Document:

Exhibit 10.2

 

FORM OF NONSTATUTORY STOCK OPTION AGREEMENT

 

This AGREEMENT (this “Agreement”) is made as
of             ,
2006 by and between Encore Medical Corporation, a Delaware corporation (the “Company”),
and [              ]
(“Optionee”) to become effective at the effective time, as defined in Section
1.1 of the Merger Agreement (the “Effective Time”). As a condition precedent to
the Company’s grant of the Option (as defined in Section 2 of this Agreement)
to Optionee, Optionee is executing and delivering a counterpart of the
Stockholders Agreement and thereby agrees to be bound by the Stockholders’
Agreement.

 

1.                                       Certain Definitions. Capitalized
terms used, but not otherwise defined, in this Agreement will have the meanings
given to such terms in the Company’s 2006 Stock Incentive Plan (the “Plan”). As
used in this Agreement:

 

(a)                                  “Code”
means the Internal Revenue Code of 1986, as amended.

 

(b)                                 “Company”
has the meaning specified in the introductory paragraph of this Agreement; provided,
that to the extent that any class of equity securities of a member of the
Company’s controlled group becomes publicly traded on an established securities
market, the term “Company” shall be deemed to refer to such publicly traded
entity.

 

(c)                                  “Compensation
Committee” means the Executive Compensation Committee of the Board.

 

(d)                                 “Disability”
shall have the meaning set forth in the Optionee’s employment agreement with
the Company or, if there is no employment agreement, it shall mean the Optionee
is disabled as determined under Section 409A(a)(2)(C) of the Code.

 

(e)                                  “EBITDA” shall mean “Consolidated
EBITDA”, as defined in that certain Credit
Agreement dated as of November 3, 2006 among Encore Medical Finance, LLC, as
Borrower, Encore Medical Holdings, LLC, Bank Of America, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer, The Other Lenders Party
Hereto, Credit Suisse Securities (USA) LLC, as Syndication Agent, General
Electric Capital Corporation, as Documentation Agent, and Banc Of America
Securities LLC and Credit Suisse Securities (USA) LLC, as Lead Arrangers and
Book Runners.

 

(f)                                    “Effective
Time” has the meaning specified in the introductory paragraph of this
Agreement.

 

(g)                                 “Fair
Market Value” has the meaning specified in the Plan, except as expressly set
forth herein.

 

(h)                                 “First
Performance-Based Tranche” has the meaning specified in Section 2 of this
Agreement.

 

 

 

(i)                                     “Free
Cash Flow” shall mean cash flow from operations as presented in the statement
of cash flows

 

(x)                                   increased,
without duplication, by

 

(i)                                     cash
payments for interest expense on borrowed money,

 

(ii)                                  the
cash tax cost incurred with respect to interest income and

 

(iii)          cash flows from
discontinued operations to the extent that such amounts are not reflected as a
source of cash from operations in the statement of cash flows, and

 

(y)                                 decreased,
without duplication, by

 

(iv)                              uses
of cash reflected as investing activities, excluding purchases of held to
maturity securities, and excluding amounts expended on acquisitions of
businesses, assets or product lines from third parties,

 

(v)                                 cash
received for interest income on invested cash or cash equivalents,

 

(vi)                              the
cash tax benefit realized during the period with respect to interest expense on
borrowed money and stock based compensation,

 

(vii)                           minority
interest expense, and

 

(viii)        uses of cash from
discontinued operations to the extent that such amounts are not included as a
use of cash from operations in the statement of cash flows.

 

For purposes
of calculating Free Cash Flow, all amounts will be determined in accordance
with GAAP, will consider changes in outstanding checks to be an operating cash
flow and will exclude the effects of any sources or uses of cash outside the
ordinary course of business (e.g., receivable financing).

 

(j)                                     “GAAP”
shall mean accounting principles generally accepted in the United States of
America as applicable to the Company, subject to regulation by the Securities
and Exchange Commission as in effect on the date of this Agreement, and to the
extent that alternative accounting treatments are permissible within those
accounting principles, in accordance with the Company’s historical accounting
policies.

 

(k)                                  “Grand
Slam” shall mean Grand Slam Holdings, LLC, a Delaware limited liability
company.

 

 

2

 

(l)                                     “Good
Reason” shall have the meaning set forth in the Optionee’s employment agreement
with the Company or, if there is no employment agreement, it shall mean,
without an Optionee’s consent, (i) a material reduction in the Optionee’s
compensation below the amount of compensation in effect on the date of this
Agreement, or (ii) a material reduction in the Optionee’s duties or authority,
in each case which is not cured within thirty (30) days following the Company’s
or its subsidiary’s, as applicable, receipt of written notice from such
Optionee describing the event constituting Good Reason.

 

(m)                               “IRR”
shall mean the Company’s annually compounded internal rate of return, based on
(i) the Company’s independent auditor’s appraisal of the per share value
of the Company as of each anniversary of the Closing, in the case of
determining the IRR performance goal, and (ii) on the applicable sale
price in the case of a Change in Control, assuming the Company is valued on a
going-concern basis as though it were a publicly traded company with reasonable
liquidity and without a controlling shareholder, and taking into account all
dividends, distributions and other proceeds received by Grand Slam, but
excluding any fees paid to Blackstone pursuant to that certain Monitoring
Agreement by and between the Company and Blackstone dated November 3,
2006, or any successor thereto, and based upon the assumption that all shares
available for or subject to award under the Plan are outstanding shares of
Company common stock.

 

(n)                                 “Merger
Agreement” means the Agreement and Plan of Merger dated June 30, 2006 by
and among Grand Slam, Grand Slam Acquisition Corporation, a Delaware
corporation, and Encore Medical Corporation.

 

(o)                                 “Option”
has the meaning specified in Section 2 of this Agreement.

 

(p)                                 “Optionee”
has the meaning specified in the introductory paragraph of this Agreement.

 

(q)                                 “Option
Price” has the meaning specified in Section 2 of this Agreement.

 

(r)                                    “Option
Shares” has the meaning specified in Section 2 of this Agreement.

 

(s)                                  “Performance
Period” shall mean the five-year period commencing
January 1, 2007 and ending December 31, 2011.

 

(t)                                    “Plan”
has the meaning specified in Section 1 of this Agreement.

 

(u)                                 “Second
Performance-Based Tranche” has the meaning specified in Section 2 of this
Agreement.

