Document:

Exhibit 10.2

 

EXECUTION COPY

 

STOCK PURCHASE AGREEMENT

 

By and between

 

EPIX MEDICAL, INC.

 

And

 

DR. MARTIN R. PRINCE

 

Dated as of November 17, 2003

 

 

THIS AGREEMENT, dated as of
November 17, 2003, is by and between EPIX MEDICAL, INC. (the “Company”), a
Delaware corporation with its principal offices at 71 Rogers Street, Cambridge,
Massachusetts 02142, and Dr. Martin R. Prince, an individual residing at the
address set forth in the IP Agreement (as defined below) (“the Purchaser”).

 

WHEREAS the Company and the
Purchaser are entering into an Intellectual Property Agreement (the “IP
Agreement”) dated as of the date hereof, and the IP Agreement contemplates that
the parties hereto shall enter into this Stock Purchase Agreement;

 

NOW, THEREFORE, in
consideration of the promises and mutual covenants contained in the IP
Agreement and this Stock Purchase Agreement, the parties agree as follows:

 

SECTION 1.                                Definitions.  Capitalized terms used herein, unless
otherwise defined herein, shall have the meanings given to them in the IP
Agreement.

 

SECTION 2.                                Authorization
of Sale of the Shares.  The Board of
Directors of the Company has authorized the issuance and sale to the Purchaser
of 132,000 shares (each, a “Share” and, collectively, the “Shares”) of common
stock, $.01 par value per share (“Common Stock”), of the Company.

 

SECTION 3.                                Agreement
to Sell and Purchase the Shares. 
The Company hereby agrees to issue and sell to the Purchaser at the
Closing (as defined in Section 4 hereof), upon the terms and conditions hereinafter
set forth, the Shares for the consideration set forth in the IP Agreement,
including the discharges, releases, promises and covenants not to sue contained
therein (the “Equity Consideration”). The aggregate purchase price for the
Shares shall be the Equity Consideration, and no further consideration shall be
due or payable under this Agreement.

 

SECTION 4.                                Delivery
of the Shares at the Closing. 
(a)  The Company shall deliver to
Purchaser on January 2, 2004 (the “Closing”) the Shares (as appropriately
adjusted for any stock split, stock dividend, combination of shares,
recapitalization or other similar event that occurs after the date of this
Agreement but before the Closing) and, to the extent tax reporting is required,
shall report the delivery of the Shares to the Purchaser as taxable for the
taxable year 2004.  Notwithstanding the
foregoing, if a Change of Control shall occur after the date of this Agreement
but before the Closing, the Company shall deliver the Shares to the Purchaser
at least

 

2

 

two (2) business days
prior to such Change of Control, in which case such accelerated date shall be
the Closing.  For the purpose of this
Agreement a Change of Control shall mean (i) the occurrence of a merger or
consolidation of the Company, other than a merger or consolidation that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to remain outstanding and to represent at least 50% of the
total voting power represented by the voting securities of the Company or such
surviving entity or parent of such surviving entity outstanding immediately
after such merger or consolidation, or (ii) the approval by the stockholders of
the Company of an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets.

 

(b)                                 At
the Closing the Company shall deliver to Purchaser one or more stock
certificates, pursuant to the Purchaser’s reasonable request.  Each such certificate shall be registered in
the name of the Purchaser.  The
Company’s obligation to issue and deliver the Shares at the Closing shall be
subject to the following conditions, which may be waived by the Company:  (i) the representations and warranties made
by the Purchaser herein shall be true, correct and complete in all material
respects as of the date of this Stock Purchase Agreement and (ii) the Company
shall have received a certificate executed by the Purchaser certifying as to
the same.  The Purchaser’s obligation to
purchase the Shares shall be subject to the fulfillment of the following
conditions, any of which may be waived by the Purchaser: (i) the
representations and warranties made by the Company herein shall be true,
correct and complete in all material respects as of the date of this Stock
Purchase Agreement, and (ii) the Purchaser shall have received a certificate
executed by an officer of the Company certifying as to the same.

 

SECTION 5.                                Representations
and Warranties of the Company.  The
Company hereby represents and warrants to the Purchaser as follows:

 

5.1                                 Organization.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.  The Company has full
corporate power and authority to own, operate and occupy its properties and to
conduct its business as presently conducted and is registered or qualified to
do business and in good standing in each jurisdiction in which it owns or
leases property or transacts business and where the failure to be so registered
or qualified would have a material adverse effect upon the results of

 

3

 

operations or its business.

