1
EXHIBIT 10(o)(1)
INCENTIVE STOCK OPTION, TRADE SECRET,
INVENTION, AND NON-COMPETITION AGREEMENT
THIS AGREEMENT, made this _____ day of _____________, 19__, by and
between TECNOL MEDICAL PRODUCTS, INC., a Delaware corporation (hereinafter
called "TMPI"), and _________________________________________________
(hereinafter called the "Optionee"), but effective as of the date set forth in
Section 2 below.
W I T N E S S E T H:
WHEREAS, Optionee is a key employee of the Company who, during the
course of Optionee's employment with the Company has been, and in the future is
expected to be, engaged in one or more of the manufacturing, marketing,
selling, administrative, management, financial, communications, legal,
engineering, product development, product quality, or other important
activities of the Company and is expected to obtain valuable and proprietary
confidential information of the Company in the course of carrying out
Optionee's duties of employment; and
WHEREAS, the Company wants to encourage Optionee's continued interest
in and loyalty and commitment to the Company and toward that end, the Company
desires to increase Optionee's proprietary interest in the success of the
Company by making it possible for Optionee to acquire an initial or increased
stock ownership interest in the Company on a basis anticipated to be
economically beneficial and favorable to Optionee; and
WHEREAS, as a condition to the Company's willingness to facilitate
Optionee's stock ownership interest in the Company and ancillary to its
undertaking to do so and to impart confidential information to Optionee, the
Company desires to obtain Optionee's commitment to the Company to not disclose
confidential information of the Company and not compete with the Company should
Optionee's employment terminate; and
WHEREAS, Optionee and the Company both recognize and agree that such
commitment by Optionee is necessary to protect the value of the Company for all
of its security holders, including Optionee;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained, TMPI and the Optionee hereby agree with each other
as follows:
1. The granting of this Option shall not impose upon the Company
any obligation to employ or continue to employ the Optionee; and the right of
the Company to terminate the
-1-
2
employment of the Optionee shall not be diminished or affected by reason of the
fact that an option has been granted to Optionee.
2. Subject to the terms and conditions set forth herein, TMPI
hereby grants to the Optionee under the Option Plan the right to purchase up
to, but not exceeding in the aggregate, the number of shares of the common
stock, $.001 par value, of TMPI (the "Common Stock") stated below, during the
period commencing one year after the Effective Date hereof (as stated below)
and ending ten (10) years after the Effective Date hereof, at a price per share
(the "Option Exercise Price") as stated below.
Number of Shares ( )
-------------------------
Option Exercise Price Dollars ($ . )
-------------------------
Effective Date -------------------------
The right and option granted hereunder may be exercised from time to
time as follows: beginning one year after the Effective Date, as to not more
than 1/9 of the total number of shares covered hereby; beginning two years
after the Effective Date, as to any number of shares which, when added to the
number of shares previously purchased under the option, shall not exceed 2/9 of
the total number of shares covered hereby; beginning three years after the
Effective Date, as to any number of shares which, when added to the number of
shares previously purchased under the option, shall not exceed 3/9 of the total
number of shares covered hereby; beginning four years after the Effective Date,
as to any number of shares which, when added to the number of shares previously
purchased under the option, shall not exceed 4/9 of the total number of shares
covered hereby; beginning five years after the Effective Date, as to any number
of shares which, when added to the number of shares previously purchased under
the option, shall not exceed 5/9 of the total shares covered hereby; beginning
six years after the Effective Date, as to any number of shares which, when
added to the number of shares previously purchased under the option, shall not
exceed 6/9 of the total number of shares covered hereby; beginning seven years
after the Effective Date, as to any number of shares which, when added to the
number of shares previously purchased under the option, shall not exceed 7/9 of
the total number of shares covered hereby; beginning eight years after the
Effective Date, as to any number of shares which, when added to the number of
shares previously purchased under the option, shall not exceed 8/9 of the total
number of shares covered hereby; beginning nine years after the Effective Date,
as to any number of shares which, when added to the number of shares previously
purchased under the option shall not exceed the total number of shares covered
hereby.
