**Exhibit 10.8**

** **

**NONSTATUTORY STOCKOPTION AGREEMENT**

** **

(ReplacementVersion)

 

This NONSTATUTORY STOCK OPTION AGREEMENT (this “Agreement”),dated as of March **[      ]**,2008 (the “Effective Date”), is made by and between DJO Incorporated, aDelaware corporation (the “Company”), and **[                        ]**(the “Optionee”).

 

**WHEREAS**, Encore Medical Corporation, a predecessor of theCompany, maintained the Encore Medical Corporation 2006 Stock Incentive Plan(the “Prior Plan”);

 

**WHEREAS**, pursuant to the certain Nonqualified Stock OptionAgreement, dated [November 3, 2006], by and between the Optionee andEncore Medical Corporation (the “Prior Agreement”), the Optionee was granted anoption to purchase shares of the Company (the “Prior Option”), subject to theterms of the Prior Plan; and

 

**WHEREAS**, in consideration of the Optionee agreeing to thecancellation of the Prior Option and the waiver of any and all rights theOptionee has pursuant to the Prior Agreement and the Prior Plan, the Companydesires to grant the Optionee an option to purchase the shares described in Section 2of this Agreement on the terms described herein;

 

**NOW THEREFORE**, the parties to this Agreement hereby agreeas follows:

 

# 1.                                **CertainDefinitions**.  Capitalizedterms used, but not otherwise defined, in this Agreement will have the meaningsgiven to such terms in the Company’s 2007 Incentive Stock Plan (the “Plan”).  As used in this Agreement:

#  

## (a)             “Board” means the Board of Directors of the Company.

##  

## (b)            “Blackstone” means each of Blackstone Capital Partners VL.P. a Cayman Islands limited partnership, Blackstone Family InvestmentPartnership V L.P., a Cayman Islands limited partnership, Blackstone FamilyInvestment Partnership V-A L.P., a Cayman Islands limited partnership,Blackstone Participation Partnership V L.P., a Cayman Islands limitedpartnership and each of their respective Affiliates.

##  

## (c)             “Change in Control” means (i) the sale ordisposition, in one or a series of related transactions, of all orsubstantially all of the assets of the Company to any “person” or “group” (assuch terms are defined in Sections 13(d)(3) and 14(d)(2) of theExchange Act) other than a sale or disposition where Blackstone retains all orsubstantially all of the assets of the Company, or (ii) any person or group,other than Blackstone, is or becomes the ‘beneficial owner” (as defined in Rules 13d-3and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% ofthe total voting power of the voting stock of the Company, including by way ofmerger, consolidation or otherwise (other than an offering of stock to thegeneral public through a registration statement filed with the Securities andExchange Commission); or (iii) the approval by the stockholders of theCompany of a plan of complete liquidation of the Company.

##  

## (d)            “Code” means the Internal Revenue Code of 1986, asamended.

##  

## (e)             “Company” has the meaning specified in the introductoryparagraph of this Agreement or its successors; provided, that to the extentthat any class of equity securities of a member of the Company’s controlledgroup becomes publicly traded on an established securities market, the term “Company”shall be deemed to refer to such publicly traded entity.

##  

## 

##  

## (f)            “Compensation Committee” means the Executive CompensationCommittee of the Board.

##  

## (g)           “Credit Agreement” means that certain Credit Agreementdated November 20, 2007, by and between DJO Finance LLC (f/k/a ReAbleTherapeutics Finance LLC), DJO Holdings LLC (f/k/a ReAble Therapeutics HoldingsLLC), Credit Suisse and certain other lenders.

##  

## (h)           “Disability” shall mean the Optionee is disabled asdetermined under Section 409A(a)(2)(C) of the Code.

##  

## (i)            “EBITDA” shallmean, for any applicable period, “Consolidated EBITDA” as defined in the CreditAgreement for such period, excluding forward cost savings as determined by theBoard.

##  

## (j)            “Fair Market Value” has the meaning specified in thePlan, except as expressly set forth herein.

##  

## (k)           “First Performance-Based Tranche” has the meaningspecified in Section 2 of this Agreement.

##  

## (l)            “Free Cash Flow” shall mean, for any applicable period,EBITDA (as defined above) for such period minus capital expenditures duringsuch period and increased or decreased, as the case may be, by the change inOperating Working Capital during such period.

