EXPLANATORY NOTE

EX-10.2 4 a74737ex10-2.txt EXHIBIT 10.2 1 EXHIBIT 10.2 EMPLOYMENT AGREEMENT dated as of June 1st, 2001 (the "Agreement"), between dj Orthopedics, LLC, a Delaware limited liability company (the "Company") and a wholly owned subsidiary of DonJoy, L.L.C., a Delaware limited liability company ("DonJoy"), and Paul K. Nichols Jr. (the "Employee"). The execution and delivery of this Agreement by the Company and the Employee is being made simultaneously with the closing of the transactions contemplated by the Asset Purchase Agreement dated as of June 1st, 2001 (as the same may be amended or otherwise modified from time to time, the "Purchase Agreement," the terms defined therein being used herein as therein defined), by and among the Company, Alaron Technologies, L.L.C., a California limited liability company, Employee and Jamal D. Rushdy. In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT. The Company shall employ the Employee, and the Employee accepts employment with the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the date hereof and ending as provided in Paragraph 4 (the "Employment Period"). 2. POSITION AND DUTIES. (a) During the Employment Period, the Employee shall serve as Senior Vice President and shall have the usual and customary duties, responsibilities and authority of a Senior Vice President subject to the power of the board of managers of the Company (the "Board") (i) with the Employee's consent, to expand or limit such duties, responsibilities and authority and (ii) to override the actions of the Employee. The Employee shall perform his duties principally in San Diego County, CA or such other location as the Employee and the Board shall agree. (b) (i) The Employee shall report to the President and Chief Executive Officer and shall devote his best efforts and substantially all of his active business time and attention (except for permitted vacation periods and reasonable periods of illness or other incapacity) to the business and affairs of the Company and its Affiliates. The Employee shall perform his duties and responsibilities to the best of his abilities in a diligent and professional manner. (ii) During the Employment Period, the Employee shall not engage in any business activity which, in the reasonable judgment of the Board, conflicts or substantially interferes with the duties of the Employee hereunder, whether or not such activity is pursued for gain, profit or other pecuniary advantage. 2 (c) The foregoing restrictions shall not limit or prohibit the Employee from engaging in passive investment, inactive business ventures and community, charitable and social activities not interfering with the Employee's performance and obligations hereunder. 3. BASE SALARY AND BENEFITS. (a) During the Employment Period, the Employee's base salary shall be $200,000 per annum, or such higher rate as the Board (excluding the Employee if he should be a member of the Board at the time of such determination) may designate from time to time (the "Base Salary"), which Base Salary shall be payable in regular installments in accordance with the Company's general payroll practices and subject to withholding and other payroll taxes. In addition, during the Employment Period, the Employee shall be entitled to participate in all employee benefit and insurance programs for which executive employees of the Company are generally eligible. (b) The Company shall reimburse the Employee for all reasonable expenses incurred by him in the course of performing his duties under this Agreement, which are consistent with the Company's policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to the Company's requirements with respect to reporting and documenting of such expenses. (c) During the Employment Period, the Employee shall be entitled to three (3) weeks paid vacation during each 12-month period worked, commencing on the date hereof. (d) At the sole discretion of the Board or compensation committee, for each annual period of employment, the Employee may receive a bonus if Executive achieves the performance goals set forth in a plan for the Employee for such annual period of employment. Such plan will be consistent with the overall plans and objectives for the Company. 4. TERM. (a) The Employment Period shall end on the second anniversary of the date of this Agreement, but may be extended annually for additional one year terms by the mutual agreement of the Company and the Employee; provided, however, that (i) the Employment Period shall terminate prior to such date upon the Employee's resignation, death or Disability (as defined in the following sentence), and (ii) the Employment Period may be terminated by the Company at any time prior to such date for Cause (as defined below) or without Cause. For purposes of this Agreement the term "Disability" means any long-term disability or incapacity which (i) renders the Employee unable to substantially perform his duties hereunder for 120 days during any 12-month period or (ii) would reasonably be expected to render the Employee unable to substantially perform his duties for 120 days during any 12-month period, in each case as determined by the Board (excluding the Employee if he should be a member of the Board at the time of such determination) in