Document:

exv10w5

 

Exhibit 10.5

ENCORE® MEDICAL CORPORATION

1997 SURGEON ADVISORY PANEL STOCK OPTION PLAN

     1. Purpose. This 1997 Surgeon Advisory Panel Stock Option Plan (the “Plan”) of Encore
Medical Corporation, a Delaware corporation (the “Company”), for surgeons affiliated with the
Company, is intended to advance the best interest of the Company by providing such individuals, who
have substantial responsibility for educating potential users of the Company’s or the Company’s
affiliates products and giving the Company or its affiliates advice on the design of its products,
with compensation and by increasing their proprietary interest in the success of the Company —
thereby encouraging them to remain involved in the Company’s surgeon advisory panel.

     2. Administration. The Plan shall be administered by a committee to be appointed by
the Board of Directors of the Company (the “Committee”); and all questions of interpretation and
application of the Plan, or of options granted hereunder (the “Options”), shall be subject to the
determination, which shall be final and binding, of a majority of the whole Committee. The
Committee shall consist of not less than three (3) members. Meetings shall be held at such times
and places as shall be determined by the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business, and the vote of a majority of those
members present at any meeting shall decide any question brought before that meeting. In addition,
the Committee may take any action otherwise proper under the Plan by the unanimous written consent
of its members. The determinations of the Committee on all matters referred to in this Plan shall
be conclusive. No member of the Committee shall be liable for any act or omission of any other
member of the Committee or for any act or omission on his or her own part, including, but not
limited to, the exercise of any power or discretion given to him or her under the Plan, except
those resulting from his or her own gross negligence or willful misconduct.

     3. Option Shares. The shares subject to the Options and other provisions of the Plan
shall be shares of the Company’s Common Stock, ($0.001) par value (the “Common Stock”). The total
amount of the Common Stock with respect to which Options may be granted under the Plan shall not
exceed, in the aggregate, four hundred twenty-five thousand (425,000) shares; provided, however,
that such aggregate number of shares shall be subject to adjustment in accordance with the
provisions of Paragraph 16 hereof. Such shares may be treasury shares or authorized but unissued
shares. In the event that any outstanding Option granted under the Plan shall expire or terminate,
the shares of Common Stock allocable to the unexercised portion of such Option may again be subject
to an Option under the Plan.

     4. Authority to Grant Options. The Committee may grant from time to time, as it shall
from time to time determine, to an eligible person, an Option or Options to buy a stated number of
shares of Common Stock under the terms and conditions of the Plan. Subject only to

As amended March 16, 2001

 

 

any applicable limitations set forth in the Plan, the number of shares of Common Stock to be
covered by any Option shall be as determined by the Committee. No tandem Options may be issued,
that is, no Option may be granted the exercise of which would affect the exercisability of any
other outstanding Option held by the optionee.

     5. Eligibility. The individuals who shall be eligible to participate in the Plan
shall be those surgeons who are serving as members of the Company’s or the Company’s affiliates’
Surgeon Advisory Panel.

     6. Grants to Surgeons. All surgeons who have entered into Consulting, Designing or
Clinical Study Agreements with the Company or an affiliate of the Company shall be eligible to
participate in the Plan and shall be granted Options as determined by the Committee.

     7. Option Price. The price at which shares may be purchased pursuant to Options may
be equal to, less than or greater than the fair market value of the shares of Common Stock on the
date the Option is granted, as the Committee in its discretion may provide. The term “fair market
value” shall mean such amount determined in good faith by the Board of Directors of the Company or,
in absence of a determination by the Board, by the Committee; provided, however, that during such
time as the Common Stock is traded in the over-the-counter market, but is not listed upon the
NASDAQ quotation system or an established stock exchange, the fair market value per share shall be
the mean between dealer “bid” and “ask” prices of the Common Stock in the New York over-the-counter
market on the day the Option is granted, as reported by the National Association of Securities
Dealers, Inc.; and provided further, that if the Common Stock is traded on the NASDAQ quotation
system or is listed on an established stock exchange or exchanges, such fair market value shall be
deemed to be the closing price of the Common Stock as reported for that day in The Wall Street
Journal listing of composite transactions for such stock exchange or exchanges on the day the
Option is granted, or if no sale of Common Stock shall have been made on any stock exchange on that
day, on the preceding day on which there was a sale of such stock as reported.

