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EXHIBIT 10.15
PLEDGE AGREEMENT dated as of June 30, 1999, among DJ
ORTHOPEDICS, LLC, a Delaware limited liability company (the
"Borrower"), DONJOY, L.L.C., a Delaware limited liability
company ("Holdings"), each subsidiary of the Borrower
listed on Schedule I hereto (each such subsidiary
individually, a "Subsidiary Pledgor" and collectively, the
"Subsidiary Pledgors"; the Borrower, Holdings and the
Subsidiary Pledgors are referred to collectively herein as
the "Pledgors") and FIRST UNION NATIONAL BANK ("First
Union"), as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in
the Credit Agreement referred to below).
Reference is made to (a) the Credit Agreement dated as of June 30, 1999
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, Holdings, the lenders from time to time party
thereto (the "Lenders"), First Union, as Administrative Agent and Collateral
Agent, and THE CHASE MANHATTAN BANK, as Syndication Agent and as issuing bank
(in such capacity, the "Issuing Bank"), (b) the Parent Guarantee Agreement dated
as of June 30, 1999 (as amended, supplemented or otherwise modified from time to
time, the "Parent Guarantee Agreement"), between Holdings and the Collateral
Agent and (c) the Subsidiary Guarantee Agreement dated as of June 30, 1999 (as
amended, supplemented or otherwise modified from time to time, the "Subsidiary
Guarantee Agreement"; and, collectively with the Parent Guarantee Agreement, the
"Guarantee Agreements") among the Subsidiary Pledgors and the Collateral Agent.
The Lenders have agreed to make Loans to the Borrower and the Issuing
Bank has agreed to issue Letters of Credit for the account of the Borrower,
pursuant to, and upon the terms and subject to the conditions specified in, the
Credit Agreement. Holdings and the Subsidiary Guarantors (as defined in the
Security Agreement) have agreed to guarantee, among other things, all the
obligations of the Borrower under the Credit Agreement. The obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit are
conditioned upon, among other things, the execution and delivery by the Pledgors
of a Pledge Agreement in the form hereof to secure (a) the due and punctual
payment by the Borrower of (i) the principal of and premium, if any, and
interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration,
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upon one or more dates set for prepayment or otherwise, (ii) each payment
required to be made by the Borrower under the Credit Agreement in respect of any
Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral and (iii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to the Secured
Parties under the Credit Agreement and the other Loan Documents, (b) the due and
punctual performance of all covenants, agreements, obligations and liabilities
of the Borrower under or pursuant to the Credit Agreement and the other Loan
Documents, (c) the due and punctual payment and performance of all the
covenants, agreements, obligations and liabilities of each other Loan Party
under or pursuant to this Agreement and the other Loan Documents and (d) the due
and punctual payment and performance of all obligations of Holdings, the
Borrower and any Subsidiary Loan Party under each Hedging Agreement entered into
with any counterparty that was a Lender (or an Affiliate of a Lender) at the
time such Hedging Agreement was entered into (all the monetary and other
obligations referred to in the preceding clauses (a) through (d) being referred
to collectively as the "Obligations"). Capitalized terms used herein and not
defined herein shall have meanings assigned to such terms in the Credit
Agreement.
