EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) made and effective as of the 1st
day of October, 2003, by and between ENCORE MEDICAL CORPORATION, a Delaware
corporation (the “Company”), and KENNETH W. DAVIDSON (the “Employee”).

 

In consideration of the mutual promises contained herein, and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Employee agree as follows:

 

ARTICLE 1

EMPLOYMENT

 

1.1 Employment Term. The Company hereby employs the Employee for a primary term
commencing on the date set forth above and, subject to earlier termination as
provided in Section 1.5 hereof, ending September 30, 2006 (the “Employment
Term”). Employee agrees to accept such employment and to perform the services
specified herein, all upon the terms and conditions hereinafter stated.

 

1.2 Duties. The Employee shall serve in the capacity as Chief Executive Officer
of the Company, or in such other capacity as the Company may in its sole
discretion direct, and shall report to, and be subject to the general direction
and control of, the Board of Directors of the Company. It is further understood
and agreed that any modification in or expansion of Employee’s duties hereunder
shall not, unless specifically agreed in writing by Company, result in any
modification in, increase or decrease of Employee’s compensation referred to in
Section 1.4 hereof.

 

1.3 Extent of Service. The Employee shall devote his full time, attention, and
energy to the business of the Company and, except as may be specifically
permitted by the Company and approved by the Board of Directors of the Company,
shall not be engaged in any other business activity while in the employ of the
Company.

 

1.4 Compensation

 

1.4.1 Salary. The Company shall pay to the Employee a base salary at a rate of
(i) Three Hundred Twenty-Five Thousand ($325,000) for the first year of the
Employment Term; (i) Three Hundred Forty Thousand ($340,000) for the second year
of the Employment Term; and (i) Three Hundred Fifty-Five Thousand ($355,000) for
the third year of the Employment Term, or at such greater rate as the Board of
Directors of the Company shall from time to time determine (the “Base Salary”).
The Base Salary shall be subject to review on no less than an annual basis,
beginning January 1, 2004. Such salary is to be payable in installments in
accordance with the payroll policies of the Company in effect from time to time
during the Employment Term.

 

1.4.2 Other Benefits. The Employee shall be entitled to such vacation days, sick
days, insurance and other fringe benefit programs (including pension,
profit-sharing, bonus and stock plans, if any) as are established for all other
executive employees of the Company, on the same basis as such other employees
are entitled thereto, it being understood that the

 

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establishment, termination, or change of any such program shall be at the
instance of the Company, in exercise of its sole discretion, from time to time,
and any such termination or change in any such program shall not affect this
Agreement.

 

1.4.3 Health Insurance. In addition, the Company agrees to provide Employee and
his spouse with medical and dental health insurance coverage, similar in terms
and coverage as is provided to the other executive employees of the Company, at
no cost to Employee during the Employment Term, any extension thereto, and, even
if the Employment Term has ended, until such time as Employee turns sixty-five
(65) years of age.

 

1.4.4 Bonus Program. Employee shall be entitled to a non-discretionary annual
bonus equal to fifty percent (50%) of Employee’s Base Salary if certain preset
goals or targets have been achieved by the Company and the Employee. Such goals
or targets for each year are to be set by the Compensation Committee of the
Board of Directors by the beginning of each fiscal year of the Company.

 

1.5 Termination.

 

1.5.1 Termination by Employee. At any time after one (1) year from the
commencement of the Employment Term, Employee may terminate this Agreement on
thirty (30) days’ prior written notice.

 

1.5.2 Termination by Company. Prior to the end of the Employment Term, the
Company may upon ten (10) days’ prior written notice discharge the Employee with
or without cause at its sole option without any further liability hereunder to
the Employee or his estate; provided, however, in the event such termination was
without cause, the Company shall be required to (i) pay the Employee, at the
time of his discharge, for one (1) year’s Base Salary, in addition to any
accrued, but unpaid Base Salary and (ii) maintain Employee and his spouse on the
Company’s health insurance plans in accordance with the requirements of Section
1.4.3 hereof. The Employee will have no further liability hereunder to the
Company except pursuant to Article 2 and Section 3.2 hereof. For purposes of
this Agreement, a “discharge for cause” shall mean a discharge resulting from
Employee having (i) committed any act involving moral turpitude, dishonesty, or
fraud that, in the good faith opinion of Company, causes a material harm to
Company, (ii) failed or refused to follow legal and reasonable policies or
directives established and previously given to Employee in writing by Company,
(iii) willfully failed to attend to his duties after ten (10) days prior written
notice of failure to so act, (iv) committed acts amounting to gross negligence
or willful misconduct to the material detriment of Company, or (v) otherwise
materially breached any of the terms or provisions of this Agreement after ten
(10) days prior written notice of such material breach and failure to cure such
breach. Employee shall be deemed to have been discharged for cause upon delivery
to Employee of a “Notice of Termination” stating the “Date of Termination” and
specifying the particulars of the conduct justifying discharge for cause.
Furthermore, if the Employee is terminated without cause, then the Company
agrees, if requested by Employee for the sole purpose of exercising any vested
options that Employee has the right to exercise, to loan to the Employee an
amount equal to (i) the full exercise price of all vested options that the
Employee has the right to exercise less (ii) the par value of such shares as are
to be exercised. The terms of the loan shall be that it shall be (a) secured by
the stock to be purchased, (b) be otherwise non-recourse to the Employee, (c)
bear

 

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interest at the prime rate of interest as published from time to time in The
Wall Street Journal, and (d) be fully due and payable, principal and interest,
two (2) years from the date of termination.

