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EXHIBIT 10.21
DONJOY, L.L.C.
1999 OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the DonJoy, L.L.C. 1999 Option Plan (the "Plan") is (i) to
further the growth and success of, DonJoy, L.L.C. (the "Company") and its
Subsidiaries (as hereinafter defined) by enabling directors and employees of,
and independent consultants and contractors to, the Company and any of its
Subsidiaries to acquire equity ownership interests in the Company (the "Units"),
thereby increasing their personal interest in such growth and success, and (ii)
to provide a means of rewarding outstanding performance by such persons to the
Company and/or its Subsidiaries. For purposes of the Plan, the term "Subsidiary"
shall mean "Subsidiary Corporation" as defined in Section 424(f) of the Internal
Revenue Code of 1986, as amended.
2. ADMINISTRATION OF THE PLAN
(a) Option Committee
The Plan shall be administered by the Board of Managers of the Company
(the "Board") or a three-person Option Committee (the "Committee") appointed
from time to time by the Board. Any reference in the Plan to action by the
Company means action by or under the authority of the Board or the Committee.
The members of the Committee may be removed by the Board at any time either with
or without cause. Any vacancy on the Committee, whether due to action of the
Board or any other cause, shall be filled by the Board. The term "Committee"
shall, for all purposes of the Plan other than this Section 2, be deemed to
refer to the Board if the Board is administering the Plan.
(b) Procedures
The Committee shall adopt such rules and regulations as it shall deem
appropriate concerning the holding of meetings and the administration of the
Plan. A majority of the entire Committee shall constitute a quorum and the
actions of a majority of the members of the Committee present at a meeting at
which a quorum is present, or actions approved in writing by all of the members
of the Committee, shall be the actions of the Committee.
(c) Interpretation
Except as otherwise expressly provided in the Plan, the Committee shall
have all powers with respect to the administration of the Plan, including,
without limitation, full power and authority to interpret the provisions of the
Plan and any Option Agreement (as defined in Section 5(b)), and to resolve all
questions arising under the Plan. All decisions of the Board or the Committee,
as the case may be, shall be conclusive and binding on all participants in the
Plan.
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3. UNITS SUBJECT TO THE PLAN.
(a) Number of Units
Subject to the provisions of Section 9 (relating to adjustments upon
changes in capital structure and other limited liability company transactions),
the maximum number of Units subject at any one time to options granted under the
Plan ("Options"), plus the number of Units theretofore issued and delivered
pursuant to the exercise of Options granted under the Plan, shall not in
aggregate exceed 133,799(1) Units, as follows:
(i) Options relating to up to 53,520(2) Units may be granted
pursuant to Option Agreements substantially in the form of Exhibit A hereto
("Tier I Options");
(ii) Options relating to up to 35,680(3) Units may be granted
pursuant to Option Agreements substantially in the form of Exhibit B hereto
("Tier II Options"); and
(iii) Options relating to up to 44,599(4) Units may be granted
pursuant to Option Agreements substantially in the form of Exhibit C hereto
("Tier III Options").
If and to the extent that Options granted under [clauses (i) through
(iii) above] [the Plan] terminate, expire or are canceled without having been
fully exercised, new Options may be granted under [clauses (i) through (iii)
above] [the Plan] with respect to the Units covered by the unexercised portion
of such terminated, expired or canceled Options.
(b) Character of Units
The Units issuable upon exercise of an Option granted under the Plan
shall be (i) authorized but unissued Units, (ii) Units held in the Company's
treasury or (iii) a combination of the foregoing.
(c) Reservation of Units
The number of Units reserved for issuance under the Plan shall at no time
be less than the maximum number of Units which may be purchased at any time
pursuant to outstanding Options.
4. ELIGIBILITY
Options may be granted under the Plan only to (i) persons who are
employees of, or independent consultants to, the Company or any of its
Subsidiaries and (ii) persons who are directors or managers of the Company or
any of its Subsidiaries. Notwithstanding the foregoing,
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(1) 15% of total Units at Closing.
(2) 6% of total Units at Closing.
(3) 4% of total Units at Closing.
(4) 5% of total Units at Closing.
