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EXHIBIT 10.2
LIFEQUEST MEDICAL, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
This Agreement dated November 27, 1996, is entered into between
LifeQuest Medical, Inc., a Delaware corporation (the "Company"), and Xxxxxxx X.
Xxxxx ("Optionee").
Recitals
A. The Company (or its affiliate) and Optionee have entered into
an Employment Agreement of even date herewith (the "Employment Agreement"), and
the Company (or its affiliate) desires to have Optionee remain in its employ,
encourage the stock ownership of Optionee and increase the Optionee's
proprietary interest in the Company.
B. The Company desires to grant to Optionee an option to purchase
up to 60,000 shares of Common Stock, $.001 par value ("Common Stock"), of the
Company.
Agreements
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth in this Agreement, the Company hereby grants to Optionee the option to
purchase, during the period commencing on the date of this Agreement and,
except as provided in Section 8, ending December 31, 2006, at an exercise price
equal to the Closing Sales Price (as defined below) per share, up to, but not
exceeding in the aggregate, 60,000 shares of Common Stock, $.001 par value
("Common Stock"), of the Company (such option is hereinafter called the
"Option"). The Closing Sales Price shall be the average of the closing bid and
asked prices, in the Over-the-Counter market as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System, on the
Closing Date as defined in the Plan of Merger and Acquisition Agreement
executed simultaneously herewith.
2. Non-Qualified Status. The Option is intended to be a
non-qualified stock option which does not satisfy the requirements of Section
422A of the Internal Revenue Code of 1986, as amended. The Option is granted
outside of and therefore shall not be subject to the terms and provisions of
the Company's 1989 Stock Option Plan, as amended.
3. Vesting of Option. The Option evidenced hereby may be
exercised from time to time as to the following number of shares, on a
cumulative basis (as to options to purchase shares not previously exercised),
upon or after the satisfaction of the following conditions:
(a) 10,000 shares on each of the following dates if the
Optionee is employed by the Company on such date:
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(i) December 31, 1997;
(ii) December 31, 1998; and
(iii) December 31, 1999.
(b) Achievement of the following annual milestones
according to the level of (i) gross sales of the
products marketed by Xxxxx Medical, Inc., as
reflected in the financial statements of Xxxxx
Medical, Inc. prepared in accordance with generally
accepted accounting principles consistently applied,
plus, (ii) to the extent not included in such gross
sales, sales of the products marketed by Xxxxx
Medical, Inc. as to which the Company is entitled to
commission income (net of such commission income);
less sales returns, discounts, taxes and bad debts
written off ("Net Sales"):
(i) Upon the close of business for 1997, if the
Optionee is employed by the Company on such date, either:
(1) 10,000 shares if Net Sales exceed
$4,500,000;
(2) 9,000 shares if Net Sales exceed
$4,000,000;
(3) 8,000 shares if Net Sales exceed
$3,500,000;
(4) 7,000 shares if Net Sales exceed
$3,000,000; or
(5) 0 shares if Net Sales do not exceed
$3,000,000.
(ii) Upon the close of business for 1998, if the
Optionee is employed by the Company on such date, either:
(1) 10,000 shares if Net Sales exceed
$6,000,000;
(2) 9,000 shares if Net Sales exceed
$5,500,000;
(3) 8,000 shares if Net Sales exceed
$5,000,000;
(4) 7,000 shares if Net Sales exceed
$4,500,000; or
(5) 0 shares if Net Sales do not exceed
$4,500,000.
(iii) Upon the close of business for 1999, if the
Optionee is employed by the Company on such date, either:
(1) 10,000 shares if Net Sales exceed
$7,500,000;
(2) 9,000 shares if Net Sales exceed
$7,000,000;
(3) 8,000 shares if Net Sales exceed
$6,500,000;
(4) 7,000 shares if Net Sales exceed
$6,000,000; or
(5) 0 shares if Net Sales do not exceed
$6,000,000.
4. Adjustment. In the event that Net Sales (including any
adjustment pursuant to this Section 4) exceed $4,500,000 in 1997, $6,000,000 in
1998, or $7,500,000 in 1999 (in such event, any such year referred to as an
"Excess Year"), and in the event that Net Sales (including any adjustment
pursuant to this section 4) are less than such amounts in 1998 or 1999 (in such
event, any such year referred to as a "Deficient Year"), the amount of such
excess in any Excess Year shall be added to the amount of Net Sales in each of
the Deficient Years, in order of the
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occurrence of such Deficient Years, in determining the exercisability of options
under section 3(b).
