Exhibit 99.1
OPTION
NEITHER THIS OPTION NOR THE SECURITIES INTO WHICH THIS OPTION IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
ENCORE MEDICAL CORPORATION
OPTION TO PURCHASE SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Galen Partners III, L.P. (the
"Holder") is entitled to subscribe for and purchase the number of fully paid and
nonassessable shares (as adjusted pursuant to Section 3 hereof, the "Shares") of
the Common Stock (the "Common Stock"), of Encore Medical Corporation, a Delaware
corporation (the "Company"), equal to $5,481,394 divided by the Exercise Price
(as defined below) at a price per Share equal to fifty percent (50%) of the
average closing price of such Common Stock, as quoted on the NASDAQ or the
principal exchange on which the Common Stock is listed for the most recent ten
(10) trading days ending on the trading day before the date of exercise,
provided such per Share price shall not be less than $3.50 per Share (as
adjusted pursuant to Section 3 hereof, the "Exercise Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. This Option
is being issued and delivered pursuant to that certain Note Purchase Agreement
dated as of February 8, 2002 (the "Galen Agreement"), by and among the Company,
Holder and CapitalSource Finance LLC. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Galen Agreement.
1. Method of Exercise; Payment.
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(a) Exercise; Expiration. This Option shall be exercisable, in
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whole or in part, from and after the earlier to occur of (i) 5:00 p.m., Central
Time on August 15, 2003 or (ii) the date that Holder's obligations under the
Galen Agreement are fully and unconditionally terminated (the "Obligation
Termination Date"), provided that Holder's note purchase obligation pursuant to
the Galen Agreement has not been previously called. This Option shall expire and
no longer be exercisable after the earlier to occur of (i) Holder's note
purchase obligation under the Galen Agreement being called pursuant to the Galen
Agreement, (ii) 5:00 p.m., Central time, on August 15, 2003, (iii) thirty (30)
days after the Obligation Termination Date, or (iv) the date on which Holder
exercises that certain Warrant, dated February 8, 2002, issued by the Company in
favor of CapitalSource Holdings LLC following the transfer of such Warrant to
Holder pursuant to Section 1.2 of the Galen Agreement.
(b) Cash Exercise. The purchase rights represented by this
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Option may be exercised by the Holder, in whole or in part, by the surrender of
this Option (with the Notice of Exercise form attached hereto as Exhibit A duly
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executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Exercise Price of the Shares being purchased.
(c) Net Issue Exercise. In lieu of exercising this Option, the
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Holder may elect to receive Shares equal to the value of this Option (or the
portion thereof being canceled) by surrender of this Option at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the Holder a number of Shares computed using the
following formula:
X = Y (A-B)
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A
Where X = the number of the Shares to be issued to the
Holder.
Y = the number of the Shares purchasable under this
Option without regard to the net issue exercise
provisions of this Section l(c)) or, if only a
portion of this Option is exercised,
the portion of this Option being canceled (at
the date of such calculation).
A = the fair market value of one share of the
Shares (at the date of such calculation).
B = the Exercise Price (as adjusted to the date of
such calculation).
(d) Fair Market Value. For purposes of this Option, the per
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share fair market value of the Shares shall mean:
(i) If the Company's Common Stock is publicly traded, the
per share fair market value of the Shares shall be the closing price of such
Common Stock as quoted on the NASDAQ or the principal exchange on which the
Common Stock is listed, or if not so listed then the fair market value shall be
the average of the closing bid and asked prices of such Common Stock as
published in The Wall Street Journal, in each case for the trading day
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immediately prior to the date of determination of fair market value; or
(ii) If the Company's Common Stock is not so publicly
traded, the per share fair market value of the Shares shall be such fair market
value as is determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose determination shall be
conclusive.
(e) Stock Certificates. Promptly upon receipt of a Notice of
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Exercise, the Company will take all necessary actions to authorize the issuance
of such Common Stock under this Option. In the event of any exercise of the
rights represented by this Option, certificates for the Shares so purchased
shall be delivered to the Holder within five (5) days and, unless this Option
has been fully exercised or has expired, a new Option representing the shares
with respect
2
to which this Option shall not have been exercised shall also be issued to the
Holder within such time.
