Document:

EX-10.2

Exhibit 10.2

TERM NOTE

$3,300,000.00 Minneapolis, Minnesota

June 23, 2005

FOR VALUE RECEIVED, the undersigned, COMPEX TECHNOLOGIES, INC., a Minnesota corporation f/k/a
Rehabilicare Inc. (the “Borrower”), promises to pay to the order of U.S. Bank National Association,
a national banking association (the “Bank”), the principal sum of Three Million Three Hundred
Thousand and No/100ths Dollars ($3,300,000.00) in the number and amount of installments and on the
installment due dates specified in Section 4.2 of the Credit Agreement. The Term Loan and
all payments of principal shall be recorded by the holder in its records which records shall be
conclusive evidence of the subject matter thereof, absent manifest error.

The Borrower further promises to pay to the order of the Bank interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until paid in full at the rates
per annum which shall be determined in accordance with the provisions of the Credit Agreement.
Accrued interest shall be payable on the dates specified in the Credit Agreement.

All payments of principal and interest under this Note shall be made in lawful money of the
United States of America in immediately available funds to the Bank at the Bank’s office at U. S.
Bancorp Center, 800 Nicollet Mall, Minneapolis, Minnesota 55402, or at such other place as may be
designated by the Bank to the Borrower in writing.

This Note is the Term Note referred to in, and evidences indebtedness incurred under, an
Amended and Restated Credit Agreement dated as of June 2, 2004, as amended to date (herein, as so
amended and as it may be further amended, modified or supplemented from time to time, called the
“Credit Agreement”; capitalized terms not otherwise defined herein being used herein as therein
defined) between the Borrower and the Bank, to which Credit Agreement reference is made for a
statement of the terms and provisions thereof, including those under which the Borrower is
permitted and required to make prepayments and repayments of principal of such indebtedness and
under which such indebtedness may be declared to be immediately due and payable.

All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment,
demand, protest and notice of dishonor in connection with this Note.

This Note is made under and governed by the internal laws of the State of Minnesota without
giving effect to conflict of laws principles thereof, but giving effect to the federal laws of the
United States applicable to national banks.

[SIGNATURE PAGE FOLLOWS]

1

COMPEX TECHNOLOGIES, INC., a Minnesota corporation
f/k/a Rehabilicare Inc.

By: /s/ Scott P. Youngstrom     

	 	 	 	Scott P. Youngstrom

Vice President, Finance & CFO

2EX-10.3

Exhibit 10.3

SECURITY AGREEMENT

(Grantor)

This SECURITY AGREEMENT is made as of June 23, 2005 by SpectraBrace, Ltd., a Kentucky
corporation, with its chief executive office at 11802 Brinley Avenue, Louisville, Kentucky 40243
(“Grantor”), in favor of U.S. Bank National Association, with an office at 800 Nicollet Mall,
Minneapolis, Minnesota 55402 (“Lender”).

RECITALS:

A. Compex Technologies, Inc., a Minnesota corporation f/k/a Rehabilicare, Inc. (the
“Borrower”), has requested extensions of credit from Lender pursuant to the terms of that certain
Amended and Restated Credit Agreement dated as of June 2, 2004, as amended by an Amendment No. 1 to
Amended and Restated Credit Agreement and Waiver dated as of April 29, 2005 (as so amended, and as
it may be further amended, modified, supplemented, increased or restated from time to time being
the “Credit Agreement”) between Borrower and Lender.

B. As a condition to the effectiveness of that certain Amendment No. 2 to Amended and Restated
Credit Agreement dated as of even date herewith the Lender has required that Grantor grant a
security interest in its assets in accordance with this Agreement.

C. Grantor has determined that the execution, delivery and performance of this Agreement is in
its best business and pecuniary interest.

NOW, THEREFORE, for good and valuable consideration the receipt and adequacy of which are
hereby acknowledged by each of the parties hereto, Grantor and Lender agree as follows:

ARTICLE I

DEFINITIONS

As used herein, the following terms shall have the meanings set forth in this Section:

“Accounts” shall have the meaning provided in the UCC.

“Borrower” shall have the meaning provided in Recital A.

“Chattel Paper” shall have the meaning provided in the UCC and shall include, without
limitation, all Electronic Chattel Paper and Tangible Chattel Paper.

“Collateral” shall mean all property in which a security interest is granted
hereunder.

“Commercial Tort Claim” shall have the meaning provided in the UCC.

“Controlled Property” shall mean the personal property of every kind and description
in which Grantor has or may acquire any interest, now or hereafter at any time in the possession or
control of Lender for any reason and all dividends and distributions on or other rights in
connection with such property.

“Credit Agreement” shall have the meaning provided in the recitals hereto.

“Data Processing Records and Systems” shall mean all of Grantor’s now existing or
hereafter acquired electronic data processing and computer records, software (including, without
limitation, all “Software” as defined in the UCC), systems, manuals, procedures, disks, tapes and
all other storage media and memory.

“Default” shall mean any event which if it continued uncured would, with notice or
lapse of time or both, constitute an Event of Default.

“Deposit Accounts” shall have the meaning provided in the UCC and shall include,
without limitation, any demand, time, savings, passbook or similar account maintained with a bank.

“Document” shall have the meaning provided in the UCC.