 

(v)                                 “Stockholders’
Agreement” shall mean that certain Management Stockholders Agreement between
Optionee, the Company, and such other persons and entities listed therein,
dated November 3, 2006.

 

(w)                               “Termination
for Cause” means the termination by the Company of Optionee’s employment with
the Company for “cause” as defined in the employment agreement between the
Company and the Optionee or, if there is no employment agreement, the
termination 

 

 

3

 

by the Company of Optionee’s employment as a
result of (A) Optionee’s willful and continued failure to substantially
perform Optionee’s duties (other than any such failure resulting from Optionee’s
Disability or any such failure subsequent to Optionee being delivered notice of
the Company’s intent to terminate Optionee’s employment without Cause)
following written notice by the Company to Optionee which specifically
identifies such failure and Optionee not curing such failure within thirty (30)
days following receipt of such notice (for
the avoidance of doubt, unsatisfactory performance by the Optionee of his duties shall not be deemed to be a
failure to substantially perform),
(B) conviction of, or a plea of nolo  contendere to, (x) a
felony (other than traffic-related) under the laws of the United States or any
state thereof or any similar criminal act in a jurisdiction outside the United
States or (y) a crime involving moral turpitude that could be injurious to the
Company or its reputation, (C) Optionee’s willful malfeasance or willful
misconduct which is materially and demonstrably injurious to the Company, or
(D) any act of fraud by Optionee in the performance of Optionee’s duties. For
purpose of the definition of Termination for Cause set forth above, no act or
failure to act shall be considered “willful” unless done or omitted to be done
by Optionee in bad faith or without reasonable belief that Optionee’s action
was in the best interests of the Company and its affiliates. Any act, or
failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board shall be conclusively presumed to be done, or omitted to
be done, by Optionee in good faith and in the best interests of the Company.

 

(x)                                   “Third
Performance-Based Tranche” has the meaning specified in Section 2 of this
Agreement.

 

2.                                       Grant of Stock Option. Subject to
and upon the terms, conditions, and restrictions set forth in this Agreement
and in the Plan, the Company hereby grants to Optionee an option (the “Option”)
to purchase          shares of the
Company’s common stock (the “Option Shares”) at a price (the “Option Price”) of
$        per share, which is the Fair Market
Value per share on the Effective Date. The Option may be exercised from time to
time in accordance with the terms of this Agreement. Subject to adjustment as
hereinafter provided, (a) one-fourth of the Option Shares (        
shares) constitute, and may be purchased pursuant to the provisions of the “Time-Based
Tranche”, (b) one-fourth of the Option Shares (        
shares) constitute and may be purchased pursuant to the provisions of the First
Performance-Based Tranche, (c) one-fourth of the Option Shares (        
shares) constitute and may be purchased pursuant to the provisions of the
Second Performance-Based Tranche and (d) one-fourth of the Option Shares (        
shares) constitute and may be purchased pursuant to the provisions of the Third
Performance-Based Tranche.

 

3.                                       Term of Option. The term of the Option
shall commence at the Effective Time and, unless earlier terminated in
accordance with Section 7 hereof, shall expire ten (10) years from the
Effective Time.

 

4.                                       Right to Exercise. Unless
terminated as hereinafter provided, the Option shall become exercisable only as
follows:

 

(a)                                  The
Option shall become exercisable with respect to 20% of the Time-Based Tranche (       
shares) on the first anniversary of the Effective Time and an additional 1/60
of the Time-Based Tranche on each monthly anniversary thereafter if Optionee 

 

4

 

remains in the continuous employ of the
Company, any Subsidiary or Affiliate as of each such date.

 

(b)                                 The
Optionee may earn the right to exercise the option to purchase 20% of the First
Performance-Based Tranche (       shares) on each
December 31 of the Performance Period, provided, that (i)
Optionee shall have remained in the continuous employ of the Company, any
Subsidiary or Affiliate as of each such date, and (ii) the Company shall have
achieved certain specified annual performance targets for both EBITDA and Free
Cash Flow, as such terms are defined herein, and as such targets are attached
hereto as Attachment A. Except as set forth in Section 4(e), below, any
shares included in the First Performance-Based Tranche as to which Optionee
does not earn the right to exercise the related Option Shares shall thereupon
expire and terminate; provided, however, that notwithstanding
anything in this sentence to the contrary, Options under the First
Performance-Based Tranche may also vest and become exercisable on a “catch-up”
basis, such that in any subsequent fiscal year during the Performance Period if
(i) the cumulative actual performance for prior years for the First
Performance-Based Tranche equals or exceeds cumulative annual performance
targets for the First Performance-Based Tranche for such years, and (ii) the
relevant performance targets were achieved in at least fifty percent of the
completed years within the Performance Period, then all prior First
Performance-Based Tranche Options to which such performance targets applied and
which did not previously vest shall also vest and become exercisable.

 

(c)                                  The
Optionee may earn the right to exercise the option to purchase 20% of the Second
Performance-Based Tranche (        shares)
on each December 31 during the Performance Period, provided, that
(i) the Optionee shall have remained in the continuous employ of the Company,
any Subsidiary or Affiliate as of each such date, and (ii) the Company shall
have achieved certain specified annual performance targets for both EBITDA and
Free Cash Flow, as such terms are defined herein, and as such targets are
attached hereto as Attachment B. Except as set forth in Section 4(e),
below, any shares included in the Second Performance-Based Tranche as to which
Optionee does not earn the right to exercise the related Option Shares shall
thereupon expire and terminate; provided, however, that
notwithstanding anything in this sentence to the contrary, Options under the
Second Performance-Based Tranche may also vest and become exercisable on a “catch-up”
basis, such that in any subsequent fiscal year if (i) the cumulative actual
performance for prior years for the Second Performance-Based Tranche equals or
exceeds cumulative annual performance targets for the Second Performance-Based
Tranche for such years, and (ii) the relevant performance targets were achieved
in at least fifty percent of the completed years within the Performance Period,
then all prior Second Performance-Based Tranche Options to which such
performance targets applied and which did not previously vest shall also vest
and become exercisable.

