan, each
associate will be eligible to receive an additional bonus payment of between 0% and 75% of
the Target bonus percentage. Determination of the additional bonus payment will be based
solely upon the associate’s FY 2006 Performance Appraisal rating, as follows:

	 	 	 
	FY 2006 Performance Appraisal Rating	 	 
	*	 	Additional Payout Potential
	Exceeds Expectations
	 	75% of Target bonus payout
	High Meets Expectations
	 	50% of Target bonus payout
	Low Meets Expectations
	 	25% of Target bonus payout
	Needs Development
	 	0%

 

			
	*	 	More details on this rating scale will be distributed prior to the FY 2006 mid-year
review

Example

	 	1.	 	Assume an employee with a FY 2006 bonus eligible salary of $60,000 (as of FY begin:
January 29, 2006), with a Target bonus of 10% and Super bonus of 15%, as outlined in the
employee’s FY 2006 Bonus Plan.
	 
	 	2.	 	At a payout level of one step below Target (FY 2006 guarantee), the FY 2006 bonus
payment would be:

	 	•	 	$60,000 X 8.75% = $5,250 (may be higher based upon actual bonus plan
criteria performance)

	 	3.	 	The additional payout potential based upon the associate’s individual performance would
add the following, depending upon the FY 2006 Performance Appraisal rating:

	 	•	 	If Low Meets Expectations (25% X Target 10% X $60,000) = $1,500
	 
	 	•	 	If High Meets Expectations (50% X Target 10% X $60,000) = $3,000
	 
	 	•	 	If Exceeds Expectations (75% X Target 10% X $60,000) = $4,500

	 	4.	 	If the associate is rated Low Meets Expectations, the total minimum payout potential
would be:

	 	•	 	$5,250 + $1,500 = $6,750

	 	5.	 	If the associate is rated Exceeds Expectations and the Super payout level is achieved,
the payout potential would be:

	 	•	 	$60,000 X 15% = $6,000 plus $4,500 = $10,500

Plan Modifications

Your rights under this Bonus shall be personal and are not subject to any additional conditions
or requirements. You may rely on the terms set forth in this Bonus Plan, and the Company may not
adversely amend or modify your rights, or terminate your Bonus, without your prior written consent.
Upon a Change in Control (as defined in the Company 2005 Incentive Compensation Plan), the Company
shall administer the terms of your Bonus in the ordinary course of its business, and any successor
to the business or the assets of the Company shall be bound by the terms of this Bonus Plan to the
same extent that the Company would have otherwise been obligated to you. In the event that any
successor would not be required to be bound by the terms of this Bonus Plan under applicable law,
the Company shall require such successor to expressly and unconditionally assume and agree to
perform the Company’s obligations under this Bonus Plan, in the same manner and to the same extent
that the Company would have been required to perform such obligations if no such succession would
have taken place.exv4w3

 

Exhibit 4.3

STOCK UNIT AWARD AGREEMENT

(Granted under the Psychemedics Corporation 2006 Equity 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 Equity
Incentive Plan (the “Plan”), does on <<GrantDate>> (the “Award Date”) hereby award to
<<FullName>> (the “Awardee”) <<SharesGrantedQuantity>> 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
remains continuously employed 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 8 of this Award Agreement:

	 	 	 	 	 
	 	 	Percentage
	Vesting
Date	 	of
SUAs
	 
	One (1) year from the Award Date

	 	 	25	%
	 
	 	 	 	 
	Two (2) years from the Award Date

	 	 	25	%
	 
	 	 	 	 
	Three (3) years from the Award Date

	 	 	25	%
	 
	 	 	 	 
	Four (4) years from the Award Date

	 	 	25	%

          (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 all of the SUA’s shall become vested in
full immediately prior to the effective date of such Change in Control, subject, however, to the
provisions of Section 21 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. Unless terminated earlier under Section 4, 5 or 6 below, an
Awardee’s rights under this Award Agreement with respect to the SUAs issued under this Award
Agreement shall terminate at the time such SUAs are converted into shares of Common Stock.

