Document:

Exhibit
10.2

 

FIRST AMENDMENT TO
MANAGEMENT STOCKHOLDERS AGREEMENT

 

 

THIS
FIRST AMENDMENT TO MANAGEMENT STOCKHOLDERS AGREEMENT (this “Amendment”)
is made as of the 20th day of November, 2007, by and among REABLE THERAPEUTICS, INC. (f/k/a, Encore Medical Corporation),
a Delaware corporation which, following the consummation of certain
transactions set forth in the Agreement and Plan of Merger, dated July 15,
2007, by and between ReAble Therapeutics, Inc. and certain other parties,
intends to change its name to “DJO Incorporated” (the “Company”), BLACKSTONE CAPITAL PARTNERS V L.P., a Cayman Islands limited
partnership (“BCP V”), BLACKSTONE FAMILY INVESTMENT PARTNERSHIP V L.P., a Cayman
Islands limited partnership (“BFIP V”),
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP V-A L.P.,
a Cayman Islands limited partnership (“BFIP
V-A”), BLACKSTONE PARTICIPATION PARTNERSHIP V L.P.,
a Cayman Islands limited partnership (“BPP
V”) and, together with BCP V, BFIP V, BFIP V-A and any of Blackstone
L.P. or its Affiliates that may from time to time hold Sponsor Interests,
collectively, the “Sponsors”), GRAND SLAM HOLDINGS, LLC, a Delaware limited liability
company (“Holdco”), and the
parties identified on the signature pages to the Management Stockholders
Agreement as Management Stockholders and the transferees of such parties (and
their respective transferees) identified on the signature pages in any
supplementary agreements to the Management Stockholders Agreement (and,
together with the Company, the Sponsors and Holdco, the “Parties”).

 

RECITALS:

 

WHEREAS, the Parties are parties to a certain
Management Stockholders Agreement dated November 3, 2006 (together with all
attachments thereto, the “Management Stockholders Agreement”); and

 

WHEREAS, the Parties desire to amend the Management
Stockholders Agreement in order to update the names of certain Parties and make
certain other minor administrative changes that will not materially affect on
the rights of the Parties; and

 

WHEREAS, provided the rights of certain Parties are
not materially affected, the Management Stockholder’ Agreement may be amended
by a written instrument signed by (i) the Company and (ii) the Parties which own, on a fully diluted basis,
shares of the Company’s common stock representing at least a majority of the
voting power represented by all of the Company’s common stock outstanding on a
fully diluted basis and owned by all Parties (collectively, the “Necessary
Parties”); and

 

WHEREAS, the Necessary Parties have duly executed this
Amendment on the signature pages attached hereto.

 

NOW, THEREFORE, in consideration of the foregoing
recitals which are incorporated by reference herein, and other good and
valuable consideration, the receipt and sufficiency of 

 

 

 

 

which are hereby acknowledged, and intending to be legally bound
hereby, the Necessary Parties agree as follows:

 

1.  From and after the date hereof, every
reference in the Management Stockholders Agreement to “Encore Medical
Corporation” and the “Company” shall be and be deemed to be a reference to “DJO
Incorporated”, except that the references to “Encore Medical Corporation” in
the Management Stockholders Agreement which are a result of Sections 2 and 4 of
this Amendment shall not be affected.

 

2.  From and after the date hereof, the
paragraph preceding the Recitals of the Management Stockholders Agreement shall
be amended by adding the following parenthetical after “DJO Incorporated”
(giving effect to Section 1 of this Amendment):

 

(f/k/a Encore Medical Corporation
and, prior to the consummation of the transactions described in clause (ii) of
the definition of “Merger” set forth in Section 1 of this Agreement, f/k/a
ReAble Therapeutics, Inc.)

 

3.  From and after the date hereof, each and
every instance of:

 

                a.  “Blackstone Encore Stockholders” shall be amended to read “Blackstone DJO
Stockholders”;

 

                b.  “Drag-Along Selling Blackstone Encore Stockholder” shall be amended to read “Drag-Along Selling Blackstone DJO Stockholder”; and

 

                c.  “Tag-Along Selling Blackstone Encore Stockholder” shall be amended to read “Tag-Along Selling Blackstone DJO Stockholder”.

 

4.  From and after the date hereof, the
definition of “Merger” in the Management Stockholders Agreement shall be
amended to read as follows:

 

“Merger” means, as may be
applicable in each particular case, (i) the transactions contemplated by the
Agreement and Plan of Merger, dated as of June 30, 2006, by and among Holdco,
Grand Slam Acquisition Corp. and Encore Medical Corporation and (ii) the
transactions contemplated by the Agreement and Plan of Merger, dated as of July
15, 2007, by and among the Company, Reaction Acquisition Merger Sub and DJO
Incorporated.