its good faith judgment; provided, however, that if the Employee disputes any determination of Disability made by the Board pursuant to clause (ii) above, the dispute shall be referred to three licensed physicians practicing 2 3 within a 100-mile radius of the city or township nearest to the Employee's place of employment by the Company, one of whom shall be selected by the Board, a second of whom shall be selected by the Employee and the third of whom shall be selected by the two physicians selected by the Board and the Employee, respectively, and the opinion of the majority of such physicians shall be the determination of Disability, and shall be final and binding on both the Employee and the Company. (b) If the Employment Period is terminated by the Company without Cause or by the Employee for Good Reason, the Employee shall be entitled to receive only his Base Salary for a period equal to the greater of twelve (12) months or the remaining term of the Employment Period following such termination. Such payments of the Base Salary as severance will be made periodically in the same amounts and at the same intervals as if the Employment Period had not ended and the Base Salary otherwise continued to be paid unless otherwise accelerated by the Board. (c) If the Employment Period is terminated by the Company for Cause, or by reason of the Employee's resignation, death or Disability, the Employee shall be entitled to receive only his Base Salary, but only to the extent such amount has accrued through the termination date. (d) Except as otherwise required by law (e.g., COBRA) or as specifically provided herein, all of the Employee's rights to salary, severance, fringe benefits and bonuses hereunder (if any) accruing after the termination of the Employment Period shall cease upon termination of the Employment Period. In the event the Employee is terminated by the Company without Cause, the sole remedy of the Employee and his successors, assigns, heirs, representatives and estate shall be to receive the severance payments described in Paragraph 4(b). In the event the Employee is terminated by the Company for Cause or by reason of the Employee's death, Disability or resignation, the sole remedy of the Employee and his successors, assigns, heirs, representatives and estate shall be to receive the severance payment described in Paragraph 4(c). For purposes of this Agreement, "Cause" means (i) failure by the Employee to perform such duties as are reasonably requested by the Board as documented in writing to the Employee, (ii) the Employee's willful disregard of his duties or failure to act, where such action would be in the ordinary course of the Employee's duties, (iii) the failure by the Employee to observe all material Company policies and material policies of all Affiliates of the Company generally applicable to executives of the Company and/or its Affiliates, (iv) gross negligence or willful misconduct by the Employee in the performance of his duties, (v) the commission by the Employee of any act of fraud, theft or financial dishonesty with respect to the Company or any of its Affiliates, or any felony or criminal act involving moral turpitude, (vi) the material breach by the Employee of this Agreement, including, without limitation, any breach by the Employee of the provisions of Paragraph 5, Paragraph 6 or Paragraph 7, or (a) the Third Amended and Restated Operating Agreement of DonJoy, (b) the Members' Agreement of DonJoy, or (c) any option agreement to which DonJoy and the Employee may become a party, (vii) chronic absenteeism, or (viii) alcohol or other substance abuse. For purposes of this Agreement, "Affiliates" means DonJoy (or its successors or assigns) and all subsidiaries thereof. 3 4 The Employee shall have "Good Reason" to terminate his employment in the event that the Company is in material breach of a post-closing obligation under the Purchase Agreement and such breach has not been cured in accordance with the terms of the Purchase Agreement. 5. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. (a) The Employee shall not disclose or use at any time, either during the Employment Period or thereafter, any Confidential Information (as defined below) of which the Employee is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Employee's performance in good faith of duties assigned to the Employee by the President and Chief Executive Officer. The Employee will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. The Employee shall deliver to the Company at the termination of the Employment Period, or at any time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) of the business of the Company or any of its Affiliates which the Employee may then possess or have under his control. (b) As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company in connection with its business, including but not limited to (i) information, observations and data obtained by the Employee while employed by the Company or any predecessors thereof (including those obtained prior to the date of this Agreement) concerning the business or affairs of the Company (or such predecessors), (ii) products or services, (iii) fees, costs and pricing structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients and customer or client lists, (xiii) copyrightable works, (xiv) all production methods, processes, technology and trade secrets and (xv) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date the Employee proposes to disclose or use such information. 