 

5.2                                 Due
Authorization.  The Company has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Stock Purchase Agreement and to consummate the
transactions contemplated hereby.  This
Stock Purchase Agreement has been duly authorized, executed and delivered by,
and constitutes a valid and binding obligation of, the Company enforceable
against the Company in accordance with its terms, except as rights to indemnity
and contribution may be limited by state, federal or foreign laws or the public
policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally, and except as
enforceability may be subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

 

5.3                                 No
Material Adverse Change.  Subsequent
to the last day of the fiscal quarter covered by the most recent Quarterly
Report on Form 10-Q filed by the Company with the Securities and Exchange
Commission (the “SEC”), other than the IP Agreement, the Company has not
incurred any material liabilities or obligations, direct or contingent, other
than in the ordinary course of business, and there has not been any material
adverse change in its condition (in each case, financial or other), results of
operations or business.

 

5.4                                 Capitalization.  As of October 31, 2003, the Company had a
total authorized capitalization consisting of (i) 40,000,000 shares of Common
Stock, of which 22,033,754 shares were outstanding, and (ii) 1,000,000 shares
of preferred stock, $.01 par value per share, of which no shares were
outstanding.  As of October 31, 2003,
the Company has reserved 3,830,956 shares of Common Stock for issuance upon the
exercise of outstanding stock options, 919,454 shares for issuance upon the
exercise of stock options available for future grant under the Company’s stock
option plans, and 59,720 shares of Common Stock for purchase under the
Company’s Employee Stock Purchase Plan. 
Except as set forth above, (i) no shares of capital stock or other
voting securities of the Company are issued, reserved for issuance or
outstanding, and (ii) there are no outstanding subscriptions, options,
warrants, convertible or exchangeable securities or other rights granted to or
by the Company to purchase shares of

 

4

 

Common Stock or other securities of the
Company and as of the date hereof, there are no commitments, plans or
arrangements to issue any shares of Common Stock or any security convertible
into or exchangeable for Common Stock. 
The outstanding shares of capital stock of the Company have been duly
and validly issued and are fully paid and nonassessable.  The Shares have been duly authorized and,
when issued pursuant to the terms of this Stock Purchase Agreement, will be
validly issued, fully paid and nonassessable and free and clear of all pledges,
liens and encumbrances (other than pledges, liens or encumbrances created by
Purchaser).

 

5.5                                 No
Conflicts; Consents.  The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated in this Agreement will not conflict with or
constitute a breach of, or default under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company
pursuant to, any contract, indenture, mortgage, loan agreement, deed, trust,
note, lease, sublease, voting agreement, voting trust or other instrument or
agreement to which the Company is a party or by which it may be bound, or to
which any of the property or assets of the Company is subject, and will not
trigger anti-dilution rights or other rights to acquire additional equity
securities of the Company, nor will such action result in any violation of the
provisions of the articles of incorporation or bylaws of the Company or any
applicable statute, law, rule, regulation, ordinance, decision, directive or
order.  No consent, approval, authorization
or order of, or filing or registration with, any court or governmental agency
or body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby, other than such as have been made or obtained.

 

5.6                                 No
Actions. There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to the
knowledge of the Company, threatened, which seeks to prevent the transactions
contemplated by this Agreement or would otherwise reasonably be expected to
impair the ability of the Company to perform its obligations under this
Agreement.

 

5.7                                 Securities
and Exchange Commission Filings. 
The Company has timely filed with the SEC all documents required to be
filed by the Company under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).  The following
documents, as of their

 

5

 

respective filing dates, did not contain any
untrue statement of material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading:

 

(i)                                     the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2002;

 

(ii)                                  the
Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2003, June 30, 2003 and September 30, 2003;

 

(iii)                               the
Company’s Proxy Statement for its 2003 Annual Meeting of Stockholders;

 

(iv)                              the
Company’s Prospectus Supplement (To Prospectus dated January 15, 2003) dated
August 7, 2003 filed pursuant to Rule 424(b)(5) promulgated under the
Securities Act; and

 

(v)                                 all
other documents, if any, filed by the Company with the Commission since June
30, 2003 pursuant to the reporting requirements of the Exchange Act.

 

5.8                                 Transfer
Taxes.  All stock transfer or other
taxes (other than income taxes) that are required to be paid in connection with
the sale and transfer of the Shares to the Purchaser under this Agreement (i)
in the Commonwealth of Massachusetts will be, or will have been, fully paid or
provided for by the Company and (ii) in the State of Michigan will be, or will
have been, fully paid or provided for by the Purchaser.

 

5.9                                 Investment
Company.  The Company is not an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.

 

SECTION 6.                                Representations
and Warranties of the Purchaser.