“Electronic Chattel Paper” shall have the meaning provided in the UCC.

“Equipment” shall have the meaning provided in the UCC.

“Event of Default” shall have the meaning specified in Article VI hereof.

“Fixtures” shall have the meaning provided in the UCC.

“General Intangibles” shall have the meaning provided in the UCC and shall include,
without limitation, all Payment Intangibles.

“Goods” shall have the meaning provided in the UCC and shall include embedded
“Software” to the extent included in “Goods” as defined in the UCC.

“Grantor” shall have the meaning provided in the preamble hereto.

“Instruments” shall have the meaning provided in the UCC.

“Insurance Proceeds” shall mean all proceeds of any and all insurance policies payable
to Grantor with respect to any Collateral, or on behalf of any Collateral, whether or not such
policies are issued to or owned by Grantor.

“Inventory” shall have the meaning provided in the UCC.

“Investment Property” shall have the meaning provided in the UCC.

“Lender” shall have the meaning set forth in the preamble hereto.

“Letter-of-Credit Rights “ shall have the meaning provided in the UCC.

“Obligations” shall mean all loans (including the Loan(s)), advances, debts,
liabilities, obligations, covenants and duties owing by any Loan Party to the Lender of any kind or
nature, present or future, whether or not evidenced by any note, guaranty or other instrument,
whether arising under the Credit Agreement, the other Loan Documents or under any other agreement
or by operation of law, whether or not for the payment of money, whether arising by reason of an
extension of credit, opening, guarantying or confirming of a letter of credit, guaranty,
indemnification or in any other manner, whether joint, several or joint and several, direct or
indirect (including those acquired by assignment or purchases), absolute or contingent, due or to
become due, and however acquired. The term includes, but is not limited to, all principal,
interest, fees, charges, expenses, reasonable attorneys’ fees, and any other sum chargeable to any
Loan Party under the Credit Agreement or any other Loan Document.

“Payment Intangibles” shall have the meaning provided in the UCC.

“Proceeds” shall have the meaning provided in the UCC.

“Products” shall mean any goods now or hereafter manufactured, processed or assembled
with any of the Collateral.

“Supporting Obligations” shall have the meaning provided in the UCC.

“Tangible Chattel Paper” shall have the meaning provided in the UCC.

“UCC” shall mean the Uniform Commercial Code as enacted in the State of Minnesota, as
amended from time to time; provided, however, that: (a) to the extent that the UCC
is used to define any term herein, and such term is defined differently in different Articles of
the UCC, the definition of such term contained in Article 9 shall govern; and (b) if, by reason of
mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies
with respect to, the Lender’s security interest in any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the State of Minnesota, the
term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection
or priority of, or remedies with respect to, the Lender’s security interest and for purposes of
definitions related to such provisions.

Other terms defined herein shall have the meanings ascribed to them herein. All capitalized
terms used herein not specifically defined herein shall have the meaning ascribed to them in the
Credit Agreement.

ARTICLE II

SECURITY INTERESTS

As security for the payment of all Obligations, Grantor hereby grants to Lender a security
interest in all of Grantor’s right, title and interest in and to the following, whether now owned
or existing or hereafter acquired or arising:

Accounts;

Chattel Paper;

Commercial Tort Claims, if any, described on Exhibit B attached hereto and
incorporated herein by reference;

Controlled Property;

Deposit Accounts;

Documents;

Equipment and Fixtures;

General Intangibles;

Instruments;

Inventory;

Investment Property;

Letter-of-Credit Rights;

Proceeds (whether cash or non-cash Proceeds, including Insurance Proceeds and
non-cash Proceeds of all types);

Products of all the foregoing; and

Supporting Obligations.

ARTICLE III

REPRESENTATIONS AND COVENANTS OF GRANTOR

Grantor represents, warrants and covenants that:

3.1 Authorization. The execution and performance of this Agreement have been duly
authorized by all necessary action and do not and will not: (a) require any consent or approval of
the stockholders of any entity, or the consent of any governmental entity which has not been
obtained; or (b) violate any provision of any indenture, contract, agreement or instrument to which
it is a party or by which it is bound.

3.2 Title to Collateral. Grantor has good and marketable title to all of the
Collateral and none of the Collateral is subject to any security interest except for the security
interest created pursuant to this Agreement or other security interests permitted by the Credit
Agreement (such other security interests being “Permitted Liens”).

3.3 Disposition or Encumbrance of Collateral. Grantor will not encumber, sell or
otherwise transfer or dispose of the Collateral without the prior written consent of Lender except
as provided in this Section or for Permitted Liens. Until a Default or Event of Default has
occurred and is continuing, Grantor may sell Collateral consisting of:

(a) Inventory in the ordinary course of business to the extent permitted by Section
9.2 of the Credit Agreement;

(b) Equipment or other property to the extent permitted by Section 9.2 of the
Credit Agreement; and

(c) License any Patents, Trademarks, Copyrights or applications therefor, trade
secrets, know-how and other intellectual property in the ordinary course of business,
provided the Grantor receives as consideration an amount not less than the fair value of
such license and provided further that if such license is an exclusive license, then Grantor
retains such rights as may be necessary to allow Grantor to perform its obligations to the
licensee or others under applicable manufacturing contracts and that such license does not
restrict the assignment of such rights to the Lender.

