Exhibit
10.1


 


STOCK
PURCHASE AGREEMENT


 


This Stock
Purchase Agreement (the “Agreement”) is entered into as of August 30, 2004 (the
“Effective Date”), by and between KD Holdings, a Denmark corporation
(“Holdings”), Kirsten Damgaard, an individual and the sole shareholder of
Holdings (“Stockholder”) (Holdings and Stockholder are hereinafter collectively
referred to as “Seller”), and dj Orthopedics, LLC, a Delaware limited liability
company (“Buyer”).


 


R  E
C  I  T  A  L  S


 


WHEREAS, Buyer and
Seller have entered into that certain letter agreement dated September 29, 2003
(the “Option”) pursuant to which Seller granted Buyer the option to purchase,
upon terms and conditions set forth therein, all of the outstanding capital
stock in dj Orthopedics Nordic ApS, formerly KD Innovations, (hereinafter, the
“Acquired Business”); and


 


WHEREAS, Buyer
wishes to exercise such Option and purchase the capital stock of the Acquired
Business, and Seller wishes to sell such capital stock, all on the terms and
conditions set forth in this Agreement.


 


A  G
R  E  E  M  E  N  T


 


NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:


 


 


ARTICLE 1


 


PURCHASE AND SALE OF
STOCK


 


1.1           Purchase and Sale of Stock.  Subject to the terms and conditions of this
Agreement and pursuant to the exercise of the Option, Seller does hereby sell,
transfer, convey, assign and deliver to Buyer, and Buyer does hereby purchase,
acquire and accept from Seller, all of Seller’s right, title and interest in
and to the outstanding shares of capital stock of the Acquired Business (the
“Stock”).


 


1.2           Transactions on the Effective Date.   In consideration for the sale, assignment,
transfer and delivery of the Stock, Buyer shall pay Holdings in readily
available funds on the Effective Date pursuant to wire transfer instructions
provided by Seller to Buyer the sum of $700,000 in U.S. dollars (unless
specifically indicated to the contrary, all sums set forth in this Agreement
shall be in U.S. dollar currency). 
Holdings shall deliver to Buyer on the Effective Date the certificates
or other evidence of the Stock, accompanied by such transfer documents as are
necessary under the laws of Denmark to transfer such Stock to Buyer and to
evidence Buyer as the holder of all right, title and interest in the Stock.


 


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1.3           Additional Scheduled Payments.  As additional consideration, Buyer hereby
agrees to pay Holdings the following amounts subject to the following
conditions:


 


(a)           Buyer shall make an additional
payment to Holdings on September 1, 2005 in the amount of $125,000 if the
aggregate “net operating income” (as defined below) of the Acquired Business in
the country of Denmark during calendar 2004 and the six-month period ending
June 30, 2005 equals or exceeds the sum of $250,000, and if such net operating
income for the country of Denmark during such period is less than $250,000, then
such payment shall be reduced in proportion to the shortfall in such net
operating income.


 


(b)           Similarly, Buyer shall make an
additional payment to Holdings on September 1, 2006 in the amount of $125,000
if the aggregate “net operating income” (as defined below) of the Acquired
Business in the country of Denmark during calendar 2005 and the six-month
period ending June 30, 2006 equals or exceeds the sum of $360,000, and if such
net operating income for the country of Denmark during such period is less than
$360,000, then such payment shall be reduced in proportion to the shortfall in
such net operating.


 


1.4         Possible Additional Consideration.  Buyer hereby agrees to pay Holdings
additional consideration of up to $250,000, at the time and in the manner described
below, if the Acquired Business achieves some or all the following cumulative
net operating income goals as of December 31 of the years shown below:


 


	
  2005

  	
   

  	
  $

  	
  258,000

  	
   

  
	
  2006

  	
   

  	
  $

  	
  687,000

  	
   

  
	
  2007

  	
   

  	
  $

  	
  1,303,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  2,065,000

  	
   

  



 


On March 1, 2006 and each subsequent March 1 through March 1, 2009, the
cumulative net operating income of the Acquired Business shall be determined as
of the preceding December 31, and if the applicable goal has been exceeded,
Buyer shall pay Holdings as additional consideration hereunder an amount equal
to 50% of such excess.  Once the
cumulative total of such additional consideration reaches $250,000, no further
such payments will be made.  The failure
of the Acquired Business to reach any applicable goal in a year subsequent to a
year in which the applicable goal was achieved will not affect any of such
additional consideration previously paid for the year in which such applicable
goal was achieved.