2. Stock Fully Paid. All of the Shares issuable upon the exercise
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of the rights represented by this Option will, upon issuance and receipt of the
Exercise Price therefor, be duly and validly authorized and issued fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
3. Adjustment to the Number of Shares Issuable and/or the Exercise
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Price. The number of Shares issuable upon the exercise of this Option and the
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Exercise Price are subject to adjustment from time to time as set forth in this
Section 3. Upon each adjustment pursuant to this Section 3, the Holder shall
thereafter be entitled to purchase the adjusted number of shares of Common Stock
at such new Exercise Price.
(a) If the Company at any time while this Option, or any portion
hereof, remains outstanding and unexpired shall pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, or split,
subdivide or combine the Common Stock, then (i) the number of shares of Common
Stock purchasable pursuant to this Option shall be proportionately increased and
the Exercise Price shall be proportionately decreased in the case of a dividend,
split or subdivision or (ii) the number of shares of Common Stock purchasable
pursuant to this Option shall be proportionately decreased and the Exercise
Price shall be proportionately increased in the case of a combination. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the effective date of a subdivision or combination.
(b) If the Company, at any time while this Option, or any
portion hereof, remains outstanding and unexpired by reclassification of
securities or otherwise, shall change any of the Common Stock as to which
purchase rights under this Option exist into the same or a different number of
securities of any other class or classes, this Option shall thereafter represent
the right to acquire such number and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock that is
subject to the purchase rights under this Option immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 3.
(c) If at any time while this Option, or any portion hereof, is
outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation,
sale or transfer, lawful provision shall be made so that the holder of this
Option shall thereafter be entitled to receive upon exercise of this Option,
during the period specified herein and upon payment of the Exercise Price then
in effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Option would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Option had been
3
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 3. The
foregoing provisions of this Section 3(d) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Option. If the per-share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors.
(d) For purposes of any computation respecting consideration
received, the following shall apply:
(i) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith; and
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined in
good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive.
(e) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one cent
($0.01) in such price; provided, however, that any adjustments which by reason
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of this subsection are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(f) Any determination that the Company or the Board of Directors
must make pursuant to this Section 3 shall be conclusive if made in good faith.
4. Notice of Adjustments. Whenever the number of Shares purchasable
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hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3
hereof, the Company shall provide notice to the Holder setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the number
and class of Shares which may be purchased and the Exercise Price therefor after
giving effect to such adjustment.
5. Fractional Shares. This Option may not be exercised for
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fractional shares. In lieu of fractional shares the Company shall make a cash
payment therefor based upon the per share fair market value of a Share then in
effect.
6. Representations and Warranties.
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(a) The Company represents and warrants that all corporate
actions on the part of the Company, its officers, directors and stockholders
necessary for the sale and issuance
4
of the Shares pursuant hereto and the performance of the Company's obligations
hereunder were taken prior to and are effective as of the effective date of this
Option.
(b) Holder represents and warrants that this Option and Common
Stock to be issued upon exercise hereof are being acquired solely for the
Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Option or any shares of Common Stock to be issued upon exercise hereof
except under circumstances that will not result in a violation of the Securities
Act or any state securities laws. Upon exercise of this Option, the Holder
shall, if requested by the Company, confirm in writing, in a form reasonably
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
7. Restrictive Legend. The Shares (unless registered under the Act)
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shall be stamped or imprinted with a legend in substantially the following
form):
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE
WITH APPLICABLE STATE SECURITIES LAWS.
8. Rights of Stockholders. Holder shall not be entitled, as a
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Option holder, to vote or receive dividends or be deemed the holder of the
Shares or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Option shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Notices. All notices and other communications required or
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permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid, guaranteeing
overnight delivery, or (d) one business
5
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at 610 Fifth Avenue, New York, New York 10020,
and (ii) if to the Company, at 9800 Metric Blvd., Austin, TX 78758 (attention:
Chief Executive Officer), or at such other address as a party may designate by
ten days advance written notice to the other party pursuant to the provisions
above.
10. Replacement of Option; Non-Transferable.
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(a) If this Option is mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Option, a new Option of like
tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and indemnity, if requested, reasonably
satisfactory to it. Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges attributable to the
replacement of this Option.
(b) This Option is non-transferable.