     8. Duration of Options. No Option shall be exercisable after the expiration of ten
(10) years from the date such Option is granted. The Committee in its discretion may provide that
an Option shall be exercisable during such ten (10)-year period or any lesser period of time, and
each Option shall be subject to earlier termination as hereinafter provided.

     9. Amount Exercisable.

          (a) Each Option may be exercised, so long as it is valid and outstanding, from time to time,
in part or as a whole, subject to the provisions of Paragraph 10 hereof and to such other
conditions as the Committee, in its sole discretion, may provide.

          (b) A “Change of Control” for purposes of this Plan shall mean the acquisition by a single
entity or group of affiliated entities of more than eighty percent (80%) of the Common Stock of the
Company issued and outstanding immediately prior to such acquisition; or the dissolution or
liquidation of the Company, or the consummation of any merger or

As amended March 16, 2001

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consolidation of the Company or any sale or other disposition of all or substantially all of its assets, if the shareholders of the
Company immediately before such transaction own,
immediately after consummation of such transaction, equity securities (other than options and other
rights to acquire equity securities) possessing less than twenty percent (20%) of the voting power
of the surviving or acquiring corporation.

               (i) Change of Control with Provision Being Made Therefor. If provision be made in
writing in connection with a Change of Control for the assumption and continuance of any Option
granted under the Plan, or the substitution for such Option of a new Option covering the shares of
the successor corporation, with the appropriate adjustment as to number and kind of shares and
prices, the Option granted under the Plan, or the new Option substituted therefor, as the case may
be, shall continue in the manner and under the terms provided.

               (ii) Change of Control Without Provision Being Made Therefor. In the event provision
is not made in connection with a Change of Control for the continuance and assumption of Options
granted under the Plan or for the substitution of any Option covering the shares of the successor
corporation, then if the Committee waives any limitations set forth in, or imposed pursuant to
Paragraph 9(a) hereof, the holder of any such vested Option shall be entitled, prior to the
effective date of any such Change of Control, to purchase the full number of shares not previously
exercised under such vested Option, without regard to the determination as to the periods and
installments of exercisability made pursuant to Paragraph 9(a) if (and only if) such Option has not
at that time expired or been terminated, failing which purchase, any unexercised portion shall be
deemed canceled as of the effective date of such Change of Control.

               (iii) All adjustments under this Paragraph 9(b) shall be made by the Committee, whose
determination as to what adjustments shall be made and the extent thereof, shall be final, binding
and conclusive for all purposes of the Plan.

     10. Exercise of Options. Options shall be exercised by the delivery of written notice
to the Company setting forth the number of shares with respect to which the Option is to be
exercised and specifying the address to which the certificates for such shares are to be mailed,
together with full payment of the Option price of such shares and such other items as may be
required pursuant to Paragraph 13 hereof. “Full payment” shall mean the full exercise price in
cash, certified check, bank draft, or postal or express money order payable to the order of the
Company. Payment in full or part may also be made in the form of shares of Common Stock not then
subject to restrictions. Shares of Common Stock so surrendered shall be valued at fair market
value on the exercise date. No options shall be exercisable except in respect of whole shares of
Stock. Not less than five hundred (500) shares of Common Stock may be purchased at one time unless
the number purchased is the total number at the time available for purchase under the terms of the
Option. As promptly as practicable after receipt of such written notification and payment, the
Company shall deliver to the optionee a certificate for the number of shares with respect to which
such Option has been so exercised, issued in the optionee’s name; provided that such delivery shall
be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited
such certificate in the United States mail, addressed to the

As amended March 16, 2001

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optionee, at the address specified pursuant to this Paragraph 10. The delivery of a certificate upon the exercise of Options may, in
the discretion of the Committee, be conditioned upon payment to the Company by the person
exercising such Option of the amount, determined by the
Company, of any tax liability of the Company resulting from such exercise. The Company shall have
the right to deduct any sums that the Committee reasonably determines that federal, state or local
tax law requires to be withheld with respect to the exercise of any Option or as otherwise may be
required by those laws. The Company may require as a condition to issuing shares of Common Stock
upon exercise of the Option that the optionee or other person exercising the Option pay any sums
that federal, state or local tax law requires to be withheld with respect to the exercise. The
Company shall not be obligated to advise any optionee of the existence of the tax or the amount
which the Company will be so required to withhold.