3.4 Validity of Accounts. Grantor warrants that all Collateral consisting of
Accounts, Chattel Paper and Instruments included in Grantor’s schedules, financial statements or
books and records are bona fide existing obligations created by the sale and actual delivery of
Inventory or the rendition of services to customers in the ordinary course of business, which
Grantor then owns free and clear of any security interest other than the security interest created
by this Agreement or other Permitted Liens, and which are then unconditionally owing to Grantor
without defenses, offset or counterclaim except those arising in the ordinary course of business
that are immaterial in the aggregate and that the unpaid principal amount of any such Chattel Paper
or Instrument and any security therefor is and will be as represented to Lender on the date of the
delivery thereof to Lender.

3.5 Maintenance of Tangible Collateral. Grantor will maintain the tangible Collateral
in good condition and repair. At the time of attachment and perfection of the security interest
granted pursuant hereto and thereafter, all tangible Collateral will be located and will be
maintained only at the locations set forth on Exhibit A hereto. Except as otherwise permitted by
Section 3.3, Grantor will not remove such Collateral from such locations unless, prior to any such
removal, Grantor has given written notice to Lender of the location or locations to which Grantor
desires to remove the Collateral, Lender has given its written consent to such removal, and Grantor
has delivered to Lender acknowledgment copies of financing statements filed where appropriate to
continue the perfection of Lender’s security interest as a first priority security interest on such
Collateral. Lender’s security interest attaches to all of the Collateral wherever located and
Grantor’s failure to inform Lender of the location of any item or items of Collateral shall not
impair Lender’s security interest thereon.

3.6 Notation on Chattel Paper. For purposes of the security interest granted pursuant
to this Agreement, Lender has been granted a direct security interest in all Chattel Paper
constituting part of the Collateral and such Chattel Paper is not claimed merely as Proceeds of
Inventory. Upon Lender’s request, Grantor will deliver to Lender the original of all Chattel
Paper. Grantor will not execute any copies of such Chattel Paper constituting part of the
Collateral other than those which are clearly marked as a copy. Lender may stamp any such Chattel
Paper with a legend reflecting Lender’s security interest therein.

3.7 Instruments as Proceeds; Deposit Accounts. Notwithstanding any other provision in
this Agreement concerning Instruments, Grantor covenants that Instruments constituting cash
Proceeds (for example, money and checks) shall be deposited in Deposit Accounts with the Lender.
Grantor has granted to the Lender a direct security interest in all Deposit Accounts constituting
part of the Collateral and such Deposit Accounts are not claimed merely as Proceeds of other
Collateral.

3.8 Protection of Collateral. All expenses of protecting, storing, warehousing,
insuring, handling and shipping of the Collateral, all costs of keeping the Collateral free of any
liens, encumbrances and security interests prohibited by this Agreement and of removing the same if
they should arise, and any and all excise, property, sales and use taxes imposed by any state,
federal or local authority on any of the Collateral or in respect of the sale thereof, shall be
borne and paid by Grantor and if Grantor fails to promptly pay any thereof when due, Lender may, at
its option, but shall not be required to pay the same whereupon the same shall constitute
Obligations and shall bear interest at the Default Rate and shall be secured by the security
interest granted hereunder.

3.9 Insurance. Grantor will procure and maintain, or cause to be procured and
maintained, insurance issued by responsible insurance companies insuring the Collateral against
damage and loss by theft, fire, collision (in the case of motor vehicles), and such other risks as
are usually carried by owners of similar properties or as may be requested by Lender in an amount
equal to the replacement value thereof, and, in any event, in an amount sufficient to avoid the
application of any co-insurance provisions and payable, in the case of any loss in excess of
$50,000.00, to Grantor and Lender jointly. All such insurance shall contain an agreement by the
insurer to provide Lender with 30 days’ prior notice of cancellation and an agreement that the
interest of Lender shall not be impaired or invalidated by any act or neglect of Grantor nor by the
occupation of the premises wherein such Collateral is located for purposes more hazardous than are
permitted by said policy. Grantor will maintain, with financially sound and reputable insurers,
insurance with respect to its properties and business against such casualties and contingencies of
such types (which may include, without limitation, public and product liability, larceny,
embezzlement, business interruption or other criminal misappropriation insurance) and in such
amounts as may from time to time be reasonably required by Lender. Grantor will deliver evidence
of such insurance and the policies of insurance or copies thereof to Lender upon request.

3.10 Compliance with Law. Grantor will not use the Collateral, or knowingly permit
the Collateral to be used, for any unlawful purpose or in violation of any federal, state or
municipal law.

3.11 Books and Records; Access.

(a) Grantor will permit Lender and its representatives, at reasonable times and
intervals, to examine Grantor’s books and records (including Data Processing Records and
Systems) with respect to the Collateral and make extracts therefrom and copies thereof at
any time and from time to time, and Grantor will furnish such information and reports to
Lender and its representatives regarding the Collateral as Lender and its representatives
may from time to time request. Grantor will also permit Lender and its representatives to
inspect the Collateral at reasonable times and intervals. Grantor’s obligation to pay the
Lender’s cost and expenses for such examinations are set forth in Section 8.5 of the
Credit Agreement.