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself
and each Secured Party (and each of their respective successors or assigns),
hereby agree as follows:
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SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of the Obligations, each Pledgor hereby transfers, grants,
bargains, sells, conveys, hypothecates, pledges, sets over and delivers unto the
Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in all of the Pledgor's right, title and
interest in, to and under (a) the shares of capital stock, membership interests
or other equity interests owned by it and listed on Schedule II hereto and any
shares of capital stock, membership interests or other equity interests of the
Borrower or any Subsidiary obtained in the future by such Pledgor and the
certificates representing all such shares, membership interests or other equity
interests (collectively, the "Pledged Equity Interests"); provided that the
Pledged Equity Interests shall not include (i) more than 65% of the issued and
outstanding shares of stock, membership interests or other equity interests of
any Foreign Subsidiary or (ii) to the extent that applicable law requires that a
Subsidiary of the Pledgor issue directors' qualifying shares, such qualifying
shares; (b)(i) the debt securities listed opposite the name of such Pledgor on
Schedule II hereto, (ii) any debt securities in the future issued to such
Pledgor and (iii) the promissory notes and any other instruments evidencing such
debt securities (the "Pledged Debt Securities"); (c) all other property that may
be delivered to and held by the Collateral Agent pursuant to the terms hereof;
(d) subject to Section 5, 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
the securities referred to in clauses (a) and (b) above; (e) subject to Section
5, all rights and privileges of the Pledgor with respect to the securities,
membership interests, other equity interests and other property referred to in
clauses (a), (b), (c) and (d) above; and (f) all proceeds of any of the
foregoing (the items referred to in clauses (a) through (f) above being
collectively referred to as the "Collateral"). Upon delivery to the Collateral
Agent, (a) any stock certificates, membership interest certificates,
certificates with respect to other equity interests, notes or other securities
now or hereafter included in the Collateral (the "Pledged Securities") shall be
accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (b) all other
property comprising part of the Collateral shall be accompanied by proper
instruments of assignment duly executed by the applicable Pledgor 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 theretofore and then being pledged hereunder, which schedule shall be
attached hereto as Schedule II and made a part hereof. Each schedule so
delivered shall supersede any prior schedules so delivered.
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral
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Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, forever; subject, however, to the terms, covenants and conditions
hereinafter set forth.
SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Collateral Agent any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral.
(b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any Person to be evidenced by a duly executed promissory note
that is pledged and delivered to the Collateral Agent pursuant to the terms
thereof.
(c) Each Pledgor agrees that, to the extent it becomes the owner of any
interest in a limited liability company or a limited partnership and such
Pledgor would be required to pledge such interest to the Collateral Agent
pursuant to Section 1(a), it will cause the issuer of such interest to provide
in such issuer's limited liability company operating agreement, or partnership
agreement or other relevant constitutive documents that its limited liability
company interests or partnership interests, respectively, shall at all times be
represented by certificates, shall constitute "securities" within the meaning of
Section 8-102 and Section 8-103 of Article 8 of the Uniform Commercial Code and
shall be governed by Article 8 of the Uniform Commercial Code.
SECTION 3. Representations, Warranties and Covenants. Each Pledgor hereby
represents, warrants and covenants, as to itself and the Collateral pledged by
it hereunder, to and with the Collateral Agent that:
(a) the Pledged Equity Interests represent that percentage as set
forth on Schedule II of the issued and outstanding shares and units of
each class of the capital stock, membership interests or other equity
interests of the issuer with respect thereto;
(b) except for the security interest granted hereunder, the
Pledgor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on
Schedule II, (ii) holds the same free and clear of all Liens, (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
Collateral, other than pursuant hereto, and (iv) subject to Section 5,
will cause any and all Collateral, whether for value paid by the Pledgor
or otherwise, to be forthwith deposited with the Collateral Agent and
pledged or assigned hereunder;
(c) the Pledgor (i) has the power and authority to pledge the
Collateral in the manner hereby done or contemplated and (ii) will defend
its title or interest
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thereto or therein against any and all Liens (other than the Lien
created by this Agreement), however arising, of all Persons whomsoever;
(d) no consent of any other Person (including stockholders or
creditors of any Pledgor) and no consent or approval of any Governmental
Authority or any securities exchange was or is necessary to the validity
of the pledge effected hereby;
(e) by virtue of the execution and delivery by the Pledgors of
this Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to the
Collateral Agent in accordance with this Agreement, the Collateral Agent
will obtain a valid and perfected first lien upon and security interest
in such Pledged Securities as security for the payment and performance of
the Obligations;
(f) the pledge effected hereby is effective to vest in the
Collateral Agent, on behalf of the Secured Parties, the rights of the
Collateral Agent in the Collateral as set forth herein;
(g) all of the Pledged Equity Interests have been duly authorized
and validly issued and are fully paid and nonassessable;
(h) all information set forth herein relating to the Pledged
Equity Interests is accurate and complete in all material respects as of
the date hereof; and
(i) the pledge of the Pledged Equity Interests pursuant to this
Agreement does not violate Regulation T, U or X of the Federal Reserve
Board or any successor thereto as of the date hereof.
