Document:

Exhibit 10.23

 

ENCORE MEDICAL
CORPORATION

ANNUAL BONUS PLAN

 

ENCORE MEDICAL CORPORATION (the “Company”) hereby
establishes this ENCORE MEDICAL CORPORATION ANNUAL BONUS PLAN (the “Plan”) as
of this 3rd day of November, 2006, in accordance with the terms provided
herein.

 

Section 1. Bonus Purposes. The
Company’s main purposes in establishing the Bonus Plan are to maintain a
competitive level of compensation and to align the interests of the Company’s
employees with those of the Company’s shareholders and with the strategic
objectives of the Company.

 

Section 2. Effective Date. The
effective date of this Plan is November 3, 2006. The Plan will remain in effect
from year to year through 2011 and until the payment of any benefits earned for
such year (each calendar year shall be referred to herein as a “Plan Year”)
until formally amended or terminated in accordance with Section 11.

 

Section 3. Eligibility. Each
of the senior executive officers of the Company who are specified on Schedule A
shall participate in the Plan. Each Plan participant shall be notified in
writing of their participation and given a Plan document for their reference.

 

Section 4. Administration of the
Plan. The Compensation Committee of the Board of Directors of the Company
(the “Committee”) shall administer the Plan. The Committee has responsibility
for all aspects of Plan administration, including interpreting and construing
the Plan, approving and notifying Plan participants, ruling on any disagreement
between Plan Participants, the Company, and any other interested parties, and
maintaining final authority to modify or terminate the Plan. The interpretation
and construction by the Committee of any provisions of the Plan shall be final.
No member of the Committee shall be liable for any action or determination made
in good faith on the Plan. The Committee may, in its discretion, designate
another party to administer the Plan.

 

Section 5. Bonus amounts. The
following bonus amounts shall be administered under the Plan:

 

•                  Target Bonus Amount;

•                  Supplemental Bonus Amount; and

•                  Retention Bonus Amount.

 

Section 6. Definitions. The
following provides the definition of certain terms, as are used in the Plan:

 

(a)                                  “Cause” shall have the meaning set forth in the individual
participant’s Employment Agreement with the Company.

 

(b)                                 “Disability” shall have the meaning set forth in the
individual participant’s Employment Agreement with the Company.

 

(c)                                  “EBITDA” shall mean “Consolidated EBITDA”, as defined in
that certain Credit Agreement dated as of November 3, 2006 among Encore Medical
Finance, LLC, as Borrower, Encore Medical Holdings, LLC, Bank Of America, N.A.,
as Administrative Agent, Swing Line Lender and L/C Issuer, The Other Lenders
Party Hereto, Credit Suisse Securities (USA) LLC, as Syndication Agent, General

 

 

Electric Capital
Corporation, as Documentation Agent, and Banc Of America Securities LLC and
Credit Suisse Securities (USA) LLC, as Lead Arrangers and Book Runners.

 

(d)                                 “Free Cash Flow” shall mean cash flow from operations as
presented in the statement of cash flows

 

(x)                                   increased,
without duplication, by

 

(1)                                  cash
payments for interest expense on borrowed money,

 

(2)                                  the
cash tax cost incurred with respect to interest income and

 

(3)           cash flows from
discontinued operations to the extent that such amounts are not reflected as a
source of cash from operations in the statement of cash flows, and

 

(y)                                 decreased,
without duplication, by

 

(1)                                  uses
of cash reflected as investing activities, excluding purchases of held to
maturity securities, and excluding amounts expended on acquisitions of
businesses, assets or product lines from third parties,

 

(2)                                  cash
received for interest income on invested cash or cash equivalents,

 

(3)                                  the
cash tax benefit realized during the period with respect to interest expense on
borrowed money and stock based compensation,

 

(4)                                  minority
interest expense, and

 

(5)           uses of cash from
discontinued operations to the extent that such amounts are not included as a
use of cash from operations in the statement of cash flows.

 

For purposes of
calculating Free Cash Flow, all amounts will be determined in accordance with
GAAP, will consider changes in outstanding checks to be an operating cash flow
and will exclude the effects of any sources or uses of cash outside the
ordinary course of business (e.g., receivable financing).

 

(e)                                  “GAAP” shall mean accounting principles generally accepted
in the United States of America as applicable to the Company, subject to
regulation by the Securities and Exchange Commission as in effect on the effective
date of the Plan, and to the extent that alternative accounting treatments are
permissible within those accounting principles, in accordance with the Company’s
historical accounting policies.