11. Reservation of Shares. The Company will at all times reserve and
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keep available out of the aggregate of its authorized but unissued Common Stock
or its authorized and issued Common Stock held in its treasury, for the purpose
of enabling it to satisfy any obligation to issue Shares upon exercise of this
Option, a number of shares of Common Stock equal to the maximum number of Shares
(as adjusted from time to time pursuant to Section 3 hereof) which may then be
deliverable upon the exercise of this Option.
12. Investors' Rights Agreement. The Shares to be issued pursuant to
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this Agreement shall be deemed to be Registrable Securities pursuant to that
certain Investors' Rights Agreement dated as of June 12, 2001, by and among the
Company and the investors named therein. The Company will take all steps
necessary so that the Shares are entitled to the provisions of such Investors'
Rights Agreement.
13. Governing Law. THIS OPTION AND ALL ACTIONS ARISING OUT OF OR IN
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CONNECTION WITH THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE CORPORATE LAWS OF THE STATE OF DELAWARE.
Issued this 8/th/ day of February, 2002.
ENCORE MEDICAL CORPORATION
By:/s/ Kenneth W. Davidson
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Kenneth W. Davidson
Chief Executive Officer
6
EXHIBIT A
NOTICE OF EXERCISE
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TO: Encore Medical Corporation
Attention: Chief Executive Officer
1. The undersigned hereby elects to purchase shares of the Common
Stock of Encore Medical Corporation (the "Company") pursuant to the terms of the
attached Option.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the
attached Option by means of a cash payment,
and tenders herewith payment in full for the
purchase price of the shares being purchased,
together with all applicable transfer taxes,
if any.
___ The undersigned elects to exercise the
attached Option by means of the net exercise
provisions of Section 1(c) of the Option.
3. Please issue a certificate or certificates representing said
Shares in the name of the undersigned.
4. The undersigned hereby represents and warrants that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof and that the undersigned will not offer, sell or
otherwise dispose of any such shares of Common Stock except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any applicable state securities laws.
____________________________________
(Signature)
Title:______________________________
______________
(Date)
A-1
OPTION
NEITHER THIS OPTION NOR THE SECURITIES INTO WHICH THIS OPTION IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
ENCORE MEDICAL CORPORATION
OPTION TO PURCHASE SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Galen Partners International
III, L.P. (the "Holder") is entitled to subscribe for and purchase the number of
fully paid and nonassessable shares (as adjusted pursuant to Section 3 hereof,
the "Shares") of the Common Stock (the "Common Stock"), of Encore Medical
Corporation, a Delaware corporation (the "Company"), equal to $496,161 divided
by the Exercise Price (as defined below) at a price per Share equal to fifty
percent (50%) of the average closing price of such Common Stock, as quoted on
the NASDAQ or the principal exchange on which the Common Stock is listed for the
most recent ten (10) trading days ending on the trading day before the date of
exercise, provided such per Share price shall not be less than $3.50 per Share
(as adjusted pursuant to Section 3 hereof, the "Exercise Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. This Option
is being issued and delivered pursuant to that certain Note Purchase Agreement
dated as of February 8, 2002 (the "Galen Agreement"), by and among the Company,
Holder and CapitalSource Finance LLC. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Galen Agreement.
1. Method of Exercise; Payment.
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(a) Exercise; Expiration. This Option shall be exercisable, in
--------------------
whole or in part, from and after the earlier to occur of (i) 5:00 p.m., Central
Time on August 15, 2003 or (ii) the date that Holder's obligations under the
Galen Agreement are fully and unconditionally terminated (the "Obligation
Termination Date"), provided that Holder's note purchase obligation pursuant to
the Galen Agreement has not been previously called. This Option shall expire and
no longer be exercisable after the earlier to occur of (i) Holder's note
purchase obligation under the Galen Agreement being called pursuant to the Galen
Agreement, (ii) 5:00 p.m., Central time, on August 15, 2003, (iii) thirty (30)
days after the Obligation Termination Date, or (iv) the date on which Holder
exercises that certain Warrant, dated February 8, 2002, issued by the Company in
favor of CapitalSource Holdings LLC following the transfer of such Warrant to
Holder pursuant to Section 1.2 of the Galen Agreement.
(b) Cash Exercise. The purchase rights represented by this Option
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may be exercised by the Holder, in whole or in part, by the surrender of this
Option (with the Notice of Exercise form attached hereto as Exhibit A duly
---------
executed) at the principal office of the Company, and by the payment to the
Company, by certified, cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Exercise Price of the Shares being purchased.