     4. Termination of Awardee’s Status as a Participant. Except as otherwise specified
in Section 5 and 6 below, in the event of termination of Awardee’s Continuous Status as a
Participant (as defined below), Awardee’s rights under this Award Agreement in any unvested SUAs
shall terminate. For purposes of this Award Agreement, an Awardee’s Continuous Status as a
Participant shall mean (1) for employees of the Company, the absence of any interruption or
termination of service as an employee, and (2) for consultants of the Company, the absence of any
interruption, expiration, or termination of such person’s consulting or advisory relationship with
the Company or the occurrence of any termination event as set forth in such person’s Award
Agreement. Continuous Status as a Participant shall not be considered interrupted (i) for an
Employee in the case of sick leave or leave of absence for which Continuous Status is not
considered interrupted as determined by the Company in its sole discretion, and (ii) for a
consultant of the Company, in the case of any temporary interruption in such person’s availability
to provide services to the Company which has been authorized in writing by the President or a Vice
President of the Company prior to its commencement.

     5. Disability of Awardee. Notwithstanding the provisions of Section 4 above, in the
event of termination of Awardee’s Continuous Status as a Participant as a result of disability
(within the meaning of Section 409A of the Internal Revenue Code, and hereinafter referred to as

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“Disability”), the SUAs which would have vested during the twelve (12) months following the date of
such termination, set out in Section 2(a) above, shall become vested as of the date of such
termination, subject, however, to the provisions of Section 21 of this Award Agreement. If
Awardee’s Disability originally required him or her to take a short-term disability leave which was
later converted into long-term disability, then for the purposes of the preceding sentence the date
on which Awardee ceased performing services shall be deemed to be the date of commencement of the
short-term disability leave. The Awardee’s rights in any unvested SUAs that remain unvested after
the application of this Section 5 shall terminate at the time Awardee ceases to be in Continuous
Status as a Participant.

     6. Death of Awardee. Notwithstanding the provisions of Section 4 above, in the event
of the death of Awardee:

          (a) If Awardee is, at the time of death, in Continuous Status as a Participant, the SUAs which
would have vested during the twelve (12) months following the date of death of Awardee, set out in
Section 2(a) above, shall become vested as of the date of death.

          (b) The Awardee’s rights in any unvested SUAs that remain after the application of Section
6(a) shall terminate at the time of the Awardee’s death.

     7. Value of Unvested SUAs. In consideration of the award of these SUAs, Awardee
agrees that upon and following termination of Awardee’s Continuous Status as a Participant for any
reason (whether or not in breach of applicable laws), and regardless of whether Awardee is
terminated with or without cause, notice, or pre-termination procedure or whether Awardee asserts
or prevails on a claim that Awardee’s employment was terminable only for cause or only with notice
or pre-termination procedure, any unvested SUAs under this Award Agreement shall be deemed to have
a value of zero dollars ($0.00).

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

          (a) Provided Awardee has satisfied the requirements of Section 8(b) below, and subject to the
provisions of Section 21 below, 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. 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) Regardless of any action the Company takes with respect to any or all income tax
(including federal, state and local taxes), social security, payroll tax or other tax-related
withholding (“Tax Related Items”), Awardee acknowledges that the ultimate liability for all Tax
Related Items legally due by Awardee is and remains Awardee’s responsibility and that the Company
(i) makes no representations or undertakings regarding the treatment of any Tax

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Related Items in
connection with any aspect of the SUAs, including the grant of the SUAs, the vesting of SUAs, the
conversion of the SUAs into shares of Common Stock, the subsequent sale of any shares of Common
Stock acquired at vesting and the receipt of any dividends; and (ii) does not commit to structure the terms of the grant or any aspect of the SUAs to reduce or
eliminate the Awardee’s liability for Tax Related Items. Prior to the issuance of shares of Common
Stock upon vesting of SUAs as provided in Section 8(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. In this regard, Awardee authorizes the Company to withhold all
applicable Tax Related Items legally payable by Awardee from Awardee’s wages or other cash
compensation payable to Awardee by the Company. Alternatively, or in addition, if permissible
under applicable law, the Company may, in its sole discretion, (i) sell or arrange for the sale of
shares of Common Stock to be issued on the vesting of SUAs to satisfy the withholding obligation,
and/or (ii) withhold in shares of Common Stock, provided that the Company shall withhold only the
amount of shares necessary to satisfy the minimum withholding amount. Awardee shall pay to the
Company any amount of Tax Related Items that the Company may be required to withhold as a result of
Awardee’s receipt of SUAs, the vesting of SUAs, or the conversion of vested SUAs to shares of
Common Stock that cannot be satisfied by the means previously described. Except where applicable
legal or regulatory provisions prohibit, the standard process for the payment of an Awardee’s Tax
Related Items shall be for the Company to withhold in shares of Common Stock only to the amount of
shares necessary to satisfy the minimum withholding amount. The Company may refuse to deliver
shares of Common Stock to Awardee if Awardee fails to comply with Awardee’s obligation in
connection with the Tax Related Items as described herein.