 

(d)                                 The
Optionee may earn the right to exercise the option to purchase 20% of the Third
Performance-Based Tranche (        
shares) on each December 31 during the Performance Period, provided, that
(i) the Optionee shall have remained in the continuous employ of the Company,
any Subsidiary or Affiliate as of each such date, and (ii) the Company shall
have achieved specified annual performance targets for IRR, as such term is
defined herein, and as such targets are attached hereto as Attachment C. Except
as set forth in Section 4(e), below, any shares included in the Third
Performance-Based Tranche as to which Optionee does not earn the right to
exercise the related Option shares shall thereupon expire and terminate; 

 

 

5

 

provided,
however, the Options represented by the Third Performance-Based Tranche
may also vest and become exercisable on a “catch-up” basis, such that if (i) in
any subsequent fiscal years the IRR performance goal is achieved, and (ii) the
relevant IRR performance goals were achieved in at least fifty percent of the
completed years within the Performance period, all prior Options in the Third
Performance-Based Tranche which did not previously vest shall also vest and
become exercisable. Notwithstanding the first sentence of this Section 4(d), if
Grand Slam sells its entire interest in the Company through a public vehicle
prior to the vesting or forfeiture of the Third Performance-Based Tranche,
other than upon a Change in Control, the following provisions will apply:

 

(i)                                     If the sale
achieves both (x) an IRR of at least 221⁄2% and (y) a return on investment to
Grand Slam of at least two (2) times its initial investment from the closing of
the acquisition of the Company under and pursuant to the Merger Agreement (the “Investment”)
through the date of the sale, as determined by the Company’s accountants
(collectively the “Condition”), then the Third Performance-Based Tranche
Options, to the extent not vested for the years elapsed within the Performance
Period, will be added to the Time-Based Tranche and will vest contingent upon
the Optionee’s continued employment with the Company or any Subsidiary on a
pro-rata monthly or annual basis, as would then normally be applicable to the
Time-Based Tranche, through the remainder of the years within the Performance
Period; or

 

(ii)                                  If the Condition is
not achieved upon such sale, then the Third Performance-Based Tranche options,
to the extent not vested for the years elapsed within the Performance Period,
will be split equally and added into the First and Second Performance-Based
Tranche Options, respectively, and will vest contingent upon the criteria and
other conditions applicable to those First and Second Performance-Based Tranche
Options for the remainder of the Performance Period.

 

(e)                                  Notwithstanding
the foregoing, (i) the Option Shares of the Time-Based Tranche granted hereby
shall become immediately exercisable upon the occurrence of a Change in Control
if Optionee remains in the continuous employ of the Company or any Subsidiary
until the date of the consummation of such Change in Control, (ii) the Option
Shares of the First Performance-Based Tranche granted hereby shall become
immediately exercisable upon the occurrence of a Change in Control if the
Optionee remains in the continuous employ of the Company or any Subsidiary
until the date of consummation of such Change in Control and the performance
targets applicable for such Tranche were achieved in (x) at least fifty percent
of the completed years that have elapsed in the Performance Period prior to or
upon the Change in Control and (y) the last completed year of the Performance
Period at the time of the Change in Control, (iii) the Option shares of
the Second Performance-Based Tranche granted hereby shall become immediately
exercisable upon the occurrence of a Change in Control if Optionee remains in the
continuous employ of the Company or any Subsidiary until the date of
consummation of such Change in Control and the performance goals for such
Tranche were 

 

 

6

 

achieved in (x) at least fifty percent of the
completed years that have elapsed in the Performance Period prior to or upon
the Change in Control and (y) the last completed year of the Performance Period
at the time of the Change in Control, and (iv) the Option Shares of the Third
Performance-Based Tranche granted hereby shall become immediately exercisable
upon the occurrence of a Change in Control if Optionee remains in the
continuous employ of the Company or any Subsidiary until the date of such
Change in Control and (x) Grand Slam has received at least a two times return
on its Investment from the Effective Date through the Change in Control, as
determined by the Company’s accountants and (y) the IRR performance goal
specified on Attachment C has been achieved for the portion of the Performance
Period that has elapsed prior to the Change in Control.

 

(f)                                    Notwithstanding anything herein to the
contrary, if Optionee is on an approved leave of absence, as provided in the
last paragraph of Section 7 hereof, Optionee will be considered as still in
continuous employ of the Company, a Subsidiary or an Affiliate for purposes of
this Plan.

 

(g)                                 Optionee
shall be entitled to the privileges of ownership with respect to Option shares
purchased and delivered to Optionee upon the exercise of all or part of this Option,
subject to Section 8 hereof.

 

5.                                       Option Nontransferable. Optionee
may not transfer or assign all or any part of the Option other than by will or
by the laws of descent and distribution. This Option may be exercised, during
the lifetime of Optionee, only by Optionee, or in the event of Optionee’s legal
incapacity, by Optionee’s guardian or legal representative acting on behalf of
Optionee in a fiduciary capacity under state law and court supervision. Notwithstanding
anything herein to the contrary, Optionee may transfer or assign all or any
part of the Option to “family members” (as defined in the General Instructions
to Form S-8 of the Securities Act of 1933) or trusts, partnerships or similar
entities for the benefit of such family members, for estate planning purposes
or in connection with the disposition of Optionee’s estate.

 

6.                                       Notice of Exercise; Payment.

 

(a)                                  To
the extent then exercisable, the Option may be exercised in whole or in part by
written notice to the Company stating the number of Option Shares for which the
Option is being exercised and the intended manner of payment. The date of such
notice shall be the exercise date. Payment equal to the aggregate Option Price
of the Option Shares being purchased pursuant to an exercise of the Option must
be tendered in full with the notice of exercise to the Company in one or a
combination of the following methods as specified by Optionee in the notice of
exercise:  (i) cash in the form of
currency or check or by wire transfer as directed by the Company, (ii) solely following an IPO in Shares
otherwise being traded on an established securities market, through the
surrender to the Company of Shares owned by Optionee for at least six months as
valued at their Fair Market Value on the date of exercise, (iii) through net
exercise, using Shares to be acquired upon exercise of the Option, such Shares
being valued at their Fair Market Value (which for such purpose shall have the
meaning set forth in the Stockholders’ Agreement) on the date of exercise, or
(iv) through such other form of consideration as is deemed acceptable by the
Board.

 

 

7

 

(b)                                 As
soon as practicable upon the Company’s receipt of Optionee’s notice of exercise
and payment, the Company shall direct the due issuance of the Option Shares so
purchased.

 

(c)                                  As
a further condition precedent to the exercise of this Option in whole or in
part, Optionee shall comply with all regulations and the requirements of any
regulatory authority having control of, or supervision over, the issuance of
the shares of common stock
and in connection therewith shall execute any documents which the Board shall
in its sole discretion deem necessary or advisable.