(c) Net Issue Exercise. In lieu of exercising this Option, the
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Holder may elect to receive Shares equal to the value of this Option (or the
portion thereof being canceled) by surrender of this Option at the principal
office of the Company together with notice of such election, in which event the
Company shall issue to the Holder a number of Shares computed using the
following formula:
X = Y (A-B)
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A
Where X = the number of the Shares to be issued to the Holder.
Y = the number of the Shares purchasable under this Option
(without regard to the net issue exercise provisions of
this Section l(c)) or, if only a portion of this Option
is exercised, the portion of this Option being canceled
(at the date of such calculation).
A = the fair market value of one share of the Shares
(at the date of such calculation).
B = the Exercise Price (as adjusted to the date of such
calculation).
(d) Fair Market Value. For purposes of this Option, the per share
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fair market value of the Shares shall mean:
(i) If the Company's Common Stock is publicly traded, the per
share fair market value of the Shares shall be the closing price of such Common
Stock as quoted on the NASDAQ or the principal exchange on which the Common
Stock is listed, or if not so listed then the fair market value shall be the
average of the closing bid and asked prices of such Common Stock as published in
The Wall Street Journal, in each case for the trading day immediately prior to
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the date of determination of fair market value; or
(ii) If the Company's Common Stock is not so publicly traded,
the per share fair market value of the Shares shall be such fair market value as
is determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose determination shall be
conclusive.
(e) Stock Certificates. Promptly upon receipt of a Notice of
------------------
Exercise, the Company will take all necessary actions to authorize the issuance
of such Common Stock under this Option. In the event of any exercise of the
rights represented by this Option, certificates for the Shares so purchased
shall be delivered to the Holder within five (5) days and, unless this Option
has been fully exercised or has expired, a new Option representing the shares
with respect
2
to which this Option shall not have been exercised shall also be issued to the
Holder within such time.
2. Stock Fully Paid. All of the Shares issuable upon the exercise of
----------------
the rights represented by this Option will, upon issuance and receipt of the
Exercise Price therefor, be duly and validly authorized and issued fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
3. Adjustment to the Number of Shares Issuable and/or the Exercise
---------------------------------------------------------------
Price. The number of Shares issuable upon the exercise of this Option and the
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Exercise Price are subject to adjustment from time to time as set forth in this
Section 3. Upon each adjustment pursuant to this Section 3, the Holder shall
thereafter be entitled to purchase the adjusted number of shares of Common Stock
at such new Exercise Price.
(a) If the Company at any time while this Option, or any portion
hereof, remains outstanding and unexpired shall pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, or split,
subdivide or combine the Common Stock, then (i) the number of shares of Common
Stock purchasable pursuant to this Option shall be proportionately increased and
the Exercise Price shall be proportionately decreased in the case of a dividend,
split or subdivision or (ii) the number of shares of Common Stock purchasable
pursuant to this Option shall be proportionately decreased and the Exercise
Price shall be proportionately increased in the case of a combination. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the effective date of a subdivision or combination.
(b) If the Company, at any time while this Option, or any portion
hereof, remains outstanding and unexpired by reclassification of securities or
otherwise, shall change any of the Common Stock as to which purchase rights
under this Option exist into the same or a different number of securities of any
other class or classes, this Option shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the Common Stock that is subject to the
purchase rights under this Option immediately prior to such reclassification or
other change and the Exercise Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 3.
(c) If at any time while this Option, or any portion hereof, is
outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation,
sale or transfer, lawful provision shall be made so that the holder of this
Option shall thereafter be entitled to receive upon exercise of this Option,
during the period specified herein and upon payment of the Exercise Price then
in effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Option would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Option had been
3
exercised immediately before such reorganization, merger, consolidation, sale or
transfer, all subject to further adjustment as provided in this Section 3. The
foregoing provisions of this Section 3(d) shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Option. If the per-share consideration payable to the holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors.
(d) For purposes of any computation respecting consideration
received, the following shall apply:
(i) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith; and
(ii) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined in
good faith by the Board of Directors of the Company (irrespective of the
accounting treatment thereof), whose determination shall be conclusive.