##  

## (m)          “Good Reason” shall mean a material reduction in theOptionee’s compensation below the amount of compensation in effect on the dateof this Agreement which is not cured within thirty (30) days following theCompany’s or its subsidiary’s, as applicable, receipt of written notice fromsuch Optionee describing the event constituting Good Reason.

##  

## (n)           “Operating Working Capital” as of any date shall mean thedifference between current assets (excluding cash and investments, interest andtax accounts) and current liabilities (excluding debt, interest and taxaccounts).  Accrued liabilities relatedto restructuring charges added back for the purposes of computing EBITDA arealso excluded from current liabilities to compute Operating Working Capital.

##  

## (o)           “Option” has the meaning specified in Section 2 ofthis Agreement.

##  

## (p)           “Option Price” has the meaning specified in Section 2of this Agreement.

##  

## (q)           “Option Shares” has the meaning specified in Section 2of this Agreement.

##  

## (r)            “Performance Period” shall mean the five-year period commencing January 1,2008 and ending December 31, 2012.

##  

## (s)           “Second Performance-Based Tranche” has the meaningspecified in Section 2 of this Agreement.

##  

## (t)            “Stockholders Agreement” shall mean that certainstockholders agreement applicable to the Optionee, as amended from time totime.

##  

## (u)           “Termination for Cause” shall mean the termination by theCompany of Optionee’s employment with the Company as a result of (i) theOptionee’s willful and continued 

 

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## failure to substantially perform Optionee’sduties (other than any such failure resulting from the Optionee’s Disability orany such failure subsequent to the Optionee being delivered notice of theCompany’s intent to terminate the Optionee’s employment without Cause), (ii) convictionof, or a plea of nolo contendere to, (A) a felony (other thantraffic-related) under the laws of the United States or any state thereof orany similar criminal act in a jurisdiction outside the United States or (B) acrime involving moral turpitude that could be injurious to the Company or itsreputation, (iii) the Optionee’s willful malfeasance or willful misconductwhich is materially and demonstrably injurious to the Company, or (iv) anyact of fraud by the Optionee in the performance of the Optionee’s duties.

##  

# 2.                                       **Grantof Stock Option**.  Subject toand upon the terms, conditions, and restrictions set forth in this Agreementand in the Plan, the Company has granted to Optionee an option (the “Option”)to purchase **[        ]**shares of the Company’s common stock (the “Option Shares”) at a price (the “OptionPrice”) of $**[        ]**per share, which is the Fair Market Value per share on the Effective Date.  The Option may be exercised from time to timein accordance with the terms of this Agreement. Subject to adjustment as hereinafter provided, (a) [        ]of the Option Shares constitute the “Time-Based Tranche”, (b) [        ]of the Option Shares constitute the First Performance-Based Tranche, (c) [        ]of the Option Shares constitute the Second Performance-Based Tranche, and (d) [        ]of the Option Shares constitute the “Prior Option Tranche” relating to thevested time-based options from the Prior Option.

#  

# 3.                                       **Termof Option**.  The term ofthe Option shall commence on the Effective Date and, unless earlier terminatedin accordance with Section 7 hereof, shall expire ten (10) years fromthe Effective Date.

#  

# 4.                                       **Rightto Exercise**.  Unlessterminated as hereinafter provided, the Option shall become exercisable only asfollows:

#  

## (a)          The Option Shares in the Time-Based Tranche shall becomevested and exercisable in accordance with the schedule set forth immediatelybelow, provided the Optionee remains in the continuous employ of the Company,any Subsidiary or Affiliate as of each such date.

 
| **Vesting Date**  | ** ** | **Percentage of Time-Based Tranche Option  Shares that Vest** | ** ** |
|------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| December 31, 2008 |       | 25                                                                                          | %          |
| December 31, 2009 |       | 20                                                                                          | %          |
| December 31, 2010 |       | 18.33                                                                                       | %          |
| December 31, 2011 |       | 18.33                                                                                       | %          |
| December 31, 2012 |       | 18.34                                                                                       | %          |

