Document:

Exhibit 4.5

 

EXECUTION COPY

 

 

SECURITY AGREEMENT

 

dated as of

 

November 20, 2007

 

among

 

REABLE THERAPEUTICS FINANCE LLC (to be renamed DJO FINANCE LLC), 

as Borrower,

 

REABLE THERAPEUTICS HOLDINGS LLC (to be renamed DJO HOLDINGS LLC), 

as Holdings,

 

and

 

CERTAIN SUBSIDIARIES OF HOLDINGS 

IDENTIFIED HEREIN,

 

and

 

CREDIT SUISSE,

as Collateral Agent

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
  Page

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  
	
  SECTION 1.01. Credit Agreement

  	
  1

  
	
  SECTION 1.02. Other Defined Terms

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  Pledge of Securities

  	
   

  
	
   

  	
   

  
	
  SECTION 2.01. Pledge

  	
  3

  
	
  SECTION 2.02. Delivery of the Pledged Collateral

  	
  4

  
	
  SECTION 2.03. Representations, Warranties and Covenants

  	
  4

  
	
  SECTION 2.04. Certification of Limited Liability Company and
  Limited Partnership Interests

  	
  5

  
	
  SECTION 2.05. Registration in Nominee Name; Denominations

  	
  6

  
	
  SECTION 2.06. Voting Rights; Dividends and Interest

  	
  6

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  Security Interests in Personal Property

  	
   

  
	
   

  	
   

  
	
  SECTION 3.01. Security Interest

  	
  8

  
	
  SECTION 3.02. Representations and Warranties

  	
  10

  
	
  SECTION 3.03. Covenants

  	
  11

  
	
  SECTION 3.04. Other Actions

  	
  12

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  Remedies

  	
   

  
	
   

  	
   

  
	
  SECTION 4.01. Remedies Upon Default

  	
  14

  
	
  SECTION 4.02. Application of Proceeds

  	
  15

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  Indemnity, Subrogation and Subordination

  	
   

  
	
   

  	
   

  
	
  SECTION 5.01. Indemnity

  	
  16

  
	
  SECTION 5.02. Contribution and Subrogation

  	
  16

  
	
  SECTION 5.03. Subordination

  	
  16

  

 

i

 

	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  SECTION 6.01. Notices

  	
  17

  
	
  SECTION 6.02. Waivers; Amendment

  	
  17

  
	
  SECTION 6.03. Collateral Agent’s Fees and Expenses

  	
  18

  
	
  SECTION 6.04. Successors and Assigns

  	
  18

  
	
  SECTION 6.05. Survival of Agreement

  	
  18

  
	
  SECTION 6.06. Counterparts; Effectiveness; Several Agreement

  	
  19

  
	
  SECTION 6.07. Severability

  	
  19

  
	
  SECTION 6.08. Right of Set-Off

  	
  19

  
	
  SECTION 6.09. Governing Law; Jurisdiction; Consent to Service of
  Process

  	
  20

  
	
  SECTION 6.10. WAIVER OF JURY TRIAL

  	
  20

  
	
  SECTION 6.11. Headings

  	
  21

  
	
  SECTION 6.12. Security Interest Absolute

  	
  21

  
	
  SECTION 6.13. Termination or Release

  	
  21

  
	
  SECTION 6.14. Additional Restricted Subsidiaries and
  Intermediate Holding Companies

  	
  22

  
	
  SECTION 6.15. Collateral Agent Appointed Attorney-in-Fact

  	
  22

  
	
  SECTION 6.16. General Authority of the Collateral Agent

  	
  23

  

 

	
  Schedules

  	
   

  
	
   

  	
   

  
	
  Schedule I

  	
  Subsidiary Parties

  
	
  Schedule II

  	
  Pledged Equity; Pledged Debt

  
	
  Schedule III

  	
  Commercial Tort Claims

  
	
  Schedule IV

  	
  Certain Foreign Subsidiaries

  
	
   

  	
   

  
	
  Exhibits

  	
   

  
	
   

  	
   

  
	
  Exhibit I

  	
  Form of Security Agreement Supplement

  
	
  Exhibit II

  	
  Form of Perfection Certificate

  

 

ii

 

SECURITY
AGREEMENT dated as
of November 20, 2007 among
REABLE THERAPEUTICS FINANCE LLC (to be renamed DJO FINANCE LLC), a Delaware
limited liability company (the “Borrower”),
REABLE THERAPEUTICS HOLDINGS LLC (to be renamed DJO HOLDINGS LLC), a Delaware
limited liability company (“Holdings”),  the Subsidiaries of Holdings from time to time party
hereto and CREDIT SUISSE, as Collateral Agent.

 

Reference is
made to the Credit Agreement dated as of November 20, 2007 (as amended,
supplemented or otherwise modified from time to time, the “Credit
Agreement”),  among the
Borrower,  Holdings, Credit Suisse, as Administrative Agent,
Collateral Agent, Swing Line Lender and an L/C Issuer, and each lender from
time to time party thereto (collectively, the “Lenders”  and individually, a “Lender”).
The Lenders have agreed to extend credit to the Borrower subject to the
terms and conditions set forth in the Credit Agreement. The Grantors may receive,
directly or indirectly, a portion of the proceeds of the Loans under the Credit
Agreement and will derive substantial direct and indirect benefits from the
transactions contemplated by the Credit Agreement. It is a condition precedent
to the making of Loans and the issuance of Letters of Credit by the Lenders
under the Credit Agreement and the entry by any Lender or Affiliate of a Lender
in its capacity as a provider of cash management services into Cash Management
Obligations and Hedge Banks into Secured Hedge Agreements from time to time
that the Grantors shall have executed and delivered this Agreement. Holdings
and the Subsidiary Parties are affiliates of the Borrower, will derive
substantial benefits from the extension of credit to the Borrower pursuant to
the Credit Agreement and are willing to execute and deliver this Agreement in
order to induce the Lenders to extend such credit. Accordingly, the parties
hereto agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01.
Credit Agreement.

 

(a)                                  Capitalized
terms used in this Agreement and not otherwise defined herein have the meanings
specified in the Credit Agreement. All terms defined in the New York UCC (as
defined herein) and not defined in this Agreement have the meanings specified
therein; the term “instrument”
shall have the meaning specified in Article 9 of the New York UCC.

 

(b)                                 The
rules of construction specified in Article I of the Credit Agreement
also apply to this Agreement.

 

SECTION 1.02.
Other Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

 

“Account Debtor”  means any Person who is or
who may become obligated to any Grantor under, with respect to or on
account of an Account.

 

“Accounts”  has the meaning specified in
Article 9 of the New York UCC.

 

“Agreement”
means this
Security Agreement.

 

 

“Article 9 Collateral”  has
the meaning assigned to such term in Section 3.01(a).

 

“Claiming  Party”  has
the meaning assigned to such term in Section 5.02.

 

“Collateral”  means the Article 9
Collateral and the Pledged Collateral.

 

“Contributing Party”  has the meaning assigned to
such term in Section 5.02.

 

“Credit Agreement”  has
the meaning assigned to such term in the preliminary statement of this
Agreement.

 

“General Intangibles”  has the meaning specified in
Article 9 of the New York UCC and includes corporate or other business
records, indemnification claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, Swap Contracts and other
agreements), goodwill, registrations, franchises, tax refund claims and any
letter of credit, guarantee, claim, security interest or other security held by
or granted to any Grantor, as the case may be, to secure payment by an
Account Debtor of any of the Accounts; provided
that General Intangibles shall not include, except solely for the
purposes of Section 3.01(b), any intellectual property and related assets
subject to the Intellectual Property Security Agreement.

 

“Grantor” means each of Holdings (in the absence of any
Intermediate Holding Company), any Intermediate Holding Company that becomes a
party to this Agreement after the Closing Date, the Borrower and each
Subsidiary Party that is a Domestic Subsidiary and not an Excluded Subsidiary.

 

“New York UCC”
means the Uniform Commercial Code as from time to time in effect in the
State of New York.

 

“Obligations”  has the meaning assigned to
such term in the Credit Agreement.

 

“Perfection Certificate” means a certificate substantially in the form of
Exhibit II, completed and supplemented with the schedules and attachments
contemplated thereby, and duly executed by the Responsible Officers of the
Borrower and each Guarantor.

 

“Pledged Collateral”  has the meaning assigned to
such term in Section 2.01.

 

“Pledged Debt” has the meaning assigned to such term in Section 2.01.

 

“Pledged Equity”  has the meaning assigned to
such term in Section 2.01.

 

“Pledged Securities”  means any promissory notes,
stock certificates or other securities now or hereafter included in the Pledged
Collateral, including all certificates, instruments or other documents
representing or evidencing any Pledged Collateral.

 

“Secured Parties”  means, collectively, the
Administrative Agent, the Collateral Agent, the Lenders, the Hedge Banks, the
Cash Management Banks, the Supplemental Administrative Agent and each co-agent
or sub-agent appointed by the Administrative Agent from time to time pursuant
to Section 9.01(c) of the Credit Agreement.

 

2

 

“Security Agreement Supplement”
means an instrument in the form of Exhibit hereto.

 

“Security Interest” has the meaning assigned to such term in Section 3.01(a).

 

“Subsidiary Parties”  means (a) the
Restricted Subsidiaries identified on Schedule I and (b) each other
Restricted Subsidiary that becomes a party to this Agreement as a Subsidiary
Party after the Closing Date.

 

“Termination Date” has the meaning assigned to such term in Section 6.13(a).

 

ARTICLE II

 

Pledge of Securities

 

SECTION 2.01.
Pledge. As security for the payment or performance, as the case may be,
in full of the Obligations, including the Guarantees, each Grantor hereby
assigns and pledges to the Collateral Agent, its successors and assigns, for
the benefit of the Secured Parties, and hereby grants to the Collateral Agent,
its successors and assigns, for the benefit of the Secured Parties, a security
interest in, all of such Grantor’s right, title and interest in, to and under (i) all
Equity Interests held by it and listed on Schedule II, any Equity
Interests with respect to any of the Subsidiaries listed on Schedule IV,
any other Equity Interests obtained in the future by such Grantor and, subject
to Section 3.03(i), the certificates, if any, representing all such Equity
Interests (the “Pledged Equity”); provided that the Pledged Equity shall not
include (A) more than 65% of the issued and outstanding voting Equity
Interests of any Foreign Subsidiary, (B) Equity Interests of Unrestricted
Subsidiaries, (C) Equity Interests of any Subsidiary of a Foreign
Subsidiary, (D) Equity Interests of any Subsidiary acquired pursuant to a
Permitted Acquisition financed with Indebtedness incurred pursuant to Section 7.03(g) of
the Credit Agreement if such Equity Interests serve as security for such
Indebtedness or if the terms of such Indebtedness prohibit the creation of any
other lien on such Equity Interests, (E) Equity Interests of any Person
(other than the Borrower) that is not a direct or indirect, wholly owned
Material Subsidiary of the Borrower and (F) Equity Interests of any
Subsidiary with respect to which the Administrative Agent and the Borrower
determine in their reasonable judgments that the costs or other consequences
(including adverse tax consequences) of providing a pledge of its Equity
Interests is excessive in view of the benefits to be obtained by the Secured
Parties; (ii)(A) subject to Section 3.03(i), the promissory notes and
instruments evidencing indebtedness owned by it and listed opposite the name of
such Grantor on Schedule II, and (B) the promissory notes and any
other instruments evidencing indebtedness obtained in the future by such
Grantor (the promissory notes and instruments referred to in clauses (A) and
(B) of this clause (ii) are collectively referred to as the “Pledged Debt”);  (iii) all other property that may be delivered to
and held by the Collateral Agent pursuant to the terms of this Agreement; (iv) subject
to Section 2.06, all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in  respect
of, in exchange for or upon the conversion of, and all other Proceeds received
in respect of, the securities referred to in clauses (i) and (ii) above;
(v) subject to Section 2.06, all rights and privileges of such
Grantor with respect to the securities and other property referred to in
clauses (i), (ii), (iii) and (iv) above; 

 

3

 

and (vi) all Proceeds of
any of the foregoing (the items referred to in clauses (i) through (vi) above
being collectively referred to as the “Pledged
Collateral”).

 

TO HAVE AND TO
HOLD the Pledged Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Parties, forever, subject, however, to the terms, covenants and conditions
hereinafter set forth.

 

SECTION 2.02.
Delivery of the Pledged Collateral.

 

(a)                                  Each
Grantor agrees promptly to deliver or cause to be delivered to the Collateral
Agent, for the benefit of the Secured Parties, any and all Pledged Securities
(other than any uncertificated securities, but only for so long as such
securities remain uncertificated) to the extent such Pledged Securities, in the case of promissory notes or other
instruments evidencing Indebtedness, are required to be delivered pursuant to
paragraph (b) of this Section 2.02.

