EXHIBIT 10.3


                                  NQO AGREEMENT
                                 (FOR DIRECTORS)


     THIS  AGREEMENT  is  entered  into as of the  Grant  Date  (as  defined  in
paragraph 1) by and between the Participant and Microtek Medical Holdings,  Inc.
(the "Company");

                                WITNESSETH THAT:

     WHEREAS,  the Company  maintains  the 1999  Long-Term  Incentive  Plan (the
"Plan"), which is incorporated into and forms a part of this Agreement,  and the
Participant  has been  selected by the Board to receive an  Non-Qualified  Stock
Option Award under the Plan;

     NOW,  THEREFORE,  IT  IS  AGREED,  by  and  between  the  Company  and  the
Participant, as follows:

     1. TERMS OF AWARD.  The following  terms used in this Agreement  shall have
the meanings set forth in this paragraph 1:

     (a) The "Participant" is ___________.

     (b) "Grant Date" is ___________.

     (c) The number of "Covered Shares" shall be ___________ shares of Stock.

     (d) The "Exercise Price" is $___________ per share.

Other  terms used in this  Agreement  are  defined  pursuant  to  paragraph 8 or
elsewhere in this Agreement.

     2. AWARD AND EXERCISE  PRICE.  This  Agreement  specifies  the terms of the
option (the  "Option")  granted to the  Participant  to  purchase  the number of
Covered  Shares  of Stock  at the  Exercise  Price  per  share  as set  forth in
paragraph  1. The Option is not  intended  to  constitute  an  "incentive  stock
option" as that term is used in Code Section 422.

     3. DATE OF EXERCISE.  Subject to the  limitations  of this  Agreement,  the
Option shall be  exercisable  on a cumulative  basis  according to the following
schedule,  with respect to each  installment  shown in the schedule on and after
the "Vesting Date" (defined as set forth below) applicable to such installment:


<TABLE>
<CAPTION>
<S>                                                          <C>
------------------------------------------------------------ ---------------------------------------------------------
                                                                                   VESTING DATE
                                                                                  APPLICABLE TO
                        INSTALLMENT                                                INSTALLMENT
------------------------------------------------------------ ---------------------------------------------------------
                    All Covered Shares                                              Grant Date
------------------------------------------------------------ ---------------------------------------------------------
</TABLE>

An installment shall not become exercisable on the otherwise  applicable Vesting
Date if the Participant's Date of Termination (as defined in the Plan) occurs on
or before such Vesting Date.  Notwithstanding  the foregoing  provisions of this



<PAGE>

paragraph  3, the Option  shall  become  exercisable  with respect to all of the
Covered  Shares  (to the  extent it is not then  otherwise  exercisable)  upon a
Change of Control  (as  defined in the  Plan),  except  that it shall not become
exercisable (a) if the  exercisability of this Option would result in an "excess
parachute  payment" within the meaning of Section 280G of the Code as determined
by the Board based on information available to it at said time, (b) if following
such Change of Control this Option shall remain in effect in accordance with its
terms  (subject to such  adjustments  as may be made in accordance  with Section
4.2(c) of the  Plan),  or (c) if the  Company  exercises  its  rights  under the
following  sentence.  The Company shall have the right,  exercisable in the sole
discretion of the Company by notice to Participant  upon or in  anticipation  of
any merger of the  Company  with or into  another  corporation  or  exchange  of
outstanding   capital  stock  of  the  Company  for  capital  stock  of  another
corporation,  to require Participant to purchase,  within ten days from the date
of such notice,  all or any portion of the remaining Shares which are subject to
this Option and which the  Participant  shall not have  previously  purchased in
accordance with this Option to the extent  Participant  shall desire to do so in
the manner otherwise provided in this Option, and this Option shall terminate as
to any shares not so  purchased  as of the date which is ten days after the date
of such notice from the Company to Participant.