(b) Lender shall have authority, at any time, to place, or require Grantor to place,
upon Grantor’s books and records relating to Accounts, Chattel Paper and other rights to
payment covered by the security interest granted hereby a notation or legend stating that
such Accounts, Chattel Paper and other rights to payment are subject to Lender’s security
interest.

3.12 Notice of Default. By no later than five (5) Business Days after any officer of
Grantor obtains knowledge of the existence of any Default or Event of Default, Grantor will give
notice to Lender that such Default or Event of Default exists, stating the nature thereof, the
period of existence thereof, and what action Grantor proposes to take with respect thereto.

3.13 Additional Documentation. Grantor will execute, from time to time, and
authorizes Lender to execute from time to time as Grantor’s attorney-in-fact and/or file, such
financing statements, assignments, and other documents covering the Collateral, including Proceeds,
as Lender may reasonably request in order to create, evidence, perfect, maintain or continue its
security interest in the Collateral (including additional Collateral acquired by Grantor after the
date hereof), and Grantor will pay the cost of filing the same in all public offices in which
Lender may deem filing to be appropriate and will notify Lender promptly upon acquiring any
additional Collateral that may require an additional filing. Upon request, Grantor will deliver to
Lender all Grantor’s Documents, Chattel Paper and Instruments constituting part of the Collateral.

3.14 Chief Executive Office; State of Incorporation. The location of the chief
executive office of Grantor is located in the State set forth in the preamble hereto and will not
be changed from such state without 30 days’ prior written notice to Lender. Grantor warrants that
its books and records concerning Accounts and Chattel Paper constituting part of the Collateral are
located at its chief executive office. Grantor’s State of organization is the State set forth in
the preamble hereto and such State has been its State of organization since the date of Grantor’s
organization. Grantor’s state organizational number is as set forth on Exhibit A attached
hereto. Grantor will not change its State of organization from such State without 30 days’ prior
written notice to Lender, Lender has given its written consent to such change, and Grantor has
delivered to Lender acknowledgment copies of financing statements filed where appropriate to
continue the perfection of Lender’s security interest as a first priority security interest
therein.

3.15 Name of Grantor. Grantor’s exact legal name and type of legal entity is as set
forth in the preamble hereto. Grantor will not change its legal name without 30 days’ prior
written notice to the Lender, the Lender has given its written consent to such change, and Grantor
has delivered to the Lender acknowledgment copies of financing statements filed where appropriate
to continue the perfection of the Lender’s security interest as a first priority security interest
in the Collateral. Grantor has not used any other name within the past five years except those
described on Exhibit A attached hereto. Neither Grantor nor, to Grantor’s knowledge, any
predecessor in title to any of the Collateral has executed any financing statements or security
agreements presently effective as to the Collateral except those described on Exhibit A attached
hereto.

3.16 Disputes; etc. Grantor shall advise Lender promptly of Inventory in excess of
$50,000.00 for any one customer in any fiscal year or in excess of $100,000.00 in the aggregate for
all customers in any fiscal year which are returned by a customer(s) or otherwise recovered from
such customer(s) and unless instructed to deliver such Inventory to Lender, Grantor shall resell
such Inventory for Lender and assign or deliver to Lender the resulting Accounts or other Proceeds.
Grantor shall also advise Lender promptly of all disputes and claims in excess of $50,000.00 for
any one obligor on the Collateral in any fiscal year or in excess of $100,000.00 in the aggregate
for all obligors in any fiscal year and settle or adjust them at no expense to Lender. After the
occurrence and during the continuance of an Event of Default, Lender may at all times settle or
adjust such disputes and claims directly with the customers for amounts and upon terms which Lender
considers commercially reasonable. No discount, credit, allowance, adjustment or return shall be
granted by Grantor to any customer without Lender’s written consent other than discounts, credits,
allowances, adjustments and returns made or granted by Grantor in the ordinary course of business.

3.17 Power of Attorney. Grantor appoints Lender, or any other person whom Lender may
from time to time designate, as Grantor’s attorney with power, to: (a) endorse Grantor’s name on
any checks, notes, acceptances, drafts or other forms of payment or security evidencing or relating
to any Collateral that may come into Lender’s possession; (b) sign Grantor’s name on any invoice or
bill of lading relating to any Collateral, on drafts against customers, on schedules and
confirmatory assignments of Accounts, Chattel Paper, Documents or other Collateral, on notices of
assignment, financing statements under the UCC and other public records, on verifications of
accounts and on notices to customers; (c) notify the post office authorities to change the address
for delivery of Grantor’s mail to an address designated by Lender; (d) receive and open all mail
addressed to Grantor; (e) send requests for verification of Accounts, Chattel Paper, Instruments or
other Collateral to customers; and (f) do all things necessary to carry out this Agreement;
provided, however, that so long as no Event of Default has occurred and is
continuing, Lender shall not exercise the powers granted pursuant to Section 3.17(c) or (d).
Grantor ratifies and approves all acts of the attorney taken within the scope of the authority
granted. Neither Lender nor the attorney will be liable for any acts of commission or omission nor
for any error in judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable so long as any Obligation remains unpaid. Grantor waives presentment and protest of
all instruments and notice thereof, notice of default and dishonor and all other notices to which
Grantor may otherwise be entitled.

