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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
paragraph 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
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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 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
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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
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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 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 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.
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
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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
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
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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.
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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 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.
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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 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 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 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
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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 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,
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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
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,
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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, (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 effects 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.
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(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 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
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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 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),
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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
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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.
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(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 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)
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(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.
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
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TECNOL MEDICAL PRODUCTS, INC.
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Optionee
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Street address
By:
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President City State/County Zip Code
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