 

7.                                       Termination of Agreement. The
Agreement and the Option granted hereby shall terminate automatically and
without further notice on the earliest of the following dates:

 

(a)                                  After
Optionee’s termination due to Optionee’s death or Disability, all unvested
Time-Based Options will be forfeited immediately, and all vested Options from
any Tranche shall remain exercisable until the lesser of (i) one (1) year
following the Optionee’s date of termination or (ii) the remaining term of the
Option; provided, however, that it shall be a condition to the
exercise of the Option in the event of Optionee’s death that the Person
exercising the Option shall (i) have agreed in a form satisfactory to the
Company to be bound by the provisions of this Agreement and the Stockholders
Agreement and (ii) comply with all regulations and the requirements of any
regulatory authority having control of, or supervision over, the issuance of
the shares of common stock
and in connection therewith shall execute any documents which the Board shall
in its sole discretion deem necessary or advisable. Unvested Options from the
First, Second and Third Performance-Based Tranches shall remain outstanding for
the twelve (12) month period following the date of such termination by reason
of death or Disability. To the extent applicable performance targets are achieved,
or a Change in Control occurs, within such twelve (12) month period following
the date of termination due to Optionee’s death or Disability (each, a “Post-Termination
Vesting Event”), the appropriate number of Options will vest as of such
Post-Termination Vesting Event, and remain exercisable for twelve (12) months
following such Post-Termination Vesting Event (but not beyond the remaining
term of the Option). On the twelve (12) month anniversary of the date of
termination of employment by reason of death or Disability, all remaining
unvested options from the First, Second and Third Performance-Based Tranches
will be forfeited;

 

(b)                                 After
Optionee’s termination by the Company without Cause or by the Optionee for Good
Reason, all unvested Time-Based Option will be forfeited immediately, and all
vested Options from any Tranche shall remain exercisable until the lesser of
(i) ninety (90) calendar days following the Optionee’s date of termination or
(ii) the remaining term of the Option. Unvested options from the First, Second
and Third Performance-Based Tranches shall remain outstanding for the twelve
(12) month period following the date of such termination by reason of
termination by the Company without Cause or by the Optionee for Good Reason. To
the extent a Post-Termination Vesting Event occurs within such twelve (12)
month period, the appropriate number of Options will vest as of such
Post-Termination Vesting Event, and remain exercisable for ninety (90) calendar
days following such Post-Termination Vesting Event (but not beyond the
remaining term of the Option). On the twelve (12) month anniversary of the date
of termination of employment by reason of termination by the Company without
Cause or by the 

 

 

8

 

Executive with Good Reason, all remaining
unvested options from the First, Second and Third Performance-Based Tranches
will be forfeited;

 

(c)                                  The
date of Optionee’s Termination for Cause, upon which all vested and unvested
Options will be forfeited immediately and terminate;

 

(d)                                 After
Optionee’s termination without Good Reason, all unvested options will be
forfeited immediately, and all vested Options from any Tranche shall remain
exercisable until the lesser of (i) ninety (90) calendar days following the
Optionee’s date of termination or (ii) the remaining term of the Option; or

 

(e)                                  Ten
(10) years from the Effective Time.

 

Notwithstanding the foregoing, in all
termination events other than a termination of the Optionee’s employment for
Cause, if the last day to exercise vested Options occurs after the date on
which the Company’s common stock is publicly traded on a national stock
exchange and during a lock-up period or securities law blackout period, the
otherwise applicable post-termination Option exercise period shall continue,
but not beyond the remaining term of the Option, until thirty (30) calendar
days after the first day when the terminating Optionee is no longer precluded
from selling stock acquired upon exercise of Options for either of such reasons.
Notwithstanding anything to the contrary herein, nothing herein shall prohibit
the Optionee from exercising his or her vested Options through net exercise,
using Shares to be acquired upon exercise of the Option, during any lock-up or
securities law blackout period to the extent not prohibited by law.

 

In the event that Optionee’s employment is
terminated in the circumstances described in Section 7(c) hereof, this
Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement and Optionee’s Option will cease to be
exercisable to the extent exercisable as of such termination and will not be or
become exercisable after such termination. Optionee shall be deemed to be an
employee of the Company or any Subsidiary if on a leave of absence approved in
writing by the Board or the Chief Executive Officer of the Company to the
extent consistent with Section 409A of the Code.

 

8.                                       Stockholders Agreement. Optionee
agrees that any Option Shares that Optionee receives pursuant to this Agreement
or under the Plan are subject to the terms and conditions set forth in the
Stockholders Agreement.

 

9.                                       Initial Public Offering. Option
Shares acquired on exercise of any Option will be subject to the terms and
conditions of the Stockholders’ Agreement.

 

10.                                 No
Employment Contract. Nothing contained in this Agreement shall
(a) confer upon Optionee any right to be employed by or remain employed by the
Company or any Subsidiary, or (b) limit or affect in any manner the right of the
Company or any Subsidiary to terminate the employment or adjust the
compensation of Optionee.

 

11.                                 Dividend
Equivalents. Upon the payment of any ordinary or extraordinary
cash dividend (or similar distributions) to holders of Company common stock,
the Optionee will be credited with dividend equivalent rights with respect to
the Options as follows. Dividend 

 

 

9

 

equivalents
relating to vested Options shall be paid to the Optionee in cash at the same
time dividends are paid to holders of Company common stock. Dividend
equivalents relating to unvested Options will be credited to a notional account
maintained on the books of the Company for the benefit of the Optionee, which
account shall not accrue interest. The Optionee will become vested in such
account at the same time as the Options to which the dividend equivalents
relate vest and become exercisable, and such vested amounts shall be payable in
cash upon the applicable vesting date, and in no event later than 2 1⁄2 months
following the end of the calendar year in which the applicable vesting date
occurs. Unvested amounts held in such account shall be forfeited by the
Optionee upon the date of any termination of employment; provided, however,
that if such termination results in the continuation of unvested Options from
the First, Second and Third Performance-Based Tranches, as provided in Sections
7(a) and 7(b), above, forfeiture of dividend equivalents shall be delayed until
the twelve (12) month anniversary of such termination, and to the extent that
any Options vest during such 12-month period, such related dividend equivalents
shall also vest and be paid to the Executive in cash on the twelve (12) month
anniversary of such termination or, if the Options are forfeited, such related
dividend equivalents shall also be forfeited.