     11. Non-Transferability of Options; Stock Transfer Restrictions. Except with the
prior written consent of the Company in its sole discretion, Options shall not be transferable by
the optionee otherwise than by will or under the laws of descent and distribution and shall be
exercisable, during his or her lifetime, only by him or her or by the optionee’s duly appointed
guardian or personal representative.

     12. Termination of Service on Advisory Board or Death of Optionee. Except as may be
otherwise expressly provided herein, or unless otherwise provided for by the Committee, any
unvested Options shall terminate on the earlier of the date specified pursuant to Paragraph 8
hereof or no later than one (1) day less than one (1) month following termination of affiliation
between the Company and the optionee for any reason, for or without cause. In the event of
termination because of the death or disability of the holder of an Option before the date of
expiration of such Option, such Option shall terminate on the earlier of such date of expiration or
one (1) year following the date of such death. After the death of the optionee, his or
her executors, administrators, or any person or persons to whom his or her Option may be
transferred, by will or by the laws of descent and distribution, shall have the right to exercise
the Option, in whole or in part (subject to any limitations set forth in, or imposed pursuant to,
Paragraph 9(a) hereof).

     13. Requirements of Law.

          (a) The Company shall not be required to sell or issue any shares pursuant to any Option if
the issuance of such shares shall constitute a violation by the optionee or the Company of any
provisions of any law or regulation of any governmental authority. If a registration statement
under the Securities Act of 1933, as amended, and any applicable state securities or Blue Sky laws
(the “Securities Laws”) is not in effect with respect to the shares of Common Stock issuable
pursuant to any Option, the Company may require the optionee to make certain representations and
may require an opinion of counsel satisfactory to the Company to the effect that such registration
is not required. Any determination in this connection by the Company shall be final, binding, and
conclusive.

          (b) Upon exercise of any Option, the Company shall not be required to issue such shares unless
the Company has received evidence satisfactory to it to the effect that the

As amended March 16, 2001

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holder of such Option will not transfer such shares except pursuant to a registration statement in effect under the
Securities Laws or unless an opinion of counsel satisfactory to the Company has been received by
the Company to the effect that such registration is not required. Any determination in this
connection by the Company shall be final, binding, and conclusive.

          (c) In the event the shares issuable on exercise of an Option are not registered under the
Securities Laws, the Company may imprint the following legend or any other legend that counsel for
the Company considers necessary or advisable to comply with the Securities Laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE
APPLICABLE STATE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT
UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY
OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY
SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

          (d) The Company may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Laws, and in the event any shares are so registered, the Company
may remove any legend on certificates representing such shares. The Company shall not be obligated
to take any other affirmative action in order to cause the exercise of an Option or the issuance of
shares pursuant thereto to comply with any law or regulation of any governmental authority.

     14. No Rights as Stockholder. No optionee shall have rights as a stockholder with
respect to shares covered by his or her Option until the date of issuance of a stock certificate
for such shares; no adjustment for dividends (other than stock dividends under Paragraph 16) or
otherwise shall be made if the record date therefor is prior to the date of issuance of such
certificate.

     15. Engagement Obligations. The granting of any Option shall not impose upon the
Company or any affiliate of the Company any obligation to engage or continue to engage any
optionee, and the right of the Company or any affiliate of the Company to terminate the engagement
of any surgeon shall not be diminished or affected by reason of the fact that an Option has been
granted to him or her.

     16. Changes in the Company’s Capital Structure.

As amended March 16, 2001

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          (a) The existence of outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company’s capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred, or prior preference
stock ahead of or affecting the Common Stock or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a similar character or
otherwise.