 


1.5           Determination
of Net Operating Income.   For
purposes of sections 1.3 and 1.4 above, “net operating income” shall be
determined by calculating the gross profit of the Acquired Business and
subtracting therefrom selling expenses, marketing expenses, general and
administrative expenses and depreciation. 
In addition, the net operating income figures in sections 1.3 and 1.4
above have been calculated using an exchange rate of 6.5 DKK per US dollar, and
such exchange rate shall be used for purposes of all calculations under
sections 1.3 and 1.4 above.  The
determination of such net operating income for the Acquired Business shall be
made by Buyer.  Following June 30 of
2005 and 2006, Buyer shall, to determine the payment under section 1.3 above,
calculate and report the net


 


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operating income of the Acquired Business in the country of Denmark for
the period required by section 1.3, limiting such calculation for this purpose
to sales achieved in Denmark and expenses incurred in Denmark.  Following December 31 of each year from 2005
to and including 2008, Buyer shall, to determine the payment under section 1.4
above, calculate and report the cumulative net operating income of the Acquired
Business as a whole from January 1, 2005 through each such December 31.  Buyer shall report to Seller each such
calculation, which shall be the basis for any payment of additional
consideration by Buyer under either section 1.3 or 1.4 above.  If Seller disagrees with the determination
of Buyer, the parties agree to meet and discuss any such disagreement in order
to resolve any differences.  If the
disagreement is not resolved to Seller’s satisfaction, Seller shall be entitled
to resolve such disagreement through the dispute resolution procedure in
section 5.4(b) below.


 


1.6           Continued Employment of Stockholder.  Stockholder understands that her continued
employment and active participation in the Acquired Business during the period
of time reflected in section 1.4 above is a material consideration to the
Seller’s participation in the transaction provided for in this Agreement.  Accordingly, if Stockholder voluntarily
terminates her employment with the Acquired Business prior to the completion of
the payment opportunity under section 1.4 above, then Buyer shall have no
further obligation to make any payments under such section.


 


 


ARTICLE 2


 


REPRESENTATIONS AND
WARRANTIES

OF THE SELLER


 


Each of Holdings and the Stockholder represents and warrants, jointly
and severally, to the Buyer as follows:


 


2.1           Organization
and Good Standing.  The Acquired
Business is a corporation duly organized, validly existing and in good standing
under the laws of Denmark.  The Acquired
Business is duly qualified and registered to transact business and is in good
standing in every country and other jurisdiction in which the character and
extent of its business makes such qualification or registration necessary.  The Acquired Business has all necessary
corporate power and authority, including all necessary licenses and permits, to
carry on its business as it is now being conducted, and to own or lease and
operate its properties and assets.


 


2.2           Authorization
and Approvals.  Holdings has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder.  This
Agreement has been duly executed and delivered by the Seller and constitutes
the legal, valid and binding obligation of Seller, enforceable in accordance
with its terms, except as may be limited by bankruptcy, reorganization,
insolvency, moratorium or other laws relating to or affecting the enforcement
of creditors’ rights and remedies generally. 
This Agreement has been duly and validly authorized by and approved by
all requisite corporate action on the part of Holdings’ Board of Directors and


 


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stockholders.  No further
approvals or consents by, or filings with, any national, regional or other
court or governmental or administrative body, agency or other third party is
required in connection with the execution and delivery by the Seller of this
Agreement, or the consummation by the Seller of the transactions contemplated
hereby.


 


2.3           Equity Structure of the Acquired
Business.  The Stock represents all
of the issued and outstanding capital stock of the Acquired Business and no
other stock or equity interest in the Acquired Business has been issued or is
outstanding.  Except for the Option and
this Agreement, there are no options, warrants, convertible debt or securities,
calls, agreements, arrangements or understandings or other rights of any kind
or character to purchase any equity interest in the Acquired Business or that
would otherwise result in the ownership of any equity interest in the Acquired
Business by any party other than the ownership of the Stock by Holdings.  The equity interest represented by the
Stock, and the Stock itself, has been duly authorized by all necessary
corporate action of the Acquired Business, is validly issued, fully paid and
nonassessable and has been issued in full compliance with all applicable laws
and regulations.