3.18 Patents and Trademarks; Etc. Grantor agrees with Lender that, until the security
interest granted by this Agreement has been terminated in accordance with the terms hereof:

(a) Grantor will perform all acts and execute all documents including, without
limitation, grants of security interest, in form suitable for filing with the United States
Patent and Trademark Office, reasonably requested by Lender at any time to evidence,
perfect, maintain, record and enforce Lender’s interest in the Collateral comprised of
patents (collectively the “Patents”), patent applications (collectively the “Patent
Applications), trademarks or service marks (collectively the “Trademarks”) or of any
applications therefor (collectively the “Trademark Applications”) or otherwise in
furtherance of the provisions of this Agreement; provided, however, that
Grantor shall be not be required to execute any assignment that, by its execution, might
cause rights in any intent-to-use trademark application or any other rights in Patents or
Trademarks to be impaired or invalid;

(b) Except to the extent that Lender shall consent in writing, Grantor (either itself
or through licensees) will, unless Grantor shall reasonably determine that a Trademark (or
the use of a Trademark in connection with a particular class of goods or products) is not of
material economic value to Grantor, (i) continue to use each Trademark on each and every
trademark class of goods in order to maintain each Trademark in full force free from any
claim of abandonment for non-use, (ii) maintain as in the past the quality of products and
services offered under each Trademark as may be necessary to prevent impairment of such
Trademark, (iii) employ each Trademark with the appropriate notice of application or
registration to the extent required by applicable law to maintain such Trademark, (iv) not
use any Trademark except for the uses for which registration or application for registration
of such Trademark has been made, unless such use is otherwise lawful, and (v) not (and not
permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated;

(c) Except to the extent that Lender shall consent in writing, Grantor will not, unless
Grantor shall reasonably determine that a Patent is not of material economic value to
Grantor relative to associated expenses, do any act, or not to do any act, whereby any
Patent may become abandoned or dedicated;

(d) Unless Grantor shall reasonably determine that a Patent, Patent Application,
Trademark or Trademark Application is not of material economic value to Grantor, Grantor
shall notify Lender immediately if it knows, or has reason to know, of any reason that any
Patent, Patent Application, Trademark or Trademark Application may become abandoned or
dedicated, or of any adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any proceeding in the
United States Patent and Trademark Office or any court) regarding Grantor’s ownership of any
Patent or Trademark, its rights to register the same, or to keep and maintain the same;

(e) If Grantor, either itself or through any agent, employee, licensee or designee,
shall file a Patent Application or Trademark Application for the registration of any
Trademark with the United States Patent and Trademark Office, or any similar office or
agency in any other country or any political subdivision thereof, Grantor shall promptly
inform Lender, and, upon request of Lender, shall promptly execute and deliver any and all
agreements, instruments, documents and papers as Lender may reasonably request to evidence
Lender’s security interest in such Patent or Trademark and the goodwill and general
intangibles of Grantor relating thereto or represented thereby; provided,
however, that Grantor shall be not be required to execute any assignment that, by
its execution, might cause rights in any intent-to-use trademark application or any other
rights in Patents or Trademarks to be impaired or invalid;

(f) Unless Grantor shall reasonably determine that a Patent Application or Trademark
Application is not of material economic value to Grantor, Grantor will take all commercially
reasonable steps, including, without limitation, proceedings before the United States Patent
and Trademark Office, or any similar office or agency in any other country or any political
subdivision thereof, to pursue each Patent Application and Trademark Application and to
maintain each issued Patent and Trademark Registration including, without limitation, filing
of applications for renewal and affidavits of use;

(g) Unless Grantor shall reasonably determine that a Patent or Trademark is not of
material economic value to Grantor, Grantor shall promptly notify Lender if any Patent or
Trademark is infringed, misappropriated or diluted by a third party and take such
commercially reasonable action as Grantor shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark; and

(h) Grantor agrees that it will not enter into any agreement (for example, a license
agreement) which is inconsistent with Grantor’s obligations under this Agreement.

3.19 Copyrights. Grantor agrees with Lender that, until the security interest granted
by this Agreement has been terminated in accordance with the terms hereof:

(a) Grantor will perform all acts and execute all documents including, without
limitation, grants of security interest, in form suitable for filing with the United States
Copyright Office, reasonably requested by Lender at any time to evidence, perfect, maintain,
record and enforce Lender’s interest in the Collateral comprised of copyrights or copyright
applications (collectively the “Copyrights”) or otherwise in furtherance of the provisions
of this Agreement; provided, however, that Grantor shall not be required to
file any documents that might cause trade secret rights in software or any other rights in
material that is subject to copyright protection to be impaired or invalid;

(b) Except to the extent that the Lender shall consent in writing, Grantor (either
itself or through licensees) will, unless Grantor shall reasonably determine that a
Copyright is not of material economic value to Grantor, publish the materials for which a
Copyright has been obtained (the “Works”) with any notice of copyright registration required
by applicable law to preserve the Copyright;

(c) Unless Grantor shall reasonably determine that a Copyright is not of material
economic value to Grantor, Grantor shall notify the Lender immediately if it knows, or has
reason to know, of any reason that any Copyright may become abandoned or dedicated or of any
adverse determination or development (including, without limitation, the institution of, or
any such determination or development in, any proceeding in the United States Copyright
Office or any court) regarding Grantor’s ownership of any Copyright, its right to register
the same, or to keep and maintain the same;