          (b) If, while there are outstanding Options, the Company shall effect a subdivision or
consolidation of shares or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Common Stock outstanding without receiving
compensation therefor in money, services, or property, then: (i) in the event of an increase in
the number of such shares outstanding, the number of shares of Common Stock then subject to Options
hereunder shall be proportionately increased, and the cash consideration payable per share shall be
proportionately reduced; (ii) in the event of a reduction in the number of such shares outstanding,
the number of shares of Common Stock then subject to Options hereunder shall be proportionately
reduced, and the cash consideration payable per share shall be proportionately increased; and (iii)
the number of shares then available for Options hereunder shall be proportionately increased or
decreased, as the case may be.

          (c) After a merger of one or more corporations into the Company, each holder of an outstanding
Option shall, at no additional cost, be entitled upon exercise of such Option to receive (subject
to any required action by stockholders) in lieu of the number of shares as to which such Option
shall then be so exercisable, the number and class of shares of stock or other securities to which
such holder would have been entitled pursuant to the terms of the agreement of merger if,
immediately prior to such merger, such holder had been the holder of record of a number of shares
of Common Stock equal to the number of shares as to which such Option shall be so exercised.

          (d) If the Company is merged into or consolidated with another corporation under circumstances
where the Company is not the surviving corporation or where the Company will be a wholly owned
subsidiary of another corporation, or if the Company sells or otherwise disposes of all or
substantially all of its property or assets to another corporation while unexercised, vested
Options remain outstanding under the Plan, then:

               (i) subject to the provisions of clause (ii) below, after the effective date of such merger,
consolidation, or sale, as the case may be, each holder of an outstanding vested Option shall be
entitled, upon exercise of such vested Option, to receive, in lieu of shares of Common Stock, the
number and class of shares of such stock, other securities, cash, and other property or rights as
the holders of shares of Common Stock received pursuant to the terms of the merger, consolidation,
or sale and to which he or she would have been entitled if, immediately prior to such merger,
consolidation, or sale, he or she had been the holder of record of a number of shares of Common
Stock equal to the number of shares as to which such vested Option shall be so exercised; and

As amended March 16, 2001

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               (ii) all outstanding Options may be canceled by the Board of Directors of the Company as of
the effective date of any such merger, consolidation, or sale, provided that (x) written notice of
such cancellation is given to each holder of a vested or non-vested Option not later than thirty
(30) days prior to such effective date and (y) each holder of a vested Option shall
have the right to exercise such vested Option in full (without regard to any limitations set forth
in or imposed pursuant to Paragraph 9(a) hereof) during the said thirty (30)-day period preceding
the effective date of such merger, consolidation, or sale.

          (e) Except as hereinbefore expressly provided, the issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, for cash or property, or
for labor or services, either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company convertible into
such shares or other securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock then subject to outstanding
Options.

     17. Amendment or Termination of Plan. The Board may at any time suspend, amend or
terminate the Plan and may, with the consent of the holder of an Option, make such modifications of
the terms and conditions of such holder’s Option as it shall deem advisable. No Option may be
granted during any suspension of the Plan or after such termination. The amendment, suspension or
termination of the Plan shall not, without the consent of the optionee, alter or impair any rights
or obligations under any Option theretofore granted under the Plan.

     18. Written Agreement. Each Option granted hereunder shall be embodied in a written
option agreement that shall be subject to the terms and conditions prescribed above, and shall be
signed by the optionee and by the Chairman of the Board, the President, or any Vice President of
the Company for and in the name and on behalf of the Company. Such an option agreement shall
contain such other provisions as the Committee in its discretion shall deem advisable.

     19. Indemnification of Committee. The Company shall indemnify each present and future
member of the Committee against, and each member of the Committee shall be entitled without further
act on his or her part to indemnity from the Company for, all expenses (including the amount of
judgments and the amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts of paid to the Company itself) reasonably incurred by him or her in
connection with or arising out of any action, suit, or proceeding in which he or she may be
involved by reason of his or her being or having been a member of the Committee, whether or not he
or she continues to be such member of the Committee at the time of incurring such expenses;
provided, however, that such indemnity shall not include any expenses incurred by any such member
of the Committee (i) in respect of matters as to which he or she shall be finally adjudged in any
such action, suit, or proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his or her duty as such member of the Committee or (ii) in respect of any matter
in which any settlement is effected, to an amount in excess of the amount approved by the Company
on the advise of its legal counsel; and provided