 

## (b)          The Option Shares in the First Performance-Based Trancheshall become vested and exercisable as of the date of the certification of thesatisfaction of each such Annual Performance Target in accordance with theschedule set forth immediately below:

 

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| **Vesting Date if First Performance-Based  Target is Satisfied** | ** ** | **Percentage of First Performance-Based  Tranche Option Shares that Vest** |
|------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|
| December 31, 2008                                                                         |       | 25% times Performance  Percentage                                                                             |
| December 31, 2009                                                                         |       | 20% times Performance  Percentage                                                                             |
| December 31, 2010                                                                         |       | 18.33% times  Performance Percentage                                                                          |
| December 31, 2011                                                                         |       | 18.33% times  Performance Percentage                                                                          |
| December 31, 2012                                                                         |       | 18.33% times  Performance Percentage                                                                          |

##  

## For purposes of the foregoing schedule, thePerformance Percentage is the weighted average of the EBITDA Factor, weightedat seventy percent (70%), and the Free Cash Flow Factor, weighted at thirtypercent (30%), where the EBITDA Factor and Free Cash Flow Factor are determinedas follows:

##  

## (i) The EBITDA Factor.  The EBITDA Factor is determined in accordancewith the schedule set forth on Attachment A. If the actual EBITDA achieved is less than the EBITDA Base Case for theapplicable year set forth on Attachment A, then the EBITDA Factor is zeropercent (0%).  If the actual EBITDAachieved is equal to or exceeds the EBITDA Base Case for the applicable year asset forth on Attachment A, then the EBITDA Factor shall equal eighty percent(80%) plus an additional percentage between zero percent (0%) and twenty percent(20%) determined in linear proportion to the portion of the difference betweenthe EBITDA Base Case and the EBITDA Target that is actually achieved.  For example, for 2008 the EBITDA Base Case is245 and the EBIDTA Target is 253.  If theactual EBITDA achieved for 2008 was 249, then the EBITDA Factor would equaleighty percent (80%) for achieving the EBITDA Base Case plus ten percent (10%)because half of the difference between the EBITDA Base Case and the EBITDATarget was actually achieved. Accordingly, the EBITDA Factor in this example would be ninety percent(90%).

##  

## (ii) Free Cash Flow Factor.  The Free Cash Flow Factor is determined inthe same manner as the EBITDA Factor as described in Section (c)(i) aboveusing the Free Cash Flow Base Case and Free Cash Flow Target set forth onAttachment A.

##  

## Any Option Shares in the FirstPerformance-Based Tranche which the Optionee does not earn the right toexercise shall thereupon expire and terminate.

##  

## (c)           The Option Shares in the Second Performance-Based Trancheshall become vested and exercisable as of the date of the certification of thesatisfaction of each such Annual Performance Target in accordance with theschedule set forth immediately below:

 
| **Vesting Date if Second Performance-  Based Target is Satisfied** | ** ** | **Percentage of Second Performance-Based  Tranche Option Shares that Vest** |
|-------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------|
| December 31, 2008                                                                                |       | 25% times  Enhanced Performance Percentage                                                                     |
| December 31, 2009                                                                                |       | 20% times  Enhanced Performance Percentage                                                                     |

 

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| December 31, 2010 |   | 18.33% times  Enhanced Performance Percentage |
|------------------------|--------|-----------------------------------------------|
| December 31, 2011 |   | 18.33% times  Enhanced Performance Percentage |
| December 31, 2012 |   | 18.33% times  Enhanced Performance Percentage |

##  

## For purposes of the foregoing schedule, theEnhanced Performance Percentage is the weighted average of the Enhanced EBITDAFactor, weighted at seventy percent (70%), and the Enhanced Free Cash FlowFactor, weighted at thirty percent (30%), where the Enhanced EBITDA Factor andthe Enhanced Free Cash Flow Factor are determined as follows:

##  

## (i) Enhanced EBITDA Factor.  The Enhanced EBITDA Factor is determined inthe same manner as the EBITDA Factor as described in Section (c)(i) aboveusing the Enhanced EBITDA Base Case and the Enhanced EBITDA Target set forth onAttachment B.