 

(b)                                 Each
Grantor will cause any Indebtedness for borrowed money having an aggregate
principal amount in excess of $5,000,000 owed to such Grantor by any Person
pursuant to any obligation to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent, for the benefit of the
Secured Parties, pursuant to the terms hereof.

 

(c)                                  Upon
delivery to the Collateral Agent, (i) any Pledged Securities shall be
accompanied by stock or note powers duly executed in blank or other instruments
of transfer reasonably satisfactory to the Collateral Agent and by such other
instruments and documents as the Collateral Agent may reasonably request
and (ii) all other property comprising part of the Pledged Collateral
shall be accompanied by proper instruments of assignment duly executed by the
applicable Grantor and such other instruments or documents as the Collateral
Agent may reasonably request. Each delivery of Pledged Securities shall be
accompanied by a schedule describing the securities, which schedule shall
be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such schedule hereto
shall not affect the validity of such pledge of such Pledged Securities. Each schedule so
delivered shall supplement any prior schedules so delivered.

 

SECTION 2.03.
Representations, Warranties and Covenants. Holdings and the Borrower
jointly and severally represent, warrant and covenant, as to themselves and the
other Grantors, to and with the Collateral Agent, for the benefit of the
Secured Parties, that:

 

(a)                                  Schedule II
correctly sets forth the percentage of the issued and outstanding units of each
class of the Equity Interests of the issuer thereof represented by the
Pledged Equity and includes all Equity Interests, promissory notes and
instruments required to be pledged hereunder in order to satisfy the Collateral
and Guaranty Requirement;

 

(b)                                 the
Pledged Equity and Pledged Debt (solely with respect to Pledged Debt issued by
a Person other than Holdings or a subsidiary of Holdings, to the best of
Holdings’ and the Borrower’s knowledge) have been duly and validly authorized
and issued by the issuers thereof and (i) the case of Pledged Equity
(other than Pledged Equity consisting of limited liability company interests or
partnership interests, which cannot be fully paid or nonassessable), 

 

4

 

are fully paid and
nonassessable and (ii) in the case of Pledged Debt (solely with respect to
Pledged Debt issued by a Person other than Holdings or a subsidiary of Holdings, to the
best of Holdings’ and the Borrower’s knowledge), are legal, valid and binding
obligations of the issuers thereof;

 

(c)                                  except
for the security interests granted hereunder, each of the Grantors (i) is
and, subject to any transfers made in compliance with the Credit Agreement,
will continue to be the direct owner, beneficially and of record, of the
Pledged Securities indicated on Schedule II as owned by such Grantors, (ii) holds
the same free and  clear of all Liens, other than (A) Liens
created by the Collateral Documents and (B) Liens expressly permitted
pursuant to Section 7.01 of the Credit Agreement, (iii) will make no
assignment, pledge, hypothecation or transfer of, or create or permit to exist
any security interest in or other Lien on, the Pledged Collateral, other than (A) Liens
created by the Collateral Documents and (B) Liens expressly permitted
pursuant to Section 7.01 of the Credit Agreement, and (iv) will
defend its title or interest thereto or therein against all Persons and the
security interest hereunder against any and all Liens (other than the Liens
permitted pursuant to this Section 2.03(c)), however arising, of all
Persons whomsoever;

 

(d)                                 except
for restrictions and limitations imposed by the Loan Documents, securities laws
generally, or with respect to limited liability companies, limited liability
company laws and except as described in the Perfection Certificate, the Pledged
Collateral is and will continue to be freely transferable and assignable, and
none of the Pledged Collateral is or will be subject to any option, right of
first refusal, shareholders agreement, charter or by-law provisions or
contractual restriction of any nature that might prohibit, impair, delay or
otherwise affect in any manner material and adverse to the Secured Parties the
pledge of such Pledged Collateral hereunder, the sale or disposition thereof
pursuant hereto or the exercise by the Collateral Agent of rights and remedies
hereunder;

 

(e)                                  each
of the Grantors has the power and authority to pledge the Pledged Collateral
pledged by it hereunder in the manner hereby done or contemplated;

 

(f)                                    no
consent or approval of any Governmental Authority, any securities exchange or
any other Person was or is necessary to the validity of the pledge effected
hereby (other than such as have been obtained and are in full force and
effect);

 

(g)                                 by
virtue of the execution and delivery by the Grantors of this Agreement, when
any Pledged Securities are delivered to the Collateral Agent in accordance with
this Agreement, the Collateral Agent will obtain a legal, valid and perfected
lien upon and security interest in such Pledged Securities as security for the payment and performance of
the Obligations; and

 

(h)                                 the
pledge effected hereby is effective to vest in the Collateral Agent, for the
benefit of the Secured Parties, the rights of the Collateral Agent in the
Pledged Collateral as set forth herein.

 

SECTION 2.04.
Certification of Limited Liability Company and Limited  Partnership
Interests. Any equity interest in any limited liability company or limited
partnership controlled by any Grantor and required to be pledged under Section 2.01
shall either (i) be 

 

5

 

represented by a certificate,
shall be a “security” within the  meaning of Article 8
of the New York UCC, and shall be delivered to the Collateral Agent or (b) not
have elected to be treated as a “security” within the meaning of Article 8
of the New York UCC and shall not be represented by a certificate.

 

SECTION 2.05.
Registration in Nominee Name; Denominations. If an Event of Default
shall occur and be continuing and the Collateral Agent shall give the Borrower
notice of its intent to exercise such rights, (a) the Collateral Agent, on
behalf of the Secured Parties, shall have the right (in its sole and absolute
discretion) to hold the Pledged Securities in its own name as pledgee, the name
of its nominee (as pledgee or as sub-agent) or the name of the applicable
Grantor, endorsed or assigned in blank or in favor of the Collateral Agent, and
each Grantor will promptly give to the Collateral Agent copies of any notices
or other communications received by it with respect to Pledged Securities
registered in the
name of such Grantor and (b) the Collateral Agent shall have the right to
exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Agreement.

 

SECTION 2.06.
Voting Rights; Dividends and Interest.

 

(a)                                  Unless
and until an Event of Default shall have occurred and be continuing and the
Collateral Agent shall have notified the Borrower that the rights of the
Grantors under this Section 2.06 are being suspended:

 

(i)                                     Each Grantor shall
be entitled to exercise any and all voting and/or other consensual rights and
powers inuring to an owner of Pledged Securities or any part thereof for
any purpose consistent with the terms of this Agreement, the Credit Agreement
and the other Loan Documents; provided that
such rights and powers shall not be exercised in any manner that could
materially and adversely affect the rights
inuring to a holder of any Pledged Securities or the rights and remedies of any
of the Collateral Agent or the other Secured Parties under this Agreement, the
Credit Agreement or any other Loan Document or the ability of the Secured
Parties to exercise the same.

 

(ii)                                  The Collateral Agent
shall execute and deliver to each Grantor, or cause to be executed and
delivered to each Grantor, all such proxies, powers of attorney and other
instruments as each Grantor may reasonably request for the purpose of
enabling such Grantor to exercise the voting and/or consensual rights and
powers it is entitled to exercise pursuant to subparagraph (i) above.

 

(iii)                               Each
Grantor shall be entitled to receive and retain any and all dividends,
interest, principal and other distributions paid on or distributed in respect
of the Pledged Securities to the extent and only to the extent that such
dividends, interest, principal and other distributions are permitted by, and
otherwise paid or distributed in accordance with, the terms and conditions of
the Credit Agreement, the other Loan Documents and applicable Laws; provided that
any noncash dividends, interest, principal or other distributions that would
constitute Pledged Equity or Pledged Debt, whether resulting from a
subdivision, combination or reclassification of the outstanding Equity
Interests of the issuer of any Pledged Securities or received in exchange for
Pledged Securities or any part thereof, or in redemption thereof, or as a
result of any merger, consolidation, 

 

6

 

acquisition or other exchange of assets to which such issuer may be
a party or otherwise, shall be and become part of the Pledged Collateral, and, if
received by any Grantor, shall not be commingled by such Grantor with any of
its other funds or property but shall be held separate and apart therefrom,
shall be held in trust for the benefit of the Collateral Agent and the Secured
Parties and shall be forthwith delivered to the Collateral Agent in the same form as
so received (with any necessary endorsement reasonably requested by the
Collateral Agent).

 

(b)                                 Upon
the occurrence and during the continuance of an Event of Default, after the
Collateral Agent shall have notified the Borrower of the suspension of the
rights of the Grantors under paragraph (a)(iii) of this Section 2.06,
then all rights of any Grantor to dividends, interest, principal or other
distributions that such Grantor is authorized to receive pursuant to paragraph
(a)(iii) of this Section 2.06 shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to receive and retain such dividends, interest,
principal or other distributions. All dividends, interest, principal or other
distributions received by any Grantor contrary to the provisions of this Section 2.06
shall be held in trust for the benefit of the Collateral Agent, shall be
segregated from other property or funds of such Grantor and shall be forthwith
delivered to the Collateral Agent upon demand in the same form as so
received (with any necessary endorsement reasonably requested by the Collateral
Agent). Any and all money and other property paid over to or received by the
Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 4.02. After all
Events of Default have been cured or waived, the Collateral Agent shall
promptly repay to each Grantor (without interest) all dividends, interest,
principal or other distributions that such Grantor would otherwise be permitted
to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.06
and that remain in such account.

 

(c)                                  Upon
the occurrence and during the continuance of an Event of Default, after the
Collateral Agent shall have notified the Borrower of the suspension of the
rights of the Grantors under paragraph (a)(i) of this Section 2.06,
then all rights of any Grantor to exercise the voting and consensual rights and
powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 2.06,
and the obligations of the Collateral Agent under paragraph (a)(ii) of
this Section 2.06, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent, which shall have the sole and exclusive right
and authority to exercise such voting and consensual
rights and powers; provided that,
unless otherwise directed by the Required Lenders, the Collateral Agent shall
have the right from time to time following and during the continuance of an
Event of Default to permit the Grantors to exercise such rights. After all
Events of Default have been cured or waived, each Grantor shall have the
exclusive right to exercise the voting and/or consensual rights and powers that
such Grantor would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) of this Section 2.06.

 

(d)                                 Any
notice given by the Collateral Agent to the Borrower suspending the rights of
the Grantors under paragraph (a) of this Section 2.06(i) may be
given by telephone if promptly confirmed in writing, (ii) may be
given with respect to one or more of the Grantors at the same or different
times and (iii) may suspend the rights of the Grantors under
paragraph (a)(i) or paragraph (a)(iii) of this Section 2.06 in part without
suspending all such rights (as specified 

 

7

 

by the Collateral Agent in its
sole and absolute discretion) and without waiving or otherwise affecting the
Collateral Agent’s rights to give additional notices from time to time
suspending other rights so long as an Event of Default has occurred and is
continuing.

 

ARTICLE III

 

Security Interests in Personal Property

 

SECTION 3.01.
Security Interest.

 

(a)                                  As security for the payment or performance,
as the case may be, in full of the Obligations, including the Guaranties,
each Grantor hereby assigns and pledges to the Collateral Agent, its successors
and assigns, for the benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Parties, a security interest (the “Security Interest”)  in all right, title or interest in
or to any and all of the following assets and properties now owned or at any
time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any
right, title or interest (collectively, the “Article 9 Collateral”):

 

(i)                                     all property;

 

(ii)                                  all Accounts;

 

(iii)                               all Chattel Paper;

 

(iv)                              all Commercial Tort
Claims described on Schedule III hereto;

 

(v)                                 all Deposit Accounts;

 

(vi)                              all Documents;

 

(vii)                           all Equipment;

 

(viii)                        all General Intangibles;

 

(ix)                                all Instruments;

 

(x)                                   all Inventory;

 

(xi)                                all Investment
Property;

 

(xii)                             all books and records
pertaining to the Article 9 Collateral; and

 

(xiii)                          to the extent not otherwise
included, all Proceeds and products of any and all of the foregoing and all
supporting obligations, collateral security and guarantees given by any Person
with respect to any of the foregoing;

 

provided that notwithstanding anything to the contrary in
this Agreement, this Agreement shall not constitute a grant of a security
interest in (A) motor vehicles and other assets subject to 

 

8

 

certificates
of title, (B) any Equity Interests in any Unrestricted Subsidiary
or any Equity Interests of any Subsidiary acquired pursuant to a Permitted
Acquisition financed with Indebtedness incurred pursuant to Section 7.03(g) of
the Credit Agreement if such Equity Interests serve as security for such
Indebtedness or if the terms of such Indebtedness prohibit the creation of any
other lien on such Equity Interests, (C) more than 65% of the issued and
outstanding voting Equity Interests of any Foreign Subsidiary or any Equity
Interests of any Subsidiary of a  Foreign Subsidiary, (D) Equity
Interests of any Person (other than the Borrower) that is not a direct or
indirect wholly owned Material Subsidiary of the Borrower, (E) any asset
(including Equity Interests) with respect to which the Administrative Agent and
the Borrower determine in their reasonable judgments that the costs or other
consequences (including adverse tax consequences) of providing a security
interest in such asset is excessive in view of the benefits to be obtained by
the Secured Parties, or (F) any General Intangible, Investment Property or
other rights of a Grantor arising under any contract, lease, instrument,
license or other document if (but only
to the extent that) the grant of a security interest therein would (x)
constitute a violation of a valid and enforceable restriction in respect of
such General Intangible, Investment Property or other such rights in favor of a
third party or under any law, regulation, permit, order or decree of any
Governmental Authority, unless and until all required consents shall have been
obtained (for the avoidance of doubt, the restrictions described herein shall
not include negative pledges or similar undertakings in favor of a lender or
other financial counterparty) or (y) expressly give any other party in respect
of any such contract, lease, instrument, license or other document, the right
to terminate its obligations thereunder; provided,
however, that the limitation set
forth in clause (F) above, shall not affect, limit, restrict or impair the
grant by a Grantor of a security interest pursuant to this Agreement in any
such Collateral to the extent that an otherwise applicable prohibition or restriction
on such grant is rendered ineffective by any applicable law, including the Uniform Commercial
Code. Each Grantor shall, if requested to do so by the Administrative Agent,
use commercially reasonable efforts to obtain any such required consent that is
reasonably obtainable with respect to Collateral which the Administrative Agent
reasonably determines to be material.