On each occasion that any shares are purchased hereunder, the shares
so purchased shall be divided into two classes: the "Exercise Cost Shares",
and the "Residual Shares". The Exercise Cost Shares shall consist of the
smallest number of whole shares which, when multiplied by the
-2-
3
market value of one share of TMPI stock on the exercise date, equals (or
exceeds) the Option Exercise Price multiplied by the total number of shares
being purchased on that occasion. The Company shall use the average of the
high and low prices of TMPI stock on the day of exercise to compute the market
value of one share. All Exercise Cost Shares purchased hereunder shall be
subject to the requirement that the Optionee notify the Company of any
disposition as provided in Section 5 hereof.
The number of shares representing the difference between the total
number of shares the Optionee is purchasing on that occasion and the Exercise
Cost Shares shall be the "Residual Shares". Residual Shares cannot be sold,
transferred, or encumbered for a period of two (2) years after issued under
this option, excluding transfers to the Company, members of the Optionee's
immediate family, or trusts for the benefit of the Optionee or members of the
Optionee's immediate family, provided that any Residual Shares so transferred
(other than to the Company) will remain subject to the remainder of the
two-year prohibition on transfer. In the event of the death of the Optionee,
any Residual Shares held by the Optionee's estate may be transferred free of
the remainder of the two-year prohibition on transfer. Any Residual Shares as
to which the two-year prohibition on transfer has been lifted shall be subject
to the requirement that the Optionee notify the Company of any disposition as
provided in Section 5 hereof. Each certificate representing shares shall bear
a legend reflecting the appropriate restriction.
The option granted hereunder is intended to qualify as an incentive
stock option under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). However, to the extent that the aggregate fair market value of
the Common Stock (determined at the date of grant of the option) with respect
to which incentive stock options are exercisable for the first time by the
Optionee during any calendar year (under all incentive stock option plans of
TMPI and any parent or subsidiary corporation of TMPI) exceeds $100,000, such
options will not be incentive stock options. For this purpose, options shall
be taken into account in the order in which they were granted.
The option granted hereunder is granted pursuant to and is governed by
the terms of the 1991 Tecnol Stock Option Plan (the "Option Plan").
3. The right and option granted hereunder shall be exercised by
delivering to Tecnol Medical Products, Inc. a written notification specifying
the number of shares which the Optionee desires to purchase, together with
cash, certified check, bank cashier's check or postal or express money order to
the order of Tecnol Medical Products, Inc. for an amount equal to the option
price of such shares, and specifying the address to which the certificates for
such shares are to be mailed. In lieu of payment in cash or the cash
equivalents as described above, Optionee may make payment by tendering to
Tecnol Medical Products, Inc. shares of Common Stock, or by tendering shares of
Common Stock plus cash or such cash equivalents, in amounts such that the
-3-
4
fair market value of the Common Stock tendered, plus the amount of cash or cash
equivalents paid, if any, equals the option price for the shares to be
purchased.
4. As promptly as practical after receipt of such written
notification and payment and receipt of such evidence of intent to acquire for
investment as may be required by the Company, the Company will deliver to the
Optionee certificates for the number of shares with respect to which such
option has been so exercised, issued in the Optionee's name; provided that such
delivery shall be deemed effected for all purposes when a stock transfer agent
of the Company shall have deposited such certificates in the United States
mail, postage prepaid, addressed to the Optionee, at the address specified
pursuant to Section 3 hereof.
5. If the Optionee shall dispose of any of the shares purchased
hereunder within the later of one year after the transfer of such shares to
Optionee or two years from the effective date of the granting of this option,
then in order to provide the Company with the opportunity to claim the benefit
of any income tax deduction which may be available to it under the
circumstances, the Optionee shall promptly notify the Company of the dates of
acquisition and disposition of such shares, the number of shares so disposed
of, and the consideration, if any, received for such shares. In addition, in
order to help assure that the Company receives notice of any such transfer, any
stock certificate evidencing any shares of Common Stock issued under this
Agreement shall bear a legend substantially as follows for the first year after
issuance of such Common Stock to the Optionee or, if sooner, until such time as
the Optionee certifies in writing to the Company that such Common Stock has
been sold in a bona fide transaction and advises the Company of the amount of
the consideration received for such shares:
"The Company has asked its stock transfer agent to notify the
Secretary of the Company if the securities represented by this
certificate are held of record at any time prior to [applicable date]
in any name other than [applicable name]."