(e) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least one cent
($0.01) in such price; provided, however, that any adjustments which by reason
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of this subsection are not required to be made shall be carried forward and
taken into account in any subsequent adjustment required to be made hereunder.
All calculations shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(f) Any determination that the Company or the Board of Directors
must make pursuant to this Section 3 shall be conclusive if made in good faith.
4. Notice of Adjustments. Whenever the number of Shares purchasable
---------------------
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3
hereof, the Company shall provide notice to the Holder setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the number
and class of Shares which may be purchased and the Exercise Price therefor after
giving effect to such adjustment.
5. Fractional Shares. This Option may not be exercised for fractional
-----------------
shares. In lieu of fractional shares the Company shall make a cash payment
therefor based upon the per share fair market value of a Share then in effect.
6. Representations and Warranties.
------------------------------
(a) The Company represents and warrants that all corporate actions
on the part of the Company, its officers, directors and stockholders necessary
for the sale and issuance
4
of the Shares pursuant hereto and the performance of the Company's obligations
hereunder were taken prior to and are effective as of the effective date of this
Option.
(b) Holder represents and warrants that this Option and Common Stock
to be issued upon exercise hereof are being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Option or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Securities Act or any
state securities laws. Upon exercise of this Option, the Holder shall, if
requested by the Company, confirm in writing, in a form reasonably satisfactory
to the Company, that the shares of Common Stock so purchased are being acquired
solely for the Holder's own account and not as a nominee for any other party,
for investment, and not with a view toward distribution or resale.
7. Restrictive Legend. The Shares (unless registered under the Act)
------------------
shall be stamped or imprinted with a legend in substantially the following
form):
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER REGULATION D
PROMULGATED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS.
8. Rights of Stockholders. Holder shall not be entitled, as a Option
----------------------
holder, to vote or receive dividends or be deemed the holder of the Shares or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Option shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid, guaranteeing overnight
delivery, or (d) one business
5
day after the business day of facsimile transmission, if delivered by facsimile
transmission with copy by first class mail, postage prepaid, and shall be
addressed (i) if to the Holder, at 610 Fifth Avenue, New York, New York 10020,
and (ii) if to the Company, at 9800 Metric Blvd., Austin, TX 78758 (attention:
Chief Executive Officer), or at such other address as a party may designate by
ten days advance written notice to the other party pursuant to the provisions
above.
10. Replacement of Option; Non-Transferable.
---------------------------------------
(a) If this Option is mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Option, a new Option of like
tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and indemnity, if requested, reasonably
satisfactory to it. Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges attributable to the
replacement of this Option.
(b) This Option is non-transferable.
11. Reservation of Shares. The Company will at all times reserve and keep
---------------------
available out of the aggregate of its authorized but unissued Common Stock or
its authorized and issued Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of this
Option, a number of shares of Common Stock equal to the maximum number of Shares
(as adjusted from time to time pursuant to Section 3 hereof) which may then be
deliverable upon the exercise of this Option.
12. Investors' Rights Agreement. The Shares to be issued pursuant to this
---------------------------
Agreement shall be deemed to be Registrable Securities pursuant to that certain
Investors' Rights Agreement dated as of June 12, 2001, by and among the Company
and the investors named therein. The Company will take all steps necessary so
that the Shares are entitled to the provisions of such Investors' Rights
Agreement.
13. Governing Law. THIS OPTION AND ALL ACTIONS ARISING OUT OF OR IN
-------------
CONNECTION WITH THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE CORPORATE LAWS OF THE STATE OF DELAWARE.
Issued this 8/th/ day of February, 2002.
ENCORE MEDICAL CORPORATION
By: /s/ Kenneth W. Davidson
--------------------------------
Kenneth W. Davidson
Chief Executive Officer
6
EXHIBIT A
NOTICE OF EXERCISE
------------------
TO: Encore Medical Corporation
Attention: Chief Executive Officer
1. The undersigned hereby elects to purchase shares of the Common
Stock of Encore Medical Corporation (the "Company") pursuant to the terms of the
attached Option.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached
Option by means of a cash payment, and tenders
herewith payment in full for the purchase price of
the shares being purchased, together with all
applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached
Option by means of the net exercise provisions of
Section 1(c) of the Option.
3. Please issue a certificate or certificates representing said
Shares in the name of the undersigned.