 

ARTICLE 2

NON-COMPETITION AND DISCLOSURE OF INFORMATION

 

2.1 Non-competition. Employee acknowledges that his services to be rendered
hereunder are of a special and unusual character which have a unique value to
Company, the loss of which cannot adequately be compensated by damages in an
action at law. In view of the unique value to Company of the services of
Employee for which Company has contracted hereunder, and because of the
confidential information to be obtained by or disclosed to Employee, and as a
material inducement to Company to enter into this Agreement, and to pay to
Employee the compensation referred to in Section 1.4 hereof, Employee covenants
and agrees that during Employee’s employment hereunder and for a period of one
(1) year after he ceases to be employed by Company, Employee shall not (a)
directly or indirectly, solicit business from, divert business from, or attempt
to convert to other methods of using the same or similar products or services as
provided by Company, any client, account or location of Company with which
Employee has had any contact as a result of his employment by Company hereunder;
(b) engage in or carry on, directly or indirectly, either for himself, as a
member of a partnership, or as a stockholder (except as limited partner or
stockholder of less than one percent (1%) of the issued and outstanding limited
partnership interests or stock of a publicly held partnership or corporation
whose gross assets exceed $l,000,000), as an investor, lender, guarantor,
landlord, manager, officer, or director of any person, partnership, corporation,
or other entity (other than the Company or its subsidiaries), or as an employee,
agent, associate, broker, or consultant of any person, partnership, corporation,
or other entity (other than the Company or its subsidiaries), any business (or
segment of a business if such business operates in more than one segment of the
orthopedic industry) that competes with any operations of the Company, as they
exist at the time of Employee’s termination, within an one hundred (100)-mile
radius of any geographic area where Company is actually engaged in business, or
maintains sales or service representatives or employees; or (c) directly or
indirectly, solicit for employment or employ any employee of Company. In the
event this Agreement is terminated by the Company without cause, Employee may
elect, by providing written notice to the Company, to shorten the term of this
non-compete to six (6) months, provided, however, in that event, the Company’s
obligation to pay severance pay to the Employee pursuant to Section 1.5.2 shall
be reduced to an amount equal to six (6) months base pay.

 

2.2 Disclosures of Information. The Employee acknowledges that in the course of
his employment by the Company, he will receive certain trade secrets, programs,
methods of operation, financial information, lists of customers, and other
confidential information and knowledge concerning the businesses of the Company
(hereinafter collectively referred to as “Information”) that the Company desires
to protect. As a material inducement to Company to enter into this Agreement,
and to pay to Employee the compensation referred to in Section 1.4 hereof,
Employee covenants and agrees that he shall not, at any time during or following
the term of his employment hereunder, directly or indirectly, divulge or
disclose, for any purpose whatsoever, any of such Information which has been
obtained by or disclosed to him as a result

 

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of his employment by Company. The Employee further agrees that he will at no
time use the Information in competing with the Company. Upon termination of this
Agreement, the Employee shall surrender to the Company all lists, books,
financial information, records, literature, products, papers, documents,
writings, and other property produced by him or coming into his possession by or
through his employment relating to the Information, and the Employee agrees that
all such materials will at all times remain the property of the Company. In the
event of a breach or threatened breach by Employee of any of the provisions of
this Article 2, Company, in addition to and not in limitation of any other
rights, remedies or damages available to Company at law or in equity, shall be
entitled to a permanent injunction in order to prevent or to restrain any such
breach by Employee, or by Employee’s partners, agents, representatives,
servants, employers, employees and/or any and all persons directly or indirectly
acting for or with him.

 

2.3 Accounting for Profits. Employee covenants and agrees that if he shall
violate any of his covenants or agreements under Article 2 hereof, Company shall
be entitled to an accounting and repayment of all profits, compensation,
commissions, remunerations or benefits which Employee directly or indirectly has
realized and/or may realize as a result of, growing out of or in connection with
any such violation; such remedy shall be in addition to and not in limitation of
any injunctive relief or other rights or remedies to which Company is or may be
entitled at law or in equity or under this Agreement.

 

2.4 Reasonableness of Restrictions.

 

2.4.1 Employee has carefully read and considered the provisions of Article 2
hereof and, having done so, agrees that the restrictions set forth in such
Article (including, but not limited to, the time period of restriction and the
geographical areas of restriction set forth in Article 2 hereof) are fair and
reasonable and are reasonably required for the protection of the interest of
Company, its officers, directors and other employees.