##  

## (ii) Enhanced Free Cash FlowFactor.  The Enhanced Free Cash FlowFactor is determined in the same manner as the EBITDA Factor as described in Section (c)(i) aboveusing the Enhanced Free Cash Flow Base Case and the Enhanced Free Cash FlowTarget set forth on Attachment B.

##  

## Any Option Shares in the SecondPerformance-Based Tranche which the Optionee does not earn the right toexercise shall thereupon expire and terminate.

##  

## (d)           TheOption Shares in the Prior Option Tranche shall be fully vested and immediatelyexercisable as of the Effective Date.

##  

## (e)           Notwithstandingthe foregoing, (i) the Option Shares of the Time-Based Tranche grantedhereby shall become immediately exercisable upon the occurrence of a Change inControl if Optionee remains in the continuous employ of the Company or anySubsidiary until the date of the consummation of such Change in Control, and (ii) theOption Shares of the First Performance-Based Tranche and the SecondPerformance-Based Tranche for the year in which such Change of Control isconsummated and for any subsequent Performance Periods shall become immediatelyexercisable if the Optionee remains in the continuous employ of the Company orany Subsidiary until the date of consummation of such Change in Control.

##  

## (f)            Notwithstanding anythingherein to the contrary, if the Optionee is on an approved leave of absence, asprovided in the last paragraph of Section 7 hereof, the Optionee will beconsidered as still in continuous employ of the Company, a Subsidiary or anAffiliate for purposes of this Plan.

##  

## (g)           TheOptionee shall be entitled to the privileges of ownership with respect toOption shares purchased and delivered to Optionee upon the exercise of all orpart of this Option, subject to Section 8 hereof.

##  

## (h)           Allof the financial factors utilized as described above to establish the vestingof the Option Shares shall be determined from the books and records of theCompany by the Chief Financial Officer of the Company and any suchdetermination that is reviewed and approved by the Board shall be final andbinding on Optionee for all purposes under this Agreement.

 

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#  

# 5.                                       **OptionNontransferable**.  TheOptionee may not transfer or assign all or any part of the Option other than bywill or by the laws of descent and distribution.  This Option may be exercised, during thelifetime of the Optionee, only by the Optionee, or in the event of the Optionee’slegal incapacity, by the Optionee’s guardian or legal representative acting onbehalf of the Optionee in a fiduciary capacity under state law and courtsupervision.  Notwithstanding anythingherein to the contrary, the Optionee may transfer or assign all or any part ofthe Option to “family members” (as defined in the General Instructions to Form S-8of the Securities Act of 1933) or trusts, partnerships or similar entities forthe benefit of such family members, for estate planning purposes or inconnection with the disposition of Optionee’s estate.

#  

# 6.                                       **Noticeof Exercise; Payment**.

#  

## (a)           To the extent then exercisable, the Option may beexercised in whole or in part by written notice to the Company stating thenumber of Option Shares for which the Option is being exercised and theintended manner of payment.  The date ofsuch notice shall be the exercise date. Payment equal to the aggregate Option Price of the Option Shares beingpurchased pursuant to an exercise of the Option must be tendered in full withthe notice of exercise to the Company in one or a combination of the followingmethods as specified by the Optionee in the notice of exercise:  (i) cash in the form of currency orcheck or by wire transfer as directed by the Company, (ii) solely following an IPO in Shares otherwise being traded on anestablished securities market, through the surrender tothe Company of Shares owned by the Optionee for at least six months as valuedat their Fair Market Value on the date of exercise, (iii) through netexercise, using Shares to be acquired upon exercise of the Option, such Sharesbeing valued at their Fair Market Value (which for such purpose shall have themeaning set forth in the Stockholders Agreement) on the date of exercise, or (iv) throughsuch other form of consideration as is deemed acceptable by the Board.

##  

## (b)           As soon as practicable upon the Company’s receipt of theOptionee’s notice of exercise and payment, the Company shall direct the dueissuance of the Option Shares so purchased.

