Exhibit 10
PSYCHEMEDICS CORPORATION
2000 STOCK OPTION PLAN
(as adjusted to reflect the Company's 1-for-4 reverse stock split
effective August 1, 2002)
ESTABLISHMENT, OBJECTIVES AND DURATION
A. ESTABLISHMENT OF THE PLAN. Effective March 21, 2000 (the "Effective
Date"), Psychemedics Corporation, a Delaware corporation (hereinafter
referred to as the "Company"), established an incentive compensation plan
known as the Psychemedics Corporation 2000 Stock Option Plan (hereinafter
referred to as the "Plan"), as set forth in this document.
B. PURPOSE. The purpose of the Plan is to encourage key employees of
the Company and of any present or future parent or subsidiary of the
Company (collectively, "Related Corporations") and other individuals who
render services to the Company or a Related Corporation, by providing
opportunities to participate in the ownership of the Company and its future
growth through (a) the grant of options which qualify as "incentive stock
options" ("ISOs") under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); or (b) the grant of options which do not
qualify as ISOs ("Non-Qualified Options"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and
collectively as "Options." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
C. PRIOR PLANS SUPERSEDED. This Plan is intended to replace and
supercede the Company's 1989 Employee Stock Option Plan as amended, and the
Company's 1989 Non-Qualified Stock Option Plan, as amended (the "Prior
Plans"), provided, however that each outstanding option under the Prior
Plans shall remain in full force and effect in accordance with the terms of
the option agreement evidencing such option as in effect on the Effective
Date.
D. DURATION OF THE PLAN. The Plan commenced on the Effective Date and
shall remain in effect, subject to the right of the Board of Directors to
amend or terminate the Plan at any time pursuant to paragraph 15 hereof,
until all shares subject to it shall have been purchased or acquired
according to the Plan's provisions.
ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered
by the Board of Directors of the Company (the "Board") or, subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code), by
a committee appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the Board if no
Committee has been appointed. Subject to ratification of the grant of each
Option by the Board (if so
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required by applicable state law), and subject to the terms of the Plan,
the Committee shall have the authority to (i) determine to whom (from among
the class of employees eligible under paragraph 3 to receive ISOs) lSOs
shall be granted, and to whom (from among the class of individuals and
entities eligible under paragraph 3 to receive Non-Qualified Options)
Non-Qualified Options may be granted; (ii) determine the time or times at
which Options shall be granted; (iii) determine the purchase price of
shares subject to each Option, which prices shall not be less than the
minimum price specified in paragraph 6; (iv) determine whether each Option
granted shall be an ISO or a Non-Qualified Option; (v) determine (subject
to paragraph 8) the time or times when each Option shall become exercisable
and the duration of the exercise period; (vi) extend the period during
which outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on shares subject
to Options, and the nature of such restrictions, if any; and (viii)
interpret the Plan and prescribe and rescind rules and regulations relating
to it. If the Committee determines to issue a Non-Qualified Option, it
shall take whatever actions it deems necessary under Section 422 of the
Code and the regulations promulgated thereunder to ensure that such Option
is not treated as an ISO. The interpretation and construction by the
Committee of any provisions of the Plan or of any Option granted under it
shall be final unless otherwise determined by the Board. The Committee may
from time to time adopt such rules and regulations for carrying out the
Plan as it may deem advisable. No member of the Board or the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as
its chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and acts
of a majority of the members of the Committee at a meeting at which a
quorum is present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state law), shall
be the valid acts of the Committee. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. GRANT OF OPTIONS TO BOARD MEMBERS. Options may be granted to
members of the Board. All grants of Options to members of the Board shall
in all respects be made in accordance with the provisions of this Plan
applicable to other eligible persons. Members of the Board who either (i)
are eligible to receive grants of Options pursuant to the Plan or (ii) have
been granted Options may vote on any matters affecting the administration
of the Plan or the grant of any Options pursuant to the Plan, except that
no such member shall act upon the granting to himself or herself of
Options, but any such member may be counted in determining the existence of
a quorum at any meeting of the Board during which action is taken with
respect to the granting to such member of Options.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may
take such action as may be necessary to ensure that Options granted under
the Plan qualify as "qualified performance-based compensation" within the
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meaning of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation"). Such action may