As amended March 16, 2001

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further, that no right of indemnification under the provisions set forth herein shall be available to or enforceable by any such member of the
Committee unless, within sixty (60) days after institution of any such action, suit, or proceeding,
he or she shall have offered the Company, in writing, the opportunity to handle and defend same at
its own expense. The foregoing right of indemnification shall inure to the benefit of the heirs,
executors, or administrators of each such member of the Committee and shall be in addition to all
other rights to which such member of the Committee may be entitled as a matter of law, contract, or otherwise.

     20. Time of Grant and Exercise.

          (a) The granting of an Option pursuant to the Plan shall take place at the time of the
Committee’s action, as described in Paragraph 2 hereof; provided, however, that if the appropriate
resolutions of the Committee indicate that an Option is to be granted as of and at some future
date, the date of grant shall be such future date. In the event action by the Committee is taken
by written consent of its members, the action by the Committee shall be deemed to have been taken
at the time the last member required for a valid action of the Committee signs the consent.

          (b) An Option shall be deemed to be exercised when the Secretary of the Company receives
written notice of such exercise from the person entitled to exercise the Option together with
payment of the purchase price made in accordance with Paragraph 10 of the Plan.

     21. Information Confidential. As partial consideration for the granting of each
Option hereunder, the optionee shall agree with the Company that he will keep confidential all
information and knowledge which he has relating to the manner and amount of his participation in
the Plan; provided, however, that such information may be given in confidence to the optionee’s
spouse or to a financial institution to the extent that such information is necessary in order to
secure a loan. In the event any breach of this promise comes to the attention of the Board of
Directors, it shall take into consideration such breach, in determining whether to recommend the
grant of any future Option or Options to such optionee, as a factor militating against the
advisability of granting any such future Option or Options to such optionee.

     22. Execution of Receipts and Releases. Any payment or any issuance or transfer of
shares of Common Stock to the optionee, or to his legal representative, heir, legatee or
distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Board of Directors may require any
optionee, legal representative, heir, legatee or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall determine.

     23. No Guarantee of Interests. Neither the Board of Directors nor the Company
guarantees the Common Stock of the Company from loss or depreciation.

     24. Payment of Expenses. All expenses incident to the administration, termination or
protection of the Plan, including, but not limited to, legal and accounting fees, shall be paid by
the Company.

As amended March 16, 2001

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     25. Severability. In the event any provision of this Plan shall be held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions
hereof, but shall be fully severable and the Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein.

     26. Notice. Whenever any notice is required or permitted hereunder, such notice must
be in writing and personally delivered or sent by mail. Except as otherwise provided in Paragraph
20 of this Plan, any notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered or, whether actually received or not, on
the third (3rd) business day after it is deposited in the United States mail, certified or
registered, postage prepaid, addressed to the person who is to receive it at the address which such
person has theretofore specified by written notice delivered in accordance herewith. The Company
or an optionee may change, at any time and from time to time, by written notice to the other, the
address which it or he had theretofore specified for receiving notices.

     27. Waiver of Notices. Any person entitled to notice hereunder may waive such notice.

     28. Successors. The Plan shall be binding upon the Optionee, his heirs, legatees and
legal representatives, upon the Company, its successors and assigns and upon the Board of Directors
and its successors.

     29. Headings. The titles and headings of sections and paragraphs are included for
convenience of reference only and are not to be considered in construction of the provisions
hereof.

     30. Word Usage. Words used in the masculine shall apply to the feminine where
applicable and, wherever the context of this Plan dictates, the plural shall be read as the
singular and the singular as the plural.

     31. Effective Date of Plan. The Plan shall become effective and shall be deemed to
have been adopted on April 4, 1997. No Option shall be granted pursuant to the Plan after December
31, 2006.

As amended March 16, 2001

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Exhibit 10.7

ENCORE MEDICAL CORPORATION

2000 NON-EMPLOYEE DIRECTORS OPTION PLAN

ARTICLE 1. PURPOSE OF THE PLAN

     The Plan is intended to promote the interests of the Corporation by providing the non-employee
members of the Board with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to remain in the service of
the Corporation.