4. The undersigned hereby represents and warrants that the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale, in connection
with the distribution thereof and that the undersigned will not offer, sell or
otherwise dispose of any such shares of Common Stock except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any applicable state securities laws.
______________________________________
(Signature)
Title: _______________________________
_______________
(Date)
7
OPTION
NEITHER THIS OPTION NOR THE SECURITIES INTO WHICH THIS OPTION IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS.
ENCORE MEDICAL CORPORATION
OPTION TO PURCHASE SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, Galen Employee Fund III, L.P.
(the "Holder") is entitled to subscribe for and purchase the number of fully
paid and nonassessable shares (as adjusted pursuant to Section 3 hereof, the
"Shares") of the Common Stock (the "Common Stock"), of Encore Medical
Corporation, a Delaware corporation (the "Company"), equal to $22,445 divided by
the Exercise Price (as defined below) at a price per Share equal to fifty
percent (50%) of the average closing price of such Common Stock, as quoted on
the NASDAQ or the principal exchange on which the Common Stock is listed for the
most recent ten (10) trading days ending on the trading day before the date of
exercise, provided such per Share price shall not be less than $3.50 per Share
(as adjusted pursuant to Section 3 hereof, the "Exercise Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. This Option
is being issued and delivered pursuant to that certain Note Purchase Agreement
dated as of February 8, 2002 (the "Galen Agreement"), by and among the Company,
Holder and CapitalSource Finance LLC. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Galen Agreement.
1. Method of Exercise; Payment.
---------------------------
(a) Exercise; Expiration. This Option shall be exercisable,
--------------------
in whole or in part, from and after the earlier to occur of (i) 5:00 p.m.,
Central Time on August 15, 2003 or (ii) the date that Holder's obligations under
the Galen Agreement are fully and unconditionally terminated (the "Obligation
Termination Date"), provided that Holder's note purchase obligation pursuant to
the Galen Agreement has not been previously called. This Option shall expire and
no longer be exercisable after the earlier to occur of (i) Holder's note
purchase obligation under the Galen Agreement being called pursuant to the Galen
Agreement, (ii) 5:00 p.m., Central time, on August 15, 2003, (iii) thirty (30)
days after the Obligation Termination Date, or (iv) the date on which Holder
exercises that certain Warrant, dated February 8, 2002, issued by the Company in
favor of CapitalSource Holdings LLC following the transfer of such Warrant to
Holder pursuant to Section 1.2 of the Galen Agreement.
(b) Cash Exercise. The purchase rights represented by this Option may
-------------
be exercised by the Holder, in whole or in part, by the surrender of this Option
(with the Notice of Exercise form attached hereto as Exhibit A duly executed) at
---------
the principal office of the Company, and by the payment to the Company, by
certified, cashier's or other check acceptable to the Company, of an amount
equal to the aggregate Exercise Price of the Shares being purchased.
(c) Net Issue Exercise. In lieu of exercising this Option, the Holder
------------------
may elect to receive Shares equal to the value of this Option (or the portion
thereof being canceled) by surrender of this Option at the principal office of
the Company together with notice of such election, in which event the Company
shall issue to the Holder a number of Shares computed using the following
formula:
X = Y(A-B)
-----
A
Where X = the number of the Shares to be issued to the Holder.
Y = the number of the Shares purchasable under this Option
(without regard to the net issue exercise provisions of this
Section l(c)) or, if only a portion of this Option is
exercised, the portion of this Option being canceled (at the
date of such calculation).
A = the fair market value of one share of the Shares
(at the date of such calculation).
B = the Exercise Price (as adjusted to the date of such
calculation).
(d) Fair Market Value. For purposes of this Option, the per share fair
-----------------
market value of the Shares shall mean:
(i) If the Company's Common Stock is publicly traded, the per
share fair market value of the Shares shall be the closing price of such Common
Stock as quoted on the NASDAQ or the principal exchange on which the Common
Stock is listed, or if not so listed then the fair market value shall be the
average of the closing bid and asked prices of such Common Stock as published in
The Wall Street Journal, in each case for the trading day immediately prior to
- -----------------------
the date of determination of fair market value; or
(ii) If the Company's Common Stock is not so publicly traded,
the per share fair market value of the Shares shall be such fair market value as
is determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose determination shall be
conclusive.