##  

## (c)           As a further condition precedent to the exercise of thisOption in whole or in part, the Optionee shall comply with all regulations andthe requirements of any regulatory authority having control of, or supervisionover, the issuance of the shares of commonstock and in connection therewith shall execute any documents which theBoard shall in its sole discretion deem necessary or advisable.

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# 7.                                       **Terminationof Agreement**.  TheAgreement and the Option granted hereby shall terminate automatically andwithout further notice on the earliest of the following dates:

#  

## (a)          After the Optionee’s termination due to the Optionee’sdeath or Disability, (i) all unvested Time-Based Options will be forfeitedimmediately and terminate and (ii) all vested Options from any Trancheshall remain exercisable until the lesser of (i) one (1) yearfollowing the Optionee’s date of termination or (ii) the remaining term ofthe Option; provided, however, that it shall be a condition to the exercise ofthe Option in the event of the Optionee’s death that the Person exercising theOption shall (i) have agreed in a form satisfactory to the Company to bebound by the provisions of this Agreement and the Stockholders Agreement and (ii) complywith all regulations and the requirements of any regulatory authority havingcontrol of, or supervision over, the issuance of the shares of common stock and in connection therewith shall execute anydocuments which the Board shall in its sole discretion deem necessary oradvisable.  Unvested Options from theFirst and Second Performance-Based Tranches shall remain outstanding for thetwelve (12) month period following the date of such termination by 

 

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##  

## reason of death or Disability.  To the extent applicable performance targetsare achieved, or a Change in Control occurs, within such twelve (12) monthperiod following the date of termination due to the Optionee’s death orDisability (each, a “Post-Termination Vesting Event”), the appropriate numberof Options will vest as of such Post-Termination Vesting Event, and remainexercisable for twelve (12) months following such Post-Termination VestingEvent (but not beyond the remaining term of the Option).  On the twelve (12) month anniversary of thedate of termination of employment by reason of death or Disability, all remainingunvested options from the First and Second Performance-Based Tranches will beforfeited;

##  

## (b)           After the Optionee’s termination by the Company withoutCause or by the Optionee for Good Reason, all unvested Time-Based Options willbe forfeited immediately and terminate and all vested Options from any Trancheshall remain exercisable until the lesser of (i) ninety (90) calendar daysfollowing the Optionee’s date of termination or (ii) the remaining term ofthe Option.  Unvested options from theFirst and Second Performance-Based Tranches shall remain outstanding for thetwelve (12) month period following the date of such termination by reason oftermination by the Company without Cause or by the Optionee for GoodReason.  To the extent a Post-TerminationVesting Event occurs within such twelve (12) month period, the appropriatenumber of Options will vest as of such Post-Termination Vesting Event, andremain exercisable for ninety (90) calendar days following suchPost-Termination Vesting Event (but not beyond the remaining term of theOption).  On the twelve (12) monthanniversary of the date of termination of employment by reason of terminationby the Company without Cause or by the Executive with Good Reason, allremaining unvested options from the First and Second Performance-Based Trancheswill be forfeited;

##  

## (c)           The date of the Optionee’s Termination for Cause, uponwhich all vested and unvested Options will be forfeited immediately andterminate;

##  

## (d)           After the Optionee’s termination without Good Reason, allunvested options will be forfeited immediately and terminate and all vestedOptions from any Tranche shall remain exercisable until the lesser of (i) ninety(90) calendar days following the Optionee’s date of termination or (ii) theremaining term of the Option; or

##  

## (e)           Ten (10) years from the Effective Date.

##  

Notwithstanding the foregoing, in all terminationevents other than a termination of the Optionee’s employment for Cause, if thelast day to exercise vested Options occurs after the date on which the Company’scommon stock is publicly traded on a national stock exchange and during alock-up period or securities law blackout period, the otherwise applicablepost-termination Option exercise period shall continue, but not beyond theremaining term of the Option, until thirty (30) calendar days after the firstday when the terminating the Optionee is no longer precluded from selling stockacquired upon exercise of Options for either of such reasons.  Notwithstanding anything to the contraryherein, nothing herein shall prohibit the Optionee from exercising his or hervested Options through net exercise, using Shares to be acquired upon exerciseof the Option, during any lock-up or securities law blackout period to theextent not prohibited by law.