 

(b)                                 Each
Grantor hereby irrevocably authorizes the Collateral Agent for the benefit of
the Secured Parties at any time and from time to time to file in any relevant
jurisdiction any initial financing statements (including fixture filings) with respect to the Article 9
Collateral or any part thereof and amendments thereto that (i) indicate
the Collateral as all assets of such Grantor or words of similar effect or
being of an equal or lesser scope or with greater detail, and (ii) contain
the information required by Article 9 of the Uniform Commercial Code
or the analogous legislation of each applicable jurisdiction for the filing of
any financing statement or amendment, including (A) whether such Grantor
is an organization, the type of organization and any organizational
identification number issued to such Grantor and .(B) in the
case of a financing statement filed as a fixture filing, a sufficient description of the real
property to which such Article 9 Collateral relates. Each Grantor agrees
to provide such information to the Collateral Agent promptly upon request.

 

(c)                                  The
Security Interest is granted as security only and shall not subject the
Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or
arising out of the Article 9 Collateral.

 

9

 

SECTION 3.02.
Representations and Warranties. Holdings and the Borrower jointly and
severally represent and warrant, as to themselves and the other Grantors, to
the Collateral Agent and the other Secured Parties that:

 

(a)                                  Each Grantor has good
and valid rights in and title to the Article 9 Collateral with respect to
which it has purported to grant a Security Interest hereunder and has full
power and authority to grant to the Collateral Agent the Security Interest in
such Article 9 Collateral pursuant hereto and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval that has
been obtained.

 

(b)                                 The Perfection
Certificate has been duly prepared, completed and executed and the information
set forth therein, including the exact legal name of each Grantor, is correct
and complete in all material respects as of the Closing Date. The UCC financing
statements (including fixture filings, as applicable) or other appropriate
filings, recordings or registrations prepared by the Collateral Agent based
upon the information provided to the Collateral Agent in the Perfection
Certificate for filing in each governmental, municipal or other office
specified in Schedule 4 to the Perfection Certificate (or specified by
notice from the Borrower to the Collateral Agent after the Closing Date in the
case of filings, recordings or registrations required by Section 6.11 of
the Credit Agreement), are all the filings, recordings and registrations that
are necessary to establish a legal, valid and perfected security interest in
favor of the Collateral Agent (for the benefit of the Secured Parties) in
respect of all Article 9 Collateral in which the Security Interest may be
perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements.

 

(c)                                  The Security Interest
constitutes (i) a legal and
valid security interest in all the Article 9 Collateral securing the
payment and performance of the Obligations and (ii) subject to the filings
described in Section 3.02(b), a perfected security interest in all Article 9
Collateral in which a security interest may be perfected by filing,
recording or registering a financing statement or analogous document in the
United States (or any political subdivision thereof) and its territories and
possessions pursuant to the Uniform Commercial Code in the relevant
jurisdiction. The Security Interest is and shall be prior to any other Lien on
any of the Article 9 Collateral, other than (i) any nonconsensual
Lien that is expressly permitted pursuant to Section 7.01 of the Credit
Agreement and has priority as a matter of law and (ii) Liens expressly
permitted pursuant to Section 7.01 of the Credit Agreement.

 

(d)                                 The
Article 9 Collateral is owned by the Grantors free and clear of any Lien,
except for Liens expressly permitted pursuant to Section 7.01 of the
Credit Agreement. None of the Grantors has filed or consented to the filing of
(i).any financing statement or analogous document under the New York
UCC or any other applicable laws covering any Article 

 

10

 

9 Collateral or (ii) any assignment in which any Grantor assigns
any Article 9 Collateral or any security agreement or similar instrument
covering any Article 9 Collateral with any foreign governmental, municipal
or other office, which financing statement or analogous document, assignment,
security agreement or similar instrument is still in effect, except, in each case, for
Liens expressly permitted pursuant to
Section 7.01 of the Credit Agreement.

 

(e)                                  All Commercial Tort
Claims in an amount in excess of $5,000,000 of each Grantor in existence on the
date of this Agreement (or on the date upon which such Grantor becomes a party
to this Agreement) are described on Schedule III hereto.

 

SECTION 3.03.
Covenants.

 

(a)                                  The
Borrower agrees promptly to notify the Collateral Agent in writing of any
change (i) in legal name of any Grantor, (ii) in the identity or type
of organization or corporate structure of any Grantor, or (iii) in the
jurisdiction of organization of any Grantor, in each case, within 10 days of
such change.

 

(b)                                 Each
Grantor shall, at its own expense, take any and all commercially reasonable
actions necessary to defend title to the Article 9 Collateral against all
Persons and to defend the Security Interest, of the Collateral Agent in the Article 9
Collateral and the priority thereof against any Lien not expressly permitted
pursuant to Section 7.01 of the Credit Agreement.

 

(c)                                  Each
year, at the time of delivery of annual financial statements with respect to
the preceding fiscal year pursuant to Section 6.01 of the Credit
Agreement, the Borrower shall deliver to the Collateral Agent a certificate
executed by the chief financial officer and the chief legal officer of the
Borrower setting forth the information required pursuant to Sections 1(a),
1(c), 1(e), 1(f) and 2(b) of the Perfection Certificate or confirming
that there has been no change in such information since the date of such
certificate or the date of the most recent certificate delivered pursuant to
this Section 3.03(c) or any interim certificate.

 

(d)                                 The
Borrower agrees, on its own behalf and on behalf of each other Grantor, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Collateral
Agent may from time to time reasonably request to better assure, preserve,
protect and perfect the Security Interest and the rights and
remedies created hereby, including the payment of any fees and taxes required
in connection with the execution and delivery of this Agreement, the granting
of the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith. If any
amount payable under or in connection with any of the Article 9 Collateral
that is in excess of $5,000,000 shall be or become evidenced by any promissory
note or other instrument, such note or instrument shall be promptly pledged and
delivered to the Collateral Agent, for the benefit of the Secured Parties, duly
endorsed in a manner reasonably satisfactory to the Collateral Agent.

 

(e)                                  At
its option, the Collateral Agent may discharge past due taxes,  assessments,
charges, fees, Liens, security interests or other encumbrances at any time
levied or placed on the Article 9 Collateral and not permitted pursuant to
Section 7.01 of the Credit Agreement, and may pay for the maintenance
and preservation of the Article 9 Collateral to the 

 

11

 

extent any Grantor fails to do
so as required by the Credit Agreement or this Agreement and within a
reasonable period of time after the Collateral Agent has requested that it do
so, and each Grantor
jointly and severally agrees to reimburse the Collateral Agent within 10 days
after demand for any payment made or any reasonable expense incurred by the Collateral Agent pursuant to the foregoing
authorization. Nothing in this paragraph shall be interpreted as excusing any
Grantor from the performance of, or imposing any obligation on the Collateral
Agent or any Secured Party to cure or perform, any covenants or other promises
of any Grantor with respect to taxes, assessments, charges, fees, Liens,
security interests or other encumbrances and maintenance as set forth herein,
in the other Loan Documents.

 

(f)                                    If
at any time any Grantor shall take a security interest in any property of an Account
Debtor or any other Person, the value of which is in excess of $5,000,000, to
secure payment and performance of an Account, such Grantor shall promptly
assign such security interest to the Collateral Agent for the benefit of the
Secured Parties. Such assignment need not be filed of public record unless
necessary to continue the perfected .status of the security interest
against creditors of and transferees from the Account Debtor or other Person
granting the security interest.

 

(g)                                 Each
Grantor (rather than the Collateral Agent or any Secured Party) shall remain
liable (as between itself and any relevant counterparty) to observe and perform all
the conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Article 9 Collateral,
all in accordance with the terms and conditions thereof, and each Grantor
jointly and severally agrees to indemnify and hold harmless the Collateral
Agent and the Secured Parties from and against any and all liability for such
performance.

 

(h)                                 If
any Grantor shall at any time hold or acquire a Commercial Tort Claim with a
value in excess of $5,000,000, such Grantor shall promptly notify the
Collateral Agent in writing signed by such Grantor of the brief details thereof
and grant to the Collateral Agent a security interest therein and in the
Proceeds thereof, all upon the terms of this Agreement pursuant to a document
in form and substance reasonably satisfactory to the Collateral Agent.

 

(i)                                     On
or prior to a date that is (1) 90 days after the Closing Date, or such
later date as the Collateral Agent in its discretion may reasonably
determine, after any request for extension by the Borrower, the Collateral
Agent shall receive share certificates for the Subsidiaries listed on Schedule IV,
together with stock powers duly executed in blank or other instruments of
transfer reasonably satisfactory to the Collateral Agent and such other
instruments and documents as the Collateral Agent may reasonably request
if such Subsidiary has not been liquidated or dissolved by such date and (2) 15
days after the Closing Date, or such later date as the Collateral Agent in its
discretion may reasonably determine, after any request for extension by
the Borrower, the Collateral Agent shall receive the duly executed promissory
notes listed on Schedule II, together with note powers duly executed in
blank or other instruments of transfer reasonably satisfactory to the
Collateral Agent and such other instruments and documents as the Collateral
Agent may reasonably request.

 

SECTION 3.04. Other
Actions. In order to further insure the attachment, perfection and priority
of, and the ability of the Collateral Agent to enforce, the Security Interest, 

 

12

 

each Grantor agrees, in each case at such
Grantor’s own expense, to take the following actions with respect to the
following Article 9 Collateral:

 

(a)                                  Instruments. If any Grantor shall at any
time hold or acquire any Instruments constituting Collateral and evidencing an
amount in excess of $5,000,000, such Grantor shall forthwith endorse, assign
and deliver the same to the Collateral Agent for the benefit of the Secured
Parties, accompanied by such instruments of transfer or assignment duly
executed in blank as the Collateral Agent may from time to time reasonably
request.

 

(b)                                 Investment Property. Except to the extent
otherwise provided in Article II, if any Grantor shall at any time hold or
acquire any certificated securities, such Grantor shall forthwith endorse,
assign and deliver the same to the Collateral Agent for the benefit of the
Secured Parties, accompanied by such instruments of transfer or assignment duly
executed in blank as the Collateral Agent may from time to time reasonably
request. If any securities now or hereafter acquired by any Grantor are
uncertificated and are issued to such Grantor or its nominee directly by the
issuer thereof, upon the Collateral Agent’s request and following the
occurrence of an Event of Default such Grantor shall promptly notify the
Collateral Agent thereof and, at the Collateral Agent’s reasonable request,
pursuant to an agreement in form and substance reasonably satisfactory to
the Collateral Agent, either (i) cause the issuer to agree to comply with
instructions from the Collateral Agent as to such securities, without further
consent of any Grantor or such nominee, or (ii) arrange for the Collateral
Agent to become the registered owner of the securities. If any securities,
whether certificated or uncertificated, or other investment property are held
by any Grantor or its nominee through a securities intermediary or commodity
intermediary, upon the Collateral Agent’s request and following the occurrence
of an Event of Default, such Grantor shall immediately notify the Collateral
Agent thereof and at the Collateral Agent’s request and option, pursuant to an
agreement in form and substance reasonably satisfactory to the Collateral
Agent, shall either (i) cause such securities intermediary or (as the case
may be) commodity intermediary to agree to comply with entitlement orders
or other instructions from the Collateral Agent to such securities intermediary
as to such security entitlements, or (as the ease may be) to apply any
value distributed on account of any commodity contract as directed by the
Collateral Agent to such commodity intermediary, in each case without further
consent of any Grantor or such nominee, or (ii) in the case of financial
assets or other Investment Property held through a securities intermediary,
arrange for the Collateral Agent to become the entitlement holder with respect
to such Investment Property, with the Grantor being permitted, only with the
consent of the Collateral Agent, to exercise rights to withdraw or otherwise
deal with such Investment Property. The Collateral Agent agrees with each of
the Grantors that the Collateral Agent shall not give any such entitlement
orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by any Grantor, unless an
Event of Default has occurred and is continuing. The provisions of this
paragraph shall not apply to any financial assets credited to a securities
account for which the Collateral Agent is the securities intermediary.