5. Exercise of Option. The Option shall be exercised by
Optionee's delivery of written notice to the Company setting forth the number
of shares with respect to which the Option is to be exercised and the address
to which the certificates representing shares of Common Stock issuable upon the
exercise of the Option shall be mailed. In order to be effective, such written
notice shall be accompanied, at the time of its actual receipt by the Company,
by payment of the option price of such shares, which payment shall be made by
check in an amount equal to the option price of such shares. As promptly as
practicable after the receipt by the Company of (a) such written notice from
Optionee setting forth the number of shares with respect to which the Option is
to be exercised and (b) payment of the option price of such shares in the form
required by the foregoing provisions, the Company shall deliver to Optionee
certificates representing the number of shares with respect to which the Option
has been so exercised, such certificates to be registered in the name of
Optionee. Delivery of such certificates shall be considered to have been made
when such certificates shall have been mailed, postage prepaid, to Optionee at
the address specified for such purpose in such written notice from Optionee to
the Company.
6. Early Forfeiture of Option. If, before the expiration of the
Option, Optionee breaches, or does not perform any of his obligations under,
any confidentiality agreement or non-competition agreement now or hereafter in
effect between Optionee and the Company, and such breach or non-performance
continues for a period 30 days after written notice thereof is given by the
Company to Optionee, then, in such event, any unexercised portion of the Option
shall automatically be forfeited by Optionee and the Option shall terminate and
become of no further effect.
7. Transferability of Option. The Option shall not be
transferable by Optionee otherwise by will or under the laws of descent and
distribution, and shall be exercisable, during his lifetime, only by him. Any
assignment or transfer of the Option otherwise than by will or under the laws
of descent and distribution, whether voluntarily or involuntarily, by operation
of law or otherwise, shall not vest in the assignee or transferee any interest
or rights whatsoever, but immediately upon such assignment or transfer the
Option shall terminate and become of no further effect.
8. Termination of Employment or Death of Optionee. The Option
granted to Optionee shall terminate on the earlier of the date of the
expiration of the Option or upon severance of the employment relationship
between the Company and Optionee under Section 5.01, 5.02 or 5.03 of the
Employment Agreement dated November 27, 1996, between Xxxxx Medical Acquisition
Co. and Optionee; provided, however, if Optionee shall die while in the employ
of the Company and before the date of expiration of his Option, his Option
shall terminate on the later of the date of expiration or one year following
the date of death. After the death of Optionee, his executor, administrator or
any person or persons to whom his Option may be transferred by will or by the
laws of descent and distribution, shall have the right, at any time prior to
its termination, to exercise his Option to the extent Optionee could have
exercised it had he lived and remained in the employ of the Company.
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9. No Rights as Stockholder. Optionee shall not have rights as a
stockholder with respect to shares covered by the Option until the date of
issuance of a stock certificate for such shares; and, except as otherwise
provided in Section 10 hereof, no adjustment for dividends or otherwise shall
be made if the record date therefor is prior to the date of issuance of such
certificate.
10. Changes in the Company's Capital Structure. The existence of
the Option shall not affect in any way the right or power of the Company to
make or authorize any or all adjustments, recapitalization, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issuance of bonds, debentures,
preferred or prior preference stock ahead or affecting the Common Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of Common Stock outstanding,
without receiving compensation therefor in money, services or property, then
(a) the number, class and per share price of shares of stock subject to the
Option hereunder shall be appropriately adjusted in such a manner as to entitle
Optionee to receive upon exercise of the Option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received had he exercised the Option in full immediately prior to the event
requiring the adjustment; and (b) the number and class of shares then reserved
for issuance under this Agreement shall be adjusted by substituting for the
total number and class of shares of Common Stock then reserved that number and
class of shares of stock that would have been received by the owner of an equal
number of outstanding shares of each class of Common Stock as the result of the
event requiring the adjustment.