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Options may be conditionally granted to persons who are prospective employees or
directors or managers of, or independent consultants to, the Company or any of
its Subsidiaries.
5. GRANT OF OPTIONS
(a) General
Options may be granted under the Plan at any time and from time to time
on or prior to the tenth anniversary of the Effective Date (as defined in
Section 11). Subject to the provisions of the Plan, the Committee shall have
plenary authority, in its discretion, to determine:
(i) the persons (from among the class of persons eligible to
receive Options under the Plan) whom Options shall be granted (the
"Optionees");
(ii) the time or times at which Options shall be granted;
(iii) the number of Units subject to each Option;
(iv) the Option Price of the Units subject to each Option; and
(v) the time or times when each Option shall become exercisable
and the duration of the exercise period.
(b) Option Agreements
Each Option granted under the Plan shall be evidenced by a written
agreement (an "Option Agreement"), containing such terms and conditions and in
such form, not inconsistent with the Plan, as the Committee shall, in its
discretion, provide. Each Option Agreement shall be executed by the Company and
the Optionee.
(c) No Evidence of Employment or Service
Nothing contained in the Plan or in any Option Agreement shall confer
upon any Optionee any right with respect to the continuation of his or her
employment by or service with the Company or any of its Subsidiaries or
interfere in any way with the right of the Company or any such Subsidiary
(subject to the terms of any separate agreement to the contrary) at any time to
terminate such employment or service or to increase or decrease the compensation
of the Optionee from the rate in existence at the time of the grant of an
Option.
(d) Date of Grant
The date of grant of an Option under the Plan shall be the date as of
which the Committee approves the grant; provided, however, that the grant shall
in no event be earlier than the date as of which the Optionee becomes an
employee of the Company or one of its Subsidiaries.
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6. OPTION PRICE
Subject to Section 9, the price (the "Option Price") at which each Unit
subject to an Option granted under the Plan may be purchased shall be determined
by the Committee at the time the Option is granted.
7. EXERCISABILITY OF OPTIONS
(a) Committee Determination
Each Option granted under the Plan shall be exercisable at such time or
times, or upon the occurrence of such event or events, and for such number of
Units subject to the Option, as shall be determined by the Committee and set
forth in the Option Agreement evidencing such Option. If an Option is not at the
time of grant immediately exercisable, the Committee may (i) in the Option
Agreement evidencing such Option, provide for the acceleration of the exercise
date or dates of the subject Option upon the occurrence of specified events
and/or (ii) at any time prior to the complete termination of an Option,
accelerate the exercise date or dates of such Option.
(b) Automatic Termination of Options
The unexercised portion of any Option granted under the Plan shall
automatically terminate and shall become null and void and be of no further
force or effect upon the first to occur of the following:
(i) the end of the stated term thereof;
(ii) if the Optionee is an employee, unless a shorter period is
provided for in any Option Agreement, the expiration of three months from the
date that the Optionee ceases to be an employee of the Company or any of its
Subsidiaries (other than as a result of an Involuntary Termination (as
defined in clause (iii) below) or termination For Cause (as defined herein));
provided, however, that if the Optionee shall die during such three-month
period, the time of termination of the unexercised portion of such Option
shall be the expiration of 12 months from the date that such Optionee ceased
to be an employee of the Company or any of its Subsidiaries;
(iii) if the Optionee is an employee, the expiration of 12 months
from the date that the Optionee ceases to be an employee of the Company or
any of its Subsidiaries, if such termination is due to such Optionee's death
or Disability (as defined below) (an "Involuntary Termination");
(iv) if the Optionee is an employee, immediately upon the date
that the Optionee ceases to be an employee of the Company or any of its
Subsidiaries, if such termination is For Cause;
(v) the expiration of such period of time or the occurrence of
such event as the Committee in its discretion may provide in the Option
Agreement;
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(vi) on the effective date of a Material Transaction (as defined
in Section 9(b)(i)) to which Section 9(b)(ii) (relating to assumptions
and substitutions of Options) does not apply; and
(vii) except to the extent permitted by Section 9(b)(ii), the date
on which an Option or any part thereof or right or privilege relating
thereto is transferred (otherwise than by will or the laws of descent and
distribution), assigned, pledged, hypothecated, attached or otherwise
disposed of by the Optionee.
