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EXHIBIT 10.20
EMPLOYMENT AGREEMENT dated as of June 30,
1999 (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
Michael R. McBrayer (the "Executive").
The execution and delivery of this Agreement by the Company and the
Executive is being made simultaneously with the closing of the transactions
contemplated by the Recapitalization Agreement dated as of April 29, 1999 (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 Smith & Nephew, Inc., a Delaware corporation, DonJoy and Chase DJ
Partners, LLC, a Delaware limited liability company ("Chase").
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 Executive, and the Executive 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 Executive shall serve as
Vice President of Sales and Assistant Secretary of the Company and shall have
the usual and customary duties, responsibilities and authority of a Vice
President subject to the power of the board of directors of the Company (the
"Board") (i) with the Executive's consent, to expand or limit such duties,
responsibilities and authority and (ii) to override the actions of the
Executive. The Executive shall perform his duties principally at Vista, CA or
such other location as the Executive and the Board shall agree.
(b) (i) The Executive shall report to the Board 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 Executive shall perform his duties and responsibilities to the
best of his abilities in a diligent and professional manner.
(ii) During the Employment Period, the Executive shall
not engage in any business activity which, in the reasonable judgment of the
Board, conflicts or substantially interferes with the duties of the Executive
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage.
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(c) The foregoing restrictions shall not limit or prohibit the
Executive from engaging in passive investment, inactive business ventures and
community, charitable and social activities not interfering with the Executive's
performance and obligations hereunder.
3. BASE SALARY AND BENEFITS.
(a) During the Employment Period, the Executive's base salary
shall be $155,715 per annum, or such higher rate as the Board (excluding the
Executive 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 Executive 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 Executive 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 Executive shall be
entitled to four weeks paid vacation during each 12-month period worked,
commencing on the date hereof.
(d) In addition to the Base Salary, the Executive shall be
eligible to receive an annual bonus (either in cash or equity interests of
DonJoy) as determined by the Board (excluding the Executive if he should be a
member of the Board at the time of such determination) in its sole discretion.
(e) In addition to the foregoing and for the 1999 calendar year
only, the Executive shall be entitled to (i) club membership dues, (ii) car
allowance and (iii) tax preparation fee consistent with the benefits previously
provided to Executive by Smith & Nephew, Inc. and each of which shall be payable
only, to the extent such benefits have not already been paid by Smith & Nephew,
Inc.; provided, however, that following the 1999 calendar year, the Executive
shall be entitled to the car allowance for the remainder of the Employment
Period in accordance with past practice.
4. TERM.
(a) The Employment Period shall end on the third 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 Executive; provided,
however, that (i) the Employment Period shall terminate prior to such date upon
the Executive'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 Executive unable to substantially perform
his duties hereunder for 120 days during any 12-month period or (ii) would
reasonably be expected to
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render the Executive unable to substantially perform his duties for 120 days
during any 12-month period, in each case as determined by the Board (excluding
the Executive 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
Executive disputes any determination of Disability made by the Board pursuant to
clause (ii) of the following sentence, the dispute shall be referred to three
licensed physicians practicing within a 100-mile radius of the city or township
nearest to the Executive'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 Executive
and the third of whom shall be selected by the two physicians selected by the
Board and the Executive, 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 Executive and the Company.
(b) If the Employment Period is terminated by the Company
without Cause, the Executive shall be entitled to receive only his Base Salary
for a period equal to twelve months 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 Executive's resignation, death or Disability, the
Executive 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 Executive'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 Executive is terminated by the Company
without Cause, the sole remedy of the Executive and his successors, assigns,
heirs, representatives and estate shall be to receive the severance payments
described in Paragraph 4(b). In the event the Executive is terminated by the
Company for Cause or by reason of the Executive's death, Disability or
resignation, the sole remedy of the Executive 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 the (i) failure by the
Executive to perform such duties as are reasonably requested by the Board as
documented in writing to the Executive, (ii) the Executive's willful disregard
of his duties or failure to act, where such action would be in the ordinary
course of the Executive's duties, (iii) the failure by the Executive 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 Executive in the performance
of his duties, (v) the commission by the Executive 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 Executive of this Agreement, including, without limitation, any breach by
the Executive of the provisions of Paragraph 5, Paragraph 6 or Paragraph 7, or
(a) the Amended and Restated Operating Agreement of DonJoy, (b) the Members'
Agreement of DonJoy, (c) any option
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agreement to which DonJoy and the Executive may become a party, or (d) the
Secured Promissory Note and Pledge Agreement dated the date hereof, (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.
5. NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION.
(a) The Executive will not disclose or use at any time, either
during the Employment Period or thereafter, any Confidential Information (as
defined below) of which the Executive 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 Executive's performance in good
faith of duties assigned to the Executive by the Board. The Executive will take
all appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, espionage, loss and theft. The Executive 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 Executive 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 Executive 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 Executive proposes to disclose or
use such information.
6. INVENTIONS AND PATENTS.
The Executive 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 Executive (whether or not
during usual business hours and whether or not alone or in conjunction with any
other person) while employed by the Company (including those conceived,
developed or made prior to the date of this Agreement)
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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 Executive 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 Executive agrees that, for the period that includes (i) the
Employment Period and (ii) four (4) years after the termination of the
Employment Period (the "Non-Solicit Period"), the Executive 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 Executive's services are unique and because the Executive 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 Executive 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 Executive.
9. INSURANCE.
The Company may, for its own benefit, maintain "keyman" life and
disability insurance policies covering the Executive. The Executive will
cooperate with the Company and
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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 Executive 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 Executive shall be terminated forthwith and the Company's obligation to
pay and the Executive'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
Executive'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 Executive hereby represents and warrants to the Company
that (i) the execution, delivery and performance of this Agreement by the
Executive 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 Executive is subject, (ii)
the Executive 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 Executive, this Agreement will
be a valid and binding obligation of the Executive, enforceable in accordance
with its terms.
(b) The Company hereby represents and warrants to the Executive
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 Executive, this Agreement will be a valid
and binding obligation of the Company.
12. TERMINATION OF EXISTING EMPLOYMENT ARRANGEMENTS.
Effective upon the singing of this Agreement, the Employee Retention
Agreement Resulting from a Change in Control or Division Divestiture, dated as
of December 14, 1998, by and between Smith & Nephew, Inc. and the Executive
shall be terminated and shall be of no further force or effect and the Executive
hereby agrees to take all action necessary to affect such termination.
13. 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
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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:
If to the Company to:
DJ Orthopedics, LLC
2985 Scott St.
Vista, CA 92083
Telephone: (760) 727-1280
Telecopy: (760) 734-3536;
with a copy to:
Chase DJ Partners, LLC
c/o Chase Capital Partners Inc.
380 Madison Avenue
New York, NY 10017
Attention: Damion Wicker, John Daileader
Telephone: (212) 622-3100
Telecopy: (212) 622-3101;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone: (212) 408-2400
Telecopy: (212) 408-2420.
If to the Executive, to:
Michael McBrayer
c/o DJ Orthopedics, LLC
2985 Scott St.
Vista, CA 92083
Telephone: (760) 727-1280
Telecopy: (760) 734-3536;
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.
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14. 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 1999 Option Plan and
related option agreements, (ii) the Members' Agreement of DonJoy, (iii) the
Amended and Restated Operating Agreement of DonJoy, (iv) the Secured Promissory
Note and (v) Pledge Agreement (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 Executive
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 Executive and all indebtedness at any time owing by the Company to
the Executive against any and all of the obligations of the Executive 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 Executive and the Company and their respective successors, assigns,
heirs, representatives and estate; provided, however, that the rights and
obligations of the Executive 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 DELAWARE, 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 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.
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(f) Jurisdiction and Venue.
(i) The Company and the Executive hereby irrevocably and
unconditionally submit, for themselves and their property, to the
non-exclusive jurisdiction of any New York court or federal court of the
United States of America sitting in New York, New York 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 Executive hereby irrevocably and
unconditionally agree that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court
or, to the extent permitted by law, in such federal court. The Company
and the Executive 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 Executive 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 New York State or federal court sitting
in New York, New York. The Company and the Executive 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 Executive 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, the
Executive and Chase, 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.
(j) Attorney's Fees. The Company agrees to pay reasonable and
substantiated fees and out-of-pocket expenses of counsel to the Executive for
such counsels' review of this Agreement and the Management Related Documents.
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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
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Name: Leslie H. Cross
Title: President and CEO
/s/ Michael R. McBrayer
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Michael R. McBrayer