 

13

 

(c)                                  Commercial Tort Claims. If any  Grantor shall at any time  after the date of this Agreement
acquire a Commercial Tort Claim in an amount (taking the greater of the
aggregate claimed damages thereunder or the reasonably estimated value thereof)
of $5,000,000 or more, such Grantor shall promptly notify the Collateral Agent
thereof in a writing signed by such Grantor and provide supplements to Schedule III
describing the details thereof and shall grant to the Collateral Agent a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement.

 

ARTICLE IV

 

Remedies

 

SECTION 4.01. Remedies
Upon Default. Upon the occurrence and during the continuance of an Event of
Default, it is agreed that the Collateral Agent shall have the right to
exercise any and all rights afforded to a secured party with respect to the
Obligations under the Uniform Commercial Code or other applicable law and
also may (i) require each Grantor to, and each Grantor agrees that it
will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of the Collateral as directed by the Collateral Agent
and make it available to the Collateral Agent at a place and time to be
designated by the Collateral Agent that is reasonably convenient to both
parties; (ii) occupy any premises owned or, to the extent lawful and
permitted, leased by any of the Grantors where the Collateral or any part thereof
is assembled or located for a reasonable period in order to effectuate its
rights and remedies hereunder or under law, without obligation to such Grantor
in respect of such occupation; provided that the Collateral Agent shall provide
the applicable Grantor with notice thereof prior to or promptly after such
occupancy; (iii) exercise any and all rights and remedies of any of the
Grantors under or in connection with the Collateral, or otherwise in respect of
the Collateral; provided
that the Collateral Agent shall provide the applicable Grantor with
notice thereof prior to or promptly after such exercise; and (iv) subject
to the mandatory requirements of applicable law and the notice requirements
described below, sell or otherwise dispose of all or any part of the Collateral securing the Obligations at a
public or private sale or at any broker’s board or on any securities exchange,
for cash, upon credit or for future delivery as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be authorized at any such sale of
securities (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to Persons who will represent and agree that they are
purchasing the Collateral for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and deliver
to the purchaser or purchasers thereof the Collateral so sold. Each  such purchaser at any sale of Collateral
shall hold the property sold absolutely, free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and
appraisal which such Grantor now has or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted.

 

The Collateral
Agent shall give the applicable Grantors 10 days’ written notice (which each
Grantor agrees is reasonable notice within the meaning of Section 9-611 of
the New York UCC or its equivalent in other jurisdictions) of the Collateral
Agent’s intention to make any sale of Collateral. Such notice, in the case of a
public sale, shall state the time and place for such sale and, in the case of a
sale at a broker’s board or on a securities exchange, shall state the 

 

14

 

board or exchange at  which
such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in
the notice (if any) of such sale. At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine. The Collateral Agent shall not be obligated to make any sale of any
Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of
the Collateral is made on credit or for future delivery, the Collateral so sold
may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Collateral Agent shall not incur
any liability in case any such purchaser or purchasers shall fail to take up
and pay for the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. At any public (or, to the
extent permitted by law, private) sale made pursuant to this Agreement, any
Secured Party may bid for or purchase, free (to the extent permitted by
law) from any right of redemption, stay, valuation or appraisal on the part of
any Grantor (all said rights being also hereby waived and released to the
extent permitted by law), the Collateral or any part thereof offered for
sale and may make payment on account thereof by using any claim then due
and payable to such Secured Party from any Grantor as a credit against the
purchase price, and such Secured Party may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to any Grantor therefor. For purposes hereof, a written agreement to purchase
the Collateral or any portion thereof shall be treated as a sale thereof; the
Collateral Agent shall be free to carry out such sale pursuant to such
agreement and no Grantor shall be entitled to the return of the Collateral or
any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Collateral Agent may proceed
by a suit or suits at law or in equity to foreclose this Agreement and to sell
the Collateral or any portion thereof pursuant to a judgment or decree of a
court or courts having competent jurisdiction or pursuant to a proceeding by a
court appointed receiver. Any sale pursuant to the provisions of this Section 4.01
shall be deemed to conform to the commercially reasonable standards as
provided in Section 9-610(b) of the New York UCC or its equivalent in
other jurisdictions.

 

SECTION 4.02.
Application of Proceeds.

 

(a)                                  The
Collateral Agent shall apply the proceeds of any collection or sale of
Collateral, including any Collateral consisting of cash, in accordance with Section 8.04
of the Credit Agreement as of the Closing Date.

 

The Collateral
Agent shall have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement. Upon any sale
of Collateral by the Collateral Agent (including pursuant to a power of sale
granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale 

 

15

 

shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to the
Collateral Agent or such officer or be answerable in any way for the
misapplication thereof.

 

(b)                             In
making the determinations and allocations required by this Section 4.02,
the Collateral Agent may conclusively rely upon information supplied by
the Administrative Agent as to the amounts of unpaid principal and interest and
other amounts outstanding with respect to the Obligations; and the Collateral
Agent shall have no liability to any of the Secured Parties for actions taken
in reliance on such information; provided that nothing in this sentence shall
prevent any Grantor from contesting any amounts claimed by any Secured Party in
any information so supplied. All distributions made by the Collateral Agent pursuant to this Section 4.02
shall be (subject to any decree of any court of competent jurisdiction) final
(absent manifest error), and the Collateral Agent shall have no duty to inquire
as to the application by the
Administrative Agent of any amounts distributed to it.

 

ARTICLE V

 

Indemnity, Subrogation and Subordination

 

SECTION 5.01.
Indemnity. In addition to all such rights of indemnity and subrogation
as the Grantors may have under applicable law (but subject to Section 5.03),
each Borrower
agrees that, in the event any assets of any Grantor shall be sold
pursuant to this Agreement or any other Collateral Document to satisfy in whole
or in part an Obligation owed to any
Secured Party, the Borrower shall indemnify such Grantor in an amount equal to
the greater of the book value or the fair market value of the assets so sold.

 

SECTION 5.02.
Contribution and Subrogation. Each Grantor (a “Contributing Party”) agrees (subject to Section 5.03)
that, in the event
assets of any other Grantor shall be sold pursuant to any Collateral
Document to satisfy any Obligation owed to any Secured Party, and such other
Grantor (the “Claiming Party”)  shall not have been fully indemnified by
the Borrower as provided in Section 5.01, the Contributing Party shall indemnify the Claiming Party in an amount
equal to the greater of the book
value or the fair market value
of such  assets, in each case multiplied by a fraction
of which the numerator shall be the net worth of the Contributing Party on the
date hereof and the denominator shall be the aggregate net worth of all the
Contributing Parties together with the net worth of the Claiming Party on the
date hereof (or, in the case of any Grantor becoming a party hereto pursuant to
Section 6.14, the date of the Security Agreement Supplement hereto
executed and delivered by such Grantor). Any Contributing Party making any
payment to a  Claiming Party pursuant to this Section 5.02 shall be subrogated
to the rights of such Claiming Party to the extent of such payment.

 

SECTION 5.03.
Subordination.

 

(a)                                  Notwithstanding
any provision of this Agreement to the contrary, all rights of the Grantors
under Sections 5.01 and 5.02 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully subordinated to
the indefeasible payment in full in cash of the Obligations. No failure on the part of
the Borrower or any Grantor 

 

16

 

to make the payments required
by Sections 5.01 and 5.02 (or any other payments required under applicable law
or otherwise) shall in any respect limit the obligations and
liabilities of any Grantor with respect to its obligations hereunder, and each
Grantor shall remain liable for the full amount of the obligations of such
Grantor hereunder.

 

(b)                                 Each
Grantor hereby agrees that upon the occurrence and during the continuance of an
Event of Default and after notice from the Collateral Agent all Indebtedness
owed by it to the Borrower or any Subsidiary shall be fully subordinated to the
indefeasible payment in full in cash of the Obligations.

 

ARTICLE VI

 

Miscellaneous

 

SECTION 6.01.
Notices. All communications and notices hereunder shall (except as
otherwise expressly permitted herein) be in writing and given as provided in Section 10.02
of the Credit Agreement. All communications and notices hereunder to any
Grantor shall be given to it in care of the Borrower as provided in Section 10.02
of the Credit Agreement.

 

SECTION 6.02.
Waivers; Amendment.

 

(a)                                  No
failure or delay by the Administrative Agent, the Collateral Agent, any L/C
Issuer or any Lender in exercising any right or power hereunder or under any
other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Collateral Agent, the L/C Issuers and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of this Agreement or consent to any departure by any Loan
Party therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this
Section 6.02, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, the Collateral Agent, any Lender or any L/C Issuer may have
had notice or knowledge of such Default at the time. No notice or demand on any
Loan Party in any case shall entitle any Loan Party to any other or further
notice or demand in similar or other circumstances.

 

(b)                                 Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Collateral Agent and the Loan Party or Loan Parties with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 10.01 of the Credit Agreement.

 

17

 

 

SECTION 6.03.
Collateral Agent’s Fees and Expenses.

 

(a)                                  The
parties hereto agree that the Collateral Agent shall be entitled to
reimbursement of its expenses incurred hereunder as provided in Section 10.04
of the Credit Agreement.

 

(b)                                 Without
limitation of its indemnification obligations under the other Loan Documents,
the Borrower agrees to indemnify the Collateral Agent and the other Indemnitees
(as defined in Section 10.05
of the Credit Agreement) against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee,
incurred by, or asserted against any Indemnitee arising out of, in connection
with, or as a result of, the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating to any
of the foregoing agreement or instrument contemplated hereby, or to the
Collateral, whether or not any Indemnitee is a party thereto; provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments,
suits, costs, expenses or disbursements resulted from the gross negligence or
willful misconduct of such Indemnitee or of any Affiliate, director, officer,
employee, counsel, agent or attorney-in-fact of such Indemnitee.

 

(c)                                  Any
such amounts payable as provided hereunder shall be additional Obligations
secured hereby and by the other Collateral Documents. The provisions of this Section 6.03
shall remain operative and in full force and effect regardless of the
termination of this Agreement or any other Loan Document, the consummation of
the transactions contemplated hereby, the repayment of any of the Obligations,
the invalidity or unenforceability of any term or provision of this Agreement
or any other Loan Document, or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party. All amounts due under this Section 6.03
shall be payable within 10 days of written demand therefor.

 

SECTION 6.04. Successors
and Assigns. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the permitted successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of any Grantor or the
Collateral Agent that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and assigns.

 

SECTION 6.05.
Survival of Agreement. All covenants, agreements, representations and
warranties made by the Loan Parties in the Loan Documents and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the execution and
delivery of the Loan Documents and the making of any Loans and issuance of any
Letters of Credit, regardless of any investigation made by any Lender or on its
behalf and notwithstanding that the Administrative Agent, the Collateral Agent,
any L/C Issuer or any Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is extended
under the Credit Agreement, and shall continue in full force and effect as long
as the principal of or any accrued interest on any Loan or any fee or any other
amount payable under any Loan Document is outstanding and unpaid or any Letter
of Credit is outstanding and so long as the Commitments have not expired or
terminated.

 

18

 

SECTION 6.06.
Counterparts; Effectiveness; Several Agreement. This Agreement may be
executed in counterparts, each of which shall constitute an original but all of
which when taken together shall constitute a single contract. Delivery of an
executed signature page to this Agreement by facsimile transmission or
other electronic transmission (i.e., a “PDF”
or “TIF”) shall be as effective as delivery of a
manually signed counterpart of this Agreement. This Agreement shall become
effective as to any Loan Party when a counterpart hereof executed on
behalf of such Loan Party shall have been delivered to the Collateral Agent and
a counterpart hereof shall have been executed on behalf of the Collateral
Agent, and thereafter shall be binding upon such Loan Party and the Collateral
Agent and their respective permitted successors and assigns, and shall inure to
the benefit of such Loan Party, the Collateral Agent and the other Secured
Parties and their respective successors and assigns, except that no Loan Party
shall have the right to assign or transfer its rights or obligations hereunder
or any interest herein or in the Collateral (and any such assignment or
transfer shall be void) except as expressly contemplated by this Agreement or
the Credit Agreement. This Agreement shall be construed as a separate agreement
with respect to each Loan Party and may be amended, modified, supplemented,
waived or released with respect to any Loan Party without the approval of any
other Loan Party and without affecting the obligations of any other Loan Party
hereunder.