As used herein, "Disability" means any accident, sickness, incapacity or
other disability which (i) renders the Optionee unable to substantially perform
all of his duties for 90 days during any period of 360 consecutive days or (ii)
would reasonably be expected to render the Optionee unable to substantially
perform all of his duties for 90 days during any period of 360 consecutive days,
in the case of each of clauses (i) or (ii), as determined by the Board
(excluding the Optionee should he be a member of the Board at the time of such
determination) in its good faith judgment.
As used herein, "For Cause" shall mean (i) the failure by the Optionee to
perform such duties as are reasonably requested by the Board or the Chief
Executive Officer of the Company or its Subsidiaries, as applicable, (ii) the
Optionee's failure to observe any material policies of the Company or its
Subsidiaries, as applicable, (iii) gross negligence or willful misconduct by the
Optionee in the performance of his duties, (iv) the commission by the Optionee
of any act of fraud, theft or financial dishonesty with respect to the Company
or any of its Affiliates, or any felony or act involving moral turpitude, (v)
the material breach by the Optionee of his/her employment agreement (if
applicable) with the Company or its Subsidiaries, as applicable, or of any other
agreement or contract with the Company or any Affiliate thereof (including,
without limitation, the Members' Agreement of the Company or any option
agreement which must be entered into pursuant to this Plan), (vi) chronic
absenteeism or (vii) the failure of the Optionee to give at least 30 days' prior
written notice of his termination of employment with the Company or its
Subsidiaries, as applicable. For purposes of this Agreement, "Affiliates" means
DJ Orthopedic, LLC (or its successors or assigns) and all subsidiaries thereof.
Anything contained in the Plan to the contrary notwithstanding, unless
otherwise provided in an Option Agreement, no Option granted under the Plan
shall be affected by any change of duties or position of the Optionee (including
a transfer to or from the Company or one of its Subsidiaries), so long as such
Optionee continues to be an employee of the Company or one of its Subsidiaries.
8. PROCEDURE FOR EXERCISE
(a) Payment
Payment upon exercise of an Option shall be made, at the election of the
Optionee, (i) in cash or personal or certified check payable to the Company in
an amount equal to the aggregate Option Price of the Units with respect to which
the Option is being exercised or (ii) upon the surrender of Units or option to
buy Units, in each case with such Units or Options to
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buy Units, as the case may be, valued at the Fair Value per Unit (as defined in
Section 8) thereof as determined by the Committee.
(b) Notice
An Optionee (or other person, as provided in Section 10(b)) may exercise
an Option granted under the Plan in whole or in part (but for the purchase of
whole Units only), as provided in the Option Agreement evidencing his Option, by
delivering a written notice (the "Notice") to the Secretary of the Company. The
Notice shall state:
(i) that the Optionee elects to exercise the Option;
(ii) the number of Units with respect to which the Option is being
exercised (the "Optioned Units");
(iii) the method of payment for the Optioned Units (which method
must be available to the Optionee under the terms of his or her Option
Agreement);
(iv) the date upon which the Optionee desires to consummate the
purchase (which date must be prior so the termination of such Option);
(v) a copy of any election filed by the Optionee pursuant to
Section 83(b) of the Code; and
(vi) such further provisions consistent with the Plan as the
Committee may from time to time require.
The exercise date of an Option shall be the date on which the Company
receives the Notice from the Optionee.
(c) Issuance of Certificates
The Company shall issue a certificate in the name of the Optionee (or
such other person exercising the Option in accordance with the provisions of
Section 10(b)) for the Optioned Units as soon as practicable after receipt of
the Notice and payment of the aggregate Option Price for such Units. Neither the
Optionee nor any person exercising an Option in accordance with the provisions
of Section 10(b) shall have any privileges as a holder of Units with respect to
any Units subject to an Option granted under the Plan until the date of payment
for such Units pursuant to the Option.
(d) Determination of Fair Market Value.