 


2.4           Title to Stock.  Holdings is the registered and beneficial
owner of the Stock, free and clear of any liens, encumbrances, security
interests, restrictions or claims whatsoever, with full power and authority to
convey the Stock to Buyer in accordance with the terms of this Agreement.  No other person or party has or can claim
any interest of any kind in the Stock or in any right in respect of the Stock.


 


2.5           No
Conflicts.  Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) violate any provision of the charter or
organizational documents of the Acquired Business or Holdings, (b) violate, or
be in conflict with, or constitute a default (or other event which, with the
giving of notice or lapse of time or both, would constitute a default) under,
or give rise to any right of termination, cancellation or acceleration under
any of the terms, conditions or provisions of any lease, license, promissory
note, contract, agreement, mortgage, deed of trust or other instrument or
document to which the Acquired Business or the Seller is a party or by which
the Acquired Business or the Seller or any of its or her respective  properties or assets may be bound, (c)
violate any order, writ, injunction, decree, law, statute, rule or
regulation of any court or governmental authority applicable to the Acquired
Business or the Seller or any of its or her respective properties or assets or
(d) give rise to a declaration or imposition of any claim, lien, charge,
security interest or encumbrance of any nature whatsoever upon any of the
assets of the Acquired Business.


 


2.6           Taxes.  The Acquired Business has paid or caused to
be paid within the time and in the manner prescribed by law all national, regional
and local taxes of any type, including without limitation, income, franchise,
gross receipts, sales or property taxes, payable or due from and owed by the
Acquired Business for all periods ending on or prior to the date hereof except
for taxes which are accrued but not yet due and payable.  The Acquired Business has collected all
sales, use and value added taxes required to be collected, and has remitted, or
will remit on a timely basis, such amounts to the appropriate governmental
authorities and has furnished properly completed exemption certificates for all
exempt transactions.  The Acquired
Business has properly withheld income or similar taxes and required social
charges and paid such amounts to the proper


 


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governmental authority with respect to all employees of the Acquired
Business.  None of the assets of the
Acquired Business are subject to any liens in respect of taxes (other than for
current taxes not yet due and payable).


 


2.7           Contracts.  Schedule 2.7 hereto contains a complete,
current and correct list of all material contracts, commitments, obligations or
agreements of the Acquired Business, whether written or oral, formal or
informal (the “Contracts”).  To the
knowledge of the Seller, no event has occurred which would constitute a default
(or any event which, with the giving of notice or lapse of time or both, would
constitute a default) under any term or provision of any of the Contracts and
thereby allow a party thereto to terminate or claim damages therefor.  Each of the Contracts is in full force and
effect and is the legal, valid and binding obligation of the Acquired Business
and, to the knowledge of the Seller, of the other parties thereto, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws relating to or affecting
the enforcement of creditors’ rights and remedies generally.  The Acquired Business is not a party to any
Contract that restricts Acquired Business, or will restrict Buyer after the
Effective Date, from carrying on the Acquired Business or any part thereof, or
from competing in any line of business with any person, corporation or entity.


 


2.8           Title
to Assets.  The Acquired Business
has good, valid and marketable title to all of its assets.  All such assets are free and clear of title
defects, liens, claims, charges, pledges, security interests, easements or
other encumbrances of any kind or nature whatsoever, except for liens, taxes
and assessments not yet due and liens arising by law or in the ordinary course
of business that do not materially adversely affect such assets or the
operation of the Acquired Business.


 


2.9           Financial Statements. Schedule
2.9 contains the balance sheet of the Acquired Business as of August 28, 2004
(the “Balance Sheet”) and the statement of income and expenses of the Acquired
Business for the period from January 1, 2004 to the date of the Balance Sheet
(the “Income Statement” and collectively with the Balance Sheet, the “Financial
Statements”).  The Financial Statements
(i) have been prepared in conformity with generally accepted accounting
principles applicable to companies in the countries is which the Acquired
Business operates consistently applied with prior periods, and (ii) fairly
present the financial condition and results of operations of the Acquired
Business as of the dates and for the periods indicated therein. The Balance
Sheet accurately reflects all liabilities, obligations and commitments of any
nature (whether absolute, accrued, contingent or otherwise and whether matured
or unmatured) of the Acquired Business except (a) liabilities, obligations or
commitments incurred since the date of the Balance Sheet in the ordinary course
of business and consistent with past practice, (b) liabilities or obligations
described on Schedule 2.9 or Schedule 2.12 hereto and (c) other liabilities or
obligations that are not material, individually or in the aggregate, to the
Acquired Business.