 

6.1                                 Purchase
of Shares.  The Purchaser hereby
represents and warrants to the Company as follows: (i) the Purchaser has had an
opportunity to ask questions of and receive answers from the management of the
Company regarding the Company, its business and the

 

6

 

terms and conditions of the offering of the
Shares and (ii) the Purchaser acknowledges that it can bear the economic risk
of this investment and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of his
investment in the Shares.

 

6.2                                 Further
Representations by the Purchaser. 
The Purchaser further represents that he has satisfied himself as to the
observance in all material respects of the laws of the State of Michigan that
are required to be complied with by him in connection with (i) the legal
requirements of the State of Michigan for the acquisition of the Shares, (ii)
any foreign exchange restrictions imposed by the State of Michigan applicable
to such acquisition, (iii) any governmental or other consents of the State of
Michigan required to be obtained, and (iv) the income tax and other tax
consequences, if any, which may be relevant to the acquisition, holding,
redemption, sale or transfer of the Shares. 
The Purchaser further represents that he (i) is not a minor, (ii) has
the legal capacity to execute this Stock Purchase Agreement and has done so
willingly and voluntarily, (iii) has sought and received the advice of counsel
in all matters pertaining to this Stock Purchase Agreement and (iv) has duly
executed and delivered this Stock Purchase Agreement, which constitutes a valid
and binding obligation of, the Purchaser enforceable in accordance with its
terms, except as rights to indemnity and contribution may be limited by state,
federal or foreign laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally, and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).

 

SECTION 7.                                Additional
Agreements.

 

7.1                                 Prospectus
Supplement.  The Company hereby
covenants and agrees that:

 

(a)                                  the
Shares shall be issued pursuant to the Company’s registration statement on Form
S-3 (File No. 333-84566) declared effective by the SEC on January 15, 2003 (the
“Initial Registration Statement”);

 

(b)                                 as
of the date hereof, no stop order suspending the effectiveness of the

 

7

 

Initial Registration Statement or any
post-effective amendment thereto has been issued and no proceeding for that
purpose has been initiated by the SEC;

 

(c)                                  not
later than the second business day following the date hereof, the Company shall
file with the SEC, a prospectus supplement pursuant to Rule 424(b) (the
“Prospectus Supplement”);

 

(d)                                 the
Shares are listed on the Nasdaq National Market pursuant to a Notification Form
for the Listing of Additional Shares, which has been previously filed with
Nasdaq by the Company; and

 

(e)                                  the
Company shall bear all expenses in connection with the authorization, issuance,
sale, preparation and delivery of the Shares, including the filing of the
Prospectus Supplement.

 

SECTION 8.                                Survival
of Representations, Warranties and Agreements; Indemnification.

 

8.1                                 Survival
of Representations, Warranties and Agreements.  Notwithstanding any investigation made by any party to this Stock
Purchase Agreement, all covenants, agreements, representations and warranties
made by the Company and the Purchaser herein shall survive the execution
hereof, the delivery to the Purchaser of the Shares being purchased and the
payment therefor.

 

8.2                                 Indemnification
by the Company.  (a) The Company hereby
agrees to defend, indemnify and hold the Purchaser harmless from and against
any damages, liabilities, losses and expenses (including reasonable attorneys’
fees and expenses) that are actually sustained by the Purchaser as a result of
or based upon a material breach of any representation, warranty or agreement of
the Company in this Stock Purchase Agreement, or by reason of any claim, action
or proceeding asserted or arising out of a material breach of any such
representation, warranty or agreement.

 

(b)                                 The
Company will indemnify and hold harmless the Purchaser against all claims,
losses, expenses, damages and liabilities (or actions in respect thereof)
insofar as such claims, losses, expenses, damages and liabilities (or action in
respect thereof) arise out of or are

 

8

 

based on any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
that relates to the issuance of the Shares, including financial statements and
schedules and all other documents filed as a part thereof or incorporated by
reference therein (the “Registration Statement”) or the Prospectus Supplement,
or any amendment or supplement to the Registration Statement or Prospectus
Supplement, or arise out of or are based on any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Purchaser
for any reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided  that the Company will not be liable in any such
case to the extent that any such claim, loss, damage or liability (or actions
in respect thereof) arises out of or is based on any untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by the Purchaser specifically for use therein.  For the purpose of this Section 8.2, the
term “Registration Statement” shall also include any preliminary or final
prospectus included in or relating to the Registration Statement or any supplement
or amendment to the Registration Statement or preliminary or final prospectus.