 

(f)                                    “Good Reason” shall have the meaning set forth in the
individual participant’s Employment Agreement with the Company.

 

2

 

Section 7. Determination of Bonus
Amounts.

 

(a)                                  Target
Bonus Amount. For each Plan Year from 2007 through 2011, a participant
shall be eligible to earn a Target Bonus Amount equal to 67% of the participant’s
base salary in effect during such Plan Year, calculated on a weighted average
monthly basis using the base salary in effect on the first day of each month,
contingent upon (i) the satisfaction of the Free Cash Flow and EBITDA targets
for such Plan Year specified on Schedule B, as determined by the Committee, and
(ii) the Participant’s continued employment with the Company through the
specified payment date for such Target Bonus Amount.

 

(b)                                 Supplemental
Bonus Amount. For each Plan Year from 2007 through 2011, a participant
shall be eligible to earn a Supplemental Bonus Amount equal to 100% of the
participant’s base salary in effect during such Plan Year, calculated on a
weighted average monthly basis using the base salary in effect on the first day
of each month, contingent upon (i) the satisfaction of the Free Cash Flow and
EBITDA targets for such Plan Year specified on Schedule C, as determined by the
Committee, and (ii) the participant’s continued employment with the Company
through the specified payment date for such Supplemental Bonus Amount.

 

(c)                                  Retention
Bonus Amount. Each participant shall be eligible to receive a Retention
Bonus Amount in the amount specified in the participant’s notice of
participation, provided that such Retention Bonus Amount must be repaid to the
Company if the participant’s employment with the Company is terminated prior to
January 1, 2008, other than by reason of a termination by the Company without
Cause, by the participant for Good Reason, or as a result of the participant’s
death or Disability.

 

Section 8. Payments. No bonus
amount shall be earned and a participant shall have no vested interest or
entitlement to any bonus amount hereunder prior to its actual payment.

 

(a)                                  Target
Bonus Amount and Supplemental Bonus Amount. The Target Bonus Amount and the
Supplemental Bonus Amount, if earned, shall be paid in cash to a participant. Payments
shall be made within 21⁄2 months following the end of a Plan Year. In the event
that a participant’s employment is terminated as a result of the participant’s
death or Disability prior to any specified payment date for the Target Bonus
Amount or Supplemental Bonus Amount, the participant shall be deemed to be
employed through the specified payment date for all purposes hereunder and
shall be entitled to the Target Bonus Amount or Supplemental Bonus Amount at
the same time it is paid to other Plan participants.

 

(b)                                 Retention
Bonus Amount. The Retention Bonus Amount shall be paid in cash to the
participant upon the closing of the transactions contemplated in that certain
Agreement and Plan of Merger by and among Grand Slam Holdings, LLC, Grand Slam
Acquisitions Corp. and the Company, dated as of June 30, 2006. As a condition to
payment, the participant shall agree in writing that such amount, if subject to
repayment under Section 7(c), may be withheld from any amounts otherwise due to
a participant, including without limitation salary, upon a participant’s
separation from service with the Company; provided, however, that repayment at
the time of separation from service shall be limited to the net after-tax
portion of the Retention Bonus Amount that was originally received by the
participant, and the balance of the Retention Bonus Amount shall be repaid at

 

3

 

the time the
participant receives a refund of the taxes paid with respect to the Retention
Bonus Amount.

 

Section 9. No Rights to
Employment. Nothing in the Plan shall confer any right on any employee to
continue in the employ of the Company. Except as may be provided in an
agreement with the participant or as otherwise provided herein, in the event
that a participant’s employment is terminated for any reason prior to payment
of a Target Bonus Amount or Supplemental Bonus Amount, such Target Bonus Amount
and Supplemental Bonus Amount shall not be earned and shall be forfeited by the
participant without any further action required by the Company. Except as
provided in Section 7(c), in the event that a participant’s employment is
terminated for any reason prior to payment of a Retention Bonus Amount, such
bonus amount shall not be earned and shall be forfeited by the participant
without any further action required by the Company.

 

Section 10. Amendment or Termination of this Plan. The
Company shall have the right to amend or terminate the Plan at any time by
written action approved by the Committee; provided, however, no such amendment
may reduce the bonus opportunity or adversely affect the targets provided
herein through 2011 or the payment of any such amounts earned, except with
respect to amendments that are necessary to comply with applicable law, rule or
regulation. The Company shall notify affected employees in writing of any amendment
or Plan termination.