 


2.10         Accounts
Receivable.  The Accounts Receivable
shown in the Balance Sheet, subject to changes in the ordinary course of
business from the date of the Balance Sheet to the Effective Date, constitute
all of the accounts receivable of the Acquired Business and represent bona
fide sales actually made or on or prior to such date in the ordinary
course of business of the Acquired Business and consistent with past
practices.  To Seller’s knowledge, there
is no contest, claim or right of


 


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set-off contained in any oral or written agreement with any account
debtor relating to the amount or validity of any such Account Receivable.  The Accounts Receivable are valid and
collectible in the ordinary course of business.


 


2.11         Compliance
With Laws.  To the knowledge of
Seller, Seller has conducted the Acquired Business in compliance with, and is
not in violation of, applicable laws, statutes, ordinances, rules, regulations,
orders and other requirements of all national governmental authorities, and of all
territories, states, municipalities and other political subdivisions and
agencies thereof, having jurisdiction over the Acquired Business, including
without limitation all such laws, regulations, ordinances and requirements
relating to environment, antitrust, consumer protection, labor and employment,
zoning and land use, immigration, health, and occupational safety,  except where the failure to be in compliance
would not have a material adverse effect on the Acquired Business.  The Acquired Business has not received any
written notification of any asserted present or past failure to comply with any
laws, statutes, ordinances, rules, regulations, orders or other legal or
regulatory requirements.


 


2.12         Litigation.


 


(a)           Except
as set forth on Schedule 2.12, there is no pending or, to the best knowledge of
the Seller, threatened action, suit, arbitration proceeding, investigation or
inquiry before any court or governmental or administrative body or agency, or
any private arbitration tribunal, against, relating to or affecting the
Acquired Business, or the transactions contemplated by this Agreement, nor to
the best knowledge of the Seller, are there any facts or circumstances which
could reasonably lead to or provide the basis for any such threatened action, suit,
arbitration proceeding, investigation or inquiry.


 


(b)           There
is not in effect any order, judgment or decree of any court or governmental or
administrative body or agency enjoining, barring, suspending, prohibiting or
otherwise limiting the Acquired Business or any officer, director or employee
of the Acquired Business from conducting or engaging in any aspect of the
Acquired Business, or requiring Seller or any officer, director or employee of
Seller to take certain action with respect to any aspect of the Acquired
Business.


 


(c)           The
Acquired Business is not in violation of or in default under any order,
judgment, writ, injunction or decree of any court or governmental or
administrative body or agency.


 


2.13         Brokers
and Finders.  Seller has not engaged
or authorized any broker, finder, investment banker or other third party to act
on its behalf, directly or indirectly, as a broker, finder, investment banker
or in any other like capacity in connection with this Agreement or the
transactions contemplated hereby, nor has Seller consented to or acquiesced in
anyone so acting.  Seller knows of no
claim for compensation from any such broker, finder, investment banker or other
third party for so acting on behalf of Seller or any basis for such a claim.


 


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2.14         Absence of Certain Changes.   Since the date of the Balance Sheet, the
Acquired Business has been conducted in the ordinary course consistent with
past practice and, to the knowledge of Seller, there has not been:


 


(a)           any event, occurrence or development
of a state of circumstances or facts relating to the Acquired Business which,
individually or in the aggregate, has had or could reasonably be expected to
have a material adverse effect thereon;


 


(b)           any sale, lease, license or other
disposition of any assets or properties of the Acquired Business, other than in
the ordinary course of business consistent with past practices;


 


(c)           any creation or assumption by the
Acquired Business of any lien, encumbrance or other charge on any of the assets
or properties of the Acquired Business;


 


(d)           any indebtedness for borrowed money
incurred by the Acquired Business or any commitment to incur indebtedness for
borrowed money entered into by the Acquired Business;


 


(e)           the incurrence by the Acquired
Business of any material liability or obligation not in the ordinary course of
business and consistent with past practice;


 