 

5.  From and after the date hereof, the definition of “Cause”
in the Management Stockholders Agreement shall be amended to read as follows:

 

“Cause” means, with respect to
any Management Stockholder, the termination by the Company of such 

 

 

 

Management
Stockholder’s employment with the Company for “cause”, as defined in the
employment agreement (“Employment Agreement”)
between the Company and such Management Stockholder, or, if there is no
employment agreement, the termination by the Company of such Management
Stockholder’s employment as a result of: 
(i) the commission by the Management Stockholder of an act of gross
negligence, willful misconduct, fraud, embezzlement, misappropriation or breach
of fiduciary duty against the Company or any of its Affiliates, or the
conviction of the Management Stockholder by a court of competent jurisdiction
of, or a plea of guilty or nolo contendere to, any felony or any crime
involving moral turpitude or any crime which reasonably could negatively affect
the reputation of the Company, or the Management Stockholder’s ability to
perform the duties required of his employment; (ii) the commission by the
Management Stockholder of a material breach of any of the covenants in this
Agreement, which breach has not been remedied within thirty (30) days of the
delivery to the Management Stockholder by the Board of Directors of written
notice of the facts constituting the breach; or (iii) the continued habitual
and willful neglect by the Management Stockholder of his or her obligations and
duties as an employee of the Company or any of its Subsidiaries after receiving
written notice from the Company or any Blackstone DJO Stockholder that such
neglect constitutes “Cause” under this Agreement and failing to cure such
neglect within thirty (30) calendar days of receipt of such notice.

 

6.  From and after the date
hereof, Sections 7(a)(i) and 7(a)(ii) of the Management Stockholders Agreement
shall be amended in their entirety to read as follows:

 

(i)           In the case of termination of
employment of such Call Option Management Stockholder for Cause (or a voluntary
termination of employment of such Call Option Management Stockholder if such termination
would have constituted a termination for Cause if it would have been initiated
by the Company), the consideration will be the lesser of (A) the purchase price
of such Callable Shares paid by the Call Option Management Stockholder; provided,
however, that in the case of any Callable Shares acquired by the Call
Option Management Stockholder, pursuant to a Rollover Option, the price paid
therefor shall be deemed to be the price paid by the applicable 

 

 

 

Blackstone
DJO Stockholder for each share of Common Stock purchased by it in connection
with the Merger, or, if such Shares were granted to such Call Option Management
Stockholder in exchange for services, the fair market value of such services at
the time of grant, and (B) Fair Market Value of such Callable Shares on the
Exercise Date or the Sponsor Exercise Date, as the case may be.

 

(ii)          In the case of any other termination
of such Call Option Management Stockholder, the consideration will be Fair
Market Value of such Callable Shares on the Exercise Date or the Sponsor
Exercise Date, as the case may be.

 

7.  This Amendment may be executed in
counterparts, as may be deemed necessary and convenient by the parties hereto,
each of which counterpart, when so executed and delivered, shall be deemed an
original, but all of such counterparts shall constitute but one and the same
instrument.

 

8.  This Amendment shall be construed in
accordance with and governed by the laws of the State of New York.

 

[Signature Pages Follow]

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this First Amendment To Management Stockholders Agreement on the date
first written above.

 

	
   

  	
  BLACKSTONE CAPITAL PARTNERS V L.P.

  
	
   

  	
   

  
	
   

  	
  By: Blackstone Management
  Associates V 

  L.L.C., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Name:Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  
	
   

  	
   

  
	
   

  	
  BLACKSTONE FAMILY INVESTMENT 

  PARTNERSHIP V L.P.

  
	
   

  	
   

  
	
   

  	
  By: Blackstone Management
  Associates V 

  L.L.C., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Name:Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  
	
   

  	
   

  
	
   

  	
  BLACKSTONE FAMILY INVESTMENT 

  PARTNERSHIP V-A L.P.

  
	
   

  	
   

  
	
   

  	
  By: Blackstone Management Associates V 

  L.L.C., its
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Name:Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  
	
   

  	
   

  
	
   

  	
  BLACKSTONE PARTICIPATION 

  PARTNERSHIP V L.P.

  
	
   

  	
   

  
	
   

  	
  By: Blackstone Management
  Associates V L.L.C., its General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Name:Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  
	
   

  	
   

  
	
   

  	
  GRAND SLAM HOLDINGS, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chinh E. Chu

  	
   

  
	
   

  	
   

  	
  Name:Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  

 

[Signature Page 1 of 2 to First
Amendment To Management Stockholders Agreement]

 

 

 

 

	
   

  	
  REABLE THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
  Name:Harry L. Zimmerman

  
	
   

  	
   

  	
  Title: Executive Vice President, General Counsel,
  Secretary and Assistant Treasurer

  

 

[Signature Page 2 of 2 to First
Amendment To Management Stockholders Agreement]Exhibit 10.3

 

EXECUTION COPY

TERM
SHEET FOR PAUL D. CHAPMAN

DIRECTOR OF DJO INCORPORATED

 

	
  Parties:

  	
   

  	
  ReAble Therapeutics, Inc.,
  a Delaware corporation which, following the consummation of certain
  transactions set forth in the Agreement and Plan of Merger, dated July 15,
  2007, intends to change its name to “DJO Incorporated” (the “Company”), and
  Paul D. Chapman (the “Director”).

