Non-Qualified Stock Option Agreement with Innovative Spinal Technologies



 EXHIBIT 10.5 
  
 INTERPORE CROSS INTERNATIONAL 
  

NON-QUALIFIED STOCK OPTION AGREEMENT 
  
 THIS AGREEMENT is made by and between Interpore International, Inc., a Delaware corporation (the “Company”), and the consultant of the Company
or Subsidiary of the Company whose name and signature appears on the Signature Page hereof (the “Optionee”) as of the date thereon: 
  
 WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase shares of its Common Stock; and 
  
 WHEREAS, the Committee appointed to administer the Company’s stock
option plans has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service
of the Company or its Subsidiaries and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; 
  
 NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: 
  
 ARTICLE I. 
  
 DEFINITIONS 
  
 Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter, and the singular the
plural, where the context so indicates. 
  
 Section 1.1 Board 
  
 “Board”
shall mean the Board of Directors of the Company. 
  
 Section 1.2 Committee 
  
 “Committee” shall mean the Stock Option and Compensation Committee of the Board. 
  
 Section 1.3 Company 
  
 “Company” shall mean Interpore International, Inc., a Delaware corporation, or any successor corporation. 
  









 Section 1.4 Exchange Act 
  
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended. 
  
 Section 1.5 Option

  
 “Option” shall mean the non-qualified option to
purchase Common Stock of the Company granted under this Agreement. 
  
 Section 1.6 Rule 16b-3 
  
 “Rule 16b-3” shall mean that certain Rule I 6b-3 under the Exchange Act, as such Rule may be amended from time to time. 
  
 Section 1.7 Secretary 
  
 “Secretary” shall mean the Secretary of the Company. 
  
 Section 1.8 Securities Act 
  
 “Securities Act” shall mean the Securities Act of 1933, as amended. 
  
 Section 1.9 Subsidiary 
  
 “Subsidiary” shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one (1) of the other corporations in such chain. 

 
 Section 1.10 Termination of Consultancy

  
 “Termination of Consultancy” shall mean the time
when the engagement of an Optionee as a consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement; but
excluding a termination where there is a simultaneous commencement of engagement of the Optionee as a consultant to or employment with the Company or any Subsidiary. The Committee, in its sole discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way of limitation, all questions of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of this Agreement,
except as set forth in a separate written agreement between the Company (or a Subsidiary) and the Optionee, the Company (or such Subsidiary) has an absolute and unrestricted right to terminate a consultant’s service at any time for any reason
whatsoever. 
  









 ARTICLE II. 
  
 GRANT OF OPTION 
  
 Section 2.1 Grant of Option 
  
 For good and valuable consideration, on the date set forth on the Signature Page hereof, the Company irrevocably grants to the Optionee the option to
purchase any part or all of the aggregate number of shares of its Common Stock (the “Option Shares”) set forth on the Signature Page hereof, all upon the terms and conditions set forth in this Agreement. 
  
 Section 2.2 Purchase Price 
  
 The purchase price of the shares of Common Stock covered by the Option shall
be the amount per share set forth on the Signature Page hereof and shall be without commission or other charge. 
  
 Section 2.3 Consideration to Company 
  
 In consideration of the granting of this Option by the Company, the Optionee agrees to render faithful and efficient
services to the Company or a Subsidiary as a consultant to the Company for a period of at least one (1) year from the date this Option is granted. Nothing in this Agreement shall confer upon the Optionee any right to continue as a consultant of the
Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, except to the extent set forth in a separate written agreement between the Company (or a
Subsidiary) and the Optionee, to discharge the Optionee at any time for any reason whatsoever, with or without cause. The Company and the Optionee acknowledge that the services provided to the Company by the Optionee are bonafide services and not in
connection with the offer or sale of securities in any capital-raising transaction. 
  
 Section 2.4 Adjustments in Option 
  

(a) In the event that the outstanding shares of the stock subject to the Option are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company, or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock splitup, stock dividend or combination of shares, the Committee may, in its
sole discretion, make an adjustment in the number and kind of shares as to which the Option, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee’s proportionate interest shall be maintained
as before the occurrence of such event. Such adjustment in the Option may include any necessary corresponding adjustment in the Option price per share, but shall be made without change in the total price applicable to the unexercised portion of the
Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices). Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons.

  









 ARTICLE III. 
  
 PERIOD OF EXERCISABILITY 
  
 Section 3.1 Commencement and Duration of Exercisability 
  
 (a) The Option shall become exercisable as set forth under the caption “Commencement of Exercisability” on the
Signature Page hereto. 
  