 

Section 11. Successors. In addition
to any obligations imposed by law upon a successor to the Company, the Company
shall require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the assets of the
Company to expressly assume the Plan and agree to perform obligations hereunder
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.

 

4Exhibit 10.24

 

EXECUTION COPY

 

THIS
TRANSACTION AND MONITORING FEE AGREEMENT (this “Agreement”)
is dated as of November 3, 2006 and is between Encore Medical Corporation, a
Delaware corporation (the “Company”),
and Blackstone Management Partners V L.L.C., a Delaware limited liability
company (“BMP”).

BACKGROUND

1.             Grand
Slam Holdings, LLC, a Delaware limited liability company (“Parent”),
and Grand Slam Acquisition Corp., a Delaware corporation (“Merger
Sub”), have engaged in a transaction in which Merger Sub has
been merged with and into the Company, with the Company surviving (the “Merger”), pursuant to an Agreement
and Plan of Merger among Parent, Merger Sub and the Company, dated as of June
30, 2006 (as amended from time to time, the “Merger
Agreement”).

2.             BMP
has expertise in the areas of finance, strategy, investment, acquisitions and
other matters relating to the Company and its business 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, other advice and negotiation assistance with all relevant
parties to the Transactions.  BMP has
also provided advice and negotiation assistance with relevant parties in
connection with the financing of certain of the Transactions as contemplated by
the Merger Agreement.

3.             The
Company desires to avail itself, for the term of this Agreement, of BMP’s
expertise in providing financial and structural analysis, due diligence
investigations, corporate strategy, other advice and negotiation assistance,
which the Company believes will be beneficial to it, and BMP desires to provide
the services to the Company as set forth in this Agreement in consideration of
the payment of the fees described below.

4.             The
rendering by BMP of the services described in this Agreement and the funding of
equity by certain Affiliates of BMP, as described above, has been made and will
be made on the basis that the Company will pay, or cause to be paid, the fees
described below.

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, corporate strategy and
other advice and negotiation assistance necessary in order to enable the
Transactions to be consummated, the Company will pay BMP at the closing of the
Merger (hereinafter referred to the “Effective Time”)
(i) a non-refundable and irrevocable transaction fee of $8,200,000, and (ii)
$412,498.81 in reimbursement for certain Out-of-Pocket Expenses (as defined
below) incurred by BMP in connection with its due diligence investigations in
the Transactions.  In consideration of
the merger and acquisition advisory group of BMP rendering strategic and other
advice and negotiation assistance to the Company in connection with identifying
and evaluating certain potential transactions, the Company will pay BMP 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 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 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
officers, employees, representatives, agents and third parties as BMP in its
sole discretion may designate from time to time (its “Affiliates”),
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 over the scope of such other services and the payment therefor.

(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 any of its
Affiliates 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, on the other
hand.  In the absence of an express
agreement regarding compensation for services performed by BMP or any of its
Affiliates 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) 1% 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, 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 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 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 one of its Affiliates for such
services.  The Company and its
subsidiaries may not hire any person, other than BMP or one of its Affiliates,
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 its affiliate to render such
services after 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 in respect of such services; (iii) ten 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 its affiliate 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 its affiliate was willing to accept in the
negotiations described above.

SECTION 4.         Monitoring Fee.

(a)           In consideration of the Services
being rendered by BMP, 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 shall be $3,000,000).

(b)           The Monitoring Fee for the year
ending December 31, 2006 shall be equal to $3,000,000, which shall be paid, or
caused to be paid, by the Company at the Effective Time in respect of Services
to be rendered from the Effective Time to December 31, 2006.

(c)           The Monitoring Fee for fiscal year
2007 and each subsequent year shall be equal to $3,000,000.  The Company will pay, or cause to be paid, to
BMP, such Monitoring Fee on January 1, 2007, and thereafter on January 1 of
each subsequent year.

(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 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 by BMP shall not be deemed to be a subordination
of such payments to any other person, entity 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 10%,
compounded quarterly, from the date due until paid.

(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 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 anniversary of the date of such
election; provided, however, that in no event shall the Lump Sum Fee
be reduced by any adjustment amounts paid or that may be payable by BMP
pursuant to Section 4(b)(iii) or Section 4(c)(ii) hereof.  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 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
Payment 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 Payment 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, entity 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 Payment 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.