 

In the event that the Optionee’s employment isterminated in the circumstances described in Section 7(c) hereof,this Agreement shall terminate at the time of such termination notwithstandingany other provision of this Agreement and the Optionee’s Option will cease tobe exercisable to the extent exercisable as of such termination and will not beor become exercisable after such termination.

 

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The Optionee shall be deemed to be an employee ofthe Company or any Subsidiary if on a leave of absence approved in writing bythe Board or the Chief Executive Officer of the Company to the extentconsistent with Section 409A of the Code.

 

# 8.             **Stockholders Agreement**.  The Optionee agrees that any Option Sharesthat the Optionee receives pursuant to this Agreement or under the Plan aresubject to the terms and conditions set forth in the Stockholders Agreement.

#  

# 9.             **No Employment Contract**.  Nothing contained in this Agreement shall (a) conferupon the Optionee any right to be employed by or remain employed by the Companyor any Subsidiary, or (b) limit or affect in any manner the right of theCompany or any Subsidiary to terminate the employment or adjust thecompensation of the Optionee.

#  

# 10.           **Dividend Equivalents**.  Upon the payment of any ordinary orextraordinary cash dividend (or similar distributions) to holders of Companycommon stock, the Optionee will be credited with dividend equivalent rightswith respect to the Options as follows. Dividend equivalents relating to vested Options shall be paid to theOptionee in cash at the same time dividends are paid to holders of Companycommon stock.  Dividend equivalentsrelating to unvested Options will be credited to a notional account maintainedon the books of the Company for the benefit of the Optionee, which accountshall not accrue interest.  The Optioneewill become vested in such account at the same time as the Options to which thedividend equivalents relate vest and become exercisable, and such vestedamounts shall be payable in cash upon the applicable vesting date, and in noevent later than 21⁄2 months following the end of the calendar year in which theapplicable vesting date occurs.  Unvestedamounts held in such account shall be forfeited by the Optionee upon the dateof any termination of employment; provided, however, that if such terminationresults in the continuation of unvested Options from the First and SecondPerformance-Based Tranches, as provided in Sections 7(a) and 7(b), above,forfeiture of dividend equivalents shall be delayed until the twelve (12) monthanniversary of such termination, and to the extent that any Options vest duringsuch twelve (12) month period, such related dividend equivalents shall alsovest and be paid to the Optionee in cash on the twelve (12) month anniversaryof such termination or, if the Options are forfeited, such related dividendequivalents shall also be forfeited.

#  

# 11.           **Taxes and Withholding**.  The Company or any Subsidiary may withhold,or require the Optionee to remit to the Company or any Subsidiary, an amount sufficientto satisfy federal, state, local or foreign taxes (including the Optionee’sFICA obligation) in connection with any payment made or benefit realized by theOptionee or other person under this Agreement or otherwise, and if the amountsavailable to the Company or any Subsidiary for such withholding areinsufficient, it shall be a condition to the receipt of such payment or therealization of such benefit that Optionee or such other person makearrangements satisfactory to the Company or any Subsidiary for payment of thebalance of such taxes required to be withheld. The Optioneemay elect to have such withholding obligation satisfied by surrendering to theCompany or any Subsidiary a portion of the Option Shares that are issued or transferred to theOptionee upon the exercise of an Option (but only to the extent of the minimumwithholding required by law), and the Option Shares so surrendered by Optioneeshall be credited against any such withholding obligation at the Fair MarketValue (which for such purpose shall have the meaning set forth in theStockholders Agreement) ofsuch Shares on the date of such surrender.

#  

# 12.           **Compliance with Law**.  The Company shall make reasonable efforts tocomply with all applicable federal and state securities laws; provided,however, that notwithstanding any other provision of this Agreement, the Optionshall not be exercisable if the exercise thereof would result in a violation ofany such law.

 

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# 13.           **Adjustments**.