(e) Stock Certificates. Promptly upon receipt of a Notice of Exercise,
------------------
the Company will take all necessary actions to authorize the issuance of such
Common Stock under this Option. In the event of any exercise of the rights
represented by this Option, certificates for the Shares so purchased shall be
delivered to the Holder within five (5) days and, unless this Option has been
fully exercised or has expired, a new Option representing the shares with
respect
2
to which this Option shall not have been exercised shall also be issued to
the Holder within such time.
2. Stock Fully Paid. All of the Shares issuable upon the exercise of the
----------------
rights represented by this Option will, upon issuance and receipt of the
Exercise Price therefor, be duly and validly authorized and issued fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof.
3. Adjustment to the Number of Shares Issuable and/or the Exercise Price.
----------------------------------------------------------------------
The number of Shares issuable upon the exercise of this Option and the Exercise
Price are subject to adjustment from time to time as set forth in this Section
3. Upon each adjustment pursuant to this Section 3, the Holder shall thereafter
be entitled to purchase the adjusted number of shares of Common Stock at such
new Exercise Price.
(a) If the Company at any time while this Option, or any portion
hereof, remains outstanding and unexpired shall pay a dividend or make a
distribution on its Common Stock in shares of its Common Stock, or split,
subdivide or combine the Common Stock, then (i) the number of shares of Common
Stock purchasable pursuant to this Option shall be proportionately increased and
the Exercise Price shall be proportionately decreased in the case of a dividend,
split or subdivision or (ii) the number of shares of Common Stock purchasable
pursuant to this Option shall be proportionately decreased and the Exercise
Price shall be proportionately increased in the case of a combination. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the effective date of a subdivision or combination.
(b) If the Company, at any time while this Option, or any portion
hereof, remains outstanding and unexpired by reclassification of securities or
otherwise, shall change any of the Common Stock as to which purchase rights
under this Option exist into the same or a different number of securities of any
other class or classes, this Option shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the Common Stock that is subject to the
purchase rights under this Option immediately prior to such reclassification or
other change and the Exercise Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 3.
(C) If at any time while this Option, or any portion hereof, is
outstanding and unexpired there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of shares otherwise
provided for herein), (ii) a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving entity, or a
reverse triangular merger in which the Company is the surviving entity but the
shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash, or otherwise, or (iii) a sale or transfer of the
Company's properties and assets as, or substantially as, an entirety to any
other person, then, as a part of such reorganization, merger, consolidation,
sale or transfer, lawful provision shall be made so that the holder of this
Option shall thereafter be entitled to receive upon exercise of this Option,
during the period specified herein and upon payment of the Exercise Price then
in effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Option would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Option had been
3
exercised immediately before such reorganization, merger, consolidation,
sale or transfer, all subject to further adjustment as provided in this Section
3. The foregoing provisions of this Section 3(d) shall similarly apply to
successive reorganizations, consolidations, mergers, sales and transfers and to
the stock or securities of any other corporation that are at the time receivable
upon the exercise of this Option. If the per-share consideration payable to the
holder hereof for shares in connection with any such transaction is in a form
other than cash or marketable securities, then the value of such consideration
shall be determined in good faith by the Company's Board of Directors.
(d) For purposes of any computation respecting consideration received,
the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith; and
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Company (irrespective of the accounting
treatment thereof), whose determination shall be conclusive.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of this
-------- --------
subsection are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder. All
calculations shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be.
(f) Any determination that the Company or the Board of Directors must
make pursuant to this Section 3 shall be conclusive if made in good faith.
4. Notice of Adjustments. Whenever the number of Shares purchasable
---------------------
hereunder or the Exercise Price thereof shall be adjusted pursuant to Section 3
hereof, the Company shall provide notice to the Holder setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the number
and class of Shares which may be purchased and the Exercise Price therefor after
giving effect to such adjustment.
5. Fractional Shares. This Option may not be exercised for fractional
-----------------
shares. In lieu of fractional shares the Company shall make a cash payment
therefor based upon the per share fair market value of a Share then in effect.
6. Representations and Warranties.
------------------------------
(a) The Company represents and warrants that all corporate actions on
the part of the Company, its officers, directors and stockholders necessary for
the sale and issuance
4
of the Shares pursuant hereto and the performance of the Company's
obligations hereunder were taken prior to and are effective as of the effective
date of this Option.