 

12.                                 Taxes and
Withholding. The Company or any Subsidiary may withhold, or
require Optionee to remit to the Company or any Subsidiary, an amount
sufficient to satisfy federal, state, local or foreign taxes (including the
Optionee’s FICA obligation) in connection with any payment made or benefit
realized by Optionee or other person under this Agreement or otherwise, and if
the amounts available to the Company or any Subsidiary for such withholding are
insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that Optionee or such other person make
arrangements satisfactory to the Company or any Subsidiary for payment of the
balance of such taxes required to be withheld. Optionee may elect to have such withholding obligation
satisfied by surrendering to the Company or any Subsidiary a portion of the
Option Shares that are issued or transferred to Optionee upon the exercise of
an Option (but only to the extent of the minimum withholding required by law),
and the Option Shares so surrendered by Optionee shall be credited against any
such withholding obligation at the Fair Market Value (which for such
purpose shall have the meaning set forth in the Stockholders’ Agreement) of such Shares on the
date of such surrender.

 

13.                                 Compliance with Law. The Company
shall make reasonable efforts to comply with all applicable federal and state
securities laws; provided, however, that notwithstanding any
other provision of this Agreement, the Option shall not be exercisable if the
exercise thereof would result in a violation of any such law.

 

14.                                 Adjustments.

 

(a)                                  The
Board shall make or provide for such substitution or adjustments in the number
of Option Shares covered by this Option, in the Option Price applicable to such
Option, and in the kind of shares covered thereby and/or such other equitable
substitution or adjustments as the Board may determine to prevent dilution or
enlargement of Optionee’s rights that otherwise would result from (a) any stock
dividend, extraordinary cash-dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the Company, (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reclassification, reorganization, partial or complete liquidation, or other
distribution of assets or issuance of rights 

 

 

10

 

or warrants to purchase securities, or (c)
any other corporate transaction or event having an effect similar to any of the
foregoing. In the case of a Change in Control, such substitutions and
adjustments include, without limitation, canceling any and all Options in
exchange for cash payments equal to the excess, if any, of the value of the
consideration paid to a shareholder of an Option Share over the Option Price
per share subject to such Option in connection with such an adjustment event.

 

(b)                                 To
the extent that any equity securities of any member of the Company’s controlled
group become publicly traded, at such time all Options shall be exchanged, in a
manner consistent with Section 409A and 424 of the Code, for options with the
same intrinsic value in the publicly-traded entity, and all Shares shall be
exchanged for shares of common stock with the same aggregate value of the
publicly-traded entity.

 

15.                                 Relation to Other Benefits. Any
economic or other benefit to Optionee under this Agreement shall not be taken
into account in determining any benefits to which Optionee may be entitled
under any profit-sharing, retirement or other benefit or compensation plan
maintained by the Company or any Subsidiary and shall not affect the amount of
any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company or any Subsidiary.

 

16.                                 Amendments. Any amendment to the
Plan shall be deemed to be an amendment to this Agreement to the extent that
the amendment is applicable hereto; provided, however, that no amendment shall
adversely affect the rights of Optionee under this Agreement without Optionee’s
prior written consent.

 

17.                                 Severability. If one or more of the
provisions of this Agreement is invalidated for any reason by a court of
competent jurisdiction, any provision so invalidated shall be deemed to be
separable from the other provisions hereof, and the remaining provisions hereof
shall continue to be valid and fully enforceable.

 

18.                                 Relation to Plan. This Agreement is
subject to the terms and conditions of the Plan. In the event of any
inconsistent provisions between this Agreement and the Plan, the Plan shall
govern. The Board acting pursuant to the Plan, as constituted from time to
time, shall, except as expressly provided otherwise herein, have the right to
determine any questions which arise in connection with the Option or its
exercise.

 

19.                                 Successors and Assigns. The
provisions of this Agreement shall inure to the benefit of, and be binding
upon, the successors, administrators, heirs, legal representatives and assigns
of Optionee, and the successors and assigns of the Company.

 

20.                                 Governing Law. The interpretation,
performance, and enforcement of this Agreement shall be governed by the laws of
the State of Delaware, without giving effect to the principles of conflict of
laws thereof and all parties, including their successors and assigns, consent
to the jurisdiction of the state and federal courts of Delaware.

 

21.                                 Prior Agreement. As of the
Effective Time, this Agreement supersedes any and all prior and/or
contemporaneous agreements, either oral or in writing, between the parties
hereto, or between either or both of the parties hereto and the Company, with
respect to the 

 

 

11

 

subject matter
hereof. Each party to this Agreement acknowledges that no representations,
inducements, promises, or other agreements, orally or otherwise, have been made
by any party, or anyone acting on behalf of any party, pertaining to the
subject matter hereof, which are not embodied herein, and that no prior and/or
contemporaneous agreement, statement or promise pertaining to the subject
matter hereof that is not contained in this Agreement shall be valid or binding
on either party.

 

22.                                 Notices. For all purposes of this
Agreement, all communications, including without limitation notices, consents,
requests or approvals, required or permitted to be given hereunder will be in
writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof
confirmed), or five business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or
three business days after having been sent by a nationally recognized overnight
courier service such as Federal Express, UPS, or Purolator, addressed to the
Company (to the attention of the Secretary of the Company) at its principal
executive offices and to Optionee at his principal residence, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

 

23.                                 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an original
but all of which together will constitute one and the same agreement.

 

 

12

 

IN WITNESS WHEREOF, the Company has caused
this Agreement to be executed on its behalf by its duly authorized officer and
Optionee has executed this Agreement, as of the day and year first above
written.

 

	
   

  	
  ENCORE MEDICAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name & Title

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
  Name:

  
					

 

 

13Exhibit 10.5

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

THIS AMENDMENT
TO EMPLOYMENT AGREEMENT (this “Amendment”) is made the 3rd day of November,
2006, by and between ENCORE MEDICAL CORPORATION, a Delaware corporation, with
its principal office located at 9800 Metric Boulevard, Austin, Texas 78758 (the
“Company”) and KENNETH W. DAVIDSON, an individual residing at 24107 Highway 71,
Spicewood, TX 78669 (the “Employee”).