Further, upon request of the Company, from time to time, the Optionee shall
certify in writing the dates of acquisition and any dispositions of such Common
Stock on or before the first anniversary of the issuance of such Common Stock
to the Optionee, the number of shares so disposed of, and the consideration, if
any, received for such shares.
6. Except as is otherwise expressly provided in this Agreement,
the option herein granted shall terminate immediately upon the severance of the
employment relationship between the Company and the Optionee by the Company for
serious violation of Company policy or intentional misconduct, and two weeks
after the severance of the employment relationship between the Company and the
Optionee for any reason, other than for serious violation of Company policy or
intentional misconduct or on account of death or retirement in good standing
from the employ
-4-
5
of the Company for reasons of age or total and permanent disability under the
then established rules of the Company. For purposes of this Agreement,
"Company" shall mean Tecnol Medical Products, Inc. and any corporation in which
Tecnol Medical Products, Inc. owns, directly or indirectly, stock possessing
eighty percent or more of the total combined voting power of all classes of
stock; and, any corporation in which Tecnol Medical Products, Inc. owns,
directly or indirectly, stock possessing fifty percent or more of the total
combined voting power of all classes of stock, if the Board of Tecnol Medical
Products, Inc. resolves that such other corporation shall be so defined.
Whether authorized leave of absence or absence on military or government
service shall constitute severance of the employment relationship between the
Company and the Optionee shall be determined by the Committee appointed by the
Board of Directors of TMPI to administer the Option Plan (the "Committee"). In
the event of the death of the Optionee while in the employ of the Company and
before the date of expiration of this option, this option shall terminate one
year following the date of death of the Optionee. After the death of the
Optionee, Optionee's executors, administrators, or any person or persons to
whom this option may be transferred by will or by the laws of descent and
distribution, shall have the right, at any time prior to such termination, to
exercise the option granted hereunder, in whole or in part. If, before the
date of expiration of this option, the Optionee shall be retired in good
standing from the employ of the Company for reasons of age or total and
permanent disability under the then established rules of the Company, this
option shall terminate three months (twelve months in the case of retirement
for disability) after the date of such retirement. However, in the event of
such retirement, the Optionee shall have the right prior to the termination of
such option to exercise the option to the extent to which Optionee was entitled
to exercise the option immediately prior to such retirement. Provided,
however, nothing in this Section shall operate to extend this option beyond 10
years after the Effective Date hereof.
7. Whenever the word "Optionee" is used in any provision of this
Agreement under circumstances where the provisions should logically be
construed to apply to the executors, administrators or the person or persons to
whom the option may be transferred by will or by the laws of descent and
distribution, the word "Optionee" shall be deemed to include such person or
persons.
8. This option is not transferable by the Optionee otherwise than
by will or under the laws of descent and distribution, and is exercisable,
during Optionee's lifetime, only by Optionee. No assignment or transfer of
this option, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except by will or by the laws of
descent and distribution) shall vest in the assignee or transferee any interest
or right herein whatsoever, but immediately upon any such assignment or
transfer this option shall terminate and become of no further effect.
-5-
6
9. The Optionee shall not be deemed for any purpose to be a
stockholder of TMPI in respect of any shares as to which this option shall not
have been exercised, as herein provided, and until such shares shall have been
issued to the Optionee by TMPI hereunder.
10. The existence of this option shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of 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.
11. The shares with respect to which this option is granted are
shares of the Common Stock of TMPI as presently constituted, but if, and
whenever, prior to the delivery by TMPI of all the shares of the Common Stock
with respect to which this option is granted, TMPI 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 the
Common Stock outstanding, without receiving compensation therefor in money,
services or property, then (a) in the event of an increase in the number of
such shares outstanding, the number of shares of Common Stock then remaining
subject to option hereunder shall be proportionately increased, and the option
price per share shall be proportionately reduced; and (b) in the event of a
reduction in the number of such shares outstanding, the number of shares of
Common Stock then remaining subject to option hereunder shall be
proportionately reduced, and the option price per share shall be
proportionately increased.