SECTION 4. Registration in Nominee Name; Denominations. 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
Pledgors, endorsed or assigned in blank or in favor of the Collateral Agent.
Each Pledgor 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 Pledgor. The Collateral Agent shall at all times
have the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.
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SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting,
management 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, however, that such Pledgor will not be entitled to
exercise any such right if the result thereof could materially and
adversely affect the rights inuring to a holder of the Pledged Securities
or the rights and remedies of any of the Secured Parties under this
Agreement or 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
Pledgor, or cause to be executed and delivered to each Pledgor, all such
proxies, powers of attorney and other instruments as such Pledgor may
reasonably request for the purpose of enabling such Pledgor to exercise
the voting, management and/or consensual rights and powers it is entitled
to exercise pursuant to subparagraph (i) above and to receive the cash
dividends it is entitled to receive pursuant to subparagraph (iii) below.
(iii) Each Pledgor shall be entitled to receive and retain any and
all cash dividends, distributions, interest and principal paid on the
Pledged Securities to the extent and only to the extent that such cash
dividends, distributions, interest and principal are permitted by, and
otherwise paid in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents (and, in the case of payments by the
Borrower, its limited liability company agreement) and applicable laws.
All noncash dividends, distributions, interest and principal, and all
dividends, distributions, interest and principal paid or payable in cash
or otherwise in connection with a partial or total liquidation or
dissolution, return of capital, capital surplus or paid-in surplus, and
all other distributions (other than distributions referred to in the
preceding sentence) made on or in respect of the Pledged Securities,
whether paid or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the outstanding capital
stock, membership interests or other 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, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the
Collateral, and, if received by any Pledgor, shall not be commingled by
such Pledgor 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
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Collateral Agent and shall be forthwith delivered to the Collateral Agent
in the same form as so received (with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default
(except with respect to Tax Distributions permitted by clause (a) (i) of Section
6.08 of the Credit Agreement which shall continue to be governed by paragraph
(a)(iii) above), all rights of any Pledgor to dividends, distributions, interest
or principal that such Pledgor is authorized to receive pursuant to paragraph
(a)(iii) above 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, distributions, interest or
principal. All dividends, distributions, interest or principal received by the
Pledgor contrary to the provisions of this Section 5 shall be held in trust for
the benefit of the Collateral Agent, shall be segregated from other property or
funds of such Pledgor and shall be forthwith delivered to the Collateral Agent
upon demand in the same form as so received (with any necessary endorsement).
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 7. After all Events of Default have been cured or
waived, the Collateral Agent shall, within five Business Days after all such
Events of Default have been cured or waived, repay to each Pledgor all cash
dividends, distribution, interest or principal (without interest), that such
Pledgor would otherwise be permitted to retain pursuant to the terms of
paragraph (a)(iii) above and which remain in such account.
(c) Upon the occurrence and during the continuance of an Event of
Default, all rights of any Pledgor to exercise the voting, management and
consensual rights and powers it is entitled to exercise pursuant to paragraph
(a)(i) of this Section 5, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 5, shall cease, upon notice thereof by the
Collateral Agent, 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, management and consensual rights and powers, provided
that, upon an Event of Default pursuant to clause (h) or (i) of Article VII of
the Credit Agreement such rights shall automatically vest in the Collateral
Agent without any action on the part of the Collateral Agent. After all Events
of Default have been cured or waived, such Pledgor will have the right to
exercise the voting, management and consensual rights and powers that it would
otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i)
above.