 

WHEREAS, the
Employee and the Company entered into an Employment Agreement dated
October 1, 2003 (the “Agreement”), which ended on September 30, 2006; and

 

WHEREAS, the
Employee and the Company desire to amend the Agreement to: (i) extend the
initial term of the Agreement, (ii) provide that the Agreement shall
automatically renew for successive one-year periods after the expiration of the
initial term, unless notice of non-renewal is provided, (iii) provide for an
annual increase of at least five percent (5%) in the Employee’s base salary,
(iv) describe certain bonus and equity awards to be provided to the Employee,
(v) set forth certain benefits provided to the Employee upon termination of
employment with the Company, and (vi) add certain additional provisions, all to
the benefit of the Employee; and

 

WHEREAS, the
Employee and the Company agree and acknowledge that neither this Amendment, its
implementation or the operation thereof will constitute “Good Reason” within
the meaning of, or otherwise result in any right to payments to Employee under
that certain Change of Control Severance Agreement dated May 27, 2005
between the Employee and the Company (the “Severance Agreement”); and

 

WHEREAS, the
Employee and the Company desire to memorialize in this Amendment their
agreements regarding such changes to the Agreement; and

 

WHEREAS,  pursuant to Section 4.7 of the Agreement, the Agreement may
be amended or modified in writing by the parties; and

 

WHEREAS, the
recitals set forth above are hereby incorporated into and made a part of this
Amendment.

 

NOW,
THEREFORE, in consideration of the premises and other mutual promises and
covenants contained in this Amendment and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties, intending to be legally bound, hereby amend the Agreement as follows:

 

1.                                       Section
1.1 (Employment Term) is amended and restated in its entirety to read as
follows:

 

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 December 31, 2009 (the “Initial Term”); provided that the term will be renewed for successive
one-year periods (each, a “Renewal Term” and together with the Initial
Term, the “Employment Term”) unless either party gives written notice to
the other of its intent not to renew at least one hundred eighty (180) days
prior to the expiration of the Initial Term or Renewal Term then in effect, as
applicable, on the terms and subject to the conditions set forth in this
Agreement. Employee agrees to accept such employment and to perform the
services specified herein, all upon the terms and conditions hereinafter
stated.

 

 

 

2.                                       The
second sentence of Section 1.4.1 (Salary) shall be replaced with the following:

 

The Base
Salary shall be subject to review on no less than an annual basis and, for
reviews occurring on or after November 3, 2006, Employee shall be entitled to
at least a five percent (5%) increase in Employee’s Base Salary on each annual
review.

 

3.                                       Section
1.4.4 (Bonus Program) shall be applicable only to fiscal years ending on or
before December 31, 2006 and, beginning in 2007, bonus opportunities shall be
provided in accordance with Section 1.4.5 of the Agreement.

 

4.                                       Section
1.4 (Compensation) is amended by adding the following sections at the end
thereof:

 

1.4.5                        Bonus.  With
respect to each calendar year during the Employment Term beginning in 2007,
Employee shall be eligible to earn (i) an annual bonus award (an “Annual Bonus”)
targeted at sixty-seven percent (67%) of Employee’s Base Salary (the “Annual
Bonus Opportunity”), based only upon the achievement of objective performance
targets of the Company established by the Company and contingent upon Employee’s
continued employment through the specified payment date, and (ii) a supplemental
bonus award (a “Supplemental Bonus”) targeted at one hundred percent (100%) of
Employee’s Base Salary (the “Supplemental Bonus Opportunity”), based only upon
the achievement of objective stretch incentive targets of the Company
established by the Company, and contingent upon Employee’s continued employment
with the Company through the specified payment date. The Annual Bonus and
Supplemental Bonus shall be paid no later than two and one-half (21⁄2) months
following the end of the calendar year to which such bonuses relate.

 

1.4.6                        Equity Awards. On the
closing date of the merger of the Company with Grand Slam Acquisition Corp.
pursuant to that certain Merger Agreement dated June 30, 2006 by and among the
Company, Grand Slam Holdings LLC and Merger Sub, the Company shall grant
Employee an amount of stock options to purchase common stock of the Company
(the “Initial Stock Option Grant”) under the Encore Medical Corporation 2006
Stock Incentive Plan (the “Stock Plan”) as may be adopted on such date. The amount
of such stock options shall be determined by the Chief Executive Officer of the
Company in his reasonable discretion. The terms and conditions of such stock
option grants shall be as set forth in the Stock Plan and such time-based and
performance-based stock option award agreements as are set forth for other
senior executives of the Company.

 

5.                                       Section
1.5 (Termination) is amended and restated in its entirety to read as follows:

 

1.5                                 Termination

 

The Employment
Term and Employee’s employment hereunder may be terminated by either party at
any time and for any reason; provided that each party will be required to give
the other party at least thirty (30) days advance written notice of any such
termination.  Notwithstanding any other provision of this Agreement, the
provisions of this Section 1.5 and the stock option award agreements shall
exclusively govern Employee’s rights upon termination of employment with the
Company and its affiliates.

 

1.5.1                        By the
Company For Cause or By Employee Resignation Without Good Reason.

 

(a)                                  The
Employment Term and Employee’s employment hereunder may be terminated by the
Company for Cause (as defined in Section 1.5.1(b) below) and 

 

 

2

 

shall terminate automatically upon Employee’s
resignation without Good Reason (as defined in Section 1.5.3(b) below).

 

(b)                                 For
purposes of this Agreement, “Cause” shall mean (i) Employee’s willful and
continued failure to substantially perform Employee’s duties hereunder (other
than any such failure resulting from Employee’s Disability or any such failure
subsequent to Employee being delivered notice of the Company’s intent to
terminate Employee’s employment without Cause or delivering to the Company a
notice of Employee’s intent to terminate for Good Reason) following written
notice by the Company to Employee which specifically identifies such failure
and Employee not curing such failure within thirty (30) days following receipt
of such notice (for the avoidance of
doubt, unsatisfactory performance by the Employee of his duties shall not be
deemed to be a failure to substantially perform), (ii) conviction of, or a plea of nolo  contendere
to, (x) a felony (other than traffic-related) under the laws of the United
States or any state thereof or any similar criminal act in a jurisdiction
outside the United States or (y) a crime involving moral turpitude that could
be injurious to the Company or its reputation, (iii) Employee’s willful malfeasance or willful misconduct which is
materially and demonstrably injurious to the Company, (iv) any act of fraud by Employee in the performance of Employee’s duties hereunder, or (v) Employee’s material breach of the
provisions of Articles 2 and 3 of this Agreement. For purpose of the definition
of Cause set forth above, no act or failure to act shall be considered “willful”
unless done or omitted to be done by Employee
in bad faith or without reasonable belief that Employee’s action was in the best interests of the Company and its
affiliates. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the board of directors of the Company (the “Board”)
shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best
interests of the Company.