 

8.3                                 Indemnification
by the Purchaser.  (a) The Purchaser
hereby agrees to defend, indemnify and hold the Company and its officers,
directors, employees and agents (collectively, the “Company Indemnitees”) harmless
from and against any damages, liabilities, losses and expenses (including
reasonable attorneys’ fees and expenses) which are actually sustained by the
Company Indemnitees as a result of or based upon a material breach of any
representation, warranty or agreement of the Purchaser in this Stock Purchase
Agreement, or by reason of any claim, action or proceeding asserted or arising
out of a material breach of any such representation, warranty or agreement.

 

(b)                                 The
Purchaser will indemnify the Company and each of its directors and officers and
each person who controls the Company against all claims, losses, expenses,
damages and liabilities (or actions in respect thereof) insofar as such claims,
losses, expenses, damages and liabilities (or actions in respect thereof) arise
out of or are based on any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus Supplement or any amendment or
supplement thereto or based on any omission or alleged omission to state
therein a

 

9

 

material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each such person for any reasonable legal and any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement or omission or alleged untrue statement or
omission is made in such Prospectus Supplement or any amendment or supplement
thereto in reliance upon and in conformity with written information furnished
to the Company by the Purchaser specifically for use therein; provided
that in no event shall any indemnity under this Section 8.3 exceed the net
proceeds received by the Purchaser from the sales of Shares pursuant to such
Registration Statement or Prospectus.

 

8.4                                 Contribution.  In order to provide for just and equitable
contribution in any case in which any person exercising rights under this
Section 8 makes a claim for indemnification, but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, then, the Company and the Purchaser will contribute to the aggregate
losses, claims, expenses, damages or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and of the Purchaser
on the other in connection with the statements or omissions which resulted in such
losses, claims, expenses, damages or liabilities, as well as any other relevant
equitable considerations.  The relative
fault of the Company on the one hand and of the Purchaser on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
by the Purchaser on the other, and each party’s relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission; provided, however, that, in any such case, no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any
person or entity who was not guilty of such fraudulent misrepresentation.  Notwithstanding any provision of this
Section 8.4 to the contrary, in no event shall any amount required to be
contributed by the Purchaser exceed the net proceeds received by the Purchaser
from the sales of Shares pursuant to the Registration Statement or Prospectus
Supplement which

 

10

 

contained such untrue or alleged untrue
statement of a material fact or omitted or allegedly omitted to state a
material fact.

 

8.5                                 Indemnification
Procedures.  Each party entitled to
indemnification under this Section 8 (the “Indemnified Party”) shall give
notice to the party required to provide indemnification (the “Indemnifying
Party”) promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided that counsel for the Indemnifying Party who shall conduct the defense
of such claim or litigation shall be approved by the Indemnified Party (which
approval shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party’s expense; provided, further, that
the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations hereunder, except to the
extent such failure resulted in actual detriment to the Indemnifying
Party.  Notwithstanding the foregoing,
if the defendants in any such claim or litigation include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party shall have reasonably
concluded that there may be a conflict between the positions of the
Indemnifying Party and the Indemnified Party in conducting the defense of any
such claim or litigation or that there may be legal defenses available to the
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, the Indemnified Party shall have the right, at the
Indemnifying Party’s expense, to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on the
Indemnified Party’s behalf.  No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such claim or litigation.

 

SECTION 9.                                No
Fee.  The parties hereto hereby
represent that there are no brokers or finders entitled to compensation in
connection with the transactions contemplated hereby.

 

SECTION 10.                          Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party’s address set forth below

 

11

 

or to such other address as a party may
designate by notice hereunder, and shall be either (i) delivered by hand, (ii)
made by facsimile transmission, (iii) sent by overnight courier, or (iv) sent
by registered or certified mail, return receipt requested, postage prepaid:

 

if
to the Company, to:

EPIX
Medical, Inc.

71
Rogers Street

Cambridge,
Massachusetts 02142

Tel:
(617) 250-6000

Fax:
(617) 250-6031

Attention:  Chief Executive Officer

 

 

with
a copy to:

William
T. Whelan, Esq.

Mintz,
Levin, Cohn, Ferris,

Glovsky
and Popeo, P.C.

One
Financial Center

Boston,
Massachusetts 02111

Tel:
(617) 542-6000

Fax:
(617) 542-2241

 

 

if
to the Purchaser, to:

Dr.
Martin R. Prince

At
the address set forth

in
the IP Agreement

 

with
a copy to:

Neil
A. Steinberg, Esq.