6. INVENTIONS AND PATENTS. The Employee agrees that all inventions, innovations, improvements, technical information, systems, software developments, methods, designs, analyses, drawings, reports, service marks, trademarks, trade names, logos and all similar or related information (whether patentable or unpatentable) which relates to the Company's or any of its Affiliates' actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Employee (whether or not during usual business hours and whether or not alone or in conjunction with any other person) while employed by the 4 5 Company (including those conceived, developed or made prior to the date of this Agreement) together with all patent applications, letters patent, trademark, tradename and service mark applications or registrations, copyrights and reissues thereof that may be granted for or upon any of the foregoing (collectively referred to herein as, the "Work Product"), belong in all instances to the Company or such Affiliate. The Employee will promptly disclose such Work Product to the Board and perform (at the Company's expense) all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm the Company's ownership of such Work Product (including, without limitation, the execution and delivery of assignments, consents, powers of attorney and other instruments) and to provide (at the Company's expense) reasonable assistance to the Company or any of its Affiliates in connection with the prosecution of any applications for patents, trademarks, trade names, service marks or reissues thereof or in the prosecution or defense of interferences relating to any Work Product. 7. NON-SOLICITATION. The Employee agrees that, for the period that includes (i) the Employment Period and (ii) three (3) years after the termination of the Employment Period (the "Non-Solicit Period"), the Employee shall not directly or indirectly through another person or entity (i) induce or attempt to induce any employee of the Company or any Affiliate of the Company to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any such Affiliate, on the one hand, and any employee thereof, on the other hand, (ii) hire any person who was an employee of the Company, until six months after such individual's employment relationship with the Company or any Affiliate of the Company has been terminated or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation, on the one hand, and the Company or any Affiliate, on the other hand. 8. ENFORCEMENT. Because the Employee's services are unique and because the Employee has access to Confidential Information and Work Product, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security), or require the Employee to account for and pay over to the Company all compensation, profits, moneys, accruals, increments or other benefits derived from or received as a result of any transactions constituting a breach of the covenants contained in this Agreement, if and when final judgment of a court of competent jurisdiction is so entered against the Employee. 9. INSURANCE. 5 6 The Company may, for its own benefit, maintain "keyman" life and disability insurance policies covering the Employee. The Employee will cooperate with the Company and provide such information or other assistance as the Company may reasonably request in connection with the Company obtaining and maintaining such policies. 10. SEVERANCE PAYMENTS. In addition to the foregoing, and not in any way in limitation thereof, or in limitation of any right or remedy otherwise available to the Company, if the Employee violates any provision of the foregoing Paragraph 5, Paragraph 6 or Paragraph 7, any severance payments then or thereafter due from the Company to the Employee shall be terminated forthwith and the Company's obligation to pay and the Employee's right to receive such severance payments shall terminate and be of no further force or effect, if and when determined by a court of competent jurisdiction, in each case without limiting or affecting the Employee's obligations under such Paragraph 5, Paragraph 6 and Paragraph 7 or the Company's other rights and remedies available at law or equity. 11. REPRESENTATIONS AND WARRANTIES. (a) The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Executive is a party or any judgment, order or decree to which the Employee is subject, (ii) the Employee is not a party to or bound by any employment agreement, consulting agreement, non-compete agreement or confidentiality agreement or similar agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company and the Employee, this Agreement will be a valid and binding obligation of the Employee, enforceable in accordance with its terms. (b) The Company hereby represents and warrants to the Employee that (i) this Agreement has been duly authorized by all necessary limited liability company action on the part of the Company, (ii) the execution, delivery and performance of this Agreement by the Company does not and will not conflict with, breach, violate or cause a default under any agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject, and (iii) upon the execution and delivery of this Agreement by the Company and the Employee, this Agreement will be a valid and binding obligation of the Company. 