(f)            the entering into a material
contract or any amendment, modification or termination of any Contract listed
on Schedule 2.7 other that the expiration of any such Contract by its terms;


 


(g)           the addition or loss of any employee
of the Acquired Business, or any material increase in, or commitment to
increase, the direct or indirect compensation payable or to become payable to
any employee of the Acquired Business, or the commitment to make severance,
bonus or special payments to any such employee;


 


(h)           any material condemnation, seizure,
damage, destruction or other casualty loss (whether or not covered by insurance)
affecting any of the assets or properties of the Acquired Business; or


 


(i)            any notice of default or any other
claim, allegation or other assertion that the Acquired Business has been or
will be in breach or violation of any provision of any contract, agreement or
instrument to which it is a party and by which its assets are bound.


 


ARTICLE 3


 


REPRESENTATIONS AND
WARRANTIES

OF BUYER


 


Buyer represents
and warrants to the Seller as follows:


 


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3.1           Organization
and Power.  Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power and
authority to own, lease and operate its properties, and to carry on its
business, as such is now being conducted.


 


3.2           Authorization
and Enforceability of Agreements. 
Buyer has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder.  This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency, moratorium or other laws relating to or affecting
the enforcement of creditors’ rights and remedies generally.  This Agreement been duly and validly
authorized by and approved by all requisite corporate action on the part of
Buyer.  No further approvals or consents
by, or filings with, any federal, state, municipal, foreign or other court or
governmental or administrative body, agency or other third party is required in
connection with the execution and delivery by Buyer of this Agreement or the
consummation by Buyer of the transactions contemplated hereby.


 


3.3           No
Conflicts.  Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (a) violate any provisions of the charter or Bylaws of
Buyer, (b) violate, or be in conflict with, or constitute a default (or other
event which, with the giving of notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions
of any material lease, license, promissory note, contract, agreement, mortgage,
deed of trust or other instrument or document to which Buyer is a party or by
which Buyer or any of its properties or assets may be bound, (c) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority applicable to Buyer or any of its properties or
assets or (d) give rise to a declaration or imposition of any claim, lien,
charge, security interest or encumbrance of any nature whatsoever upon any of
the assets of Buyer’s businesses.


 


3.4           Brokers
and Finders.  Buyer has not engaged
or authorized any broker, finder, investment banker or other third party to act
on behalf of Buyer, directly or indirectly, as a broker, finder, investment
banker or in any other like capacity in connection with this Agreement or the
transactions contemplated hereby, or consented to or acquiesced in anyone so
acting, and Buyer does not know of any claim for compensation from any such
broker, finder, investment banker or other third party for so acting on behalf
of Buyer or of any basis for such a claim.


 


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ARTICLE 4


 


CERTAIN OTHER COVENANTS
AND AGREEMENTS


 


4.1           Consents and Filings Each
party shall use all commercially reasonable efforts to obtain or make, as the
case may be, as soon as possible, all filings and requests for governmental
approvals as may be required to be obtained or made by it in order to enable
such party to perform its obligations under this Agreement.


 


4.2           Delivery of Books and Records.  At the Closing, Seller will deliver to Buyer
all original contracts, books and records of the Acquired Business.


 


4.3           Cooperation and Further Assurance.               After the Closing, the parties
shall cooperate in good faith to facilitate the transfer of the Stock in the
manner contemplated hereunder with minimum disruption for the parties. Each
party shall execute such further documents and instruments as the other may
reasonably request to reflect the transactions contemplated hereunder and to
vest in Buyer full title to the Stock and the Acquired Business.


 


4.4           Transfer Taxes.  All sales, use, transfer, stamp, conveyance,
or other similar taxes, duties, excises or governmental charges imposed by any
governmental authority, domestic or foreign, with respect to the sale or
transfer of the Stock shall be borne entirely by Seller.


 


4.5           Transaction Expenses.  Each party shall pay its own expenses
incident to preparing for, entering into and carrying out this Agreement and
the transactions contemplated hereby, whether or not the Closing occurs.  Any such expenses of the Seller shall not be
charged to or incurred by the Acquired Business.


