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EXHIBIT 10(K)
INCENTIVE STOCK OPTION,
TRADE SECRET, INVENTION, AND
NON-COMPETITION AGREEMENT
THIS AGREEMENT, made this 20th day of November, 1995, by and between
TECNOL MEDICAL PRODUCTS, INC., a Delaware corporation (hereinafter called
"TMPI"), and Jeffrey A. Nick (hereinafter called the "Optionee"), but effective
as of the date set forth in paragraph 2 below.
W I T N E 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
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employment of the Optionee shall not be diminished or affected by reason of the
fact that an option has been granted to him.
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, 11,667 shares of the common stock, $.001 par
value, of TMPI (the "Common Stock") during the period commencing March 1, 1996
and ending March 1, 2003, at a price per share of $17.00 (the "Option Exercise
Price"). The "Effective Date" of this agreement is November 20, 1995.
The right and option granted hereunder may be exercised from time to time
as follows: beginning March 1, 1996, as to not more than 1,667 shares covered
hereby; beginning March 1, 1997, as to any number of shares which, when added
to the number of shares previously purchased under the option, shall not exceed
3,334 shares covered hereby; beginning March 1, 1998, as to any number of
shares which, when added to the number of shares previously purchased under the
option, shall not exceed 5,001 covered hereby; beginning March 1, 1999, as to
any number of shares which, when added to the number of shares previously
purchased under the option, shall not exceed 6667 shares covered hereby;
beginning March 1, 2000, as to any number of shares which, when added to the
number of shares previously purchased under the option shall not exceed 8334 of
the total shares covered hereby; beginning March 1, 2001, as to any number of
shares which, when added to the number of shares previously purchased under the
option, shall not exceed 10,001 shares covered hereby; beginning March 1, 2002,
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 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
paragraph 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 the date on
which the Option is exercised, 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
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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
paragraph 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.
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 cash equivalents,
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 cash
equivalents, in amounts such that the 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 paragraph 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 him
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
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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
good cause, and two weeks after the severance of the employment relationship
between the Company and the Optionee for any reason, other than for good cause
or on account of death or retirement 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. 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
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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.
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
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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 corporations into TMPI, or after a
consolidation of TMPI and one or more corporations in which TMPI shall be the
surviving corporation, the Optionee shall, at no additional cost, be entitled
upon any exercise of this option, to receive (subject to any required action by
stockholders) in lieu of the number of shares as to which this option shall
then be so exercisable, the number and class of shares of stock or other
securities or cash or other property to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger or consolidation, as
if immediately prior to such merger or consolidation the Optionee had been the
holder of record of a number of shares of Common Stock of TMPI equal to the
number of shares as to which such option shall be so exercised; provided that,
anything herein contained to the contrary notwithstanding, upon the dissolution
or liquidation of TMPI, or upon any merger or consolidation if TMPI is not the
surviving corporation, the Board of Directors of TMPI shall determine the
disposition of this option in accordance with the alternatives set forth in
paragraph 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 he 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 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.
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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 7201
Industrial Park Blvd., Fort Worth, Texas 76180, and all notices or
communications by the Company to the Optionee may be given to the Optionee
personally or may be mailed to him at Optionee's address as shown in the
records of the Company.
16. (a) The Optionee recognized 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
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
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manufacture machines used to manufacture such materials in the
performance if 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.
(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 the
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
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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
cost, (ix) information about the Company's products and anticipated
new products, (x) forecasts, plans, objectives,
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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 effects the successful conduct of the business of the
Company, and its good will, regardless of 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 is 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,
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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 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, an 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
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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
(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
or designed to be used to manufacture Company-Type
Products; or
(2) recruit, or hire, or attempt to recruit or hire,
directly or or by assisting others, any other employee or
consultant of the Company or give 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
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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.
(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)
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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 immediately following termination
of Optionee's employment under Section 16.
(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
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pursuing any other remedies available to it for 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) 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 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.
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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 subject 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 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TECNOL MEDICAL PRODUCTS, INC.
By: /s/ Van Hubbard
----------------------------------------
President
/s/ Jeffrey A. Nick
--------------------------------------------
Optionee
704 Giltin Court
--------------------------------------------
Street address
Arlington TX/USA 76006
--------------------------------------------
City State/County Zip Code
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