(b) Holder represents and warrants that this Option and Common Stock
to be issued upon exercise hereof are being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder will not offer, sell or otherwise dispose of this Option or any
shares of Common Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Securities Act or any
state securities laws. Upon exercise of this Option, the Holder shall, if
requested by the Company, confirm in writing, in a form reasonably satisfactory
to the Company, that the shares of Common Stock so purchased are being acquired
solely for the Holder's own account and not as a nominee for any other party,
for investment, and not with a view toward distribution or resale.
7. Restrictive Legend. The Shares (unless registered under the Act) shall
------------------
be stamped or imprinted with a legend in substantially the following form):
THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS.
8. Rights of Stockholders. Holder shall not be entitled, as a Option
----------------------
holder, to vote or receive dividends or be deemed the holder of the Shares or
any other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until this Option shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given upon receipt or, if earlier, (a) five (5) days after
deposit with the U.S. Postal Service or other applicable postal service, if
delivered by first class mail, postage prepaid, (b) upon delivery, if delivered
by hand, (c) one business day after the business day of deposit with Federal
Express or similar overnight courier, freight prepaid, guaranteeing overnight
delivery, or (d) one business
5
day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by first class mail, postage prepaid, and shall
be addressed (i) if to the Holder, at 610 Fifth Avenue, New York, New York
10020, and (ii) if to the Company, at 9800 Metric Blvd., Austin, TX 78758
(attention: Chief Executive Officer), or at such other address as a party may
designate by ten days advance written notice to the other party pursuant to the
provisions above.
10. Replacement of Option; Non-Transferable.
---------------------------------------
(a) If this Option is mutilated, lost, stolen or destroyed, the
Company shall issue in exchange and substitution for and upon cancellation
hereof, or in lieu of and substitution for this Option, a new Option of like
tenor, but only upon receipt of evidence reasonably satisfactory to the Company
of such loss, theft or destruction and indemnity, if requested, reasonably
satisfactory to it. Holder shall also comply with such other reasonable
regulations and pay such other reasonable charges attributable to the
replacement of this Option.
(b) This Option is non-transferable.
11. Reservation of Shares. The Company will at all times reserve and keep
---------------------
available out of the aggregate of its authorized but unissued Common Stock or
its authorized and issued Common Stock held in its treasury, for the purpose of
enabling it to satisfy any obligation to issue Shares upon exercise of this
Option, a number of shares of Common Stock equal to the maximum number of Shares
(as adjusted from time to time pursuant to Section 3 hereof) which may then be
deliverable upon the exercise of this Option.
12. Investors' Rights Agreement. The Shares to be issued pursuant to this
---------------------------
Agreement shall be deemed to be Registrable Securities pursuant to that certain
Investors' Rights Agreement dated as of June 12, 2001, by and among the Company
and the investors named therein. The Company will take all steps necessary so
that the Shares are entitled to the provisions of such Investors' Rights
Agreement.
13. Governing Law. THIS OPTION AND ALL ACTIONS ARISING OUT OF OR IN
-------------
CONNECTION WITH THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE CORPORATE LAWS OF THE STATE OF DELAWARE.
Issued this 8/th/ day of February, 2002.
ENCORE MEDICAL CORPORATION
By: /s/ Kenneth W. Davidson
---------------------------------
Kenneth W. Davidson
Chief Executive Officer
6
EXHIBIT A
NOTICE OF EXERCISE
------------------
TO: Encore Medical Corporation
Attention: Chief Executive Officer
1. The undersigned hereby elects to purchase shares of the Common
Stock of Encore Medical Corporation (the "Company") pursuant to the terms of
the attached Option.
2. Method of Exercise (Please initial the applicable blank):
___ The undersigned elects to exercise the attached Option by
means of a cash payment, and tenders herewith payment in
full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
___ The undersigned elects to exercise the attached Option by
means of the net exercise provisions of Section 1(c) of
the Option.
3. Please issue a certificate or certificates representing said
Shares in the name of the undersigned.
4. The undersigned hereby represents and warrants that the aforesaid
shares of Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof and that the undersigned will not offer, sell or otherwise
dispose of any such shares of Common Stock except under circumstances that will
not result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws.
____________________________________
(Signature)
Title: ____________________________
_______________
(Date)
A-1