Except as provided herein, if the Company is merged or consolidated
with another corporation or if the Company is liquidated or sells or otherwise
disposes of substantially all its assets while the Option remains unexercised
under this Agreement, (x) subject to the provisions of clause (y) below, after
the effective date of such merger, consolidation, liquidation, sale or other
disposition, as the case may be, Optionee shall be entitled, upon exercise of
the Option, to receive, in lieu of shares of Common Stock, the number and class
or classes of shares of such stock or other securities or property to which
Optionee would have been entitled if, immediately prior to such merger,
consolidation, liquidation, sale or other disposition, Optionee had been the
holder of record of a number of shares of Common Stock equal to the number of
shares as to which the Option shall be so exercised; or (y) the Option shall be
canceled by the Company as of the effective date of any such merger,
consolidation, liquidation, sale or other disposition, provided that (i) notice
of such cancellation shall be given to Optionee and (ii) Optionee shall have
the right to exercise the Option in full (without regard to any limitations set
forth in paragraph 3 hereof) during a period set by the Company preceding the
effective date of such merger, consolidation, liquidation, sale or other
disposition and, provided further, that in the event the Option may not be
exercised in full under applicable securities laws without registration of the
shares of Common Stock issuable on exercise of the Option, the Company may
limit the exercise of the Option to such number of shares of Common Stock, if
any, as may
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be issued without such registration, the method of choosing the number of shares
of Common Stock for which the Option may be exercised to be solely within the
discretion of the Company.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number, class or price of shares of Common
Stock then subject to the Option.
11. Requirements of Law. The Company shall not be required to
sell or issue any shares under the Option if the issuance of such shares shall
constitute or result in a violation by Optionee or the Company of any provision
of any law, statute or regulation of any governmental authority. Specifically,
in connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of the Option, the Company shall not
be required to issue such shares unless the Company has received evidence
reasonably satisfactory to it to the effect that Optionee will not transfer
such shares except in accordance with applicable law, including receipt of an
opinion of counsel reasonably satisfactory to the Company to the effect that
any proposed transfer complies with applicable law. The Company may, but shall
in no event be obligated to, register any shares covered hereby pursuant to
applicable securities laws of any county or political subdivision thereof. In
the event the shares issuable on exercise of the Option are not so registered,
the Company may imprint on the certificate evidencing such shares any legend
that counsel for the Company considers necessary or advisable to comply with
applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of the Option or the issuance
of shares pursuant to the Option to comply with any law or regulation of any
governmental authority.
12. Arbitration. The Company and Optionee agree that any dispute
or controversy arising out of or in connection with this Agreement or any
alleged breach hereof shall be settled by arbitration in San Antonio, Texas
pursuant to the rules of the American Arbitration Association. If the two
parties cannot jointly select a single arbitrator to determine the matter, one
arbitrator shall be chosen by each party (or, if a party fails to make a
choice, by the American Arbitration Association on behalf of such party) and
the two arbitrators so chosen will select a third. The decisions of the single
arbitrator jointly selected by the parties, or, if three arbitrators are
selected, the decision of any two of them, will be final and binding upon the
parties and the judgment of a court of competent jurisdiction may be entered
thereon. Fees of the arbitrators and costs of arbitration shall be borne by
the parties in such manner as shall be determined by the arbitrator or
arbitrators.
13. Notices. Any notice, report, demand or payment required,
permitted or desired to be given pursuant to any of the provisions of this
Agreement shall be deemed to have been sufficiently given or served for all
purposes if hand delivered or delivered by responsible overnight courier or
sent by certified or registered air mail, return receipt requested, and postage
prepaid as follows:
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If to the Company:
LifeQuest Medical, Inc.
0000 XxXxxxxxxx Xxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxxx
with a copy to: Fulbright & Xxxxxxxx L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No. (000) 000-0000
If to Employee: Xxxxxxx X. Xxxxx
1206 Safari
Xxx Xxxxxxx, Xxxxx 00000-0000
with a copy to: Vail & Xxxxxxxxx, P.C.
00 X. 00 Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxx
Facsimile No. (000) 000-0000
14. Employment Agreement. The granting of the Option shall not
diminish or impair the rights and responsibilities of Optionee and the Company
under the Employment Agreement or any confidentiality or non-competition
agreement in effect between the Optionee and the Company. Optionee and the
Company agree that the granting of the Option pursuant to this Agreement
constitutes full satisfaction of any and all obligations of the Company
contained in the Employment Agreement with respect to the granting of stock
options, and Optionee hereby forever releases any claims with respect to such
obligations of the Company (and its affiliate) under the Employment Agreement.
This Agreement is effective as of the date first written above.
LIFEQUEST MEDICAL, INC.
By:/s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx,
President and Chief Executive Officer
/s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
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