#  

## (a)           The Board shall make or provide for such substitution oradjustments in the number of Option Shares covered by this Option, in theOption Price applicable to such Option, and in the kind of shares coveredthereby and/or such other equitable substitution or adjustments as the Boardmay determine to prevent dilution or enlargement of the Optionee’s rights thatotherwise would result from (i) any stock dividend, extraordinarycash-dividend, stock split, combination of shares, recapitalization, or otherchange in the capital structure of the Company, (ii) any merger,consolidation, spin-off, split-off, spin-out, split-up, reclassification,reorganization, partial or complete liquidation, or other distribution ofassets or issuance of rights or warrants to purchase securities, or (iii) anyother corporate transaction or event having an effect similar to any of theforegoing.  In the case of a Change inControl, such substitutions and adjustments include, without limitation,canceling any and all Options in exchange for cash payments equal to theexcess, if any, of the value of the consideration paid to a shareholder of anOption Share over the Option Price per share subject to such Option inconnection with such an adjustment event.

##  

## (b)          To the extent that any equity securities of any member ofthe Company’s controlled group become publicly traded, at such time all Optionsshall be exchanged, in a manner consistent with Sections 409A and 424 of theCode, for options with the same intrinsic value in the publicly-traded entity,and all Shares shall be exchanged for shares of common stock with the sameaggregate value of the publicly-traded entity.

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# 14.           **Relation to Other Benefits**.  Any economic or other benefit to Optioneeunder this Agreement shall not be taken into account in determining anybenefits to which Optionee may be entitled under any profit-sharing, retirementor other benefit or compensation plan maintained by the Company or anySubsidiary and shall not affect the amount of any life insurance coverage availableto any beneficiary under any life insurance plan covering employees of theCompany or any Subsidiary.

#  

# 15.           **Amendments**.  Any amendment to the Plan shall be deemed tobe an amendment to this Agreement to the extent that the amendment isapplicable hereto.

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# 16.           **Severability**.  If one or more of the provisions of thisAgreement is invalidated for any reason by a court of competent jurisdiction,any provision so invalidated shall be deemed to be separable from the otherprovisions hereof, and the remaining provisions hereof shall continue to bevalid and fully enforceable.

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# 17.           **Relation to Plan**.  This Agreement is subject to the terms andconditions of the Plan.  In the event ofany inconsistent provisions between this Agreement and the Plan, the Plan shallgovern.  The Board acting pursuant to thePlan, as constituted from time to time, shall, except as expressly providedotherwise herein, have the right to determine any questions which arise inconnection with the Option or its exercise.

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# 18.           **Successors and Assigns**.  The provisions of this Agreement shall inureto the benefit of, and be binding upon, the successors, administrators, heirs,legal representatives and assigns of Optionee, and the successors and assignsof the Company.

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# 19.           **Governing Law**.  The interpretation, performance, andenforcement of this Agreement shall be governed by the laws of the State of NewYork, without giving effect to the principles of conflict of laws thereof andall parties, including their successors and assigns, consent to the jurisdictionof the state and federal courts of New York.

 

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# 20.           **Prior Agreement**.  As of the Effective Date, this Agreementsupersedes any and all prior and/or contemporaneous agreements, either oral orin writing, between the parties hereto, or between either or both of theparties hereto and the Company, with respect to the subject matter hereof,including but not limited to the Prior Grant. Each party to this Agreement acknowledges that no representations,inducements, promises, or other agreements, orally or otherwise, have been madeby any party, or anyone acting on behalf of any party, pertaining to thesubject matter hereof, which are not embodied herein, and that no prior and/orcontemporaneous agreement, statement or promise pertaining to the subjectmatter hereof that is not contained in this Agreement shall be valid or bindingon either party.

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# 21.           **Notices**.  For all purposes of this Agreement, allcommunications, including without limitation notices, consents, requests orapprovals, required or permitted to be given hereunder will be in writing andwill be deemed to have been duly given when hand delivered or dispatched byelectronic facsimile transmission (with receipt thereof confirmed), or five businessdays after having been mailed by United States registered or certified mail,return receipt requested, postage prepaid, or three business days after havingbeen sent by a nationally recognized overnight courier service such as FederalExpress, UPS, or Purolator, addressed to the Company (to the attention of theSecretary of the Company) at its principal executive offices and to Optionee athis principal residence, or to such other address as any party may havefurnished to the other in writing and in accordance herewith, except thatnotices of changes of address shall be effective only upon receipt.