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 for, their respective Out-of-Pocket
Expenses (as defined below). 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 in
connection with the Transactions and the Services or other services provided by
them under this 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 its
successor by BMP or its Affiliates, or otherwise incurred by BMP or its
Affiliates from time to time in the future in connection with the ownership or
subsequent sale or transfer by BMP or its Affiliates of capital stock of the
Company or its successor, 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, (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,
and (c) transportation, per diem costs, word processing expenses or any similar
expense not associated with BMP’s or its Affiliates’ 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.

SECTION 6.         Indemnification.

The
Company will indemnify and hold harmless BMP, its Affiliates and their
respective partners (both general and limited), members (both managing and
otherwise), officers, directors, employees, agents and representatives (each
such person being an “Indemnified Party”)
from and against any and all actions, suits, investigations, losses, claims,
damages and liabilities, including in connection with seeking indemnification,
whether joint or several (the “Liabilities”),
related to, arising out of or in connection with the Services or other services
contemplated by this Agreement or the engagement of BMP pursuant to, and the
performance by BMP of the Services or other services contemplated by, this
Agreement, 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 claim, action or proceeding relating to
the matters contemplated hereby (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 claim, action
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 loss, claim, damage, liability, cost or expense 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 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 of equity
securities of the Company (all such information so furnished, the “Information”). The Company
recognizes and confirms that BMP (a) will use and rely primarily on the
Information and on information available from generally recognized public
sources in performing the Services and other services contemplated by this
Agreement without having independently verified the same, (b) does not assume
responsibility for the accuracy or completeness of the Information and such
other information and (c) 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 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 Sections 4(e), 4(f)(ii), 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 to be provided by it
hereunder.  In no event shall BMP 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 BMP 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
currently have, and will in the future have or will consider acquiring,
investments in numerous companies with respect to which BMP or its Affiliates
may serve as an advisor, a director or in some other capacity, in recognition
that BMP and its Affiliates have myriad 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. 
Except as BMP may otherwise agree in writing after the date hereof:

                (i)            BMP and its Affiliates 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 believes in good faith is necessary to or
appropriate to fulfill its obligations as described 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 shall have no duty (contractual or
otherwise) to communicate or present any corporate opportunities to the Company
or any of its affiliates 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
affiliates, hereby irrevocably waives any right to require BMP or any of its
Affiliates to act in a manner inconsistent with the provisions of this Section
9(b).

                (iii)          Neither BMP nor any of its Affiliates shall be liable to
the Company or any of its affiliates 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 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), officers, directors, employees, agents and representatives from
any and all liabilities, claims and causes of action in connection with the
Services or other services contemplated by this Agreement or the engagement of
BMP pursuant to, and the performance by BMP of the Services or other services
contemplated by, this Agreement that the Company 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 be liable to the Company or any of its affiliates 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,
including, without limitation, the services to be provided by BMP or any of its
Affiliates hereunder, 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.

(b)           Any notices or other
communications required or permitted hereunder shall be made in writing and
will be sufficiently given if delivered personally or sent by facsimile with
confirmed receipt, or 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

 

With a copy to:

 

Reed Smith LLP

599 Lexington Ave., 29th Floor

New York, NY 10022

Facsimile: (212) 521-5450

 

if to the Company:

 

Encore Medical Corporation

9800 Metric Blvd

Austin, Texas 78758

Attn: Harry L. Zimmerman, Esq.

Facsimile: (512) 834-6300

 

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 with confirmed receipt, 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.

(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 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)            Except as otherwise contemplated by
Section 3(a) hereof, 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 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
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
BMP and its Affiliates and their respective partners (both general and
limited), members (both managing and otherwise), officers, directors,
employees, agents and representatives are intended to be third-party
beneficiaries under Section 6 hereof.

(g)           This Agreement may be executed by one
or more parties to this Agreement on any number of separate counterparts
(including by facsimile), 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.

 

THE REMAINDER OF THIS PAGE HAS BEEN
INTENTIONALLY LEFT BLANK.

 

 

 

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

	
   

  	
   

  	
   

  
	
   

  	
  BLACKSTONE MANAGEMENT
  PARTNERS V L.L.C.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chinh. E. Chu

  	
   

  
	
   

  	
   

  	
  Name: Chinh E. Chu

  
	
   

  	
   

  	
  Title: Authorized Person

  
					

 

 

 

	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry L. Zimmerman

  	
   

  
	
   

  	
   

  	
  Name: Harry L. Zimmerman

  
	
   

  	
   

  	
  Title: Executive Vice President and General
  Counsel

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