Steinberg
& Whitt, LLP

2665
Marine Way, Suite 1150

Mountain
View, California

Tel:
(650) 968-8079

Fax:
(650) 968-8102

 

All
notices, requests, consents and other communications hereunder shall be deemed
to have been given either (i) if by hand, at the time of the delivery thereof
to the receiving party at the address of such party set forth above, (ii) if
made by facsimile transmission, at the time that receipt thereof has been
acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified
mail, on the 5th business day following the day such mailing is made.

 

SECTION 11.                          Changes.  Any term of this Stock Purchase Agreement
may be amended or

 

12

 

compliance therewith waived with the written
consent of the parties hereto.

 

SECTION 12.                          Assignment.  The rights and obligations under this Stock
Purchase Agreement may not be assigned by any party hereto without the prior
written consent of the other party.  Any
assignee of the rights and obligations under this Stock Purchase Agreement
pursuant to this Section 12 shall agree to be bound by the terms and conditions
contained in this Stock Purchase Agreement.

 

SECTION 13.                          Benefit.  All statements, representations, warranties,
covenants and agreements in this Stock Purchase Agreement shall be binding on,
and inure to the benefit of, the respective parties hereto and their respective
successors and permitted assigns.  Other
than Sections 8.2 and 8.3 hereof, nothing herein shall be construed to create
any rights or obligations except among the parties hereto, and no person or
entity shall be regarded as a third-party beneficiary of this Stock Purchase
Agreement.

 

SECTION 14.                          Expenses.  Each of the parties hereto shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Stock Purchase
Agreement and the transactions contemplated hereby whether or not the
transactions contemplated hereby or thereby are consummated.

 

SECTION 15.                          Headings.  The headings of the various sections of this
Stock Purchase Agreement have been inserted for convenience of reference only
and shall not be deemed to be part hereof.

 

SECTION 16.                          Severability.  In case any provision contained in this
Stock Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.

 

SECTION 17.                          Governing
Law.  This Stock Purchase Agreement
shall be governed by and construed in accordance with the internal laws of the
State of Delaware without giving effect to principles of conflicts of law.

 

13

 

SECTION 18.                          Counterparts.  This Stock Purchase Agreement may be
executed in counterparts, each of which shall constitute an original, but all
of which, when taken together, shall constitute one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.

 

 

[Signature
page follows]

 

14

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Stock Purchase Agreement as of the 17th
day of November 2003.

 

 

	
   

  	
  EPIX
  MEDICAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Peyton J. Marshall

  	
   

  
	
   

  	
  Name:

  	
  Peyton
  J. Marshall

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Martin R. Prince

  	
   

  
	
   

  	
   

  	
  Martin
  R. Prince

  	
   

  
							

 

15EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

                  This Agreement,  dated as of June 1, 2002, is between NANNACO,
INC.  ("Employer"  or the  "Company"),  and ANDREW  DEVRIES,  III  ("Employee").
Employer and Employee agree to the following terms and conditions of employment.

         1.       Period of Employment.

                  Employer shall employ  Employee to render services to Employer
in the position and with the duties and responsibilities  described in Section 2
for the period  (the  "Period  of  Employment")  commencing  on the date of this
Agreement and ending on June 1, 2005.

         2.       Position and Responsibilities.

                  (a)      Position.

                  Employee  shall be employed  with the company as President and
Chief  Executive  Officer and shall  perform all  services  appropriate  to that
position,  as well as such  other  duties and  services  as may be  assigned  by
Employer.  Employee  shall  devote his best  efforts to the  performance  of his
duties.  Employee  shall be subject to the  direction of  Employer,  which shall
retain  full  control of the means and  methods by which he  performs  the above
services and of the place(s) at which all services are rendered.

                  (b)      Other Activity.

                  Employee  (during  the  Period  of  Employment)  shall  not be
prohibited  from  accepting  other  employment  or engaging  in other  business,
commercial or  professional  activity  provided that Employee  shall not engage,
directly or  indirectly,  in any other  business,  commercial,  or  professional
activity  (whether  or not pursued for  pecuniary  advantage)  that is or may be
competitive  with  Employer,  that might  create a  conflict  of  interest  with
Employer,  or that otherwise might  interfere with the business of Employer,  or
any Related  Company.  A "Related  Company" shall mean any person or entity that
directly or indirectly  controls,  is controlled  by, or is under common control
with  Employer  provided  this control is  disclosed  to or  otherwise  known by
Employee.  So that Employer may be aware of the extent of any other demands upon
Employee's time and attention, Employee shall disclose in confidence to Employer
the general  nature and scope of any other  business  activity in which he is or
becomes engaged during the Period of Employment.

                                       5
<PAGE>

                  (c)      Representations and Warranties.

