Correct Answer: You said to me, "I did not sleep last night and cannot work now."

Solution : The second option is correct.

In the case of direct speech, the words are directly quoted. While transforming, one has to take care of the time references being mentioned and changes should be made accordingly.

Narration Conversion:

• Told is changed to said .
• The past perfect tense is changed to the simple past tense. Thus, had not slept is changed to did not sleep .
• Then is changed to now to maintain the temporal reference in the direct speech.
• The Previous night is changed to last night, to maintain time reference in the direct speech.
• Could not is changed to cannot to maintain the correct tense form.
• The exact words of the speaker are enclosed in quotation marks.

Therefore, the correct sentence is: You said to me, "I did not sleep last night and cannot work now ."