12. After a merger of one or more business entities into TMPI,
after a consolidation of TMPI and one or more business entities, or upon the
sale, dissolution or liquidation of TMPI, the Board of Directors of TMPI shall
determine the disposition of this option in accordance with the alternatives
set forth in Section 14 of the Option Plan.
13. 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, 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 or price
of shares of Common Stock subject to this option.
14. Notwithstanding any of the provisions hereof, the Optionee
hereby agrees that Optionee will not exercise the option granted hereby, and
that the Company will not be obligated to issue any shares to the Optionee
hereunder, if the exercise hereof or the issuance of such shares
-6-
7
shall constitute a violation by the Optionee or the Company of any provisions
of any law or regulations of any governmental authority. If, at any time
specified herein for the issuance of shares to the Optionee, any law or
regulation shall require either the Company or the Optionee to take any action
in connection with the shares then to be issued, the issuance of such shares
shall be deferred until such action shall have been taken. Any determination in
this connection by the Committee shall be final, binding and conclusive. The
Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to
take any other affirmative action in order to cause the exercise of the option
or the issuance of shares pursuant thereto to comply with any law or regulation
of any governmental authority.
15. Every notice or other communication relating to this Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by it in
a notice mailed or delivered to the other party as herein provided; provided
that, unless and until some other address be so designated, all notices or
communications by the Optionee to the Company shall be addressed to the
President of TMPI and mailed or delivered to TMPI at its office at 0000
Xxxxxxxxxx Xxxx Xxxx., Xxxx Xxxxx, Xxxxx 00000, and all notices or
communications by the Company to the Optionee may be given to the Optionee
personally or may be mailed to Optionee at Optionee's address as shown in the
records of the Company.
16. (a) The Optionee recognizes and acknowledges that:
(1) "Company-Type Products" means the types of
products that the Company is and will be engaged in
developing, manufacturing, marketing and selling, such as, but
not limited to, the following: reusable orthopedic soft
goods; face masks and respirators; all disposable restraints,
holders, binders, supports, pads, protectors, straps, ice
packs, telemetry unit pouches, wash mitts, caps, shoe covers,
wound dressings, and other health care and industrial
disposable items developed, manufactured, marketed or sold by
the Company during Optionee's employment with the Company;
and, if Optionee engages in Technical Activities of the
Company (as defined below) at any time during Optionee's
employment with the Company, any components or raw materials
for use in any of the above which were the subject of research
and/or development during Optionee's employment with the
Company.
(2) If Optionee, at any time during the course of
Optionee's employment with the Company, is engaged in the
manufacturing, engineering and/or product development
activities of the Company ("Technical Activities") such as
manufacturing existing Company-Type Products, improving and
enhancing
-7-
8
Company-Type Products, and developing new Company-Type
Products, then, during the course of Optionee's employment,
Optionee will likely (a) engage in research and
experimentation to create and improve the design of such
products; (b) design and manufacture special machinery that is
used to manufacture, automatically inspect and/or package such
products; (c) develop and design sonic bonding equipment used
in such machines; (d) design and develop specifications and
manufacturing processes for materials used in Company-Type
Products including, without limitation, films, and non-woven
fabrics; and/or (e) design and manufacture machines used to
manufacture such materials in the performance of Optionee's
duties. The Company's success and innovation in developing
new, and in enhancing existing, Company-Type Products and in
developing and improving the materials and machinery used in,
and to manufacture, its Company-Type Products confers on the
Company a significant competitive advantage against its
competitors. The continued confidentiality of these aspects of
the Company's business are vital to its business.