 


4.6           Non-compete.  In consideration of the purchase price paid
by Buyer hereunder and the other covenants and agreements contained herein,
Seller hereby agrees, during the time in which any payment may be due and
payable under either section 1.3 or section 1.4 of this Agreement and for a
period of three (3) years thereafter, that neither Stockholder, Holdings nor
any of its or her successors or assigns, shall compete, directly or indirectly,
with the Buyer, or any affiliate of the Buyer, in any business activity related
to the Acquired Business within the countries of Denmark, Norway, Sweden or
Finland.  For purposes of this section,
Seller’s activity in disposing of existing inventory of Sports Enterprises
shall not be considered to be activities in competition with Buyer or the
Acquired Business.


 


 


ARTICLE 5


 


INDEMNIFICATION


 


5.1           Indemnity
by the Seller.  The Seller shall
indemnify and hold harmless, Buyer and the officers, directors, agents,
affiliates and representatives of Buyer or any of them (the “Buyer


 


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Indemnitees”) from and against, and shall reimburse the Buyer
Indemnitees for any loss, liability, damage or expense, including reasonable
attorneys’ fees and costs of investigation incurred as a result thereof, that
the Buyer Indemnitees shall incur or suffer (collectively “Buyer’s Recoverable
Losses”), arising out of or resulting from (a) a breach or default by Seller of
or under (i) any representation or warranty contained in Article 2
hereof; or (ii) any agreement or covenant under or pursuant to this Agreement;
or (b) any liability or obligation of the Acquired Business arising or incurred
on or prior to the Effective Date and not disclosed to Buyer under this
Agreement..


 


5.2           Indemnity
by Buyer.  Buyer shall indemnify and
hold harmless the Seller and the officers, directors, agents, affiliates and
representatives of Seller or any of them (the “Seller Indemnitees”) from and
against, and shall reimburse the Seller Indemnitees for any loss, liability,
damage or expense, including reasonable attorneys’ fees and cost of
investigation incurred as a result thereof, that the Seller Indemnities shall
incur or suffer (collectively, “Seller’s Recoverable Losses”) resulting from
(a) a breach or default by Buyer of or under (i) any representation or warranty
contained in Article 3 hereof; or (ii) any agreement or covenant under
or pursuant to this Agreement;  or (b)
any liability or obligation of the Acquired Business arising or incurred after
the Effective Date or arising or incurred on or prior to the Effective Date and
disclosed to Buyer under this Agreement..


 


5.3           Limitations
on Liability; Offset.  Seller shall
have no liability to Buyer under Section 5.1 above until the aggregate of the
Buyer’s Recoverable Losses reaches $25,000, at which point Seller shall be
liable for all of Buyer’s Recoverable Losses to the extent provided in Section
5.1.  Seller shall not be obligated for
Buyer’s Recoverable Losses under section 5.1(a) above to the extent such losses
exceed the sum of $700,000 plus all amounts paid or payable under sections 1.3
or 1.4 above, nor shall Seller be liable for any claims described in Section
5.1(a) above which are first asserted after August 30, 2005, it being
understood that claims made on or prior to such expiration date shall survive
such expiration date  In the event that
Buyer shall incur a loss that is a Buyer Recoverable Loss at a time in which
any amounts remain to be paid under sections 1.3 or 1.4 above, Buyer may
satisfy Seller’s liability for such loss by reducing the amount of any such
payment or payments under said sections in the amount of such loss.  If Seller disputes its or her liability for
such loss, Seller may submit such dispute to the dispute resolution procedure
described below in section 5.4.


 


5.4                                 Claims
for Indemnification; Disputes


 


(a)           Claims for Indemnification.  Any party hereto shall give Seller or Buyer,
as the case may be (the “Indemnitor”), written notice (the “Claim Notice”) of
any claim (including the receipt of any demand) or the commencement of any
action with respect to which indemnity may be sought (the “Claim” or the
“Claims).  The Claim Notice shall state
(i) the aggregate amount of Buyer’s Recoverable Losses or Seller’s
Recoverable Losses (in either case, “Recoverable Losses”) as to which indemnification
is being sought (which amount may be estimated and updated from time to time),
(ii) the components of the amount of Recoverable Losses for which
indemnification is being sought (which components may be estimated and updated
from time to time); and (iii) the specific grounds upon which the Claim
for indemnification is being made.  The
right to indemnification for a Claim shall be deemed to be accepted by the
Indemnitor unless, within 30 days after the Indemnitor’s receipt of the Claim


 


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Notice, the Indemnitor shall notify the claimant in writing that it
objects to the right to indemnification with respect to the Claim.