          (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 21
below, 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 10 of the Plan.

          (e) 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 an
Employee, Consultant or outside director of the Company or a Subsidiary of the Company.

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     9. 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.

     10. 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) notwithstanding any terms or conditions of the Plan to the contrary and consistent with
Section 4 and Section 7 above, in the event of involuntary termination of Awardee’s employment
(whether or not in breach of applicable laws), Awardee’s right to receive SUAs and vest under the
Plan, if any, will terminate effective as of the date that Awardee is no longer actively employed
and will not be extended by any notice period mandated under applicable law; furthermore, in the
event of involuntary termination of employment (whether or not in breach of applicable laws),
Awardee’s right to receive shares of Common Stock pursuant to the SUAs after termination of
employment, if any, will be measured by the date of termination of Awardee’s active employment and
will not be extended by any notice period mandated under applicable law. The Committee shall have
the exclusive discretion to determine when Awardee is no longer actively employed for purposes of
the award of SUAs; and

          (h) Awardee acknowledges and agrees that, regardless of whether Awardee is terminated with or
without cause, notice or pre-termination procedure or whether Awardee asserts or prevails on a
claim that Awardee’s employment was terminable only for cause or only with notice or
pre-termination procedure, Awardee has no right to, and will not bring any legal claim

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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.

     11. No Employment Right. Awardee acknowledges that neither the fact of this Award of
SUAs nor any provision of this Award Agreement or the Plan or the policies adopted pursuant to the
Plan shall confer upon Awardee any right with respect to employment or continuation of current
employment with the Company, or to employment that is not terminable at will. Awardee further acknowledges and agrees that neither the Plan nor this Award of SUAs
makes Awardee’s employment with the Company for any minimum or fixed period, and that such
employment is subject to the mutual consent of Awardee and the Company , and may be terminated by
either Awardee or the Company at any time, for any reason or no reason, with or without cause or
notice or any kind of pre- or post-termination warning, discipline or procedure.

     12. Administration. The authority to manage and control the operation and
administration of this Award Agreement shall be vested in the Committee (as such term is defined in
Section 2 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.

     13. 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.

     14. 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.

     15. 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.

     16. Acknowledgment. By Awardee’s acceptance as evidenced below, Awardee 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. The
Awardee further acknowledges that he or she must accept this Award Agreement in the manner
prescribed by the Company no later than the earlier of the first

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anniversary of Award Date or the
first vesting date specified in Section 2(a) of this Award Agreement.

     17. Board Approval. These SUAs have been awarded pursuant to the Plan and
accordingly this Award of SUAs is subject to approval by an authorized committee of the Board of
Directors. If this Award of SUAs has not already been approved, the Company agrees to submit this
Award for approval as soon as practical. If such approval is not obtained, this award is null and
void.

     18. 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.

     19. 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.

     20. 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 20.

     21. Section 409A of the Internal Revenue Code. This Award Agreement is intended to be
in compliance with the provisions of Section 409A of the Internal Revenue Code to the extent
applicable, and the Regulations thereunder. If: (a) the Awardee is a “specified employee”, as
such term is defined in Prop. Reg. Section 1.409A-1(i); and (b) there occurs a separation of
service (within the meaning of Section 409A of the Internal Revenue Code) of the Awardee, for any
reason, including, without limitation, due to a Change in Control pursuant to Section 2(b) above or
a Disability pursuant to Section 5 above, then any shares of Common Stock that would otherwise have
been distributable to the Awardee upon such separation of service, or within 6 months thereafter,
shall instead be distributable on the earlier to occur of (i) the date which is six (6) months
following such separation of service, or (ii) the date of death of the Awardee. Notwithstanding
anything set forth in this Agreement to the contrary, in the event the issuance of Common Stock to
the Awardee as a result of the vesting of SUA’s would conflict with the provisions of said Section
409A or the Regulations thereunder, as the same may be amended, then such issuance shall be
deferred to the extent necessary so as to remain in compliance with said Section 409A and the
Regulations thereunder.

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     EXECUTED the day and year first above written.

	 	 	 	 	 
	 	PSYCHEMEDICS CORPORATION

 	 
	 
	 
	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

AWARDEE’S ACCEPTANCE:

I have read and fully understood this Award Agreement and, as referenced in Section 16 above, I
accept and agree to be bound by all of the terms, conditions and restrictions contained in this
Award Agreement and the other documents referenced in it.

 

9

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