include, in the Board's discretion, some or all of the following (i) if the
Board determines that Options granted under the Plan generally shall
constitute Performance-Based Compensation, the Plan shall be administered,
to the extent required for such Options to constitute Performance-Based
Compensation, by a Committee consisting solely of two or more "outside
directors" (as defined in applicable regulations promulgated under Section
162(m) of the Code), and (ii) Options granted under the Plan may be subject
to such other terms and conditions as are necessary for compensation
recognized in connection with the exercise or disposition of such Option or
the disposition of Common Stock acquired pursuant to such Option, to
constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options may be granted to
any employee, officer or director (whether or not also an employee) or
consultant of the Company or any Related Corporation. The Committee may take
into consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock, par value $.005 per share of the Company (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares which may be issued pursuant to the Plan is 500,000,
subject to adjustment as provided in paragraph 13. If any Option granted under
the Plan shall expire or terminate for any reason without having been exercised
in full or shall cease for any reason to be exercisable in whole or in part or
shall be repurchased by the Company, the unpurchased shares of Common Stock
subject to such Option shall again be available for grants of Options under the
Plan.
No employee of the Company or any Related Corporation may be granted Options to
acquire, in the aggregate, more than 62,500 shares of Common Stock under the
Plan during any fiscal year of the Company. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time
on or after the Effective Date. The date of grant of a Option under the Plan
will be the date specified by the Committee at the time it grants the Option;
provided, however, that such date shall not be prior to the date on which the
Committee acts to approve the grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. EXERCISE PRICE. The exercise price per share specified in the
agreement relating to each Option granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
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the case of an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any Related Corporation, the price per share specified
in the agreement relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common Stock on the date of
grant. For purposes of determining stock ownership under this paragraph, the
rules of Section 424(d) of the Code shall apply.
B. $100,000 ANNUAL LIMITATION ON LSO VESTING. Each eligible employee may be
granted Options treated as ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and any Related
Corporation, ISOs do not become exercisable for the first time by such employee
during any calendar year with respect to stock having a fair market value
(determined at the time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of such limitation as
Non-Qualified Options, and the Company shall issue separate certificates to the
optionee with respect to Options that are Non-Qualified Options and Options that
are ISOs.
C. DETERMINATION OF FAIR MARKET VALUE. The "fair market value" of the
Company's Common Stock shall be determined as of the trading day next preceding
the date of grant and shall mean (i) the average (on that date) of the high and
low prices of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq Stock Market, if the Common Stock is not
then traded on a national securities exchange; or (iii) the closing bid price
(or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq Stock Market. If the Common Stock is not publicly traded
at the time an Option is granted under the Plan, "fair market value" shall mean
the fair value of the Common Stock as determined by the Committee after taking
into consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(A).
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date
of grant or shall become exercisable thereafter in such installments as the
Committee may specify.
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B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes exercisable;
provided that the Committee shall not, without the consent of an optionee,
accelerate the permitted exercise date of any installment of any Option
granted to any employee as an ISO if such acceleration would violate the
annual vesting limitation contained in Section 422(d) of the Code, as
described in paragraph 6(A).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
those terms are defined in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the date
of termination of his or her employment. For purposes of this paragraph 9,
employment shall be considered as continuing uninterrupted during any bona fide
leave of absence (such as those attributable to illness, military obligations or
governmental service) provided that the period of such leave does not exceed 90
days or, if longer, any period during which such optionee's right to
reemployment is guaranteed by statute or by contract. A bona fide leave of
absence with the written approval of the Committee shall not be considered an
interruption of employment under this paragraph 9, provided that such written
approval contractually obligates the Company or any Related Corporation to
continue the employment of the optionee after the approved period of absence.