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# 22.           **Cancellation of PriorOption**.  By executing thisAgreement, the Optionee agrees to the cancellation of the Prior Option andwaives any and all rights the Optionee has pursuant to the Prior Agreement andthe Prior Plan.  The Optioneeunderstands  and acknowledges that  such cancellation and waiver is required as acondition precedent to the Optionee’s receipt of the Option and any additionaloptions to purchase shares in the Company at any time in the future.

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# 23.           **Counterparts**.  This Agreement may be executed in one or morecounterparts, each of which shall be deemed to be an original but all of whichtogether will constitute one and the same agreement.

 

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IN WITNESS WHEREOF, theCompany has caused this Agreement to be executed on its behalf by its dulyauthorized officer and the Optionee has executed this Agreement, as of the dayand year first above written.

 

 
|   | **DJO  INCORPORATED****:**                               |
|--------|----------------------------------------------------------|
|   |                                                     |
|   |                                                     |
|   | DONALD  ROBERTS                                          |
|   | Executive  Vice President, General Counsel and Secretary |

 

 

I hereby agree to be boundby the terms of the Plan, this Agreement and the Stockholder’s Agreement.  I hereby further agree that all the decisionsand determinations of the Board shall be final and binding.  **I understand that bysigning below, I am agreeing to the cancellation of the Prior Option and I amwaiving any and all rights that I have pursuant to the Prior Agreement and thePrior Plan.**

 

 
|   | **OPTIONEE:** |
|--------|---------------|
|   |          |
|   |          |

 

 

*[Signature Page to Option Agreement]*

 

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**ATTACHMENT A**

 

**First Performance-Based Tranche**

 

*In U.S.$mm*

 
| ** **               | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** |
|--------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| EBITDA Target            | ** ** | **$**      | **253.0**  | ** ** | **$**      | **297.7**  | ** ** | **$**      | **347.3**  | ** ** | **$**      | **381.9** | ** ** | **$** | **419.2** | ** ** |
| EBITDA Base Case         | ** ** | **$**      | **245.0**  | ** ** | **$**      | **281.9**  | ** ** | **$**      | **320.1**  | ** ** | **$**      | **345.6** | ** ** | **$** | **371.6** | ** ** |
| ** **               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Free Cash Flow Target    | ** ** | **$**      | **214.1**  | ** ** | **$**      | **239.3**  | ** ** | **$**      | **289.5**  | ** ** | **$**      | **320.4** | ** ** | **$** | **353.1** | ** ** |
| Free Cash Flow Base Case | ** ** | **$**      | **202.2**  | ** ** | **$**      | **217.7**  | ** ** | **$**      | **256.5**  | ** ** | **$**      | **277.9** | ** ** | **$** | **298.9** | ** ** |

 

----

 

**ATTACHMENT B**

 

**Second Performance-Based Tranche**

 

*In U.S.$mm*

 
| ** **                         | ** ** | **2008**   | ** ** | **2009**   | ** ** | **2010**   | ** ** | **2011**   | ** ** | **2012**   | ** ** |
|------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| Enhanced EBITDA Target             | ** ** | **$**      | **278.3**  | ** ** | **$**      | **327.5**  | ** ** | **$**      | **382.0**  | ** ** | **$**      | **420.1** | ** ** | **$** | **461.1** | ** ** |
| Enhanced EBITDA Base Case          | ** ** | **$**      | **267.2**  | ** ** | **$**      | **314.4**  | ** ** | **$**      | **366.7**  | ** ** | **$**      | **403.3** | ** ** | **$** | **442.7** | ** ** |
| ** **                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Enhanced Free Cash Flow  Target    | ** ** | **$**      | **243.0**  | ** ** | **$**      | **274.4**  | ** ** | **$**      | **329.5**  | ** ** | **$**      | **364.2** | ** ** | **$** | **401.1** | ** ** |
| Enhanced Free Cash Flow  Base Case | ** ** | **$**      | **230.4**  | ** ** | **$**      | **259.2**  | ** ** | **$**      | **312.1**  | ** ** | **$**      | **345.1** | ** ** | **$** | **380.2** | ** ** |

 

13

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