 

SECTION 6.07.
Severability. Any provision of this Agreement held to be invalid, illegal
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

 

SECTION 6.08. Right
of Set-Off. In addition to any rights and remedies of the Lenders provided
by Law, upon the occurrence and during the continuance of any Event of Default,
each Lender and its Affiliates and each L/C Issuer and its Affiliates is
authorized at any time and from time to time, without prior notice to the
Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan
Party and its Subsidiaries) to the fullest extent permitted by applicable Law,
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other Indebtedness at any time
owing by, such Lender and its Affiliates or such L/C Issuer and its Affiliates,
as the case may be, to or for the credit or the account of the respective
Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates or such L/C Issuer and its Affiliates
hereunder or under any other Loan Document, now or hereafter
existing, irrespective of whether or not such Agent or such Lender or Affiliate
shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be
contingent or unmatured or denominated in a currency different from that of the
applicable deposit or Indebtedness. Each Lender and L/C Issuer agrees promptly
to notify the Borrower and the Administrative Agent after any such set off and
application made by such Lender
or L/C Issuer, as the case may be; provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
of the Administrative Agent, each Lender and each L/C  Issuer under this Section 6.08 are in
addition to other rights and remedies (including other rights of setoff) that
the Administrative Agent, such Lender and such L/C Issuer may have.

 

19

 

SECTION 6.09.
Governing Law; Jurisdiction; Consent to Service of Process.

 

(a)                                  This
Agreement shall be construed in accordance with and governed by the law of the
State of New York.

 

(b)                                 Each
of the Loan Parties hereby irrevocably and unconditionally submits, for itself
and its property, to the nonexclusive jurisdiction of the Supreme Court of the
State of New York sitting in New York County and of the United States District
Court of the Southern District of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any other Loan Document, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by law,
in such Federal court. Each of the parties hereto agrees that a final judgment
in any such action or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit on the judgment or in any other manner provided
by law. Nothing in this Agreement or any other Loan Document shall affect any
right that the Administrative Agent, the Collateral Agent, any L/C Issuer or
any Lender may otherwise have to bring any action or proceeding relating
to this Agreement or any other Loan Document against any Grantor or its
properties in the courts of any jurisdiction.

 

(c)                                  Each
of the Loan Parties hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any other Loan
Document in any court referred to in paragraph (b) of this Section 6.09.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an
inconvenient forum to  the maintenance of such action or
proceeding in any such court.

 

(d)                                 Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 6.01. Nothing in this Agreement or
any other Loan Document will affect the right of any party to this Agreement to
serve process in any other manner permitted by law.

 

SECTION 6.10.
WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 6.10.

 

20

 

SECTION 6.11.
Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

 

SECTION 6.12. Security
Interest Absolute. All rights of the Collateral Agent and each Lender
hereunder, the Security Interest, the grant of a security interest in the
Pledged Collateral and all obligations of each Grantor hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or enforceability of the
Credit Agreement, any other Loan Document, any agreement with respect to any of
the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any  consent to any departure from the Credit
Agreement, any .other Loan Document or any other agreement or instrument,(c) any
exchange, release or nonperfection of any Lien on other collateral, or any
release or amendment or waiver of or consent under or departure from any  guarantee, securing or guaranteeing all or
any of the Obligations or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Grantor in respect of
the Obligations or this Agreement.

 

SECTION 6.13.
Termination or Release.

 

(a)                                  This
Agreement, the Security Interest and all other security interests granted
hereby shall terminate with respect to all Obligations (other than (x)
obligations under Secured Hedge Agreements not yet due and payable, (y) Cash
Management Obligations not yet due and payable and (z) contingent
indemnification obligations not yet accrued and payable) when all the
outstanding Obligations have been indefeasibly paid in full and the Lenders
have no further commitment to lend under the Credit Agreement, the L/C
Obligations have been reduced to zero (unless the L/C Obligations shall have
been collateralized on terms and conditions reasonably satisfactory to the
relevant L/C Issuer following the termination of the Commitments) and the L/C
Issuers have no further obligations to issue Letters of Credit under the Credit
Agreement (the “Termination Date”).

 

(b)                                 A
Subsidiary Party shall automatically be released from its obligations hereunder
and the Security Interest in the Collateral of such Subsidiary Party shall be
automatically released upon the consummation of any transaction permitted by
the Credit Agreement as a result of which such Subsidiary Party ceases to be a
Subsidiary or is designated as an Unrestricted Subsidiary of the Borrower; provided that
the Required Lenders shall have consented to such transaction (to the extent
required by the Credit Agreement) and the terms of such consent did not provide
otherwise.

 

(c)                                  Upon
any sale or other transfer by any Grantor of any Collateral (other than any
transfer to another Guarantor or to any Intermediate Holding Company that is
required to become a Guarantor) that is permitted under the Credit Agreement,
or upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 10.01 of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.

 

21

 

(d)                                 Upon
the execution and delivery by any Intermediate Holding Company of the Security
Agreement Supplement and its becoming a Grantor hereunder, Holdings shall
automatically cease to be a Grantor hereunder and the security interests in its
Collateral granted hereunder shall automatically be released; provided however, that the foregoing provision shall not
operate as a release of any security interest in the Equity Interests of the
Borrower which shall continue undisturbed both prior to and after any transfer
of such Equity Interests to any Intermediate Holding Company.

 

(e)                                  In
connection with any termination or release pursuant to paragraph (a), (b), (c),
or (d) of this Section 6.13, the Collateral Agent shall execute and
deliver to any Grantor, at such Grantor’s expense, all documents that such
Grantor shall reasonably request to evidence such termination or release. Any
execution and delivery of documents pursuant to this Section 6.13 shall be
without recourse to or warranty by the Collateral Agent.

 

(f)                                    Notwithstanding
anything to contrary set forth in this Agreement, each Cash Management Bank and
each Hedge Bank by the acceptance of the benefits under this Agreement hereby
acknowledges and agrees that (i) the Security Interests granted under this
Agreement of the Obligations of any Loan Party and its Subsidiaries under any
Secured Hedge Agreement and the Cash Management Obligations shall be
automatically released upon termination of the Commitments and payment in full
of all other Obligations, in each case, unless the Obligations under the
Secured Hedge Agreement or the Cash Management Obligations are due and payable
at such time (it being understood and agreed that this Agreement and the
Security Interests granted herein shall survive solely as to such due and
payable Obligations and until such time as such due and payable Obligations
have been paid in full) and (ii) any release of Collateral or of a
Grantor, as the case may be, effected in the manner permitted by this
Agreement shall not require the consent of any Hedge Bank or Cash Management
Bank.

 

SECTION 6.14.
Additional Restricted Subsidiaries and Intermediate Holding Companies. Pursuant
to Section 6.11 of the Credit Agreement, any Intermediate Holding Company
and certain Restricted Subsidiaries of the Loan Parties that were not in
existence or not Restricted Subsidiaries on the date of the Credit Agreement
are required to enter in this Agreement as Grantors and, in the case of such
Restricted Subsidiaries, Subsidiary Parties, upon becoming Restricted
Subsidiaries or an Intermediate Holding Company. Upon execution and delivery by
the Collateral Agent and a Restricted Subsidiary or Intermediate Holding
Company, as the case may be, of a Security Agreement
Supplement, such Restricted Subsidiary or Intermediate Holding Company shall
become a Grantor and, in the case of such Restricted Subsidiary, a Subsidiary
Party hereunder with the same force and effect as if originally named as a
Grantor or a Subsidiary Party, as applicable, herein. The execution and
delivery of any such instrument shall not require the consent of any other Loan
Party hereunder. The rights and obligations of each Loan Party hereunder shall
remain in full force and effect notwithstanding the addition of any new Loan
Party as a party to this Agreement.

 

SECTION 6.15. Collateral
Agent Appointed Attorney-in-Fact. Each Grantor irrevocably makes,
constitutes and hereby appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor’s true
and lawful agent (and attorney-in-fact) of such Grantor for the purpose of
carrying out the provisions of this 

 

22

 

Agreement and taking any action
and executing any instrument that the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof at any time after and during the
continuance of an Event of Default, which appointment is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, the
Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default and notice by the Collateral Agent to the
Borrower of its intent to exercise such rights, with full power of substitution
either in the Collateral Agent’s name or in the name of such Grantor, (a) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment relating to the Collateral
or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral; (c) to
sign the name of any Grantor on any invoice or bill of lading relating to any
of the Collateral; (d) to send verifications of Accounts Receivable to any
Account Debtor; (e) to commence and prosecute any and all suits, actions
or proceedings at law or in equity in any court of competent jurisdiction to collect or
otherwise realize on all or any of the Collateral or to enforce any rights in
respect of any Collateral; (f) to settle, compromise, compound, adjust or
defend any actions, suits or proceedings relating to all or any of the Collateral; (g) to
notify, or to require any Grantor
to notify, Account Debtors to make payment directly to the Collateral Agent; (h) to
make, settle and adjust claims in respect of Article 9 Collateral under
policies of insurance, endorsing
the name of such Grantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance; (i) to make all
determinations and decisions with respect thereto and (j) to obtain or maintain
the policies of insurance required by Section 6.07 of the Credit Agreement
or paying any premium in whole
or in part relating thereto; and (k) to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to
do all other acts and things necessary to carry out the purposes of this Agreement, as fully and
completely as though the Collateral Agent were the absolute owner of the
Collateral for all purposes; provided
that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Collateral Agent, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to
become due in respect thereof or any property covered thereby. The Collateral
Agent and the other Secured Parties shall be accountable only for amounts
actually received as a result of the exercise of the powers granted to them
herein, and neither they nor their officers, directors, employees or agents
shall be responsible to any Grantor for any act or failure to act hereunder,
except for their own gross negligence or willful misconduct or that of any of
their Affiliates, directors, officers, employees, counsel, agents or
attorneys-in-fact. All sums disbursed by the Collateral Agent in connection with this paragraph, including reasonable attorneys’ fees, court
costs, expenses and other charges relating thereto, shall be payable, within 10
days of demand, by the Grantors
to the Collateral Agent and shall be additional Obligations secured hereby.

 

SECTION 6.16.
General Authority of the Collateral Agent. By acceptance of the benefits
of this Agreement and any other Collateral Documents, each Secured Party
(whether or not a signatory hereto) shall be deemed irrevocably (a) to
consent to the appointment of the Collateral Agent as its agent hereunder and
under such other Collateral Documents, (b) to confirm that the Collateral
Agent shall have the authority to act as the exclusive agent of such Secured
Party for the enforcement of any provisions of this Agreement and such other
Collateral Documents against any Grantor, the exercise of remedies hereunder or
thereunder and the giving 

 

23

 

or withholding of any consent
or approval hereunder or thereunder relating to any Collateral or any Grantor’s
obligations with respect thereto, (c) to agree that it shall not take any
action to enforce any provisions of this Agreement or any other Collateral
Document against any Grantor, to exercise any remedy hereunder or thereunder or
to give any consents or approvals hereunder or thereunder except as expressly
provided in this Agreement or any other Collateral Document and (d) to
agree to be bound by the terms of this Agreement and any other Collateral
Documents.

 

24

 

IN WITNESS WHEREOF, the
parties hereto have duly executed this Agreement as of the day and year
first above written.

 

	
   

  	
  REABLE THERAPEUTICS FINANCE LLC,
  

  as the Borrower,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
    Name: 

  	
  Harry L. Zimmerman

  
	
   

  	
   

  	
    Title:

  	
  Executive
  Vice President, General 

  Counsel, Secretary and Assistant 

  Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  REABLE THERAPEUTICS HOLDINGS LLC,
  

  as Holdings,

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
    Name: 

  	
  Harry L. Zimmerman

  
	
   

  	
   

  	
    Title:

  	
  Executive
  Vice President, General 

  Counsel, Secretary and Assistant 

  Treasurer

  
						

 

[DJO Security Agreement]

 

 

	
   

  	
  REABLE THERAPEUTICS LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  REABLE THERAPEUTICS FINANCE CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL PARTNERS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL ASSET CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL GP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EMPI, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EMPI CORP.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EMPICARE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  IOMED, LLC,

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
    Name: 

  	
  Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
    Title:

  	
  Executive
  Vice President, General 

  Counsel, Secretary and Assistant 

  Treasurer

  
							

 

[DJO Security Agreement]

 

 

	
   

  	
  DJO
  INCORPORATED 

  

  DJO, LLC,

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Donald M. Roberts

  
	
   

  	
   

  	
    Name: 

  	
  Donald M. Roberts

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice
  President and General 

  Counsel

  

 

[DJO Security Agreement]

 

 

	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS 

  BRANCH,  

  as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Judith E. Smith

  	
   

  
	
   

  	
   

  	
    Name: 

  	
  Judith E. Smith

  
	
   

  	
   

  	
    Title: 

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Doreen Barr

  	
   

  
	
   

  	
   

  	
    Name: 

  	
  Doreen Barr

  
	
   

  	
   

  	
  Title: 

  	
  Vice President

  
					

 

[DJO Security Agreement]

 

 

Schedule I

Subsidiary Parties

 

	
   

  
	
   

  
	
   

  

 

 

Schedule II

Pledged Equity and Pledged Notes and Instruments

 

Pledged Equity

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered Owner

  	
   

  	
  Number and Class of 

  Equity Interests

  	
   

  	
  Percentage of

  Equity Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Pledged Notes and
Instruments

 

	
  Lender

  	
   

  	
  Issuer

  	
   

  	
  Principal Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule III

Commercial Tort Claims

 

 

Schedule IV

Certain Foreign Subsidiaries

 

 

Exhibit I to the

Security Agreement

 

SUPPLEMENT NO.      
dated as of [   ], to the Security Agreement dated as of November 20, 2007 among REABLE THERAPEUTICS FINANCE LLC (to be
renamed DJO FINANCE LLC), a Delaware limited liability company (the “Borrower”), REABLE THERAPEUTICS HOLDINGS LLC (to be renamed
DJO HOLDINGS LLC), a Delaware limited liability company (“Holdings”),  the Subsidiaries of Holdings from
time to time party hereto and CREDIT SUISSE, as Collateral Agent.