 (b) No portion of the Option which is
unexercisable at Termination of Consultancy shall thereafter become exercisable. 
  
 (c) The installments provided for in Section 3.1(a) are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1(a) shall remain exercisable until it becomes unexercisable under Section 3.2.

  
 Section 3.2 Expiration of
Option 
  
 The Option may not be exercised to any extent by
anyone after the first to occur of the following events: 
  
 (a)
The Expiration Date set forth on the Signature Page hereto; or 
  
 (b) The expiration of three (3) months from the date of the Optionee’s Termination of Consultancy; or 
  
 (c) Except to the extent of Committee or Board action as authorized by Section 3.3 or otherwise, the effective date of either the merger or consolidation
of the Company with or into another corporation, the exchange of all or substantially all of the assets of the Company for the securities of another corporation, or the acquisition by another corporation or person of all or substantially all of the
Company’s assets or eighty percent (80%) or more of the Company’s then outstanding voting stock, or the liquidation or dissolution of the Company, unless the Committee waives this provision in connection with such transaction. At least
fifteen (15) days prior to the effective date of such merger, consolidation, exchange, acquisition, liquidation or dissolution, the Committee shall give the Optionee notice of such termination. 
  
 Section 3.3 Acceleration of Exercisability

  
 In the event of the merger or consolidation of the Company
with or into another corporation, the exchange of all or substantially all of the assets of the Company for the securities of another corporation, the acquisition by another corporation or person of all or substantially all of the Company’s
assets or eighty percent (80%) or more of the Company’s then outstanding voting stock, or the liquidation or dissolution of the Company, the Committee may, in its absolute discretion and upon such terms and conditions as it deems appropriate,
provide by resolution, adopted prior to such event, that as of some time prior to the effective date of such event this Option shall be exercisable as to all the shares covered hereby, notwithstanding that this Option may not yet have become fully
exercisable under Section 3.1; provided, however, that this acceleration of exercisability shall not take place if: 
  
 (a) Option becomes unexercisable under Section 3.2 prior to said effective date; or 
  









 (b) In connection with such event, provision is made, with the consent of the Committee, for an
assumption of this Option or a substitution therefor of a new option by a successor corporation or a parent or subsidiary of such corporation. 
  
 The Committee may make such determinations and adopt such rules and conditions as it, in its absolute discretion, deems appropriate in connection with
such acceleration of exercisability, including, but not by way of limitation, provisions to ensure that any such acceleration and resulting exercise shall be conditioned upon the consummation of the contemplated corporate transaction. 
  
 None of the foregoing discretionary terms of this Section shall be permitted
to the extent that such discretion would be inconsistent with the requirements of Rule 16b-3. 
  
 ARTICLE IV. 
  
 EXERCISE OF
OPTION 
  
 Section 4.1 Person
Eligible to Exercise 
  
 Only the Optionee (or transferee
permitted by Section 5.2) may exercise the Option or any portion thereof. 
  
 Section 4.2 Partial Exercise 
  
 Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under
Section 3.2; provided, however, that each partial exercise shall be for not less than one hundred (100) shares (or the minimum installment set forth in Section 3.1, if a smaller number of shares) and shall be for whole shares only. 
  
 Section 4.3 Manner of Exercise 
  
 The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2: 
  
 (a) A written notice complying with the applicable rules established by. the Committee stating that the Option, or a portion thereof, is exercised. The
notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion; and 
  
 (b) Full cash payment to the Secretary of the Company for the shares with respect to which such Option or portion is exercised; and 
  
 (c) A bona fide written representation and agreement, in a form satisfactory
to the Committee, signed by the Optionee or other person then entitled to exercise such Option or 

  









 
portion, stating that the shares of stock are being acquired for its own account, for investment and without any present intention of distributing or
reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion will indemnify the
Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above. The
Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and any other federal or
state securities laws or regulations. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does not
violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the
agreements herein; and 
  
 (d) Full payment to the Company (or
Subsidiary) of all amounts which, under federal, state or local tax law, it is required to withhold upon exercise of the Option; and 
  
 (e) In the event the Option or portion shall be exercised pursuant to Section 5.2 by any person or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option. 
  