ISOs granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the optionee
continues to be an employee of the Company or any Related Corporation. Nothing
in the Plan shall be deemed to give any grantee of any Option the right to be
retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY. Unless otherwise specified in the agreement relating
to such ISO, if an ISO optionee ceases to be employed by the Company and all
Related Corporations by reason of his or her death, permanent and total
disability (as defined in Section 22(c)(3) of the Code or any successor
statute), any ISO owned by such optionee may be exercised, to the extent
otherwise exercisable on the date of such death, or permanent and total
disability, by the optionee, or if he or she is not living, by his or her
estate, personal representative or beneficiary who has acquired the ISO by will
or by the laws of descent and distribution, until the earlier of (i) the
specified expiration date of the ISO or (ii) one year from the date of
termination of employment.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee.
Non-Qualified Options shall be transferable to the extent set forth in the
agreement relating to such Non-Qualified Option.
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12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of Options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger or other reorganization in
which the holders of the outstanding voting stock of the Company
immediately preceding the consummation of such event, shall, immediately
following such event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the event of a sale
of all or substantially all of the Company's assets or otherwise (each, an
"Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options either (a) the consideration
payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition, (b) shares of stock of the surviving or
successor corporation or (c) such other securities as the Successor Board
deems appropriate, the fair market value of which shall not materially
exceed the fair market value of the shares of Common Stock subject to such
Options immediately preceding the Acquisition; or (ii) upon written notice
to the optionees, provide that all Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of
the shares subject to such Options (to the extent then exercisable or to be
exercisable as a result of the Acquisition) over the exercise price
thereof.
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C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the
Company or of another corporation are issued with respect to the
outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise
the securities he or she would have received if he or she had exercised
such Option prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of the
Code) or would cause any adverse tax consequences for the holders of such
ISOs. If the Committee determines that such adjustments made with respect
to ISOs would constitute a modification of such ISOs or would cause adverse
tax consequences to the holders, it may refrain from making such
adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such proposed action or at such
other time and subject to such other conditions as shall be determined by
the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B or C above, the class and aggregate number of shares set
forth in paragraph 4 hereof that are subject to Options which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value
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equal as of the date of the exercise to the cash exercise price of the Option,
(c) at the discretion of the Committee, by delivery of the grantee's personal
recourse note bearing interest payable not less frequently than annually at a
rate not less than 100% of the lowest applicable Federal rate, as defined in
Section 1274(d) of the Code and secured by such collateral as may be required by
the Committee, (d) at the discretion of the Committee and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Option and an authorization to the broker or selling agent
to pay that amount to the Company, which sale shall be at the participant's
direction at the time of exercise, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. DURATION OF PLAN; AMENDMENT OF PLAN. This Plan was adopted by the Board
on March 21, 2000 and ratified by the stockholders of the Company on May 11,
2000. The Board may terminate or amend the Plan in any respect at any time,
except that, without the approval of the stockholders obtained within 12 months
before or after the Board adopts a resolution authorizing any of the following
actions: (a) the total number of shares that may be issued under the Plan may
not be increased (except by adjustment pursuant to paragraph 13); (b) the
provisions of paragraph 3 regarding eligibility for grants of lSOs may not be
modified; and (c) the provisions of paragraph 6(A) regarding the exercise price
at which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13). Except as otherwise provided in this
paragraph 15, in no event may action of the Board or stockholders alter or
impair the rights of a grantee, without such grantee's consent, under any Option
previously granted to such grantee.
16. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
17. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
18. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option or the making of a Disqualifying Disposition (as defined in
paragraph 17), the Company may withhold taxes in respect of amounts that
constitute compensation includible in gross income. The Committee in its
discretion may condition the exercise of an Option, on the grantee's making
satisfactory arrangement
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for such withholding. Such arrangement may include payment by the grantee in
cash or by check of the amount of the withholding taxes or, at the discretion of
the Committee, by the grantee's delivery of previously held shares of Common
Stock or the withholding from the shares of Common Stock otherwise deliverable
upon exercise of an Option shares having an aggregate fair market value equal to
the amount of such withholding taxes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
20. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of the State of
Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
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