                  Employee   represents  and  warrants  that  (i)  he  is  fully
qualified  and competent to perform the  responsibilities  for which he is being
hired  pursuant to the terms of this  Agreement,  and (ii) his execution of this
Agreement,  his employment with  Employers,  and the performance of his proposed
duties under this Agreement shall not violate any obligations he may have to any
former  employer (or other person or entity),  including  any  obligations  with
respect  to  proprietary  or  confidential  information  of any other  person or
entity. Employee agrees that he will not use for the benefit of, or disclose to,
Employer any confidential  information belonging to any former employer or other
entity unless he has written permission from the employer or entity to do so (or
unless Employer has been granted such permission).

         3.       Compensation and Benefits.

                  (a)      Compensation.

                           (1) In  consideration  of the services to be rendered
under this Agreement, Employee
shall  receive a minimum  salary in the  total  amount of Two  Hundred  Thousand
Dollars  ($200,000) per year, payable  semi-monthly,  pursuant to the procedures
regularly  established  and as they may be amended by Employer during the Period
of Employment.  This compensation may be deferred at the option of Employee, and
in such case,  the salary shall  accrue  interest at prime plus 1%. The Employee
has the option to convert  any or all salary with  accrued  interest to Nannaco,
Inc. stock  restricted  under Rule 144 at a conversion rate thirty percent (30%)
off  the  average  closing  bid  during  the  month  prior  to the  month  being
compensated.

                           (4) All  compensation  and comparable  payments to be
paid to Employee under this
Agreement shall be less withholdings required by law.

                  (b)      Benefits.

                   Employee shall be entitled to fringe  benefits  comparable to
similarly situated executives,  officers or directors, including paid annual tax
preparation assistance. As Employee becomes eligible, he shall have the right to
participate in and to receive benefits from all present and future benefit plans
generally made available to similarly situated employees of Employer. The amount
and extent of  benefits to which  Employee is entitled  shall be governed by the
specific  benefit  plans,  as  amended.  Employee  shall also be entitled to any
benefits or compensation  tied to termination as described in Section 4. No oral
statement  concerning  benefits or  compensation  to which  Employee is entitled
shall alter in any way the term of this Agreement or its termination.

                                       6
<PAGE>

                  (c)      Insurance and Indemnity.

         Employer  shall  obtain for the  benefit  of  Employee  director's  and
         officer's   liability  insurance  coverage  to  protect  Employee  from
         personal  liability  to the  fullest  extent  allowed  by law for  acts
         undertaken  as an officer or  director  of  Employer  or an  Affiliate.
         Furthermore,  to the  fullest  extent  allowed by law,  Employer  shall
         indemnify  Employee  for and hold  Employee  harmless  from any and all
         claims or causes of action  arising out of  Employee's  exercise of his
         duties as an employee, officer or director of Employer or an Affiliate.

         4.       Termination of Employment.

                  (a)      By Notice.

                  Employer  or  Employee  may  terminate  Employee's  employment
without  Cause (as defined  below) by providing  the other with sixty (60) day's
advance written notice.

                           (1) In the  event  Employer  exercises  its  right to
terminate under this subsection,
Employee  shall  have the  option,  in his  complete  discretion,  to  terminate
Employee's  employment  at any  time  prior  to the end of such  notice  period,
however,  Employer shall  nevertheless  pay to Employee all compensation due and
owing  through the last day  actually  worked,  plus an amount equal to the base
salary  Employee  would have  earned  through  the  balance of the above  notice
period,  plus $1,000.  In addition,  Employer  shall pay to Employee a Severance
Payment, as described in Paragraph 4(e) below, which payment shall be in lieu of
any damages under this Agreement for any alleged breach.

                           (2) In the  event  Employee  exercises  his  right to
terminate this agreement under
this subsection,  Employer shall have the option, in its complete discretion, to
terminate  Employee's  employment  at any time  prior to the end of such  notice
period,  however,  Employer shall  nevertheless pay to Employee all compensation
due and owing through the last day actually worked,  plus an amount equal to the
base salary  Employee  would have earned through the balance of the above notice
period, plus $1,000.

                  (b)      By Death.

                  The Period of Employment  shall terminate  automatically  upon
the death of Employee. Employer shall pay to Employee's beneficiaries or estate,
as  appropriate,  any  compensation  then due and owing,  including  payment for
accrued unused vacation,  if any. Thereafter,  all obligations of Employer under
this Agreement shall cease. Nothing in this Section shall affect any entitlement
of  Employee's  heirs  to the  benefits  of any  life  insurance  plan or  other
applicable benefits.

                                       7
<PAGE>

                  (c)      By Employer For Cause.