 

A.                                   Reference
is made to the Credit Agreement dated as of November 20, 2007 (as amended,
supplemented or otherwise modified from time to time, the “Credit
Agreement”),  among the
Borrower,  Holdings, Credit Suisse, as Administrative Agent,
Collateral Agent, Swing Line Lender and an L/C Issuer, and each lender from time
to time party thereto (collectively, the “Lenders”  and individually, a “Lender”).

 

B.                                     Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement and the Security Agreement referred
to therein.

 

C.                                     The
Grantors have entered into the Security Agreement in order to induce the
Lenders to make Loans and the L/C Issuers to issue Letters of Credit. Section 6.14
of the Security Agreement provides that any Intermediate Holding Company or
additional Restricted Subsidiaries of the Borrower may become Grantors
and, in the case of such Restricted Subsidiaries, Subsidiary Parties under the
Security Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Intermediate Holding Company or Restricted
Subsidiary (the “New Grantor”) is executing this
Supplement in accordance with the requirements of the Credit Agreement to
become a Grantor and, in the case of any such Restricted Subsidiary, a
Subsidiary Party under the Security Agreement in order to induce the Lenders to
make additional Loans and the L/C Issuers to issue additional Letters of Credit
and as consideration for Loans previously made and Letters of Credit previously
issued.

 

Accordingly,
the Collateral Agent and the New Grantor agree as follows:

 

SECTION 1.
In accordance with Section 6.14 of the Security Agreement, the New Grantor
by its signature below becomes a Grantor and a Subsidiary Party, as applicable,
under the Security Agreement with the same force and effect as if originally
named therein as a Grantor and a Subsidiary Party, as applicable, and the New
Grantor hereby (a) agrees to all the terms and provisions of the Security
Agreement applicable to it as a Subsidiary Party and Grantor, as applicable,
thereunder and (b) represents and warrants that the representations and
warranties made by it as a Grantor thereunder are true and correct on and as of
the date hereof. In furtherance of the foregoing, the New Grantor, as security
for the payment and performance in full of the Obligations does hereby create
and grant to the Collateral Agent, its successors and assigns, for the benefit
of the Secured Parties, their successors and assigns, a security interest in
and lien on all of the New Grantor’s right, title and interest in and to the
Collateral (as defined in the Security Agreement) of the New Grantor. Each
reference to a “Grantor” in the Security Agreement
shall be deemed to include the New Grantor. The Security Agreement is hereby
incorporated herein by reference.

 

 

Exhibit I - 1

 

 

SECTION 2.
The New Grantor represents and warrants to the Collateral Agent and the other
Secured Parties that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.

 

SECTION 3.
This Supplement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract. This
Supplement shall become effective when the Collateral Agent shall have received
a counterpart of this Supplement that bears the signature of the New
Grantor, and the Collateral Agent has executed a counterpart hereof. Delivery
of an executed signature page to this Supplement by facsimile transmission
or other electronic transmission (i.e., a “PDF” or “TIF”) shall be as effective
as delivery of a manually signed counterpart of this Supplement.

 

SECTION 4.
The New Grantor hereby represents and warrants that (a) set forth on Schedule I
attached hereto is a true and correct schedule of the Pledged Collateral
and (b) set forth under its signature hereto is the true and correct legal
name of the New Grantor, its jurisdiction of formation and the location of its
chief executive office.

 

SECTION 5.
Except as expressly supplemented hereby, the Security Agreement shall remain in
full force and effect.

 

SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 7.
In case any one or more of the provisions contained in this Supplement should
be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and in
the Security Agreement shall not in any way be affected or impaired thereby (it
being understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision
in any other jurisdiction). The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.

 

SECTION 8.
All communications and notices hereunder shall be in writing and given as
provided in Section 6.01 of the Security Agreement.

 

SECTION 9.
The New Grantor agrees to reimburse the Collateral Agent for its reasonable
out-of-pocket expenses in connection with this Supplement, including the
reasonable fees, other charges and disbursements of counsel for the Collateral
Agent.

 

 

Exhibit I - 2

 

 

IN WITNESS
WHEREOF, the New Grantor and the Collateral Agent have duly executed this
Supplement to the Security Agreement as of the day and year first above
written.

 

	
   

  	
  [NAME OF NEW
  GRANTOR]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jurisdiction
  of Formation: 

  Address of Chief Executive Office:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CREDIT
  SUISSE, CAYMAN ISLANDS 

  BRANCH,  

  as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

Exhibit I - 3

 

 

Schedule I

to the Supplement No     to the

Security Agreement

 

PLEDGED COLLATERAL

 

	
  Description

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

EQUITY INTERESTS

 

	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Equity Interests

  	
   

  	
  Percentage

  of Equity Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

PROMISSORY NOTES AND INSTRUMENTS

 

	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule I - 1

 

 

Exhibit II to the

Security Agreement

 

FORM OF

PERFECTION CERTIFICATE

 

 

 

Exhibit II - 1Exhibit 10.1

 

EXECUTION VERSION

 

THIS
AMENDED AND RESTATED TRANSACTION AND MONITORING FEE AGREEMENT (this “Agreement”) is dated as of November
20, 2007, and is by and between ReAble Therapeutics, Inc. (f/k/a, Encore
Medical Corporation), a Delaware corporation which, following the consummation
of the Transactions (as defined in Paragraph 3 of the Background,
below), intends to change its name to “DJO Incorporated” (the “Company”), and Blackstone
Management Partners V L.L.C., a Delaware limited liability company (“BMP”).

BACKGROUND

1.             The
Company and BMP are parties to that certain Transaction and Monitoring Fee
Agreement, dated as of November 3, 2006 (the “Current
Transaction and Monitoring Fee Agreement”), pursuant to which,
among other things, BMP has provided certain financial and structural analysis,
due diligence investigation, corporate strategy, and other financial advisory
services to the Company.

2.             ReAble
Therapeutics Finance LLC, a Delaware limited liability company and wholly-owned
subsidiary of the Company (“Merger Parent”),
and Reaction Acquisition Merger Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of Merger Parent (“Merger Sub”),
and an entity currently known as DJO Incorporated, a Delaware Corporation
which, following the consummation of the Transactions, intends to change its
name to “DJO Opco Holdings, Inc.” (“DJO Opco Holdings”),
are parties to that certain Agreement and Plan of Merger, dated as of July 15,
2007 (the “Merger Agreement”), pursuant
to which at the “Effective Time”
(as defined in the Merger Agreement) Merger Sub shall be merged with and into
DJO Opco Holdings, and DJO Opco Holdings shall thereafter be a wholly-owned
subsidiary of the Company (the “Merger”).

3.             BMP
has expertise in the areas of finance, strategy, investment, acquisitions and
other matters relating to the Company, DJO Opco Holdings, and their respective
businesses, and has facilitated the transactions referred to above and certain
other related transactions (collectively, the “Transactions”)
through its provision of financial and structural analysis, due diligence
investigations, negotiation assistance, corporate strategy and other financial
advisory services with all relevant parties to the Transactions, including in
connection with the financing of certain of the Transactions as contemplated by
the Merger Agreement.

4.             The
Company desires to continue to avail itself, for the term of this Agreement, of
BMP’s expertise and services as aforesaid, which the Company believes will be
beneficial to it, and BMP desires to continue to make such expertise available
and provide such services to the Company on the terms, and subject to the
conditions set forth in this Agreement by amending and restating in its
entirety the Current Transaction and Monitoring Fee Agreement.

In consideration of the premises and agreements contained herein and of
other good and valuable consideration, the sufficiency of which are hereby
acknowledged, the parties agree as follows:

AGREEMENT

SECTION 1.         Transaction and M&A
Advisory Fees.  In consideration of BMP undertaking financial
and structural analysis, due diligence investigations, negotiation assistance,
corporate strategy and other financial advisory services necessary in order to
enable the Transactions to be consummated, the Company will pay BMP at the
Effective Time (i) a non-refundable and irrevocable transaction fee of
$15,000,000, and (ii) $600,000 in reimbursement for certain Out-of-Pocket
Expenses (as defined in Section 5, below) incurred by BMP in connection
with its due diligence investigations in the Transactions.  In consideration of the merger and
acquisition advisory group of Blackstone
Advisory Services, L.P.
(“BAS”), an 

 

Affiliate (as defined in Section
3(a), below) of BMP, rendering strategic and other advice and negotiation
assistance to the Company on behalf of BMP in connection with identifying and
evaluating certain potential transactions, the Company will also pay to BAS, at
the Effective Time, a non-refundable and irrevocable advisory fee of
$3,000,000.

SECTION
2.         Appointment. 
The Company hereby engages BMP to render the Services (as defined in Section
3(a), below) on the terms and subject to the conditions of this Agreement.

SECTION 3.         Services.

(a)           BMP agrees that until the Termination
Date (as defined in Section 8, below) or the earlier termination of its
obligations under this Section 3(a) pursuant to Section 4(f)
hereof, it will render to the Company, by and through itself and its
Affiliates, and such of their respective, directors, officers, employees,
investment bankers, attorneys, accountants and other advisors or
representatives (such directors, officers, employees, investment bankers,
attorneys, accountants, other advisors and representatives collectively, “Representatives”) monitoring,
advisory and consulting services in relation to the affairs of the Company and
its subsidiaries, including, without limitation, (i) advice regarding the
structure, distribution and timing of private or public debt or equity
offerings and advice regarding relationships with the Company’s and its
subsidiaries’ lenders and bankers, including in relation to the selection,
retention and supervision of independent auditors, outside legal counsel,
investment bankers or other financial advisors or consultants, (ii) advice regarding
the strategy of the Company and its subsidiaries, (iii)  advice regarding the structuring and
implementation of equity participation plans, employee benefit plans and other
incentive arrangements for certain key executives of the Company, (iv) general
advice regarding dispositions and/or acquisitions and (v) such other advice
directly related or ancillary to the above financial advisory services as may
be reasonably requested by the Company (collectively, the “Services”).  However, BMP will have no obligation to
provide any other services to the Company absent an agreement between BMP and
the Company regarding the scope of such other services and the compensation
therefor.  For the purposes of this
Agreement, “Affiliate” when used with
respect to any party shall mean any Person who is an “affiliate” of that party
within the meaning of Rule 405 promulgated under the Securities Act of 1933, as
amended; provided, that the Company and its subsidiaries shall be deemed
not to be Affiliates of BMP and its Affiliates for the purposes of this
Agreement. For the purposes of this Agreement, “Person”
shall mean any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, governmental entity or other entity of any kind or
nature.

(b)           It is expressly agreed that the
Services to be rendered hereunder will not include investment banking or other
financial advisory services which may be provided by BMP or its Affiliates or
their respective Representatives to the Company or any of its Affiliates, in
connection with any specific acquisition, divestiture, disposition, merger,
consolidation, restructuring, refinancing, recapitalization, issuance of
private or public debt or equity securities (including, without limitation, an
initial public offering of equity securities), financing or similar transaction
by the Company or any of its subsidiaries. 
BMP may be entitled to receive additional compensation for providing services
of the type specified in the preceding sentence by mutual agreement of the
Company or such subsidiary, on the one hand, and BMP or its relevant Affiliates
or their respective Representatives, on the other hand.  In the absence of an express agreement
regarding compensation for such services performed by BMP or its Affiliates, or
their respective Representatives in connection with any such transaction
specified in this Section 3(b), and without regard to whether any such
services were performed, BMP shall be entitled to receive upon consummation of:

(i)            any such
acquisition, divestiture, disposition, merger, consolidation, restructuring or
recapitalization, a non-refundable and irrevocable fee equal to (x) one percent
(1%) 

 

2

 

of the aggregate enterprise value of the acquired, divested, merged,
consolidated, restructured or recapitalized entity (calculated, on a
consolidated basis for such entity, as the sum of (1) the market value of its
common equity (or the fair market value thereof if not publicly traded), (2)
the value of its preferred stock (at liquidation value), (3) the book value of
its minority interests and (4) its aggregate long- and short-term debt, less
its cash and cash equivalents), or (y) if such transaction is structured as an
asset purchase or sale, one percent (1%) of the consideration paid for or
received in respect of the assets acquired or disposed of;

(ii)           any such
refinancing, a non-refundable and irrevocable fee equal to one percent (1%) of
the aggregate value of the securities subject to such refinancing; and

(iii)          any such issuance,
a non-refundable and irrevocable fee equal to one percent (1%) of the aggregate
value of the securities subject to such issuance.