ARTICLE 2. ADMINISTRATION

     The terms and conditions of each automatic option grant (including the timing and pricing of
the option grant) shall be determined by the express terms and conditions of the Plan, and neither
the Board nor any committee of the Board shall exercise any discretionary functions with respect to
option grants made pursuant to the Plan.

ARTICLE 3. STOCK SUBJECT TO THE PLAN

     A. Shares of Common Stock shall be available for issuance under the Plan and shall be drawn
from either the Corporation’s authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the open market. The
number of shares of Common Stock reserved for issuance over the term of the Plan shall be fixed at
seven hundred fifty thousand (750,000) shares.

     B. Should one or more outstanding options under this Plan expire or terminate for any reason
prior to exercise in full, then the shares subject to the portion of each option not so exercised
shall be available for subsequent option grant under the Plan. In addition, should the exercise
price of an outstanding option under the Plan be paid with shares of Common Stock, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced by the net number
of shares of Common Stock actually issued to the holder of such option.

     C. Should any change be made to the Common Stock issuable under the Plan by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the Corporation’s receipt of
consideration, then appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities for which automatic
option grants are to be subsequently made to each newly- elected or continuing non-employee Board
member under the Plan, and (iii) the number and/or class of securities and price per share in
effect under each option outstanding under the Plan. The adjustments to the outstanding options
shall be made by the Board in a manner which shall preclude the enlargement or dilution of rights
and benefits under such options and shall be final, binding and conclusive.

As amended May 16, 2002

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ARTICLE 4. ELIGIBILITY

     The individuals eligible to receive automatic option grants pursuant to the provisions of this
Plan shall be limited to (i) those individuals serving as non-employee Board members on the
Effective Date and (ii) those individuals who are first elected or appointed as non-employee Board
members after the Effective Date, whether through appointment by the Board or election by the
Corporation’s stockholders. A non-employee Board member shall not be eligible to receive the
initial automatic option grant if such individual has previously been in the employ of the
Corporation (or any parent or subsidiary). However, a non-employee Board member shall be eligible
to receive one or more annual option grants, whether or not he or she has previously been in the
employ of the Corporation (or any parent or subsidiary). Each non-employee Board member eligible
to participate in the Plan pursuant to the foregoing criteria is hereby designated an Eligible
Director.

ARTICLE 5. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

     A. Grant Date. Option grants shall be made on the date of each Annual Meeting,
beginning with the 2000 Annual Meeting. Each Eligible Director who serves on the Board at the time
of that Annual Meeting, whether or not standing for re-election, shall automatically be granted a
non-statutory option to purchase 15,000 shares of Common Stock. An Eligible Director who resigns
effective at an Annual Meeting shall not be eligible to be granted a non-statutory option at that
time. There shall be no limit on the number of such annual 15,000-share option grants any one
Eligible Director may receive over his or her period of continued Board service.
In addition to the annual 15,000-share option grant, the Chairperson of the Audit Committee shall be
granted an additional non-statutory option to purchase 5,000 shares of Common Stock under the same
terms and conditions as the annual 15,000-share option grant.

     B. Exercise Price. The exercise price per share of Common Stock subject to each
automatic option grant shall be equal to one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the automatic grant date.

     C. Payment. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one of the alternative forms specified below: (i) full payment in
cash or check made payable to the Corporation’s order; or (ii) full payment in shares of Common
Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for
financial-reporting purposes and valued at Fair Market Value on the Exercise Date (as such term is
defined below); or (iii) full payment in a combination of shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation’s earnings for financial-reporting
purposes and valued at Fair Market Value on the Exercise Date and cash or check payable to the
Corporation’s order; or (iv) full payment through a broker-dealer sale and remittance procedure
pursuant to which the non-employee Board member (a) shall provide irrevocable written instructions
to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased shares and (b) shall
concurrently provide written directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale transaction. For
purposes of this Section 5.C, the Exercise Date shall be the date on which written notice of the
option exercise is delivered to the Corporation. Except to the extent the sale and remittance
procedure specified above is used, payment of the exercise price for the purchased shares must
accompany the exercise notice.