SECTION 6. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, subject to applicable regulatory and legal
requirements, the Collateral Agent may sell the Collateral, or any part thereof,
at 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
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Agent shall be authorized at any such sale (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 such sale shall hold the property
sold absolutely free from any claim or right on the part of any Pledgor, and, to
the extent permitted by applicable law, the Pledgors hereby waive all rights of
redemption, stay, valuation and appraisal any Pledgor 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 a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notification within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of such Pledgor's 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
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 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 in
full 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 applicable law, private) sale made pursuant to this Section 6, any
Secured Party may bid for or purchase, free from any right of redemption, stay
or appraisal on the part of any Pledgor (all said rights being also hereby
waived and released), 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
it from such Pledgor as a credit against the purchase price, and it may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Pledgor therefor. For purposes hereof,
(a) a written agreement to purchase the Collateral
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or any portion thereof shall be treated as a sale thereof, (b) the Collateral
Agent shall be free to carry out such sale pursuant to such agreement and (c)
such Pledgor shall not 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 upon the Collateral
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 6 shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-504(3) of the Uniform Commercial Code as in
effect in the State of New York or its equivalent in other jurisdictions.
SECTION 7. Application of Proceeds of Sale. The proceeds of any sale of
Collateral pursuant to Section 6, as well as any Collateral consisting of cash,
shall be applied by the Collateral Agent as follows:
FIRST, to the payment of all costs and expenses incurred by the
Collateral Agent in connection with such sale or otherwise in connection
with this Agreement, any other Loan Document or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
any Pledgor and any other costs or expenses incurred in connection with
the exercise of any right or remedy hereunder or under any other Loan
Document;
SECOND, to the payment in full of the Obligations (the amounts so
applied to be distributed among the Secured Parties pro rata in
accordance with the amounts of the Obligations owed to them on the date
of any such distribution); and
THIRD, to the Pledgors, their successors or assigns, or as a court
of competent jurisdiction may otherwise direct.
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 the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the purchase money by the Collateral Agent or of the officer
making the sale 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.
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SECTION 8. Reimbursement of Collateral Agent. (a) Each Pledgor agrees to
pay upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, other charges and disbursements of its
counsel and of any experts or agents, that the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder or (iv) the failure by such Pledgor to perform or
observe any of the provisions hereof.
(b) Without limitation of its indemnification obligations under the other
Loan Documents, each Pledgor agrees to indemnify the Collateral Agent and the
Indemnitees (as defined in Section 9.03(b) of the Credit Agreement) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, other
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations thereunder or the consummation of the
Transactions and the other transactions contemplated thereby or (ii) any claim,
litigation, investigation or proceeding relating to any of the foregoing,
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 losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Indemnitee.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement, 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 8 shall be payable
on written demand therefor and shall bear interest at the rate specified in
Section 2.13(c)(ii) of the Credit Agreement.
SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor, upon
the occurrence and during the continuance of an Event of Default, for the
purpose of carrying out the provisions of this Agreement and taking any action
and executing any instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the
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generality of the foregoing, the Collateral Agent shall have the right, upon the
occurrence and during the continuance of an Event of Default, with full power of
substitution either in the Collateral Agent's name or in the name of such
Pledgor, to ask for, demand, xxx for, collect, receive and give acquittance for
any and all moneys due or to become due under and by virtue of any Collateral,
to endorse checks, drafts, orders and other instruments for the payment of money
payable to the Pledgor representing any interest or dividend or other
distribution payable in respect of the Collateral or any part thereof or on
account thereof and to give full discharge for the same, to settle, compromise,
prosecute or defend any action, claim or proceeding with respect thereto, and to
sell, assign, endorse, pledge, transfer and to make any agreement respecting, or
otherwise deal with, the same; provided, however, 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 Pledgor for any act or failure to act hereunder,
except for their own gross negligence or wilful misconduct.
SECTION 10. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent in exercising any power or right hereunder 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 Collateral Agent hereunder and of
the Collateral Agent and the other Secured Parties 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 provisions of this Agreement or
consent to any departure by any Pledgor therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on any Pledgor in any case
shall entitle such Pledgor 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 a written agreement entered into between
the Collateral Agent and the Pledgor or Pledgors with respect to which such
waiver, amendment or modification is to apply, with the prior written consent of
the Required Lenders (except as otherwise provided by the Credit Agreement).
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SECTION 11. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
"blue sky" or other state securities laws or similar laws analogous in purpose
or effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion, (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale. Each Pledgor acknowledges and agrees that any such sale might
result in prices and other terms less favorable to the seller than if such sale
were a public sale without such restrictions. In the event of any such sale, the
Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good xxxxx xxxx reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached. The provisions of
this Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.
SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default hereunder, if for
any reason the Collateral Agent desires to sell any of the Pledged Securities of
the Borrower at a public sale, it will, at any time and from time to time, upon
the written request of the Collateral Agent, use its best efforts to take or to
cause the issuer of such Pledged Securities to take such action and prepare,
distribute and/or file such documents, as are required or advisable in the
reasonable opinion of counsel for the Collateral Agent to permit the public sale
of such Pledged Securities. Each Pledgor further agrees to indemnify, defend and
hold
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harmless the Collateral Agent, each other Secured Party, any underwriter and
their respective officers, directors, affiliates and controlling persons from
and against all loss, liability, expenses, costs of counsel (including, without
limitation, reasonable fees and expenses to the Collateral Agent of legal
counsel), and claims (including the costs of investigation) that they may incur
insofar as such loss, liability, expense or claim arises out of or is based upon
any alleged untrue statement of a material fact contained in any prospectus (or
any amendment or supplement thereto) or in any notification or offering
circular, or arises out of or is based upon any alleged omission to state a
material fact required to be stated therein or necessary to make the statements
in any thereof not misleading, except insofar as the same may have been caused
by any untrue statement or omission based upon information furnished in writing
to such Pledgor or the issuer of such Pledged Securities by the Collateral Agent
or any other Secured Party expressly for use therein. Each Pledgor further
agrees, upon such written request referred to above, to use its best efforts to
qualify, file or register, or cause the issuer of such Pledged Securities to
qualify, file or register, any of the Pledged Securities under the "blue sky" or
other securities laws of such states as may be requested by the Collateral Agent
and keep effective, or cause to be kept effective, all such qualifications,
filings or registrations. Each Pledgor will bear all costs and expenses of
carrying out its obligations under this Section 12. Each Pledgor acknowledges
that there is no adequate remedy at law for failure by it to comply with the
provisions of this Section 12 and that such failure would not be adequately
compensable in damages, and therefore agrees that its agreements contained in
this Section 12 may be specifically enforced.
SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor 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 relating to any of the foregoing,
(c) any exchange, release or nonperfection of any other collateral, or any
release or amendment or waiver of or consent to or departure from any guaranty,
for all or any of the Obligations or (d) any other circumstance that might
otherwise constitute a defense available to, or a discharge of, any Pledgor in
respect of the Obligations or in respect of this Agreement (other than the
indefeasible payment in full of all the Obligations).
SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the principal of and interest
on each Loan and all other fees and amounts payable under this Agreement or any
other Loan Document
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14
have been indefeasibly paid in full in cash, the LC Exposure has been reduced to
zero and the Commitments have been terminated.
(b) Upon any sale or other transfer by any Pledgor of any Collateral that
is permitted under the Credit Agreement to any Person that is not a Pledgor, or,
upon the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.02(b) of the
Credit Agreement, the security interest in such Collateral shall be
automatically released.
(c) In connection with any termination or release pursuant to paragraph
(a) or (b), the Collateral Agent shall execute and deliver to any Pledgor, at
such Pledgor's expense, all documents that such Pledgor shall reasonably request
to evidence such termination or release. Any execution and delivery of documents
pursuant to this Section 14 shall be without recourse to or warranty by the
Collateral Agent.
SECTION 15. Notices. All communications and notices hereunder shall be in
writing and given as provided in Section 9.01 of the Credit Agreement. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it in care of the Borrower.
SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent may at any time
reasonably request in connection with the administration and enforcement of this
Agreement or with respect to the Collateral or any part thereof or in order
better to assure and confirm unto the Collateral Agent its rights and remedies
hereunder.
SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor 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
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Loan Documents.