(3) If Optionee, at any time during the course of
Optionee's employment with the Company, is engaged in the
financial, legal, administrative, management, marketing,
sales, or communication activities of the Company ("Sales and
Administrative Activities") then the Optionee will become
familiar with or have access to extensive confidential
information pertaining to the business of the Company, which
may include, without limiting the forgoing, and depending upon
Optionee's specific employment duties, names of customers of
the Company and the prices it obtains or has obtained from
customers or for which it sells or has sold its products,
sources for materials used in the Company's products, contract
relationships between the Company and its customers and
suppliers, confidential business and financial data of the
Company, information pertaining to the Company's employees
(including, without limitation, information concerning
compensation and benefit programs), information regarding the
Company's costs, information about the Company's products and
anticipated new products, forecasts, plans, objectives,
investment opportunities, and long term business strategies
and plans of the Company. This confidential information is of
strategic importance to the Company in its ability to
successfully compete. The continued confidentiality of this
information is vital to the Company's business.
(4) The Company has established a valuable and
extensive trade in its Company-Type Products as well as
business connections and customers which are of significant
value to it.
-8-
9
(5) By virtue of Optionee's employment, Optionee
acknowledges that Optionee holds a position of trust with
respect to the confidential information of the Company made
accessible to Optionee, and that the Company will suffer
irreparable injury if during Optionee's employment or at any
time subsequent to the termination of such employment,
Optionee should, directly or indirectly, enter into
competition with the Company or divulge such secret and
confidential information to competitors or potential
competitors of the Company.
(6) It is expected that Optionee, during
Optionee's employment by the Company, may conceive or generate
(alone or together with others) inventions, discoveries or
ideas, and it is recognized that the ownership thereof should
be and will be in the Company.
(7) The covenants and conditions contained herein
are reasonable and necessary for the protection of the
Company's business. In this regard, Optionee recognizes that
the descriptive scope of the confidential information
described in Section 16 and the territory covered by the non-
competition covenants in Section 16 hereof are reasonable in
light of the fact that the work that Optionee will perform for
the Company as its employee will contribute to the manufacture
or sale of products that will be sold to end users (directly
or in many cases through intermediary distributors) located
throughout the Geographic Region described in Section 16(f).
(b) Optionee covenants and agrees that Optionee will not at
any time during Optionee's employment or thereafter, in any fashion,
form or manner, either directly or indirectly, except to the extent
necessary to carry out Optionee's employee responsibilities for the
benefit of the Company, divulge, disclose or communicate to any
person, firm, partnership, corporation or enterprise in any manner
whatsoever any information of any kind, nature or description
concerning any matters affecting or relating to the business of the
Company, including without limitation, (i) research conducted by the
Company in connection with product development, manufacturing
processes, machinery construction, product materials or otherwise,
(ii) the manufacturing methods or processes used or under development
by the Company for its products, machines and materials, (iii) the
nature or properties of the materials used by the Company in its
products or under development, and supply sources of such materials,
(iv) the names of any of the Company's customers and the prices it
obtains or has obtained or for which it sells or has sold its
products, (v) contract relationships between the Company and its
customers and suppliers, (vi) confidential business and financial data
of the Company, (vii) information pertaining to the Company's
employees (including, without limitation, information concerning
compensation and benefit programs), (viii) information regarding the
Company's costs,
-9-
10
(ix) information about the Company's products and anticipated new
products, (x) forecasts, plans, objectives, investment opportunities,
and long term business strategies and plans of the Company, and (xi)
any other information of, about or concerning the business of the
Company, its manner of operations, its plans, processes or other data
of any kind, nature or description. The Optionee and Company agree
that the foregoing information is important, material and confidential
and substantially affects the successful conduct of the business of
the Company, and its good will, regardless whether any or all of the
foregoing matters would be deemed to be "trade secrets" as defined by
law. Optionee may have occasion to learn other information as a
consequence of or through Optionee's employment with the Company, such
as information from or about suppliers, customers, competitors and
others. This information generally is obtained by the Company by
studying competitive products, by requesting information from such
other companies, by doing various studies and the like. Such
information in some cases may not be proprietary to the Company but
nevertheless the Company learns such information in the course of its
business, keeps such information secret (because it is costly and
useful information), and legitimately uses such information in
connection with its business. Optionee agrees Optionee will not use
or disclose, or permit such information to be disclosed or used except
in furtherance of Optionee's duties for the Company and agrees not to
use or disclose such information in violation of any obligations or
duties which Optionee or the Company has to any third party. The
parties agree that any breach of the terms of this Section 16(b) is a
material breach of this Agreement. The Company considers, and the
Optionee agrees, that all such information is the Company's sole and
exclusive property, and Optionee agrees to promptly deliver all such
information in tangible form as well as all other correspondence,
memoranda, notes, records, reports, plans, customer lists and all
other papers (and copies thereof) and all electronically stored or
computerized data to the Company either upon the Company's request or
upon any termination of this Agreement. The Company agrees to provide
Optionee with access to and the right to use in the performance of
Optionee's duties to the Company the confidential, proprietary and
other business information and trade secrets described above in this
Section 16 in consideration of the covenants of Optionee of
non-disclosure and non- competition set forth in this Section 16.