As amended May 16, 2002

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     D. Exercisability/Vesting. Each automatic grant shall become exercisable for one
hundred percent (100%) of the option shares upon the optionee’s completion of one year of Board
service. Exercisability of the option shall be subject to acceleration as provided in Article 6.
In no event, however, shall the option become exercisable for any additional option shares after
the Optionee’s cessation of Board service.

     E. Option Term. Each automatic grant under the Plan shall have a maximum term of ten
(10) years measured from the automatic grant date.

     F. Non-Transferability. During the lifetime of the Optionee, each automatic option
grant shall be exercisable only by the Optionee and shall not be assignable or transferable by the
Optionee other than a transfer of the option effected by will or by the laws of descent and
distribution following Optionee’s death.

     G. Effect of Termination of Board Service.

     1. Should the Optionee cease to serve as a Board member for any reason (other than
death) while holding one or more automatic option grants under the Plan, then such
individual shall have a twelve (12)-month period following the date of such cessation of
Board service in which to exercise each such option for any or all of the option shares for
which the option is exercisable at the time of his or her cessation of Board service. Each
such option shall immediately terminate and cease to be outstanding, at the time of such
cessation of Board service, with respect to any option shares for which the option is not
otherwise at that time exercisable.

     2. Should the Optionee die while serving as a Board member or within twelve (12) months
after cessation of Board service, then any automatic option grant held by the Optionee at
the time of death may subsequently be exercised, for the option shares for which the option
is exercisable at the time of his or her cessation of Board service (less any option shares
purchased by the Optionee prior to death), by the personal representative of the Optionee’s
estate or by the person or persons to whom the option is transferred pursuant to the
Optionee’s will or in accordance with the laws of descent and distribution. The right to
exercise each such option shall lapse upon the expiration of the twelve (12)-month period
measured from the date of the Optionee’s cessation of service.

     3. In no event shall any automatic grant under this Plan remain exercisable after the
expiration date of the maximum ten (10)-year option term. Upon the expiration of the
applicable post-service exercise period under subparagraphs 1 through 2 above or (if
earlier) upon the expiration of the maximum ten (10)-year option term, the automatic grant
shall terminate and cease to be outstanding for any option shares for which the option was
not exercisable at the time of the Optionee’s cessation of Board service.

     H. Stockholder Rights. The holder of an automatic option grant shall have none of the
rights of a stockholder with respect to any shares subject to such option until such individual
shall have exercised the option and paid the exercise price for the purchased shares.

     I. Remaining Terms. The remaining terms and conditions of each automatic option grant
shall be as set forth in the form Stock Option Agreement approved for use under the Plan.

As amended May 16, 2002

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ARTICLE 6. SPECIAL ACCELERATION EVENTS

     A. In the event of any Change in Control, the shares of Common Stock at the time subject to
each outstanding option but not otherwise fully exercisable shall automatically accelerate in full
so that each such option shall, immediately prior to the specified effective date for the Change in
Control, become fully exercisable for all of the shares of Common Stock at the time subject to that
option. Immediately following the consummation of the Change in Control, each automatic option
grant under the Plan shall terminate and cease to be outstanding, except to the extent assumed by
the successor corporation or its parent company.

     B. The automatic option grants outstanding under the Plan shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

ARTICLE 7. AMENDMENT OF THE PLAN AND AWARDS

     The Board has complete and exclusive power and authority to amend or modify the Plan (or any
component thereof) in any or all respects whatsoever. However, no such amendment or modification
shall adversely affect rights and obligations with respect to options at the time outstanding under
the Plan, unless the affected Optionees consent to such amendment. Stockholder approval shall be
obtained to the extent required by applicable law.

ARTICLE 8. EFFECTIVE DATE AND TERM OF PLAN

     A. The Plan shall become effective on the Effective Date. One or more automatic option grants
may be made under the Plan at any time on or after the Effective Date.

     B. The Plan shall terminate upon the earlier of (i) April 30, 2010 or (ii) the date on which
all shares available for issuance under the Plan shall have been issued pursuant to the exercise of
the options granted under the Plan. If the date of termination is determined under clause (i)
above, then all option grants outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the agreements evidencing those option grants.