Fair Market Value of each Unit shall be determined in accordance with the
following:
(i) "FAIR VALUE PER UNIT " shall mean, as of any date of
determination, the fair value of each Unit (or, with respect to a warrant
or option, the fair value of each Unit obtainable upon exercise thereof
net of the exercise price), determined as follows:
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At any time that the Fair Value Per Unit shall be required to be
determined hereunder, the Board shall make a good faith determination
(the "Board's Determination") of the fair value of each Unit within 30
days of the delivery by the Company of a Repurchase Notice (as defined in
the Operating Agreement) (without taking into account that the Units may
be "restricted securities" but with a reasonable discount, for the
minority position represented by the Units and shall provide to the
Member (as defined in the Operating Agreement) with respect to whose Unit
such determination is being made a written notice thereof which notice
shall set forth supporting data in respect of such calculation (the
"Determination Notice"). The Member shall have 10 days following receipt
of the Determination Notice within which to deliver to the Company a
written notice (the "Objection Notice") of an objection, if any, to the
Board's Determination, which Objection Notice shall set forth the
Member's good faith determination (the "Member's Determination") of the
fair value of each Unit. The failure by the Member to deliver the
Objection Notice within such 10-day period shall constitute the Member's
acceptance of the Board's Determination as conclusive. In the event of
the timely delivery of an Objection Notice, the Company and the Member
shall attempt in good faith to arrive at an agreement with respect to the
Fair Value per Unit, which agreement shall be set forth in writing within
15 days following delivery of the Objection Notice. If the Company and
the Member are unable to reach an agreement within such 15-day period,
the matter shall be promptly referred for determination to a regionally
or nationally recognized investment banking or valuation firm (the
"Valuer") reasonably acceptable to the Company and the Member. The
Company and the Member will cooperate with each other in good faith to
select such Valuer. The Valuer may select the Board's Determination or
the Member's Determination as the Fair Value Per Unit or may select any
other number or value (determined without taking into account that the
Units may be "restricted securities" but with a reasonable discount, not
to exceed 20% for the minority position represented by the Units). The
Valuer's selection will be furnished to the Company and the Member in
writing and conclusive and binding upon the Company and the Member. The
fees and expenses of the Valuer shall be borne equally by the Company and
the Member with respect to whose Units such determination relates;
provided, however, that if the Fair Value per Unit, as determined by the
Valuer, shall be more than 15% greater than the Board's Determination of
such Fair Value per Unit, then such fees and expenses of the Valuer
shall be borne entirely by the Company.
9. ADJUSTMENTS
(a) Changes in Capital Structure
Subject to Section 9(b), if the Unit is changed by reason of a split,
reverse split or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation or reorganization, the
Committee shall make such adjustments in the number and class of Units with
respect to which Options may be granted under the Plan as shall be equitable and
appropriate in order to make such Options, as nearly as may be practicable,
equivalent to such Options immediately prior to such change. A corresponding
adjustment changing the
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number and class of Units allocated to, and the Option Price of, each Option or
portion thereof outstanding at the time of such change shall likewise be made.
(b) Material Transactions
The following rules shall apply in connection with the dissolution or
liquidation of the Company, a reorganization, merger or consolidation in which
the Company is not the surviving corporation, or a sale of all or substantially
all of the assets of the Company to another person or entity (each, a "Material
Transaction"), unless otherwise provided in the Option Agreement or in the
Members' Agreement of even date herewith:
(i) each holder of an Option outstanding at such time shall be
given (A) written notice of such Material Transaction at least 20 days
prior to its proposed effective date (as specified in such notice) and
(B) an opportunity, during the period commencing with delivery of such
notice and ending 10 days prior to such proposed effective date, to
exercise the Option to the full extent to which such Option would have
been exercisable by the Optionee at the expiration of such 20-day period;
provided, however, that upon the occurrence of a Material Transaction,
all Options granted under the Plan and not so exercised shall
automatically terminate; and
(ii) Notwithstanding anything contained in the Plan to the
contrary, Section 9(b)(i) shall not be applicable if provision shall be
made in connection with such Material Transaction for the assumption of
outstanding Options by, or the substitution for such Options of new
options covering the equity securities of, the surviving, successor or
purchasing corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number, kind and option prices of Units
subject to such options.