 

2.4.2 In the event that, notwithstanding the foregoing, any of the provisions of
Article 2 hereof shall be held to be invalid or unenforceable, the remaining
provisions thereof shall nevertheless continue to be valid and enforceable as
though the invalid or unenforceable parts had not been included therein. In the
event that any provision of Article 2 relating to time period and/or areas of
restriction shall be declared by a court of competent jurisdiction to exceed the
maximum time period or areas such court deems reasonable and enforceable, said
time period and/or areas of restriction shall be deemed to become and thereafter
be the maximum time period and/or areas which such court deems reasonable and
enforceable.

 

ARTICLE 3

EMPLOYEE INVENTIONS

 

3.1 Employee Inventions. Employee shall promptly disclose to the Company or its
designee any and all ideas, inventions, works of authorship (including, but not
limited to computer programs, software and documentation), improvements,
discoveries, developments, or innovations (hereinafter referred to as “said
inventions”), whether patentable or unpatentable, copyrightable or
uncopyrightable, made, developed, worked on, or conceived by Employee, either
solely or jointly with others, whether or not reduced to drawings, written
description,

 

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documentation, models, or other tangible form: (a) during the Employment Term
that relate to, or arise out of, any developments, services, research, or
products of, or pertain to the business of, the Company and (b) for a period of
six (6) months after termination of the Employment Term, said inventions that
relate to, or arise out of, any developments, services, research, or products
that Employee has been concerned with during the term of his employment.

 

3.2 Assignment. Employee hereby assigns and agrees to assign to the Company, its
successors and assigns, Employee’s entire right, title, and interest in and to
any of said inventions. All of said inventions shall forthwith and without
further consideration become and be the exclusive property of the Company, it
successors and assigns.

 

3.3 Cooperation. Employee shall, without further compensation, do all lawful
things, including, but not limited to, maintaining invention records that shall
be the property of the Company, rendering assistance, giving of evidence and
testimony, and executing necessary documents, as requested, to enable the
Company to file and obtain patents in the United States and foreign countries on
any of said inventions, as well as to protect the Company’s interest in any of
said inventions.

 

ARTICLE 4

MISCELLANEOUS

 

4.1 Notices. All notices, requests, consents, and other communications under
this Agreement shall be in writing and shall be deemed to have been delivered on
the date personally delivered or on the date mailed, postage prepaid, by
certified mail, return receipt requested, or telegraphed or telexed and
confirmed if addressed to the respective parties as follows: (a) if to the
Employee to the address set forth below, and (b) if to the Company to Encore
Medical Corporation, 9800 Metric Blvd., Austin, Texas 78758 ATTENTION: Chairman
of the Board. Either party hereto may designate a different address by providing
written notice of such new address to the other party hereto.

 

4.2 Specific Performance. The Employee acknowledges that a remedy at law for any
breach or attempted breach of Section 1.3 and Article 2 of this Agreement will
be inadequate, and agrees that the Company shall be entitled to specific
performance and injunctive and other equitable relief in case of any such breach
or attempted breach, and further agrees to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any such
injunctive or any other equitable relief. In the event the Company brings legal
action to enforce its rights hereunder, the Employee shall pay all of the
Company’s court costs and legal fees and expenses arising out of such action if
the Company prevails in such action.

 

4.3 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

4.4 Assignment. This Agreement may not be assigned by the Employee. Neither the
Employee nor his spouse shall have any right to commute, encumber, or otherwise
dispose of any

 

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right to receive payments hereunder, it being the intention of the parties that
such payments and the rights thereto are nonassignable and nontransferable. This
Agreement is only assignable by the Company to a parent, subsidiary, successor
or other affiliate of the Company.

 

4.5 Binding Effect. Subject to the provisions of Section 4.4 of this Agreement,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, the Employee’s heirs and personal representatives, and the successors
and assigns of the Company.

 

4.6 Governing Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Texas.

 

4.7 Entire Agreement; Amendment. This Agreement contains the entire
understanding between the parties, and there are no agreements or understandings
among the parties except as set forth herein. The Employee represents and
warrants to the Company that at the time of execution of this Agreement he is
not a party to any other employment agreement. Employee further represents and
warrants that he neither has any proprietary information of any other business
nor is he providing any other business’ proprietary information to the Company.
No alteration or modification of this Agreement shall be valid except by
subsequent written instrument executed by the parties hereto. No waiver by
either party of any breach by the other party of any provision or condition of
this Agreement in one circumstance shall be deemed a waiver of such provision or
condition in any other circumstances or be deemed a waiver of any other
provision or condition. The section and paragraph headings in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.

 

COMPANY:

  ENCORE MEDICAL CORPORATION By:   /s/    Harry L. Zimmerman          

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Harry L. Zimmerman,

Executive VP-General Counsel

 

EMPLOYEE:   /s/    Kenneth W. Davidson        

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KENNETH W. DAVIDSON

24107 Highway 71

Spicewood, TX 78669

 

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