(d) If Grantor, either itself or through any agent, employee, licensee or designee,
shall file an application for the registration of any Copyright with the United States
Copyright Office or any similar office or agency in any other country or any political
subdivision thereof, Grantor shall promptly inform Lender, and, upon request of Lender,
execute and deliver any and all agreements, instruments, documents and papers as Lender may
request to evidence Lender’s security interest in such Copyright and the Works relating
thereto or represented thereby; provided, however, that Grantor shall not be
required to file any documents that might cause trade secret rights in software or any other
rights in material that is subject to copyright protection to be impaired or invalid;

(e) Unless Grantor shall reasonably determine that a Copyright is not of material
economic value to Grantor, Grantor will take all commercially reasonable steps, including,
without limitation, in any proceeding before the United States Copyright Office or any
similar office or agency in any other country or any political subdivision thereof, to
maintain and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the Copyrights;

(f) In the event that any Copyright is infringed by a third party, Grantor shall
promptly notify Lender and shall, unless Grantor shall reasonably determine that such
Copyright is not of material economic value to Grantor, promptly take such commercially
reasaonable actions as Grantor shall reasonably deem appropriate under the circumstances to
protect such Copyright; and

(g) Grantor agrees that it will not enter into any agreement (for example, a license
agreement) which is inconsistent with Grantor’s obligations under this Agreement.

3.20 Control. Grantor will cooperate with Lender in obtaining control with respect to
Collateral consisting of Deposit Accounts, Investment Property, Letter-of-Credit Rights, and
Electronic Chattel Paper.

3.21 Further Acts. Where Collateral is in the possession of a third party, Grantor
will join with Lender in notifying such third party of Lender’s security interest and in obtaining
an acknowledgment from such third party that it is holding such Collateral for the benefit of the
Lender.

ARTICLE IV

COLLECTIONS

Except as otherwise provided in this Article IV, Grantor shall continue to collect, at its own
expense, all amounts due or to become due to Grantor under the Accounts constituting part of the
Collateral and all other Collateral. In connection with such collections, Grantor may take (and,
at Lender’s direction, shall take) such action as Grantor or Lender may deem necessary or advisable
to enforce collection of the Accounts and such other Collateral; provided, however,
that, Lender shall have the right at any time after the occurrence and during the continuance of a
Default or Event of Default, without giving written notice to Grantor of Lender’s intention to do
so, to notify the account debtors under any Accounts or obligors with respect to such other
Collateral of the assignment of such Accounts and such other Collateral to Lender and to direct
such account debtors or obligors to make payment of all amounts due or to become due to Grantor
thereunder directly to Lender and, upon such notification and at the expense of Grantor, to enforce
collection of any such Accounts or other Collateral, and to adjust, settle or compromise the amount
or payment thereof in the same manner and to the same extent as Grantor might have done, but unless
and until Lender does so or gives Grantor other instructions, Grantor shall make all collections
for Lender. In addition to its rights under the preceding sentence to this Section, Lender, at
any time after the occurrence and during the continuance of a Default or Event of Default, may
require that Grantor instruct all current and future account debtors and obligors on other
Collateral to make all payments directly to a lockbox (the “Lockbox”) controlled by Lender. All
payments received in the Lockbox shall be transferred to a special bank account (the “Collateral
Account”) maintained at Lender subject to withdrawal by Lender only. After the earliest to occur
of a Default or Event of Default, Lender’s exercise of its rights to direct account debtors or
other obligors on any Collateral to make payments directly to Lender or to require Grantor to
establish a Lockbox, Grantor shall immediately deliver all full and partial payments on any
Collateral received by Grantor to Lender in their original form, except for endorsements where
necessary. Lender, at its sole discretion, may hold any collections on the Collateral delivered to
it or deposited in the Collateral Account as cash collateral or may apply such collections to the
payment of the Obligations in such order as Lender may elect; provided, however,
that after an Event of Default has occurred and is continuing, Lender shall apply all collections
in accordance with Section 7.7. Until such payments are so delivered to Lender, such payments shall
be held in trust by Grantor for and as Lender’s property, and shall not be commingled with any
funds of Grantor. Any application of any collection to the payment of any Obligation is conditioned
upon final payment of any check or other instrument.

ARTICLE V

ASSIGNMENT OF INSURANCE

Grantor hereby assigns to Lender, as additional security for payment of the Obligations, any
and all monies due or to become due under, and any and all other rights of Grantor with respect to,
any and all policies of insurance covering the Collateral. So long as no Default or Event of
Default has occurred and is continuing, Grantor may itself adjust and collect for any losses of up
to an aggregate amount of $100,000.00 for all occurrences during any of Grantor’s fiscal years and
Grantor may use the resulting Insurance Proceeds for the replacement, restoration or repair of the
Collateral. After the occurrence and during the continuance of a Default or an Event of Default,
or after the aggregate amount of losses arising out of all occurrences during any of Grantor’s
fiscal years exceeds $100,000.00, Lender may (but need not) in its own name or in Grantor’s name
execute and deliver proofs of claim, receive such monies, and settle or litigate any claim against
the issuer of any such policy and Grantor directs the issuer to pay any such monies directly to
Lender and Lender, at its sole discretion and regardless of whether Lender exercises its right to
collect Insurance Proceeds under this Section, may apply any Insurance Proceeds to the payment of
the Obligations, whether due or not, in such order and manner as Lender may elect or may permit
Grantor to use such Insurance Proceeds for the replacement, restoration or repair of the
Collateral.