If all of the capital stock, membership interests or other equity interests of a
Pledgor is or are sold, transferred or otherwise disposed of to a
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15
Person that is not an Affiliate of the Borrower pursuant to a transaction
permitted by Section 6.05 of the Credit Agreement, such Pledgor shall be
released from its obligations under this Agreement without further action. This
Agreement shall be construed as a separate agreement with respect to each
Pledgor and may be amended, modified, supplemented, waived or released with
respect to any Pledgor without the approval of any other Pledgor and without
affecting the obligations of any other Pledgor hereunder
SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein 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 Collateral Agent and the other Secured Parties and
shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the Issuing Bank, regardless of any investigation made by
the Secured Parties or on their behalf, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
other fee or amount payable under this Agreement or any other Loan Document is
outstanding and unpaid or the LC Exposure does not equal zero and as long as the
Commitments have not been terminated.
(b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein 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 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 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Credit Agreement shall be applicable to this
Agreement.
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16
Section headings 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 22. Jurisdiction; Consent to Service of Process. (a) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that, to the extent permitted by applicable law, 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 shall affect any
right that the Collateral Agent or any other Secured Party may otherwise have to
bring any action or proceeding relating to this Agreement or the other Loan
Documents against any Pledgor or its properties in the courts of any
jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that 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 the other Loan Documents in any
New York State or Federal court. 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.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 23. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. 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
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INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 24. Additional Pledgors. Pursuant to Section 5.12 of the Credit
Agreement, the Borrower is required to cause each Subsidiary of the Borrower
that was not in existence or not a Subsidiary on the date of the Credit
Agreement to enter in this Agreement as a Subsidiary Pledgor upon becoming a
Subsidiary that is a Subsidiary Loan Party if such Subsidiary owns or possesses
property of a type that would be considered Collateral hereunder. Upon execution
and delivery by the Collateral Agent and a Subsidiary of an instrument in the
form of Annex 1, such Subsidiary shall become a Subsidiary Pledgor hereunder
with the same force and effect as if originally named as a Subsidiary Pledgor
herein. The execution and delivery of such instrument shall not require the
consent of any Pledgor hereunder. The rights and obligations of each Pledgor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Subsidiary Pledgor as a party to this Agreement.
SECTION 25. Execution of Financing Statements. Pursuant to Section 9-402
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions, each Pledgor authorizes the Collateral Agent
to file financing statements with respect to the Collateral owned by it without
the signature of such Pledgor in such form and in such filing offices as the
Collateral Agent reasonably determines appropriate to perfect the security
interests of the Collateral Agent under this Agreement. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
DJ ORTHOPEDICS, LLC,
by /s/ Xxxxx Xxxxxx III
----------------------
Name: Xxxxx Xxxxxx III
Title: V.P., CFO and Secretary
DONJOY, L.L.C.,
by /s/ Xxxxx Xxxxxx III
----------------------
Name: Xxxxx Xxxxxx III
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18
Title: V.P., CFO and Secretary
THE SUBSIDIARY PLEDGORS LISTED
ON SCHEDULE I HERETO
by /s/ Xxxxxx X. Xxxxx
----------------------
Name: Xxxxxx X. Xxxxx
Title: Authorized Officer
FIRST UNION NATIONAL BANK, as
Collateral Agent,
by /s/ J. Xxxx XxxXxxx, Xx.
----------------------
Name: J. Xxxx XxxXxxx, Xx.
Title: Vice President
19
Schedule I to the
Pledge Agreement
SUBSIDIARY PLEDGORS
Name Address
---- -------
DJ Orthopedics Capital Corporation 0000 Xxxxx Xxxxxx
Xxxxx, Xxxxxxxxxx 00000
20
Schedule II to the
Pledge Agreement
EQUITY SECURITIES
Number and Class Percentage of
of Shares/ Shares/
Membership Membership
Number of Registered Interests/Equity Interests/Equity
Issuer Certificate Owner Interests Interests
------ ----------- ---------- ----------------- -------------------
DEBT SECURITIES
Principal
Issuer Amount Date of Note Maturity Date
------ --------- ------------ -------------
21
Annex 1 to the
Pledge Agreement
SUPPLEMENT NO. dated as of , to the PLEDGE
AGREEMENT dated as of June 30, 1999, among DJ ORTHOPEDICS,
LLC, a Delaware limited liability company (the "Borrower"),
DONJOY, L.L.C., a Delaware limited liability company
("Holdings"), and each subsidiary of the Borrower listed on
Schedule I thereto (each such subsidiary individually a
"Subsidiary Pledgor" and collectively, the "Subsidiary
Pledgors"; the Borrower, Holdings and Subsidiary Pledgors
are referred to collectively herein as the "Pledgors") and
FIRST UNION NATIONAL BANK ("First Union"), as collateral
agent (in such capacity, the "Collateral Agent") for the
Secured Parties (as defined in the Credit Agreement
referred to below).