(c)           Without affecting the rights of BMP
under Section 3(b) hereof, if the Company or any of its subsidiaries
determines that it is advisable for the Company or such subsidiary to hire a
financial advisor, consultant, investment banker or any similar advisor in
connection with any acquisition, divestiture, disposition, merger,
consolidation, restructuring, refinancing, recapitalization, issuance of
private or public debt or equity securities (including, without limitation, an
initial public offering of equity securities), financing or similar
transaction, it will notify BMP of such determination in writing.  Promptly thereafter, upon the request of BMP,
the parties will negotiate in good faith to agree upon appropriate services,
compensation and indemnification for the Company or such subsidiary to hire BMP
or its Affiliates or their respective Representatives for such services.  The Company and its subsidiaries may not hire
any Person, other than BMP or one of its Affiliates or their respective
Representatives, to perform any such services unless all of the following
conditions have been satisfied:  (i) the
parties are unable to agree upon the terms of the engagement of BMP or any such
Affiliate or Representative to render such services after thirty (30) days
following receipt by BMP of such written notice; (ii) such other Person has a
reputation that is at least equal to the reputation of BMP or any such
Affiliate or Representative in respect of such services; (iii) ten (10)
business days have elapsed after the Company or such subsidiary provides a
written notice to BMP of its intention to hire such other Person, which notice
shall identify such other Person and shall describe in reasonable detail the
nature of the services to be provided, the compensation to be paid and the indemnification
to be provided; (iv) the compensation to be paid is not more than BMP or any
such Affiliate or Representative was willing to accept in the negotiations
described above; and (v) the indemnification to be provided is not more
favorable to the Company or the applicable subsidiary than the indemnification
that BMP or any such Affiliate or Representative was willing to accept in the
negotiations described above.

SECTION 4.         Monitoring Fee.

(a)           In consideration of the Services
being rendered by BMP, for the term of this Agreement, the Company will pay, or
will cause to be paid, to BMP an annual non-refundable and irrevocable
monitoring fee (the “Monitoring Fee”;
the term “Monitoring Fee” as used in this Agreement with respect to any annual
period means all amounts payable with respect to such annual period pursuant to
Sections 4(b) or (c) hereof, as applicable; provided, that,
notwithstanding anything to the contrary contained in this Agreement, the
minimum annual Monitoring Fee payable to BMP beginning on January 1, 2008 and
throughout the term of this Agreement shall be $7,000,000).

(b)           The parties acknowledge that the
Monitoring Fee for the year ending December 31, 2007 was equal to $3,000,000
and was paid to BMP on January 1, 2007.

 

3

 

(c)           The annual Monitoring Fee for fiscal
year 2008 and each subsequent year shall be equal the greater of $7,000,000 and
two percent (2%) of Consolidated EBITDA (as defined in Section 4(g),
below).  The Company will pay, or cause
to be paid, to BMP, (i) $7,000,000 on January 1, 2008, and thereafter on
January 1 of each subsequent year and (ii) within five (5) business days
following the preparation of the Company’s consolidated annual financial
statements for each fiscal year, an amount equal to the excess, if any, of two
percent (2%) of Consolidated EBITDA for the immediately preceding fiscal year
over $7,000,000, plus interest thereon from
January 1 of the relevant year through the date of payment of such amount at an
annual rate of ten percent (10%) computed and compounded daily.

(d)           In the event the Company or any of
its subsidiaries enters into a business combination transaction with another
entity that is large enough to constitute a “significant subsidiary” of the Company
under any of the relevant tests contained in Regulation S-X as promulgated by
the Securities and Exchange Commission, the Company and BMP will mutually
agree, following good faith negotiations, on an appropriate increase in the
minimum annual Monitoring Fee as warranted by the increase in the Company’s
size.  Such increase will be based on the
percentage increase in the Company’s Consolidated EBITDA determined on a pro
forma basis giving effect to such business combination transaction.

(e)           To the extent the Company cannot pay,
or cause to be paid, the Monitoring Fee for any reason, including by reason of
any prohibition on such payment pursuant to any applicable law or the terms of
any debt financing of the Company or its subsidiaries, the payment by the
Company or any of its subsidiaries to BMP of the accrued and payable Monitoring
Fee will be payable immediately on the earlier of (i) the first date on
which the payment of such deferred Monitoring Fee is no longer prohibited under
any contract applicable to the Company and the Company or its subsidiaries, as
applicable, is otherwise able to make such payment, or cause such payment to be
made, and (ii) total or partial liquidation, dissolution or winding up of
the Company.  Notwithstanding anything to
the contrary herein, under any applicable law or under any contract applicable
to the Company or its subsidiaries, any forbearance of collection of the
Monitoring Fee by BMP shall not be deemed to be a subordination of such
payments to any other Person or creditor of the Company or its
subsidiaries.  Any such forbearance shall
be at BMP’s sole option and discretion and shall in no way impair BMP’s right
to collect such payments.  Any
installment of the Monitoring Fee not paid on the scheduled due date will bear
interest, payable in cash on each scheduled due date, at an annual rate of ten
percent (10%), compounded quarterly, from the date due until paid; provided,
that with respect to the payment specified in Section 4(c)(ii), such
interest shall be in addition to, and not in lieu of, the interest specified in
Section 4(c)(ii).

(f)            (i) Notwithstanding
anything to the contrary contained in this Agreement, BMP may elect (in its
sole discretion by the delivery of written notice to the Company) at any time
in connection with or in anticipation of a change of control of the Company, a
sale of all or substantially all of the Company’s assets or an initial public
offering of common stock of the Company or its successor (or at any time
thereafter) to receive, in consideration of the termination of the Services and
for any remaining Monitoring Fees payable by the Company under this Agreement
and in addition to any fees owing to BMP in connection with such transaction
pursuant to Section 3(b) hereof, a single lump sum non-refundable and
irrevocable cash payment (the “Lump Sum Fee”)
equal to the then present value (using a discount rate equal to the yield to
maturity on the date of such written notice of the class of outstanding U.S.
government bonds having a final maturity closest to the twelfth (12th)
anniversary of such written notice (the “Discount Rate”))
of all then current and future Monitoring Fees payable under this Agreement,
assuming the Termination Date is the twelfth (12th) anniversary of the date of
such election.  Promptly after the
receipt of such written notice, the Company shall pay the Lump Sum Fee to BMP
by wire transfer in same-day funds to the bank account designated by BMP, which

 

4

 

payment shall not be refundable under any circumstances.  Following the payment of the Lump Sum Fee,
the obligation of BMP to provide the Services hereunder, and the obligations of
the Company to pay Monitoring Fees, shall be terminated, but all other
provisions of this Agreement shall continue unaffected.

(ii)           To the extent the Company does not
pay, or cause to be paid, any portion of the Lump Sum Fee by reason of any
prohibition on such payment pursuant to any applicable law, the terms of any
agreement or indenture governing indebtedness of the Company or its
subsidiaries, any unpaid portion of the Lump Sum Fee shall be paid to BMP on
the first date on which the payment of such unpaid amount is permitted under
such agreement or indenture. 
Notwithstanding anything to the contrary herein, under any applicable
law or under any contract applicable to the Company or its subsidiaries, any
forbearance of collection of the Lump Sum Fee by BMP shall not be deemed to be
a subordination of such payments to any other Person or creditor of the Company
or its subsidiaries.  Any such
forbearance shall be at BMP’s sole option and discretion and shall in no way
impair BMP’s right to collect such payments. 
Any portion of the Lump Sum Fee not paid on the scheduled due date shall
bear interest at an annual rate equal to the Discount Rate, compounded
quarterly, from the date due until paid.

(g)           For the purposes of this Agreement, “Consolidated EBITDA” has the
meaning specified in that certain Credit Agreement, dated as of November 20,
2007, among ReAble Therapeutics Finance LLC (which, following the consummation
of the Transactions, intends to change its name to “DJO Finance LLC”), as “borrower”; ReAble Therapeutics Holdings
LLC (which, following the consummation of the Transactions, intends to
change its name to “DJO Holdings LLC”), as “holdings”; Credit
Suisse, as “administrative agent, collateral agent, swing line lender and l/c
issuer”; the “lenders” party thereto; and the other parties thereto.

SECTION 5.         Reimbursements.  In addition to the fees payable pursuant to
this Agreement, the Company will pay, or cause to be paid, directly, or
reimburse BMP and each of its Affiliates and their respective Representatives
for, their respective Out-of-Pocket Expenses. For the purposes of this
Agreement, the term “Out-of-Pocket Expenses”
means the out-of-pocket costs and expenses incurred by BMP and its Affiliates
and their respective Representatives in connection with the Transactions and
the Services or any other services provided by them under this Agreement or the
Current Transaction and Monitoring Fee Agreement (including prior to the
Effective Time), or in order to make Securities and Exchange Commission and
other legally required filings relating to the ownership of capital stock of
the Company or DJO Opco Holdings or their respective successors by BMP or its
Affiliates (including, as applicable, the Company), or otherwise incurred by
BMP or its Affiliates or their respective Representatives from time to time in
the future in connection with the ownership or subsequent sale or transfer by
BMP or its Affiliates (including, as applicable, the Company) of capital stock
of the Company or DJO Opco Holdings or their respective successors, including,
without limitation, (a) fees and disbursements of any independent professionals
and organizations, including independent accountants, outside legal counsel or
consultants, retained by BMP or any of its Affiliates or their respective
Representatives, (b) costs of any outside services or independent contractors
such as financial printers, couriers, business publications, on-line financial
services or similar services, retained or used by BMP or any of its Affiliates
or their respective Representatives, and (c) transportation, per diem costs,
word processing expenses or any similar expense not associated with BMP’s or
its Affiliates’ or their respective Representatives ordinary operations.  All payments or reimbursements for
Out-of-Pocket Expenses will be made by wire transfer in same-day funds promptly
upon or as soon as practicable following request for payment or reimbursement
in accordance with this Agreement, to the bank account indicated to the Company
by the relevant payee.

 

5

 

SECTION 6.         Indemnification.

The
Company will indemnify and hold harmless BMP and its Affiliates, and their
respective partners (both general and limited), members (both managing and
otherwise), shareholders and Representatives (each such Person being an “Indemnified Party”) from and
against any and all actions, claims, suits, investigations, proceedings,
losses, damages, costs, expenses and liabilities, including in connection with
seeking indemnification, whether joint or several, and also including, without
limitation, reasonably attorneys’ fees and expenses and other litigation
related expenses (the “Liabilities”),
related to, arising out of or in connection with the Transactions, Services or
any other services or transactions contemplated by this Agreement or the
Current Transaction and Monitoring Fee Agreement (including, in each case,
prior to the Effective Time) or the engagement of BMP pursuant to, and the
performance by BMP or its Affiliates or their respective Representatives of the
Services or other services or transactions contemplated by, this Agreement or
the Current Transaction and Monitoring Fee Agreement (including, in each case,
prior to the Effective Time), whether or not pending or threatened, whether or
not an Indemnified Party is a party, whether or not resulting in any liability and
whether or not such action, claim, suit, investigation or proceeding is
initiated or brought by the Company.  The
Company will reimburse any Indemnified Party for all reasonable costs and
expenses (including reasonable attorneys’ fees and expenses and any other
litigation-related expenses) as they are incurred in connection with
investigating, preparing, pursuing, defending or assisting in the defense of
any action, claim, suit, investigation or proceeding for which the Indemnified
Party would be entitled to indemnification under the terms of the previous
sentence, or any action or proceeding arising therefrom, whether or not such
Indemnified Party is a party thereto. 
The Company agrees that it will not, without the prior written consent
of the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened action, claim, suit, investigation or
proceeding relating to the matters contemplated hereby or the Current
Transaction and Monitoring Fee Agreement (including, in each case, prior to the
Effective Time) (if any Indemnified Party is a party thereto or has been
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of the Indemnified Party from all
liability, without future obligation or prohibition on the part of the
Indemnified Party, arising or that may arise out of such action, claim, suit,
investigation or proceeding, and does not contain an admission of guilt or
liability on the part of the Indemnified Party. 
The Company will not be liable under the foregoing indemnification
provision with respect to any particular Liability of an Indemnified Party that
is determined by a court, in a final judgment from which no further appeal may
be taken, to have resulted solely from the gross negligence or willful
misconduct of such Indemnified Party. 
The attorneys’ fees and other expenses of an Indemnified Party shall be
paid by the Company as they are incurred upon receipt, in each case, of an
undertaking by or on behalf of the Indemnified Party to repay such amounts if
it is finally judicially determined that the Liabilities in question resulted
solely from the gross negligence or willful misconduct of such Indemnified
Party.