ARTICLE VI

EVENTS OF DEFAULT

The occurrence of any Event of Default as defined in the Credit Agreement shall constitute an
Event of Default hereunder (“Event of Default”).

ARTICLE VII

RIGHTS AND REMEDIES ON DEFAULT

Upon the occurrence of an Event of Default, and at any time thereafter until such Event of
Default is cured to the satisfaction of Lender or waived by Lender, and in addition to the rights
granted to Lender under Articles IV and V hereof, Lender may exercise any one or more of the
following rights and remedies:

7.1 Acceleration of Obligations. Declare any and all Obligations to be immediately
due and payable, and the same shall thereupon become immediately due and payable without further
notice or demand.

7.2 Right of Offset. Offset any deposits, including unmatured time deposits, then
maintained by Grantor with Lender, whether or not then due, against any indebtedness then owed by
Grantor to Lender whether or not then due.

7.3 Deal with Collateral. In the name of Grantor or otherwise, demand, collect,
receive and give receipt for, compound, compromise, settle and give acquittance for and prosecute
and discontinue any suits or proceedings in respect of any or all of the Collateral.

7.4 Realize on Collateral. Take any action which Lender may deem reasonably necessary
or desirable in order to realize on the Collateral, including, without limitation, the power to
perform any contract, to endorse in the name of Grantor any checks, drafts, notes, or other
instruments or documents received in payment of or on account of the Collateral. Lender may comply
with any applicable state or federal law requirements in connection with a disposition of the
Collateral and compliance will not be considered adversely to affect the commercial reasonableness
of any sale of the Collateral. Lender may sell the Collateral without giving any warranties as to
the Collateral. Lender may specifically disclaim any warranties of

title or the like. This procedure will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral.

7.5 Access to Property. Enter upon and into and take possession of all or such part
or parts of the properties of Grantor, including lands, plants, buildings, machinery, equipment,
Data Processing Records and Systems and other property as may be necessary or appropriate in the
reasonable judgment of Lender, to permit or enable Lender to store, lease, sell or otherwise
dispose of or collect all or any part of the Collateral, and use and operate said properties for
such purposes and for such length of time as Lender may reasonably deem necessary or appropriate
for said purposes without the payment of any compensation to Grantor therefor. Grantor shall
provide Lender with all information and assistance requested by Lender to facilitate the storage,
leasing, sale or other disposition or collection of the Collateral after an Event of Default has
occurred and is continuing.

7.6 Other Rights. Exercise any and all other rights and remedies available to it by
law or by agreement, including rights and remedies under the UCC as adopted in the relevant
jurisdiction or any other applicable law, or under the Credit Agreement and, in connection
therewith, Lender may require Grantor to assemble the Collateral and make it available to Lender at
a place to be designated by Lender, and any notice of intended disposition of any of the Collateral
required by law shall be deemed reasonable if such notice is mailed or delivered to Grantor at its
address as shown on Lender’s records at least 10 days before the date of such disposition.

7.7 Application of Proceeds. All proceeds of Collateral shall be applied in
accordance with the UCC, and such proceeds applied toward the Obligations shall be applied in such
order as Lender may elect.

7.8 Patents and Trademarks. Upon the occurrence and during the continuance of an
Event of Default:

(a) Lender may, at any time and from time to time, upon thirty (30) days’ prior notice
to Grantor, license or, to the extent permitted by an applicable license, sublicense,
whether general, special or otherwise, and whether on an exclusive or non-exclusive basis,
any Patent or Trademark, throughout the world for such term or terms, on such conditions,
and in such manner, as Lender shall in its sole discretion determine;

(b) Lender may (without assuming any obligations or liability thereunder), at any time
enforce (and shall have the exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one or more license or
other agreements with respect to any Patent or Trademark and take or refrain from taking any
action under any such license or other agreement, and Grantor hereby releases Lender from,
and agrees to hold Lender free and harmless from and against, any claims arising out of, any
action taken or omitted to be taken with respect to any such license or agreement;

(c) Any and all payments received by Lender under or in respect of any Patent or
Trademark (whether from Grantor or otherwise), or received by Lender by virtue of the
exercise of the licenses or assignments granted to Lender by this Section 7.8, shall be
applied to the Obligations in accordance with Section 7.7 hereof;

(d) Lender may exercise in respect of the Patents and Trademarks, in addition to other
rights and remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC;

(e) In order to implement the sale, lease, assignment, license, sublicense or other
disposition of any of the Patents and Trademarks pursuant to this Section 7.8, Lender may,
at any time, execute and deliver on behalf of Grantor one or more instruments of assignment
of the Patents and Trademarks (or any application or registration thereof), in form suitable
for filing, recording or registration in any country. Grantor agrees to pay when due all
reasonable costs incurred in any such transfer of the Patents and Trademarks, including any
taxes, fees and reasonable attorneys’ fees;

(f) In the event of any sale, lease, assignment, license, sublicense or other
disposition of any of the Patents or Trademarks pursuant to this Section, Grantor shall
supply to Lender or its designee its know-how and expertise relating to the manufacture and
sale of the products relating to any Patent or Trademark subject to such disposition, and
its customer lists and other records relating to such Patents or Trademarks and to the
distribution of said products; and

(g) For the purpose of enabling Lender to exercise rights and remedies under this
Agreement at such time as Lender shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, Grantor hereby grants to Lender, an irrevocable,
non-exclusive license (exercisable without payment of royalty or other compensation to
Grantor) to use, license or sublicense at such time any Patent or Trademark, now owned or
hereafter acquired by Grantor, and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be recorded or
stored and to all computer and automatic machinery software and programs used for the
compilation or printout thereof.