A. Reference is made to (a) the Credit Agreement dated as of June 30,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Borrower, Holdings, the lenders from time to time
party thereto (the "Lenders"), First Union, as Administrative Agent and
Collateral Agent, and THE CHASE MANHATTAN BANK, as Syndication Agent and as
issuing bank (in such capacity, the "Issuing Bank"), (b) the Parent Guarantee
Agreement dated as of June 30, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Parent Guarantee Agreement"), between Holdings
and the Collateral Agent and (c) the Subsidiary Guarantee Agreement dated as of
June 30, 1999 (as amended, supplemented or otherwise modified from time to time,
the "Subsidiary Guarantee Agreement"; and, collectively with the Parent
Guarantee Agreement, the "Guarantee Agreements") among the Subsidiary Pledgors
and the Collateral Agent.
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement and the Credit
Agreement.
C. The Pledgors have entered into the Pledge Agreement in order to induce
the Lenders to make Loans and the Issuing Bank to issue Letters of Credit.
Pursuant to Section 5.12 of the Credit Agreement, the Borrower is required to
cause each Subsidiary that was not in existence or not a Subsidiary on the date
of the Credit Agreement to enter into the Pledge Agreement as a Subsidiary
Pledgor upon becoming a Subsidiary that is a Subsidiary Loan Party. Section 24
of the Pledge Agreement provides that such Subsidiaries may become Subsidiary
Pledgors under the Pledge Agreement by execution and delivery of an instrument
in the form of this Supplement. The undersigned Subsidiary (the "New Pledgor")
is executing this Supplement in accordance with the requirements of the Credit
Agreement to become a Subsidiary Pledgor under the Pledge Agreement in order to
induce the Lenders to make additional Loans and the Issuing Bank to issue
22
additional Letters of Credit and as consideration for Loans previously made and
Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 24 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Pledgor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Pledgor, as security for the payment and performance in
full of the Obligations (as defined in the Pledge Agreement), 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 Pledgor's right, title and interest in and to the
Collateral (as defined in the Pledge Agreement) of the New Pledgor. Each
reference to a "Subsidiary Pledgor" or a "Pledgor" in the Pledge Agreement shall
be deemed to include the New Pledgor. The Pledge Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Pledgor 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, 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 counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.
SECTION 4. The New Pledgor hereby represents and warrants that set forth
on Schedule I attached hereto is a true and correct schedule of all its Pledged
Securities.
SECTION 5. Except as expressly supplemented hereby, the Pledge 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,
neither party hereto shall be required to comply with such provision for so long
as such provision is
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held to be invalid, illegal or unenforceable, but the validity, legality and
enforceability of the remaining provisions contained herein and in the Pledge
Agreement shall not in any way be affected or impaired. 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 15 of the Pledge Agreement. All communications
and notices hereunder to the New Pledgor shall be given to it in care of the
Borrower.
SECTION 9. The New Pledgor 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.
IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.
[Name of New Pledgor],
by
----------------------
Name:
Title:
Address:
FIRST UNION NATIONAL BANK, as
Collateral Agent,
by
----------------------
Name:
Title:
24
Schedule I to
to the Pledge Agreement
Pledged Securities of the New Pledgor
-------------------------------------
EQUITY SECURITIES
Number and Class Percentage of
of Shares/ Shares/
Membership Membership
Number of Registered Interests/Equity Interests/Equity
Issuer Certificate Owner Interests Interests
------ ----------- ---------- ---------------- --------------------
DEBT SECURITIES
Principal
Issuer Amount Date of Note Maturity Date
------ --------- ------------ -------------