     4.  EXPIRATION.  The Option shall not be  exercisable  after the  Company's
close of business on the Expiration  Date (or, if the  Expiration  Date is not a
date in which the Company is open for business, the next regular business day of
the Company). The "Expiration Date" shall be earliest to occur of:

     (a) the five-year anniversary of the Grant Date; or

     (b) the one-year  anniversary of the date the  Participant no longer serves
as a director of the Company.

     5. METHOD OF OPTION  EXERCISE.  Subject to this Agreement and the Plan, the
Option may be exercised in whole or in part by filing a written  notice with the
Secretary of the Company or his designee at its corporate  headquarters prior to
the  Company's  close of  business on the  Expiration  Date.  Such notice  shall
specify the number of shares of Stock which the Participant  elects to purchase,
and shall be  accompanied  by payment of the  Exercise  Price for such shares of
Stock indicated by the  Participant's  election.  Payment shall be by cash or by
check payable to the Company. Except as otherwise provided by the Board, (i) all
or a portion of the Exercise Price may be paid by the Participant by delivery of
shares of Stock owned by the  Participant  and acceptable to the Board having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to
the amount of cash that would  otherwise be required;  and (ii) the  Participant
may pay the Exercise  Price by authorizing a third party to sell shares of Stock
(or a sufficient portion of the shares) acquired upon exercise of the Option and
remit to the Company a sufficient portion of the sale proceeds to pay the entire
Exercise Price and any tax withholding resulting from such exercise.  The Option
shall not be exercisable if and to the extent the Company  determines  that such
exercise would violate  applicable state or Federal securities laws or the rules
and regulations of any securities  exchange on which the Stock is traded. If the
Company  makes  such a  determination,  it shall use all  reasonable  efforts to
obtain  compliance  with  such  laws,  rules  or  regulations.   In  making  any
determination  hereunder, the Company may rely on the opinion of counsel for the
Company.  Any certificate  representing  shares of Stock issued upon exercise of
this Option shall  contain such legends as the Company  shall in its  discretion
require.



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<PAGE>

     6. WITHHOLDING.  All deliveries and distributions  under this Agreement are
subject to withholding of all applicable taxes. Any exercise of the Option shall
be subject to the  Participant's  payment to the Company of an amount sufficient
to satisfy any federal,  state and local tax  withholding  requirements.  At the
election  of the  Participant,  and subject to the  approval of the Board,  such
withholding  obligations  may be  satisfied  through the  surrender of shares of
Stock  which  the  Participant  already  owns,  or to which the  Participant  is
otherwise entitled under the Plan.

     7.  TRANSFERABILITY.  Except as otherwise provided in this paragraph 7, the
Option is not  transferable  other than as designated by the Participant by will
or by the laws of descent and distribution,  and during the Participant's  life,
may be exercised only by the Participant.  However,  the  Participant,  with the
approval of the Board  (which  shall be in the  Board's  sole  discretion),  may
transfer  the  Option  for  no  consideration  to or  for  the  benefit  of  the
Participant's  Immediate Family (including,  without limitation,  to a trust for
the benefit of the Participant's Immediate Family or to a partnership or limited
liability  company  for  one or  more  members  of the  Participant's  Immediate
Family),  subject to such limits as the Board may establish, and the transferees
shall remain  subject to all the terms and  conditions  applicable to the Option
prior to such transfer.  The foregoing  right to transfer the Option shall apply
to the right to consent to amendments to this  Agreement  and, in the discretion
of the  Board,  shall  also  apply to the  right to  transfer  ancillary  rights
associated  with  the  Option.  The  term  "Immediate  Family"  shall  mean  the
Participant's spouse, parents, children,  stepchildren,  adoptive relationships,
sisters,  brothers and grandchildren (and, for this purpose,  shall also include
the Participant).

     8.  DEFINITIONS.  Except where the context clearly implies or indicates the
contrary,  a word,  term,  or phrase used in the Plan is similarly  used in this
Agreement.