(c) All "Inventions" made or conceived by the Optionee,
solely or with others, while employed by the Company, either during or
after working hours, or within a period of one (1) year after
termination of Optionee's employment, which are useful in or related
to the business of the Company or which have been made or conceived,
wholly or partially, with the use of the Company's time, material or
facilities, shall belong exclusively to the Company. The Optionee
agrees that Optionee shall have no claim for additional compensation
for such Inventions. The Optionee agrees promptly to disclose in
accordance with Company procedures any such Invention promptly and
fully by a
-10-
11
written report, setting forth in detail the structures, procedures and
methodology employed and the results achieved. In addition, full
reports and records shall be kept in accordance with Company practices
during and on completion of any study or research project undertaken
on the Company's behalf, whether or not in Optionee's opinion a given
study or project has resulted in an Invention. For purposes hereof
the term "Invention" means any discovery, concept, idea, whether
patentable or not, relating to any present or prospective activities
of the Company, including, but not limited to, devices, processes,
methods, formulae, techniques, and any improvements to any of the
foregoing. The Optionee hereby assigns and agrees to assign to the
Company all of Optionee's rights to such Inventions and to all
proprietary rights therein, based thereon or related thereto,
including, but not limited to, applications for United States and
foreign letters patent and resulting letters patent. At the request
of the Company, either before or after termination of Optionee's
employment, Optionee shall assist the Company in acquiring and
maintaining patent protection upon and confirming its title to such
Inventions. Optionee's assistance shall include the signing of
applications for patent assignments and other papers, and taking any
other steps considered desirable by the Company.
(d) Ancillary to, and in order to further assure that the
Optionee will not violate Optionee's covenants of non-disclosure of
confidential, proprietary and other business information of the
Company set forth in Section 16(b) hereof or Optionee's obligations
respecting Inventions under Section 16(c), and ancillary to the rest
of this Agreement and in consideration of each of the foregoing,
Optionee covenants and agrees that for the Applicable Period (as
defined below) after termination of Optionee's employment for any
reason, Optionee will not, for any reason, anywhere in the Geographic
Region (as defined below), directly or indirectly, as an employee,
employer, consultant, agent, principal, partner, stockholder, officer,
director, or in any other individual or representative capacity:
(1) engage or participate in any business that:
(A) is engaged, directly or indirectly, in the
sale or marketing of any product that is the same as or
similar to or competitive with any Company-Type Product which
was sold or marketed by the Company during Optionee's
employment with the Company; or
(B) is engaged, directly or indirectly in
research for or the development or manufacture of any product
that is the same as or similar to or competitive with any
Company-Type Product which was the subject of research or
development or which was manufactured, by the Company during
Optionee's employment with the Company; or
-11-
12
(C) is engaged, directly or indirectly, in the
research, development, manufacture, sale or marketing of any
item made from film or non-woven fabric bonded through a sonic
bonding manufacturing process; or
(D) is engaged, directly or indirectly, in the
research, development, manufacture, use, sale or marketing of
any manufacturing equipment that (i) uses computers in
automated manufacturing; or (ii) is used to produce products
made of film or non-woven fabric; or (iii) uses an automated
or computerized product inspection system, because equipment
similar in function or design to any of the foregoing
equipment would be similar to equipment developed or
manufactured by the Company during the course of Employee's
employment; or
(E) is engaged, directly or indirectly, in the
business described in clause (D) above, if such machines are
designed to be used to manufacture Company-Type Products; or
(2) recruit, or hire, or attempt to recruit or hire,
directly or by assisting others, any other employee or consultant of
the Company or give any advice or counsel with respect to the hiring
of any person who shall have been an employee of the Company at any
time within the two-year period immediately preceding such hiring,
advice or counsel.