The
rights of an Indemnified Party to indemnification hereunder will be in addition
to any other rights and remedies any such Person may have under any other
agreement or instrument to which each Indemnified Party is or becomes a party
or is or otherwise becomes a beneficiary or under any law or regulation.

SECTION 7.         Accuracy of
Information. The Company shall furnish or cause to be
furnished to BMP and its Affiliates and their respective Representatives such
information as BMP believes reasonably appropriate to rendering the Services and
other services contemplated by this Agreement and to comply with the Securities
and Exchange Commission or other legal requirements relating to the beneficial
ownership by BMP or its Affiliates (including, as applicable, the Company) of
equity securities of the Company or DJO Opco Holdings or their respective
successors (all such information so furnished, the “Information”).
The Company recognizes and confirms that BMP (i) will use and rely primarily on
the Information and on 

 

6

 

information
available from generally recognized public sources in performing the Services
and other services contemplated by this Agreement without having independently
verified the same, (ii) does not assume responsibility for the accuracy or
completeness of the Information and such other information and (iii) is
entitled to rely upon the Information without independent verification.

SECTION 8.         Term.  This Agreement will become effective as of
the Effective Time and (except as otherwise provided herein) will continue
until the “Termination Date,” which is
the earliest of (i) the twelfth (12th) anniversary of the date hereof and (ii)
such earlier date as the Company and BMP may mutually agree upon in writing; provided,
that (x) the occurrence of the Termination Date will not affect the
obligations of the Company to pay, or cause to be paid, any amounts accrued but
not yet paid as of such date, (y) Section 5 hereof will remain in effect
after the Termination Date with respect to Out-of-Pocket Expenses that were
incurred prior to or within a reasonable period of time after the Termination
Date, but which have not been paid to BMP in accordance with Section 5 hereof,
and (z) the provisions of this Section 8 and Sections 4(e), 4(f)(ii),
4(g)  6, 7, 9 and 10 hereof will survive
after the Termination Date.  The
Monitoring Fee will accrue and be payable with respect to the entire fiscal
year of the Company in which the Termination Date occurs.

SECTION 9.             Disclaimer,
Opportunities, Release and Limitation of Liability.

(a)           Disclaimer; Standard of Care.  BMP makes no representations or warranties,
express or implied, in respect of the Services or any other services to be
provided by it or any transactions (including, without limitation, the Transactions)
with which it, its Affiliates or their respective Representatives have been,
may be or become involved hereunder or under the Current Transaction and
Monitoring Fee Agreement.  In no event
shall BMP or its Affiliates or their respective Representatives be liable to
the Company or any of its Affiliates for any act, alleged act, omission or
alleged omission that does not constitute gross negligence or willful
misconduct of, as applicable BMP, or any such Affiliates or Representatives as
determined by a final, non-appealable determination of a court of competent
jurisdiction.

(b)           Freedom to Pursue Opportunities.  In recognition that BMP and its Affiliates
and their respective Representatives currently have, and will in the future
have or will consider acquiring, investments in numerous companies with respect
to which BMP or its Affiliates or their respective Representatives may serve as
an advisor, a director or in some other capacity, in recognition that BMP and
its Affiliates and their respective Representatives have a myriad of duties to
various investors and partners, in anticipation that the Company, on the one
hand, and BMP (or one or more Affiliates, associated investment funds or
portfolio companies), on the other hand, may engage in the same or similar
activities or lines of business and have an interest in the same areas of
corporate opportunities, in recognition of the benefits to be derived by the
Company hereunder, and in recognition of the difficulties which may confront
any advisor who desires and endeavors fully to satisfy such advisor’s duties in
determining the full scope of such duties in any particular situation, the
provisions of this Section 9(b) are set forth to regulate, define and
guide the conduct of certain affairs of the Company as they may involve BMP and
its Affiliates and their respective Representatives.  Except as BMP may otherwise agree in writing
after the date hereof:

                (i)            BMP and its Affiliates and their respective
Representatives shall have the right: 
(A) to directly or indirectly engage in any business (including, without
limitation, any business activities or lines of business that are the same as
or similar to those pursued by, or competitive with, the Company and its
subsidiaries); (B) to directly or indirectly do business with any client or
customer of the Company and its subsidiaries; (C) to take any other action that
BMP or its Affiliates or their respective Representatives, as applicable,
believes in good faith is necessary to or appropriate to fulfill its obligations
as described 

 

7

 

in
the first sentence of this Section 9(b); and (D) not to present
potential transactions, matters or business opportunities to the Company or any
of its subsidiaries, and to pursue, directly or indirectly, any such
opportunity for themselves, and to direct any such opportunity to another
Person.

                (ii)           BMP and its Affiliates and their respective
Representatives shall have no duty (contractual or otherwise) to communicate or
present any corporate opportunities to the Company or any of its subsidiaries
or to refrain from any actions specified in Section 9(b)(i) hereof, and
the Company, on its own behalf and on behalf of its subsidiaries, hereby
irrevocably waives any right to require BMP or any of its Affiliates or their
respective Representatives to act in a manner inconsistent with the provisions
of this Section 9(b).

                (iii)          Neither BMP nor any of its Affiliates or their respective
Representatives shall be liable to the Company or any of its subsidiaries for
breach of any duty (contractual or otherwise) by reason of any activities or
omissions of the types referred to in this Section 9(b) or of any such
Person’s participation therein.

(c)           Release.  The Company, on behalf of it and its subsidiaries,
hereby irrevocably and unconditionally releases and forever discharges BMP and
its Affiliates and their respective partners (both general and limited),
members (both managing and otherwise), and Representatives from any and all
Liabilities in connection with the Services or any other services or
transactions contemplated by this Agreement or the Current Transaction and
Monitoring Fee Agreement (including, in each case, prior to the Effective Time)
or the engagement of BMP pursuant to, and the performance by BMP and its
Affiliates and their respective Representatives of the Services or any other
services or their respective involvement with any transaction (including,
without limitation, the Transactions) contemplated by, this Agreement or the
Current Transaction and Monitoring Fee Agreement (including, in each case,
prior to the Effective Time) that the Company or any of its subsidiaries may
have, or may claim to have, on or after the date hereof, except with respect to
any act or omission that constitutes gross negligence or willful misconduct as
determined by a final, non-appealable determination of a court of competent
jurisdiction.

(d)           Limitation of
Liability.  In no event will BMP or
any of its Affiliates or any of their respective Representatives be liable to
the Company or any of its subsidiaries for any indirect, special, incidental or
consequential damages, including, without limitation, lost profits or savings,
whether or not such damages are foreseeable, or for any third-party claims
(whether based in contract, tort or otherwise), relating to, in connection with
or arising out of this Agreement or the Current Transaction and Monitoring Fee
Agreement (including, in each case, prior to the Effective Time), including,
without limitation, the services to be provided by BMP or any of its Affiliates
or any of their respective Representatives hereunder or which have been
provided by such Persons under the Current Transaction and Monitoring Fee
Agreement, or for any act or omission that does not constitute gross negligence
or willful misconduct as determined by a final, non-appealable determination of
a court of competent jurisdiction or in excess of the fees actually received by
BMP hereunder.

SECTION
10.           Miscellaneous.

(a)           No amendment or
waiver of any provision of this Agreement, or consent to any departure by any
party hereto from any such provision, will be effective unless it is in writing
and signed by each of the parties hereto. Any amendment, waiver or consent will
be effective only in the specific instance and for the specific purpose for
which given. The waiver by any party of any breach of this Agreement will not
operate as or be construed to be a waiver by such party of any subsequent
breach.

 

8

 

(b)           Any notices or other
communications required or permitted hereunder shall be made in writing and
will be sufficiently given if delivered personally, sent by facsimile or
electronic mail with confirmed receipt of successful transmittal, or sent by overnight
courier, addressed as follows or to such other address of which the parties may
have given written notice:

if to BMP:

 

c/o The Blackstone Group L.P.

345 Park Avenue

31st Floor

New York, New York 10154

Attention: Chinh E. Chu

Facsimile: (212) 583-5573

E-mail: chu@blackstone.com

 

With a copy, which shall not constitute notice to BMP, to:

 

Reed Smith LLP

599 Lexington Ave., 29th Floor

New York, New York 10022

Attention: Mark G. Pedretti, Esq.

Facsimile: (212) 521-5450

E-mail: mpedretti@reedsmith.com

 

if to the Company:

 

ReAble Therapeutics, Inc. (and after the name change referred to above,
to “DJO Incorporated”)

1430 Decision Street

Vista, California 92081

Attention: Donald
M. Roberts, Esq.

Facsimile: (760) 734-3536

E-mail: don.roberts@djortho.com

 

Unless
otherwise specified herein, such notices or other communications will be deemed
received (i) on the date delivered, if delivered personally or sent by
facsimile or electronic mail upon receipt by the sender of successful
transmittal, and (ii) one business day after being sent by overnight courier.

(c)           This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof, and
supersedes all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.

(d)           This Agreement will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to any conflicts of law principles that would require the
application of the laws of a jurisdiction other than the State of New York.

(e)           Each party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in New York County, New
York for the purpose of any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof,
(ii) hereby waives to the extent not prohibited by applicable law, and
agrees not to assert, and agrees not to allow any of its subsidiaries to
assert, by way of motion, as a defense or otherwise, in any such action, any
claim that it is not subject personally 

 

9

 

to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one of
the above-named courts is improper, or that this Agreement or the subject
matter hereof or thereof may not be enforced in or by such court and
(iii) hereby agrees not to commence or maintain any action, claim, cause
of action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Agreement or relating to the
subject matter hereof or thereof other than before one of the above-named
courts nor to make any motion or take any other action seeking or intending to
cause the transfer or removal of any such action, claim, cause of action or
suit (in contract, tort or otherwise), inquiry, proceeding or investigation to
any court other than one of the above-named courts whether on the grounds of
inconvenient forum or otherwise. 
Notwithstanding the foregoing, to the extent that any party hereto is or
becomes a party in any litigation in connection with which it may assert
indemnification rights set forth in this agreement, the court in which such
litigation is being heard shall be deemed to be included in clause
(i) above.  Notwithstanding the
foregoing, any party to this Agreement may commence and maintain an action to
enforce a judgment of any of the above-named courts in any court of competent
jurisdiction.  Each party hereto hereby
consents to service of process in any such proceeding in any manner permitted
by New York law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to Section
10(b) hereof is reasonably calculated to give actual notice.

(f)            Neither this Agreement nor any of
the rights or obligations hereunder may be assigned by the Company without the
prior written consent of BMP; provided, however, that BMP may,
without the prior consent of the Company, assign or transfer its duties or
interests hereunder to any Affiliate at the sole discretion of BMP. Subject to
the foregoing, the provisions of this Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Subject to the next sentence, no Person or party other than
the parties hereto and their respective successors or permitted assigns is
intended to be a beneficiary of this Agreement. The parties acknowledge and
agree that (i) BAS, with respect to the second sentence of Section 1 hereof,
and (ii) Indemnified Parties that are not parties hereto, with respect to Section
6 hereof, are, in each case, intended to be third-party beneficiaries
hereunder.

(g)           This Agreement may be executed by one
or more parties to this Agreement on any number of separate counterparts
(including by facsimile or electronic mail (via .pdf counterpart)), and all of
said counterparts taken together will be deemed to constitute one and the same
instrument.

(h)           Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction.

(i)            Each payment made by the Company
pursuant to this Agreement shall be paid by wire transfer of immediately
available federal funds to such account or accounts as specified by BMP to the
Company prior to such payment.

[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK, SIGNATURE PAGE FOLLOWS]

 

10

IN
WITNESS WHEREOF, the undersigned have executed, or have caused to be executed,
this Agreement as of the date first written above.

 

	
   

  	
  BLACKSTONE MANAGEMENT PARTNERS V L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Chinh E. Chu

  
	
   

  	
   

  	
  Authorized Person

  
	
   

  	
   

  
	
   

  	
  REABLE THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
  Name: Harry L. Zimmerman

  
	
   

  	
   

  	
  Title: Executive Vice President, General Counsel,

  Secretary and Assistant Treasurer

  

 

 

 

 

[Signature Page to Amended and
Restated Transaction and Monitoring Fee Agreement]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]