 


(b)           Resolution
of Disputes.  The parties shall
undertake in good faith to have their representatives promptly meet and attempt
to resolve all disputes regarding indemnification.  If the parties are unable to resolve such disputes within 30
days, the resolution of the disputes shall be referred to and settled by
arbitration in accordance with the Rules of Procedure of the Danish Institute
of Arbitration (Copenhagen Arbitration). 
The arbitration tribunal shall be composed of three artibrators.  Each party shall appoint one arbitrator and
the Institute shall appoint a third arbitrator who shall be the chairman of the
arbitration tribunal.  If a party has
not appointed an arbitrator within 30 days of having requested or received
notice of the arbitration, the Institute shall appoint such arbitrator.  The arbitrators in such a proceeding shall
have the authority to resolve any such dispute and award judgments for monetary
amounts, but shall not have the authority to award damages in the nature of
punitive, exemplary or consequential damages. 
The arbitration shall be conducted in English.  Judgment upon the award may be entered in any court of competent
jurisdiction or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may be.  The successful or prevailing party shall be
entitled to recover all attorneys’ fees, expert witness fees and other costs
incurred in such action, in addition to any other relief to which it may be
entitled.


 


 


ARTICLE 6


 


GENERAL PROVISIONS


 


6.1           Entire
Agreement; Modifications; Waiver. 
Subject to the following sentence, this Agreement and the agreements
ancillary hereto, supersede any and all agreements heretofore made, written or
oral, relating to the subject matter hereof, and constitute the entire
agreement of the parties relating to the subject matter hereof.  This Agreement supersedes the September 29,
2003 option letter between Seller and Buyer except for the cost sharing
provisions of paragraph 1 of said letter, which provisions shall remain in
effect until all such costs for the period specified therein have been
calculated and reimbursed by Buyer as provided in said paragraph 1. This
Agreement may be amended only by an instrument in writing signed by Buyer and
Seller.  Inspection of documents or the
receipt of information pursuant to this Agreement shall not constitute a waiver
of any representation, warranty, covenant or condition hereunder.  No waiver shall be binding unless executed
in writing by the party making such waiver.


 


6.2           Severability.  If any clause or provision of this Agreement
shall be held invalid or unenforceable by the final determination of a court of
competent jurisdiction, and all appeals therefrom shall have failed or the time
for such appeals shall have expired, such clause or provision shall be deemed
eliminated from this Agreement but the remaining provisions shall nevertheless
be given full force and effect.


 


6.3           Successors
and Assigns.  Neither party hereto
may assign or transfer all or a portion of its rights or obligations under this
Agreement without the prior written consent of the other party.


 


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Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of each of the parties hereto, and their respective
successors and assigns.


 


6.4           Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.


 


6.5           Governing
Law.  This Agreement shall be
construed and interpreted in accordance with the internal substantive laws of
the Country of Denmark.


 


6.6           Notices.  All notices required or desired to be given
hereunder shall be given in writing and signed by the party so giving notice,
and shall be effective when personally delivered or sent by facsimile with
receipt confirmed or two business days after transmission if sent by overnight
delivery service and appropriate confirmation is received, addressed as set
forth below.  Any party from time to
time may change such party’s address for giving notice by giving notice thereof
in the manner outlined above:


 




	
  If to Buyer:

  
	
   

  	
   

  
	
   

  	
  dj Orthopedics, LLC

  
	
   

  	
  2985 Scott Street

  
	
   

  	
  Vista, California 
  92083

  
	
   

  	
  Attention:

  	
  Donald M. Roberts

  
	
   

  	
  Facsimile:

  	
  (760) 734-3536

  
	
   

  	
   

  
	
  If to the Seller:

  
	
   

  	
   

  
	
   

  	
  KD Holdings

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  Kirsten Damgaard

  
	
   

  	
  Facsimile:

  






 


6.7           Recitals,
Schedules and Exhibits.  The
recitals, schedules and exhibits to this Agreement are incorporated herein and,
by this reference, made a part hereof as if fully set forth at length herein.


 


IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.


 


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  DJ ORTHOPEDICS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Buyer”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KD HOLDINGS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Kirsten Damgaard

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  “Seller”

  	
   

  
														



 


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