(e) Ancillary to, and in order to further assure that Optionee
will not violate Optionee's covenants of non-disclosure of confidential,
proprietary and other business information of the Company set forth in Section
16(b) herein, or Optionee's obligations respecting Inventions under Section
16(c), and ancillary to the rest of this Agreement and in consideration of
each of the foregoing, Optionee covenants and agrees that for the Applicable
Period after termination of Optionee's employment for any reason Optionee will
not, for any reason, anywhere outside the Geographic Region (as defined below),
directly or indirectly, as an employee, employer, consultant, agent, principal,
partner, stockholder, officer, director, or in any other individual or
representative capacity engage or participate in any business described in
paragraph (d)(1) of this Section 16 if in fact such business is shipping the
products or equipment described therein to any country included in the
Geographic Region. Optionee recognizes that the foregoing covenant is
necessary to prevent Optionee from indirectly competing with the Company in a
prohibited manner inside the Geographic Region.
-12-
13
(f) Geographic Region means United States, Canada, Japan, Puerto
Rico, Mexico, Australia and the countries included in the European Economic
Community; and, if Optionee was directly engaged in selling Company-Type
Products in any other country while employed by the Company, then in such other
country.
(g) If Optionee engages in Technical Activities at any time during
Optionee's employment with the Company, then, for purposes of Sections 16(d)(1)
and (2) and 16(e), Applicable Period means:
Period For Conduct Described in Clause
------ -------------------------------
6 months (d)(1)(A)
2 years (d)(1)(B)
2 years (d)(1)(C)
2 years (d)(1)(D)
3 years (d)(1)(E)
2 years (d)(2)
and, if Optionee engages in Sales and Administrative Activities at any time
during Optionee's employment with the Company, then, for purposes of Sections
16(d)(1) and (2) and 16(e), "Applicable Period" means:
Period For Conduct Described in Clause
------ -------------------------------
2 years (d)(1)(A)
2 years (d)(1)(B)
6 months (d)(1)(C)
6 months (d)(1)(D)
1 year (d)(1)(E)
2 years (d)(2)
If Optionee engages in Technical Activities and in Sales and
Administrative Activities during Optionee's employment with Company then the
Applicable Period shall be the longer period designated for specific conduct.
(h) Optionee agrees to provide to any future employer a copy of
the covenants contained in this Section 16 and agrees that the Company may do
so as well.
(i) During the term of Optionee's employment, Optionee shall not
do any act that is prohibited following termination of Optionee's employment
under Section 16.
-13-
14
(j) The ownership of less than 2% of a publicly traded company
will not, in and of itself, violate Section 16.
(k) Both the Company's rights and the Optionee's duties under this
Section 16 shall survive any termination of this Agreement. If Optionee
violates any covenant contained in Section 16 of this Agreement, the Company
shall not, as a result of the time involved in obtaining relief, be deprived of
the benefit of the full period of any such covenant. Accordingly, the
covenants of Optionee contained in Section 16 shall be deemed to have the
durations specified therein, which periods shall commence upon the later of (i)
the termination of Optionee's employment with the Company and (ii) the later to
occur of: (A) the date of entry of a final judgment enforcing the covenants of
Optionee under Section 16, as the case may be or (B) the date on which Optionee
permanently ceases such violation.
(l) The Optionee recognizes that the remedy of damages for breach or
threatened breach of the provisions of this Section 16 would be inadequate and
that the harm occasioned by such breach would be irreparable, and accordingly,
Optionee expressly agrees that in the event of a breach or threatened breach by
Optionee of any of the provisions of this Section 16, the Company will be
entitled to an injunction, without the requirement of posting bond, restraining
Optionee from violating the terms hereof, or from rendering services to any
person, firm, corporation, association, or other entity to whom any
confidential information concerning or relating to the business of the Company
has been disclosed or may be threatened to be disclosed, or for whom Optionee
is working or rendering services, or threatens to work or render services in
violation of the terms hereof. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach of this Section 16, including recovery of
damages from Optionee. Optionee's allegation of or the existence of any claim
against the Company, under this Agreement or otherwise, will not constitute a
defense to the Company's enforcement of this Section.