 

(c)                                  If
Employee’s employment is terminated by the Company for Cause, or if Employee
resigns without Good Reason, Employee (or his dependents or beneficiaries, as
applicable) shall be entitled to receive:

 

(i)                                     the
Base Salary through the date of termination in a lump sum payment, to be paid
on the tenth (10th) business day following such termination;

 

(ii)                                  reimbursement
for any unreimbursed business expenses properly incurred by Employee in
accordance with Company policy prior to the date of Employee’s termination in a
lump sum payment, to be paid on the tenth (10th) business day
following such termination;

 

(iii)                               any
earned but unpaid Annual Bonus and Supplemental Bonus with respect to the most
recently completed calendar year prior to the date on which such termination
occurs, in each case, to be paid no later than two and one-half (21⁄2) months
following the end of such calendar year;

 

(iv)                              any
accrued and unused vacation pay in a lump sum payment, to be paid on the tenth
(10th) business day following such termination; and

 

(v)                                 such
employee benefits, if any, as to which Employee (or his dependents or
beneficiaries, as applicable) may be entitled under the employee benefit plans
of the Company or its affiliates pursuant to the terms of such plans (the amounts
described in clauses (i) through (v) above being referred to as the “Accrued
Rights”).

 

 

3

 

Following such termination of Employee’s
employment by the Company for Cause or resignation by Employee without Good
Reason, except as set forth in this Section 1.5.1(c) and any stock option
award agreements or otherwise required by law, Employee shall have no further
rights to any compensation or any other benefits under this Agreement.

 

1.5.2                        Disability
or Death.

 

(a)                                  The
Employment Term and Employee’s employment hereunder shall terminate upon
Employee’s death and may be terminated by the Company if Employee becomes
physically or mentally incapacitated and is therefore unable for a period of
six (6) consecutive months or for an aggregate of nine (9) months in any
eighteen (18) consecutive month period to perform Employee’s duties with
reasonable accommodation (such incapacity is hereinafter referred to as “Disability”).

 

(b)                                 Upon
termination of Employee’s employment hereunder for either Disability or death,
Employee or Employee’s estate, dependents or beneficiaries, as applicable,
shall be entitled to receive the Accrued Rights.

 

Following
Employee’s termination of employment due to death or Disability, except as set
forth in this Section 1.5.2(b) and any stock option award agreements or
otherwise required by law, Employee shall have no further rights to any
compensation or any other benefits under this Agreement.

 

1.5.3                        By the
Company Without Cause or Resignation by Employee for Good Reason.

 

(a)                                  The
Employment Term and Employee’s employment hereunder may be terminated by the
Company without Cause or by Employee’s resignation for Good Reason. Notwithstanding
anything to the contrary herein, written notice of intent not to renew or any
failure to renew the Initial Term or any Renewal Term shall not constitute
either a termination by the Company without Cause or a basis for the Employee
to terminate for Good Reason.

 

(b)                                 For
purposes of this Agreement, “Good Reason” shall mean (i) any reduction in
Employee’s Base Salary, Annual Bonus Opportunity, Supplemental Bonus
Opportunity or any material employee benefits, (ii) any substantial diminution
in Employee’s position or duties, adverse change in reporting lines or assignment
of duties materially inconsistent with Employee’s position (other than in
connection with an increase in responsibility or a promotion), including but
not limited to no longer reporting to the Board of Directors of the Company,
its successor or its ultimate parent company in connection with a corporate
transaction, (iii) a failure on the part of the Company to grant or cause to be
granted to Employee any of the Equity Awards set forth in Section 1.4.6 herein,
(iv) any material failure on the part of the Company to comply with and satisfy
the terms of Sections 1.4.1, 1.4.2, 1.4.3 and 1.4.5 of this Agreement, or (v) the Company requiring the Employee to be
based at any office location other than the Company’s executive offices in the
Austin, Texas SMSA, except for travel reasonably required in the performance of
the Employee’s responsibilities; provided that the events
described in (i), (ii), (iii), (iv) or (v) above shall constitute Good Reason
only if the Company fails to cure such event within thirty (30) days after
receipt from Employee of written notice of the event which constitutes Good
Reason.

 

(c)                                  If
Employee’s employment is terminated by the Company without Cause (other than by
reason of death or Disability) or if Employee resigns for Good Reason, Employee
(or his dependents or beneficiaries, as applicable) shall be entitled to
receive:

 

 

4

 

(i)                                     the
Accrued Rights; provided, that, for purposes of this subparagraph 1.5.3(c)(i),
the Accrued Rights shall be deemed to include the amount set forth in
subparagraph 1.5.1(c)(iii) if the Employee remained employed by the
Company for the entire calendar year for which the bonus amounts were
applicable, regardless of whether the amount was “earned” pursuant to the
Annual Bonus Plan;

 

(ii)                                  a
lump sum, to be paid on the tenth (10th) business day after such
termination, equal to the sum of: (i) the most recent Annual Bonus, if any,
awarded to Employee, or, if such termination occurs in 2006 or 2007, then the
Annual Bonus Opportunity and (ii) the most recent Supplemental Bonus, if any,
awarded to Employee, or, if such termination occurs in 2006 or 2007, then the
Supplemental Bonus Opportunity; and

 

(iii)                               subject
to Employee’s continued compliance with the provisions of Articles 2 and 3
herein, continued payment of the Base Salary, payable in regular installments
in accordance with the Company’s usual payment practices, until twelve (12) months  after the date
of such termination; provided, that the aggregate amount described in clauses
(ii) and (iii) shall be reduced by the present value of any other cash
severance payable to Employee under any other plans, programs or arrangements
of the Company or its affiliates other than the Severance Agreement; provided,
further that the amounts described in clauses (ii) and (iii) shall be
considered “similar payments” to those described in Sections 2(b)(i) and (ii)
of the Severance Agreement, for the purpose of avoiding duplication thereof.

 

Following
Employee’s termination of employment by the Company without Cause (other than
by reason of Employee’s death or Disability) or by Employee’s resignation for
Good Reason, except as set forth in this Section 1.5.3(c) and any stock option
award agreements or otherwise required by law, Employee shall have no further
rights to any compensation or any other benefits under this Agreement.

 

1.5.4                        Notice of Termination.  Any purported termination of
employment by the Company or by Employee (other than due to Employee’s death)
shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 4.1 hereof.  For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision so indicated.