                  At any time, and without prior notice,  Employer may terminate
Employee for Cause.  Employer shall pay Employee all  compensation  then due and
owing;  thereafter,  all of Employer's  obligations  under this Agreement  shall
cease.  Termination shall be for "Cause" if Employee:  (i) acts in bad faith and
to the detriment of Employer;  (ii) refuses or fails to act in  accordance  with
any specific direction or lawful order of Employer;  (iii) exhibits in regard to
his employment unfitness or unavailability for service, misconduct,  dishonesty,
habitual  neglect,  or  incompetence;  (iv) is  convicted  of a crime  involving
dishonesty,  breach of trust,  or physical or emotional harm to any person;  (v)
breaches any material term of this Agreement.

                  (d)      Change in Employer Status.

         Notwithstanding  anything  above,  Employee may terminate the Period of
         Employment  (in which  case all of  Employer's  obligations  under this
         Agreement shall cease after payment of all  compensation due and owing)
         upon any formal action of Employer's management to terminate Employer's
         existence   or  otherwise   wind  up  its  affairs,   to  sell  all  or
         substantially  all of its  assets,  or to  merge  with or into  another
         entity. In the event Employee terminates the Period of Employment under
         this  subsection,  Employer shall pay Employee all compensation due and
         owing through the last day actually worked plus a Severance  Payment as
         described in subsection  4(e) below,  which payment shall be in lieu of
         any damages under this Agreement for any alleged breach. Employee shall
         be entitled to compensation  under this subsection 4(d) only if, within
         ninety (90) days after the change in employer status becomes effective,
         Employee gives Employer, or its successor or assigns,  sixty (60) day's
         notice of Employee's intent to terminate the Period of Employment. Upon
         receiving this notice,  Employer shall have the option, in its complete
         discretion,  to make Employee's termination effective at any time prior
         to the end of the notice  period,  provided that Employer pays Employee
         all compensation due and owing through the balance of the notice period
         (not to exceed sixty (60) days), in addition to all other  compensation
         due and owing, including without limitation, the Severance Payment.

                  (e) Severance Payment

                  (1) Employee  terminates the Period of Employment  pursuant to
subsection 4(d) above or Employer  terminates the Period of Employment  pursuant
to subsection 4(a) above,  Employer shall pay Employee all  compensation due and
owing,  plus a lump sum equal to twelve (12)  month's base salary plus an amount
equal to any bonus paid in cash or stock in the prior twelve (12) months,  which
payment  shall be in lieu of any damages  under this  Agreement  for any alleged
breach.

                                       8
<PAGE>

                  (f) Termination Obligations

                           (1)  Employee  agrees that all  property,  including,
without limitation, all equipment, tangible proprietary information,  documents,
books,  records,  reports,  notes,  contracts,  lists, computer disks (and other
computer-generated  files and data),  and copies thereof,  created on any medium
and  furnished  to,  obtained  by, or  prepared  by Employee in the course of or
incident to his employment,  belongs to Employer and shall be returned  promptly
to Employer upon termination of the Period of Employment.

                           (2) All  benefits  to  which  Employee  is  otherwise
entitled shall cease upon Employee's  termination,  unless explicitly  continued
either under this Agreement or under any specific written policy or benefit plan
of Employer.

                           (3) Upon  termination  of the  Period of  Employment,
Employee  shall be deemed to have  resigned  from all offices and  directorships
then held with Employer or any Affiliate.

                           (4) The representations  and warranties  contained in
this  Agreement  and  Employee's  obligations  under  this  subsection  4(f)  on
Termination   Obligations  shall  survive  the  termination  of  the  Period  of
Employment and the expiration of this Agreement.

                           (5)  Following  any  termination  of  the  Period  of
Employment, Employee shall fully cooperate with Employer in all matters relating
to the winding up of pending work on behalf of Employer and the orderly transfer
of work to other  employees of Employer.  Employee  shall also  cooperate in the
defense of any action  brought by any third party against  Employer that relates
in any way to Employee's acts or omissions while employed by Employer.

         5.       Notices.

                  Any notice or other communication under this Agreement must be
in writing and shall be  effective  upon  delivery by hand or three (3) business
days after  deposit in the United  States mail,  postage  prepaid,  certified or
registered,  and  addressed  to  Employers  or to Employee at the  corresponding
addresses  below.  Employee shall be obligated to notify Employers in writing of
any change in his address.  Notice of change of address shall be effective  only
when done in accordance with this Section.