ARTICLE 9. USE OF PROCEEDS

     Any cash proceeds received by the Corporation from the sale of shares pursuant to option
grants under the Plan shall be used for general corporate purposes.

ARTICLE 10. REGULATORY APPROVALS

     A. The implementation of the Plan, the granting of any option under the Plan and the issuance
of Common Stock upon the exercise of the option grants made hereunder shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the options granted under it, and the Common Stock issued pursuant to
it.

As amended May 16, 2002

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     B. No shares of Common Stock or other assets shall be issued or delivered under this Plan
unless and until there shall have been compliance with all applicable requirements of Federal and
state securities laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all applicable listing
requirements of the Nasdaq National Market or any Stock Exchange on which the Common Stock is then
listed for trading.

ARTICLE 11. NO IMPAIRMENT OF RIGHTS

     Neither the action of the Corporation in establishing the Plan nor any provision of the Plan
shall be construed or interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove any individual from the Board at any time in accordance
with the provisions of applicable law.

ARTICLE 12. MISCELLANEOUS PROVISIONS

     A. The right to acquire Common Stock or other assets under the Plan may not be assigned,
encumbered or otherwise transferred by any Optionee.

     B. The provisions of the Plan relating to the exercise of options shall be governed by the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

     C. The provisions of the Plan shall inure to the benefit of, and be binding upon, the
Corporation and its successors or assigns, whether by Change in Control or otherwise, and the
Optionees, the legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.

ARTICLE 13. DEFINITIONS

     A. Annual Meeting: the annual meeting of the Corporation’s stockholders.

     B. Board: the Corporation’s Board of Directors.

     C. Code: the Internal Revenue Code of 1986, as amended.

     D. Common Stock: shares of the Corporation’s common stock.

     E. Corporation: Encore Medical Corporation, a Delaware corporation.

     F. Change in Control: a change in ownership or control of the Corporation effected
through either of the following transactions:

     (a) the consummation of a merger or consolidation of the Corporation with or into
another entity or any other corporate reorganization, if more than fifty percent (50%) of
the combined voting power of the continuing or surviving entity’s securities outstanding
immediately after such merger, consolidation or other reorganization is owned by persons who
were not stockholders of the Corporation immediately prior to such merger, consolidation or
other reorganization;

As amended May 16, 2002

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     (b) the sale, transfer or other disposition of all or substantially all of the
Corporation’s assets;

     (c) a change in the composition of the Board, as a result of which fewer than one-third
of the incumbent directors are directors who either (i) had been directors of the
Corporation on the date twenty-four (24) months prior to the date of the event that may
constitute a Change in Control (the “original directors”) or (ii) were elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time of the election or
nomination and the directors whose election or nomination was previously so approved;

     (d) any transaction as a result of which any person is the “beneficial owner” (as
defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the
Corporation representing at least 50% of the total voting power represented by the
Corporation’s then outstanding voting securities. For purposes of this Paragraph (d), the
term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the
1934 Act but shall exclude (i) a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or of a parent or subsidiary and (ii) a corporation
owned directly or indirectly by the stockholders of the Corporation in substantially the
same proportions as their ownership of the Common Stock of the Corporation; or

     (e) a transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Corporation’s incorporation or to create a holding company that will
be owned in substantially the same proportions by the persons who held the Corporation’s
securities immediately before such transaction.

     G. Effective Date: May 25, 2000.

     H. Fair Market Value: the Fair Market Value per share of Common Stock determined in
accordance with the following provisions:

     1. If the Common Stock is at the time traded on the Nasdaq National Market, then the
Fair Market Value shall be the closing selling price per share of Common Stock on the date
in question, as such price is reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation exists.

     2. If the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

As amended May 16, 2002

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     I. 1934 Act: the Securities Exchange Act of 1934, as amended.

     J. Optionee: any person to whom an option is granted under the Plan.

     K. Plan: this Encore Medical Corporation 2000 Non-Employee Directors Option Plan.

     L. Stock Exchange: either the American Stock Exchange or the New York Stock Exchange.

As amended May 16, 2002

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