7.9 Copyrights. Upon the occurrence and during the continuance of an Event of
Default:

(a) Lender may, at any time and from time to time, upon thirty (30) days’ prior notice
to Grantor, license or, to the extent permitted by an applicable license, sublicense,
whether general, special or otherwise, and whether on an exclusive or non-exclusive basis,
any Copyright, for such term or terms, on such conditions, and in such manner, as Lender
shall in its sole discretion determine;

(b) Lender may (without assuming any obligations or liability thereunder), at any time
        , enforce (and shall have the exclusive right to enforce) against any licensor, licensee or
sublicensee all rights and remedies of Grantor in, to and under any one or more license or
other agreements with respect to any Copyright and take or refrain from taking any action
under any such license or other agreement and Grantor hereby releases Lender from, and
agrees to hold Lender free and harmless from and against, any claims arising out of, any
action taken or omitted to be taken with respect to any such license or agreement;

(c) Any and all payments received by Lender under or in respect of any Copyright
(whether from Grantor or otherwise), or received by Lender by virtue of the exercise of the
licenses or assignments granted to Lender by this Section 7.9, shall be applied to the
Obligations in accordance with Section 7.7;

(d) Lender may exercise in respect of the Copyrights, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC;

(e) In order to implement the sale, lease, assignment, license, sublicense or other
disposition of any of the Copyrights pursuant to this Section 7.9, Lender may, at any time,
execute and deliver on behalf of Grantor one or more instruments of assignment of the
Copyrights (or any application or registration thereof), in form suitable for filing,
recording or registration in the Copyright Office or any country where the relevant
Copyright is of material economic value to Grantor. Grantor agrees to pay when due all
reasonable costs incurred in any such transfer of the Copyrights, including any taxes, fees
and reasonable attorneys’ fees; and

(f) For the purpose of enabling Lender to exercise rights and remedies under this
Agreement at such time as Lender shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, Grantor hereby grants to Lender an irrevocable,
non-exclusive license (exercisable without payment of royalty or other compensation to
Grantor) to use, license or sublicense any Copyright, now owned or hereafter acquired by
Grantor, and wherever the same may be located, and including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored and to all
computer and automatic machinery software and programs used for the compilation or printout
thereof.

ARTICLE VIII

MISCELLANEOUS

8.1 No Liability on Collateral. It is understood that Lender does not in any way
assume any of Grantor’s obligations under any of the Collateral. Grantor hereby agrees to
indemnify Lender against all liability arising in connection with or on account of any of the
Collateral, except for any such liabilities arising on account of Lender’s negligence or willful
misconduct.

8.2 No Waiver. Lender shall not be deemed to have waived any of its rights hereunder
or under any other agreement, instrument or paper signed by Grantor unless such waiver be in
writing and signed by Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any future occasion.

8.3 Remedies Cumulative. All rights and remedies of Lender shall be cumulative and
may be exercised singularly or concurrently, at their option, and the exercise or enforcement of
any one such right or remedy shall not bar or be a condition to the exercise or enforcement of any
other.

8.4 Governing Law; Jurisdiction. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of the State of
Minnesota, except to the extent that the perfection of the security interest hereunder, or the
enforcement of any remedies hereunder, with respect to any particular Collateral shall be governed
by the laws of a jurisdiction other than the State of Minnesota. AT THE OPTION OF LENDER, THIS
AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR
ST. PAUL, MINNESOTA; AND GRANTOR CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT GRANTOR COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, LENDER AT
ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

8.5 Expenses. Grantor agrees to pay the reasonable attorneys’ fees and legal expenses
incurred by Lender in the exercise of any right or remedy available to it under this Agreement,
whether or not suit is commenced, including, without limitation, attorneys’ fees and legal expenses
incurred in connection with any appeal of a lower court’s order or judgment.

8.6 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of Grantor and Lender.

8.7 Recitals. The above Recitals are true and correct as of the date hereof and
constitute a part of this Agreement.

8.8 Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.

8.9 No Obligation to Pursue Others. Lender has no obligation to attempt to satisfy
the Obligations by collecting them from any other person liable for them and Lender may release,
modify or waive any Collateral provided by any other person to secure any of the Obligations, all
without affecting Lender’s rights against Grantor. Grantor waives any right it may have to require
Lender to pursue any third person for any of the Obligations.

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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as of the date and
year first above written.

SPECTRABRACE, LTD., a Kentucky corporation

By: /s/ Scott P. Youngstrom

	 	 	 	Scott P. Youngstrom

Vice President/Treasurer

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