     9. HEIRS AND SUCCESSORS. This Agreement shall be binding upon, and inure to
the  benefit  of, the  Company and its  successors  and  assigns.  If any rights
exercisable by the Participant or benefits  deliverable to the Participant under
this Agreement have not been exercised or delivered,  respectively,  at the time
of the  Participant's  death, such rights shall be exercisable by the Designated
Beneficiary, and such benefits shall be delivered to the Designated Beneficiary,
in  accordance  with  the  provisions  of  this  Agreement  and  the  Plan.  The
"Designated Beneficiary" shall be the beneficiary or beneficiaries designated by
the  Participant in a writing filed with the Board in such form and at such time
as the Board  shall  require.  If a deceased  Participant  fails to  designate a
beneficiary,  or if the Designated Beneficiary does not survive the Participant,
any rights that would have been  exercisable by the Participant and any benefits
distributable  to the  Participant  shall be exercised by or  distributed to the
legal representative of the estate of the Participant. If a deceased Participant
designates  a  beneficiary  but  the  Designated  Beneficiary  dies  before  the
Designated  Beneficiary's  exercise of all rights under this Agreement or before
the complete  distribution of benefits to the Designated  Beneficiary under this
Agreement,  then any rights that would have been  exercisable  by the Designated
Beneficiary shall be exercised by the legal  representative of the estate of the
Designated  Beneficiary,  and  any  benefits  distributable  to  the  Designated
Beneficiary  shall be distributed to the legal  representative  of the estate of
the Designated Beneficiary.

     10.  ADMINISTRATION.  The authority to manage and control the operation and
administration  of this  Agreement  shall be vested in the Board,  and the Board
shall have all powers with  respect to this  Agreement as it has with respect to
the Plan. Any interpretation of the Agreement by the Board and any decision made
by it with respect to the Agreement is final and binding on all persons.



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<PAGE>

     11.  PLAN  GOVERNS.  Notwithstanding  anything  in  this  Agreement  to the
contrary, the terms of this Agreement shall be subject to the terms of the Plan,
a copy of which  may be  obtained  by the  Participant  from the  office  of the
Secretary of the Company;  and this Agreement is subject to all interpretations,
amendments,  rules and  regulations  promulgated  by the Board from time to time
pursuant to the Plan.

     12.  NOT  AN  EMPLOYMENT  CONTRACT.  The  Option  will  not  confer  on the
Participant any right with respect to continuance of employment or other service
with the Company or any Related  Company,  nor will it interfere in any way with
any right the Company or any Related  Company would  otherwise have to terminate
or modify the terms of such  Participant's  employment  or other  service at any
time.

     13. NOTICES. Any written notices provided for in this Agreement or the Plan
shall be in  writing  and shall be  deemed  sufficiently  given if  either  hand
delivered or if sent by fax or overnight courier, or by postage paid first class
mail.  Notices sent by mail shall be deemed  received  three business days after
mailed but in no event later than the date of actual  receipt.  Notices shall be
directed,  if to the Participant,  at the Participant's address indicated by the
Company's records,  or if to the Company,  at the Company's  principal executive
office.

     14.  FRACTIONAL  SHARES.  In lieu of issuing a fraction of a share upon any
exercise of the Option  resulting  from an adjustment of the Option  pursuant to
paragraph  4.2(c) of the Plan or otherwise,  the Company will be entitled to pay
to the  Participant an amount equal to the fair market value of such  fractional
share.

     15. NO RIGHTS AS SHAREHOLDER.  The Participant shall not have any rights of
a shareholder  with respect to the shares  subject to the Option,  until a stock
certificate  has been duly issued  following  exercise of the Option as provided
herein.

     16.  AMENDMENT.  This Agreement may be amended by written  agreement of the
Participant and the Company, without the consent of any other person.

     IN WITNESS  WHEREOF,  the Participant has executed this Agreement,  and the
Company has caused these  presents to be executed in its name and on its behalf,
all as of the Grant Date.

                                        PARTICIPANT

                                        ________________________________________



                                        MICROTEK MEDICAL HOLDINGS, INC.


                                        By: ____________________________________
                                        Its: ___________________________________


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