(m)
(1) The parties recognize and agree that it may be
difficult if not impossible for the Company to prove the existence of
a breach of the Optionee's covenants of confidentiality and non-
disclosure under Section 16(b) of this Agreement. The parties further
recognize and agree that the non-competition covenants contained in
Section 16(d) and (e) are necessary to support the legitimate business
interests of the Company in preserving the confidentiality and secrecy
of and control over such confidential information and its business
goodwill and are ancillary to, supportive of, and a part of this
Agreement, are ancillary to the
-14-
15
Company's undertaking to facilitate Optionee's stock ownership
in the Company, and are necessary as a means of ensuring
compliance by Optionee with such confidentiality covenants.
(2) The existence of any claim or cause of action
of Optionee against the Company or any officer, director, or
shareholder of the Company, that is predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants of the Optionee
contained in this Section 16. In addition, the provisions of
this Section 16 shall continue to be binding upon Optionee in
accordance with their terms, notwithstanding the termination
of Optionee's employment with the Company for any reason.
(3) The parties acknowledge and agree that the
time, scope, territory and other provisions of this Section 16
are reasonable under the circumstances. The parties further
agree that if at any time despite the express agreement of the
parties hereto, it is held through enforcement proceedings
that any portion of Section 16 is unenforceable by reason of
its being too extensive in any respect, then it shall be
interpreted and reformed to extend only over the maximum
period of time for which it may be enforceable and over the
maximum geographical area as to which it may be enforceable
and to the maximum extent in all other respects as to which it
may be enforceable.
17. This Agreement constitutes the entire agreement between the
parties and may not be amended except by an instrument in writing executed by
both parties.
18. This Agreement has been executed and will be performed in the
State of Texas and will be governed by and construed in accordance with the
laws of the State of Texas except to the extent limited in Section 20 hereof.
19. If any one or more provisions of this Agreement shall be held
to be invalid, illegal or unenforceable in any respect in any jurisdiction, the
validity, legality or enforceability of the remaining provisions of this
Agreement in such jurisdiction shall not in any way be affected or impaired
thereby. Further, in lieu of such invalid, illegal, or unenforceable
provision, there shall be deemed inserted a provision as close in scope and
content to such provision as possible while remaining valid, legal and
enforceable in such jurisdiction.
20.
(a) Any dispute arising out of or relating to the
interpretation, validity, or enforcement of Section 16 of this
Agreement shall be settled by binding arbitration in
-15-
16
accordance with the then current Commercial Arbitration Rules of the
American Arbitration Association. Either party may initiate an
arbitration proceeding in accordance with such Rules. The arbitration
shall be conducted by a panel of three independent arbitrators
appointed in accordance with such Rules. The arbitration shall be
governed solely by the United States Arbitration Act notwithstanding
any other provision of this Agreement to the contrary. If the
arbitrators determine that a breach of any of the provisions of
Section 16 has occurred or is threatened then, at the request of the
Company, the arbitrators shall award temporary or permanent injunctive
relief in favor of the Company, as it may request, restraining and
enjoining any further such breach. Such award shall be in addition to
and not in lieu of any other relief to which the Company may be
entitled, including, without limitation, damages arising out of any
such breach. The arbitrators shall enter any award in form sufficient
to permit judgment upon the award to be entered by, and to permit an
order for contempt enforcing compliance with such judgment to be
entered by, a court of competent jurisdiction.
(b) Prior to the hearing on the merits in an arbitration
proceeding to enforce the provisions of Section 16 hereof, in order to
maintain the status quo pending such hearing, the Company shall have
the right to seek and obtain temporary or preliminary injunctive
relief from a court of competent jurisdiction restraining Optionee
from violating the provisions of Section 16.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TECNOL MEDICAL PRODUCTS, INC.
-----------------------------------
Optionee
-----------------------------------
Street address
By:
---------------------------- -----------------------------------
President City State/County Zip Code
-16-