 

6.                                       Article
4 (Miscellaneous) is amended by adding the following new sections at the end
thereof to read as follows:

 

4.8                                 Tax Matters; Golden
Parachute.

 

(a)                                  Section 4.8(b) shall
apply if, and only if the Employee does not receive any payments or benefits
under the Severance Agreement; provided, further, in no event shall Section
4.8(b) duplicate any payment or benefit otherwise provided under the Severance
Agreement.

 

(b)                                 Subject to Section
4.8(a), in the event it shall be determined that any payment or benefit to
Employee by the Company, any affiliate of the Company, any person who acquires ownership
or effective control of the Company or ownership of a substantial portion of
the Company assets (within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations thereunder) or any
affiliate of such Person (the “Change in Control Payments”), is or will 

 

 

5

 

be subject to
the excise tax imposed by Section 4999 of the Code or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are collectively referred to as the “Excise Tax”),
then  Employee shall be entitled to
receive an additional payment (a “280G Reimbursement Payment”) in an
amount such that after payment by Employee of all taxes (including any interest
or penalties imposed with respect to such taxes), including any income tax,
employment tax or Excise Tax, imposed upon the 280G Reimbursement Payment,
Employee retains an amount of the 280G Reimbursement Payment equal to the Excise
Tax imposed upon the Change in Control Payments. The 280G Reimbursement Payment
shall be paid on the thirtieth (30th) day from the date that Employee is deemed
to have “excess parachute payments” as defined in Section 280G of the Code. All
mathematical determinations, and all determinations as to whether any of the
Change in Control Payments are “parachute payments” (within the meaning of
Section 280G of the Code), that are required to be made hereunder, including
determinations as to whether a 280G Reimbursement Payment is required and the
amount of such 280G Reimbursement Payment shall be made by the Company’s
accounting firm (the “Accounting Firm”), which shall provide its
determination (the “Determination”), together with detailed supporting
calculations regarding the amount of any 280G Reimbursement Payment and any
other relevant matter, both to the Company and Employee by no later than ten
(10) days following the date of employment termination or, if applicable, such
earlier time as is requested by the Company or Employee (if Employee reasonably
believes that any of the Change in Control Payments may be subject to the
Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by
Employee, it shall furnish Employee and the Company with an opinion reasonably
acceptable to Employee and the Company that no Excise Tax is payable (including
the reasons therefor) and that Employee has substantial authority not to report
any Excise Tax on his federal income tax return. Any determination by the
Accounting Firm shall be binding upon the Company and Employee, absent manifest
error. As a result of uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that 280G Reimbursement Payments not made by the Company should
have been made (“Underpayment”), or that 280G Reimbursement Payments
will have been made by the Company which should not have been made (“Overpayments”).
In either such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an Underpayment,
the amount of such Underpayment (together with any interest and penalties
payable by Employee as a result of such Underpayment) shall be promptly paid by
the Company to or for the benefit of Employee. In the case of an Overpayment,
Employee shall, at the direction and expense of the Company, take such steps as
are reasonably necessary (including the filing of returns and claims for
refund), follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to correct
such Overpayment, provided, however, that (i) Employee shall not in any
event be obligated to return to the Company an amount greater than the net
after-tax portion of the Overpayment that he has retained or has recovered as a
refund from the applicable taxing authorities and (ii) if a 280G
Reimbursement Payment is determined to be payable, this provision shall be interpreted
in a manner consistent with an intent to make Employee whole, on an after-tax
basis, from the application of the Excise Tax, it being understood that the
correction of an Overpayment may result in Employee repaying to the Company an
amount which is less than the Overpayment. The cost of the Accounting Firm in
connection with any such Determination shall be paid by the Company.

 

4.9                                 No Set Off, No
Mitigation, No Offset. The Company’s obligation to pay Employee the amounts
provided and to make the arrangements provided hereunder shall not be subject
to set-off, counterclaim or recoupment of amounts owed by Employee to the
Company or its affiliates other than any amounts as may be owed by Employee
with respect to the Retention Bonus Amount under the Company’s Annual Bonus
Plan. Employee shall not be required to mitigate the amount of any payment
provided for 

 

 

6

 

pursuant to
this Agreement nor shall the amount be reduced on account of any payments
received by Employee from any other party.

 

4.10                           Indemnification. The
Company and its successors and/or assigns will indemnify, hold harmless, and
defend Employee to the fullest extent permitted by applicable law with respect
to any claims that may be brought against Employee arising out of or related to
any action taken or not taken in Employee’s capacity as an employee, officer or
director of the Company or any of its affiliates, including, without
limitation, the advancement of legal fees and expenses, as such fees and
expenses are incurred by Employee. In addition, Employee shall be covered, in
respect of Employee’s activities as an officer or director of the Company or
any of its subsidiaries, by the Company’s (or any of its subsidiaries’)
Directors and Officers liability policy or other comparable policies, if any,
obtained by the Company’s (or any of its subsidiaries’) successors, to the
fullest extent permitted by such policies.

 

4.11                           Dispute Resolution. Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Austin, Texas under the
Employment Dispute Resolution Rules of the American Arbitration Association (“AAA”)
then currently in effect, as modified herein. Arbitration proceedings shall take
place in Austin, Texas, before a single neutral arbitrator who shall be a
lawyer. The arbitrator’s award shall be final and judgment may be entered upon
such award by a court of competent jurisdiction. This arbitration procedure
will be governed by the Federal Arbitration Act as will any actions to compel,
enforce or vacate proceedings, awards, orders of the arbitration or settlement
under this procedure. Each party shall
be responsible for and directly pay its own fees and expenses of counsel and
other experts retained in connection with such dispute or controversy, on a
current basis as they may be incurred.

 

In all other
respects, the provisions of the Agreement are hereby ratified and confirmed,
and they shall continue in full force and effect. The Employee acknowledges and
agrees that the changes provided in this Amendment, their implementation and
the operation thereof shall not constitute “Good Reason” as defined in the
Severance Agreement, or otherwise result in any rights to payments to Employee under
such Severance Agreement.

 

 

7

 

IN WITNESS
WHEREOF, the Company has caused this Amendment to be executed by its duly
authorized officer and the Employee has hereto set his/her hand as of the date
and year first above written.

 

	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ENCORE MEDICAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Harry L. Zimmerman

  
	
   

  	
   

  	
  Harry L.
  Zimmerman, Executive Vice President and 

  General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Kenneth W. Davidson

  
	
   

  	
   

  	
  KENNETH W. DAVIDSON

  

 

 

8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}]]