 Section 4.4 Conditions to Issuance of Stock Certificates 
  
 The shares of stock deliverable upon the exercise of the Option, or any portion thereof; may be either previously authorized but unissued shares or issued
shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the
Option or portion thereof prior to fulfillment of all of the following conditions: 
  
 (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; and 
  
 (b) The completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the
Securities and Exchange Commission or of any other governmental regulatory body, which the Committee shall, in its absolute discretion, deem necessary or advisable; and 
  
 (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee
shall, in its absolute discretion, determine to be necessary or advisable; and 
  
 (d) The receipt by the Company of full payment for such shares, including payment of all amounts which, under federal, state or local tax law, the Company (or Subsidiary) is required to withhold upon exercise of the
Option; and 
  









 (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may
from time to time establish for reasons of administrative convenience. 
  
 Section 4.5 Rights as Stockholder 
  
 The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to such holder. 
  
 ARTICLE V. 
  
 OTHER
PROVISIONS 
  
 Section 5.1
Administration 
  
 The Committee shall have the power to
interpret this Agreement and to adopt such rules for the administration, interpretation and application of the Agreement as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Option. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Agreement except with respect to matters which under Rule 16b-3
or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. 
  
 Section 5.2 Option Not Transferable 
  
 Without the Consent of the Committee: 
  
 (a) neither the Option nor any interest or right therein or part thereof shall be sold, pledged, assigned, or transferred in
any manner unless and until such Option has been exercised, or the shares underlying such Option have been issued, and all restrictions applicable to such shares have lapsed; and 
  
 (b) neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition
is permitted by the preceding sentence. 
  









 Section 5.3 Confidentiality; Risk of Forfeiture 
  
 Optionee shall maintain the terms of this Agreement and the terms of the
Option in strictest confidence and shall not disclose any of such terms to any other person or entity without the prior approval of the Company. Optionee’s failure to comply with this Section 5.3 shall be harmful to the interests of the Company
and may result in termination of the Option and forfeiture of any gains or other economic benefit received by Optionee in connection with the Option or upon the receipt or resale of any Common Stock underlying the Option. 
  
 Section 5.4 Shares to Be Reserved 

 
 The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. 
  
 Section 5.5 Sale of Option Shares 
  

Neither this Option nor any of the Option Shares have been registered under the Act or under the securities laws of any state. Until the Option Shares
have been registered under the Act and registered and qualified under the securities laws of any state in question, the Corporation shall cause each certificate evidencing any Option Shares to bear the following legend: 
  
 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND SUCH REGISTRATION OR QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF ANY STATE, OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED. 
  
 Section 5.6 Notices

  
 Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Section 5.5, either
party may hereafter designate a different address for notices to be given to him. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office
or branch post office regularly maintained by the United States Postal Service. 
  
 Section 5.7 Titles 
  
 Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 
  









 Section 5.8 Construction 
  
 This Agreement shall be administered, interpreted and enforced under the
internal laws of the State of Delaware without regard to conflicts of laws thereof. 
  









 INTERPORE CROSS INTERNATIONAL 
 NON-QUALIFIED STOCK OPTION AGREEMENT 
  
 SIGNATURE PAGE 
  
 IN WITNESS WHEREOF, this Agreement has
been executed and delivered by the parties hereto. 
  

									
	 The Musculo-Skeletal Research Foundation
	 	 	 	 Interpore International, Inc.

					
	By:	 	 /s/ Barton L. Sachs, M.D.
	 	 	 	 By:
	 	 /s/ Richard L. Harrison

	 	 	 Barton L. Sachs, M.D.
	 	 	 	 	 	 Richard L. Harrison

					
	 Its:
	 	 President
	 	 	 	 Its:
	 	 CFO & Sr. VP, Finance

				
	 752961307
	 	 	 	 	 	 
	 Taxpayer Identification Number
	 	 	 	 	 	 
				
	 	 	 	 	 	 	Date of Grant: July 10, 2001
			
	 6300 West Parker Road
	 	 	 	Expiration Date: July 10, 2006
			
	 Plano, TX 75093
	 	 	 	Number of Option Shares: 60,000
	 Address
	 	 	 	 	 	 
				
	 	 	 	 	 	 	Purchase Price Per Share: $5.24

  
 Commencement of Exercisability 
  
 The Option
shall become exercisable in three (3) cumulative installments as follows: 
  
 (i) The first installment shall consist of thirty three and 1/3 percent (33 1/3%) of the shares covered by the Option and shall become exercisable on the first anniversary of the date the Option is granted.

  
 (ii) The second installment shall consist of
thirty three and 1/3 percent (33 1/3%) of the shares covered by the Option and shall become exercisable on the second anniversary of the date the Option is granted. 
  
 (iii) The third installment shall consist of thirty three and 1/3 percent (33 1/3%) of the shares covered by
the Option and shall become exercisable on the third anniversary of the date the Option is granted. 
  
 END OF DOCUMENT