12. NOTICES. All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be delivered personally to the recipient, delivered by United States Post Office mail, telecopied to the intended recipient at the telecopy number set forth therefor below (with hard copy to follow), or sent to the recipient by reputable express courier service (charges prepaid) and addressed to the intended recipient as set forth below: 6 7 If to the Company to: dj Orthopedics, LLC 2985 Scott St. Vista, CA 92083 Attention: Les Cross Telephone: (760) 727-1280 Telecopy: (760) 734-3536; with a copy to: J.P. Morgan DJ Partners, LLC c/o J.P. Morgan Partners, LLC 1221 Avenue of the Americas, 39th Floor New York, NY 10020-1080 Attention: Damion Wicker, Brett Ingersoll Telephone: (212) 899-3400 Telecopy: (212) 899-3401 with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza, 41st Floor New York, New York 10112 Attention: Gregory Gilbert, Esq. Telephone: (212) 408-2400 Telecopy: (212) 408-2420. If to the Employee, to: Paul K. Nichols, Jr. with a copy to: Solomon Ward Seidenwurm & Smith LLP 401 B St. Suite 1200 San Diego, CA 92101 Attention: Jeff Silberman Telephone: (619) 231-0303 Telecopy: (619) 231-4755 7 8 or such other address as the recipient party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. Any such communication shall deemed to have been delivered and received (a) when delivered, if personally delivered, sent by telecopier or sent by overnight courier, and (b) on the fifth business day following the date posted, if sent by mail. 13. GENERAL PROVISIONS. (a) Severability. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (b) Complete Agreement. This Agreement, those documents expressly referred to herein and each of (i) DonJoy's Third Amended and Restated 1999 Option Plan and related option agreements, (ii) the Members' Agreement of DonJoy, (iii) the Third Amended and Restated Operating Agreement of DonJoy, (collectively, the "Management Related Documents") embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (c) Right of Set Off. In the event of a breach by the Employee of the provisions of any of the Management Documents, the Company is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all amounts at any time held by the Company on behalf of the Employee and all indebtedness at any time owing by the Company to the Employee against any and all of the obligations of the Employee now or hereafter existing under the Management Related Documents. (d) Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Employee and the Company and their respective successors, assigns, heirs, representatives and estate; provided, however, that the rights and obligations of the Employee under this Agreement shall not be assigned without the prior written consent of the Company. (e) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF DELAWARE OR ANY OTHER JURISDICTION), THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN 8 9 FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF DELAWARE WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. (f) Jurisdiction and Venue. (i) The Company and the Employee hereby irrevocably and unconditionally submit, for themselves and their property, to the non-exclusive jurisdiction of any California state court or federal court of the United States of America sitting in San Diego, California and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or for recognition or enforcement of any judgment, and the Company and the Employee hereby irrevocably and unconditionally agree that all claims in respect of any such action or proceeding may be heard and determined in any such California state court or, to the extent permitted by law, in such federal court. The Company and the Employee agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (ii) The Company and the Employee irrevocably and unconditionally waive, to the fullest extent they may legally and effectively do so, any objection that they may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any California state or federal court sitting in San Diego, California. The Company and the Employee irrevocably waive, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (iii) The Company and the Employee further agree that the mailing by certified or registered mail, return receipt requested, of any process required by any such court shall constitute valid and lawful service of process against them, without the necessity for service by any other means provided by law. (g) Amendment and Waiver. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and the Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement or any provision hereof. (h) Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (i) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 9 10 * * * * 10 11 IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above. DJ ORTHOPEDICS, LLC By: /s/ LESLIE H. CROSS --------------------------------- Name: Leslie H. Cross Title: CEO/President PAUL K. NICHOLS, JR. /s/ PAUL K. NICHOLS, JR. ------------------------------------ Paul K. Nichols, Jr.