(c) Special Rules
The following rules shall apply in connection with Section 9(a) and
(b) above:
(i) no fractional Units shall be issued as a result of any such
adjustment, and any fractional Units resulting from the computations
pursuant to Section 9(a) or (b) shall be eliminated and the Optionee
shall receive cash consideration for such fractional Unit at the rate of
the Fair Market Value of such Unit, determined in accordance with clause
(d) below;
(ii) no adjustment shall be made for cash dividends or the
issuance to holders of rights to subscribe for additional Units or other
securities; and
(iii) any adjustments referred to in Section 9(a) or (b) shall be
made by the Board or Committee (as the case may be) in good faith and
shall be conclusive and binding on all persons holding Options granted
under the Plan.
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10. RESTRICTIONS ON OPTIONS AND OPTIONED UNITS
(a) Compliance With Securities Laws
No Options shall be granted under the Plan, and no Units shall be issued
and delivered upon the exercise of Options granted under the Plan, unless and
until the Company and/or the Optionee shall have complied with all applicable
Federal or state registration, listing and/or qualification requirements and all
other requirements of law or of any regulatory agencies having jurisdiction.
The Committee in its discretion may, as a condition to the exercise of
any Option granted under the Plan, require an Optionee (i) to represent in
writing that the Units received upon exercise of an Option are being acquired
for investment and not with a view to distribution and (ii) to make such other
representations and warranties as are deemed appropriate by the Company.
Certificates representing Units acquired upon the exercise of Options that have
not been registered under the Securities Act shall, if required by the
Committee, bear the following legend and such additional legends as may be
required by the Option Agreement evidencing a particular Option:
"THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE UNITS HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE UNITS UNDER THE SECURITIES ACT OR AN
OPINION OF COUNSEL TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT."
(b) Nonassignability of Option Rights
No Option granted under the Plan shall be assignable or otherwise
transferable by the Optionee except by will or by the laws of descent and
distribution. An Option may be exercised during the lifetime of the Optionee
only by the Optionee. If an Optionee dies, his or her Option shall thereafter be
exercisable, during the period specified in Section 7(b)(ii) or (iii) (as the
case may be), by his or her executors or administrators to the full extent to
which such Option was exercisable by the Optionee at the time of his or her
death.
11. EFFECTIVE DATE OF PLAN
The Plan shall become effective on the date of its adoption by the Board.
12. EXPIRATION AND TERMINATION OF THE PLAN
Except with respect to Options then outstanding, the Plan shall expire on
the first to occur of (i) the fifteenth anniversary of the date on which the
Plan is approved by the holders of Units and (ii) the date as of which the
Board, in its sole discretion, determines that the Plan
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shall terminate (the "Expiration Date"). Any Options outstanding as of the
Expiration Date shall remain in effect until they have been exercised or
terminated or have expired by their respective terms.
13. AMENDMENT OF PLAN
The Board may at any time prior to the Expiration Date modify and amend
the Plan in any respect. No such amendment to the Plan shall affect the terms or
provisions of any Option granted by the Company prior to the effectiveness of
such amendment.
14. CAPTIONS
The use of captions in the Plan is for convenience. The captions are
not intended to provide substantive rights.
15. WITHHOLDING TAXES
Whenever under the Plan, Units are to be delivered by an Optionee upon
exercise of an Option, the Company shall be entitled to require as a condition
of delivery that the Optionee remit or, in appropriate cases, agree to remit
when due, an amount sufficient to satisfy all current or estimated future
Federal, state and local income tax withholding the employee's portion of any
employment tax requirements relating thereto.
16. OTHER PROVISIONS
Each Option granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.
17. NUMBER AND GENDER
With respect to words used in the Plan, the singular form shall
include the plural form, the masculine gender shall include the feminine gender,
and vice-versa, as the context requires
18. GOVERNING LAW
The validity and construction of the Plan and the instruments evidencing
the Options granted hereunder shall be governed by the laws of the State of
Delaware.
AS ADOPTED BY THE BOARD OF MANAGERS
OF DONJOY, L.L.C.
ON JUNE 30, 1999.
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