  
	
   

  	
   

  	
   

  
	
  Service Period:

  	
   

  	
  The Director shall serve on the Company’s Board of
  Directors (the “Board”) until the next annual meeting of the Company’s
  stockholders at which time the stockholders may elect the Director to serve
  for an additional term. The Director may be removed at any time with or
  without cause by the Company’s stockholders as set forth under the Delaware
  General Corporation Law or as provided in the Company’s Certificate of
  Incorporation.

  
	
   

  	
   

  	
   

  
	
  Position and Duties:

  	
   

  	
  To serve as a director on the Company’s Board. The
  duties, responsibilities and obligations of the Director are as established
  by law, the Certificate of Incorporation and Bylaws of the Company, the
  Corporate Governance Guidelines, Committee Charters and other governance
  procedures and policies established by the Company from time to time.

  
	
   

  	
   

  	
   

  
	
  Annual Retainer:

  	
   

  	
  For each annual term commencing on or after January
  1, 2008 that the Director is elected to serve on the Board, the Director will
  be paid an annual retainer as set forth on Exhibit A, payable in 4
  equal installments on the date of each regularly scheduled quarterly Board
  meeting. No annual retainer shall be paid for Board membership in 2007.

  
	
   

  	
   

  	
   

  
	
  Travel Expenses:

  	
   

  	
  The Director will be reimbursed for all reasonable
  travel and lodging expenses associated with attendance at Board meetings,
  subject to the policies of the Company in effect from time to time.

  
	
   

  	
   

  	
   

  
	
  Equity Grant:

  	
   

  	
  The Director will be granted annual equity awards,
  in the form to be determined by the Company, as set forth on Exhibit A.
  The first equity award will be granted January 1, 2008 and a similar grant
  shall be made on each following January 1 during this term on the Board.

  
	
   

  	
   

  	
   

  
	
  Termination of Service:

  	
   

  	
  All annual retainers, equity awards and expense
  reimbursements will cease and all unvested equity awards, if any, shall be
  forfeited upon the termination of the Director’s membership on the Board for
  any reason whatsoever.

  
	
   

  	
   

  	
   

  
	
  Director’s Covenants:

  	
   

  	
  During the period the Director is a member of the
  Board and thereafter, the Director will not disclose or otherwise use any
  confidential information or trade secrets of the Company, its subsidiaries
  and affiliates. “Confidential Information,” shall mean any information
  regarding the business methods, business policies, policies, procedures,
  techniques, research or development projects or results, historical or
  projected financial information, budgets, trade secrets, or other knowledge
  or processes of or developed by the Company or any names and addresses of
  customers or clients or any data on or relating to past, present or
  prospective Company customers or clients or any other confidential
  information relating to or dealing with the business operations or activities
  of the Company, made known to the Director or learned or acquired by the
  Director while associated with the Company, excepting information otherwise
  lawfully known generally by or readily accessible to the general 

  

 

 

	
   

  	
   

  	
  public.

  
	
   

  	
   

  	
   

  
	
  Governing Law:

  	
   

  	
  The provisions of this Term Sheet shall be governed
  by the laws of the State of New York, without regard to any choice of law
  provisions.

  

 

[Signature
Page Follows]

 

	
  REABLE
  THERAPEUTICS, INC.

  	
   

  	
  PAUL
  D. CHAPMAN

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Harry L. Zimmerman

  	
   

  	
  /s/
  Paul D. Chapman

  
	
   

  	
  HARRY
  L. ZIMMERMAN

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  November
  20, 2007

  	
   

  	
  Date:

  	
  November
  20, 2007

  
						

 

 

[Signature Page to Paul D.
Chapman Board Term Sheet]

 

 

Exhibit A

 

Certain
Terms and Conditions of Service

	
  Name:

  	
   

  	
  Paul D. Chapman

  
	
   

  	
   

  	
   

  
	
  Position:

  	
   

  	
  Non-employee Director
  of the Company

  
	
   

  	
   

  	
   

  
	
  Annual Retainer for

  membership on

  Board:

  	
   

  	
  $50,000

  
	
   

  	
   

  	
   

  
	
  Annual Equity Award

  	
   

  	
  Annual grant of options
  to acquire the Company’s stock valued at approximately $25,000 (not to exceed
  1,500 shares per grant), with the exercise prices to be set at the fair
  market value of the stock on the date of option grant). One-third of the
  shares subject to each annual option grant shall vest on the first
  anniversary of such grant, and one-third of the shares subject to such annual
  option grant shall vest on each of the next two following anniversaries of
  such annual option grant, provided the Director continues to serve on the
  Board.

  

  The options shall have restrictions on transfer, and the options and the
  shares subject to such options shall be subject to certain call rights,
  drag-along and tag-along rights, and registration rights similar to those
  included in the Management Stockholders Agreement that has been entered into
  between the Company and its senior management.

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