                           Employer's Notice Addresses:

                           Nannaco, Inc.
                           2935 Thousand Oaks #261
                           San Antonio, TX 78247
                           Employee's Notice Address:

                           Andrew DeVries, III
                           3670 Menger
                           San Antonio, TX 78259

                                       9
<PAGE>

         6.       Action by Employers.

                  All  actions  required  or  permitted  to be taken  under this
Agreement by Employer,  including,  without limitation,  exercise of discretion,
consents,  waivers,  and  amendments  to  this  Agreement,  shall  be  made  and
authorized only by the President,  by his or his designated  representative,  or
another  representative  specifically  authorized  by the Board of  Directors to
fulfill the obligations under this Agreement.

         7.       Integration and Other Policies.

                  This Agreement  supersedes all other prior and contemporaneous
representations,  agreements and statements, whether written or oral, express or
implied,   and  it  may  not  be  contradicted  by  evidence  of  any  prior  or
contemporaneous   representations,   statements   or   agreements.   Except   as
specifically  restricted  by an express  provision of this  Agreement,  Employer
retains  and  may  exercise  all  management  rights  and  prerogatives  in  its
discretion.  However, to the extent that the practices,  policies, or procedures
of Employer,  now or in the future,  apply to Employee and are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall control.

         8.       Amendments; Waivers.

                  This  Agreement may not be amended  except by an instrument in
writing,  signed by each of the parties.  No failure to exercise and no delay in
exercising any right,  remedy,  or power under this Agreement shall operate as a
waiver thereof,  nor shall any single or partial exercise of any right,  remedy,
or power under this Agreement preclude any other or further exercise thereof, or
the exercise of any other right,  remedy,  or power provided herein or by law or
in equity.

         9.       Assignment; Successors and Assigns.

                  Employee  agrees  that he will  not  assign,  sell,  transfer,
delegate,  or otherwise dispose of, whether voluntarily or involuntarily,  or by
operation  of law,  any rights or  obligations  under this  Agreement.  Any such
purported assignment, transfer, or delegation shall be null and void. Nothing in
this Agreement shall prevent the  consolidation  of Employer with, or its merger
into, any other entity,  or the sale by Employer of all or substantially  all of
its assets,  or the  otherwise  lawful  assignment  by Employer of any rights or
obligations under this Agreement. Subject to the foregoing, this Agreement shall
be  binding  upon and  shall  inure to the  benefit  of the  parties  and  their
respective heirs, legal representatives,  successors, and permitted assigns, and
shall not benefit any person or entity other than those specifically  enumerated
in this Agreement.

                                       10
<PAGE>

         10.      Severability.

                  If any provision of this Agreement,  or its application to any
person, place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction  to be invalid,  unenforceable,  or void,  such provision  shall be
enforced to the greatest  extent  permitted  by law,  and the  remainder of this
Agreement  and  such  provision  as  applied  to  other  persons,   places,  and
circumstances shall remain in full force and effect.

         11.      Attorneys' Fees.

                  In any legal action,  arbitration, or other proceeding brought
to enforce or interpret the terms of this Agreement,  the prevailing party shall
be entitled to recover reasonable attorneys' fees and costs.

         12.      Interpretation.

                  This Agreement shall be construed as a whole, according to its
fair  meaning,  and not in favor of or against any party.  By way of example and
not in limitation,  this Agreement  shall not be construed in favor of the party
receiving  a benefit  nor  against  the  party  responsible  for any  particular
language in this  Agreement.  Captions are used for reference  purposes only and
should be ignored in the interpretation of the Agreement.

         13.      Proprietary Information.

         Employee  represents and warrants that Employer has  consistently  made
Employee's  willingness  to  protect  Employer's  confidential  and  proprietary
information from any unauthorized use and disclosure, and Employee's willingness
to comply with the terms of Employer's confidentiality policies, procedures, and
agreements,  conditions of (1) Employer's agreement to disclose confidential and
proprietary  information  to  Employee,  (2)  Employee's  employment,   and  (3)
Employee's continued employment.  Employee agrees that Employer's requirement of
satisfactory  confidentiality  agreements is reasonable and necessary to protect
Employer's  confidential  and  proprietary  information  and to  effectuate  the
purposes of, and is ancillary to, Employee's employment agreement.

         14.      Acknowledgment.

         The parties  acknowledge  that they have had the opportunity to consult
legal counsel in regard to this  Agreement,  that they have read and  understand
this  Agreement,  that they are fully aware of its legal  effect,  and that they
have entered into it freely and  voluntarily and based on their own judgment and
not on any  representations  or  promises  other  than those  contained  in this
Agreement.

                                       11
<PAGE>

The parties  have duly  executed  this  Agreement  as of the date first  written
above.

------------------------------
Andrew DeVries, III

NANNACO, INC.

-------------------------------

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