DONJOY LLC
EXHIBIT 10.7
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>9
<FILENAME>a74737ex10-7.txt
<DESCRIPTION>EXHIBIT 10.7
<TEXT>
<PAGE>   1

                                                                    EXHIBIT 10.7

                                                      THIRD AMENDED AND RESTATED
                                            PLEDGE AGREEMENT dated as of June
                                            11, 2001, among LESLIE H. CROSS
                                            ("Cross"), LESLIE H. CROSS & DEBORAH
                                            L. CROSS FAMILY TRUST (the
                                            "Pledgor"; and together with Cross,
                                            collectively, the "Obligors"), and
                                            DONJOY, L.L.C., a Delaware limited
                                            liability company (the "Company").

              The Company and the Obligors are parties to a Second Amended and
Restated Pledge Agreement dated as of July 7, 2000 (the "Existing Pledge
Agreement"), whereby the Pledgor has pledged to the Company 14,946 Common Units
of the Company (the "Initial Pledged Securities") as security for the Obligors'
due and punctual payment and performance of the Obligors' obligations under the
following three promissory notes (as amended, supplemented, restated or
otherwise modified from time to time in accordance with their respective terms,
the "Existing Notes") issued by the Obligors in favor of the Company to evidence
loans made by the Company to the Obligors to finance portions of the respective
purchase prices paid for the Initial Pledged Securities: (i) a promissory note,
originally issued as of June 30, 1999, and amended and restated as of June 28,
2000, in the original principal amount, as so amended and restated, of
$1,052,705.56; (ii) a promissory note issued as of June 28, 2000, in the
original principal amount of $88,644.58 and (iii) a promissory note issued as of
July 7, 2000, in the original principal amount of $124,608.80.

              The Pledgor now proposes to purchase 1,727 Common Units of the
Company (the "Additional Pledged Securities"; and together with the Initial
Pledged Securities, the "Pledged Securities") from the Company, pursuant to the
Common Unit Purchase Agreement dated as of the date hereof, among the Company,
the Pledgor and certain other members of the Company. In order to fund a portion
of the aggregate purchase price being paid by the Pledgor for the Additional
Pledged Securities, the Pledgor desires to borrow $150,610.29 (the "Additional
Loan") from the Company, against the issuance by the Obligors in favor of the
Company of an additional promissory note, dated as of the date hereof, in the
aggregate principal amount of the Additional Loan (as amended, supplemented,
restated or otherwise modified from time to time in accordance with its terms,
the "Additional Note"; and together with the Existing Notes, the "Notes").

              As a material inducement to the Company to make the Additional
Loan, the Obligors have agreed with the Company to amend and restate the
Existing Pledge Agreement to provide for the Pledgor's pledge of the Pledged
Securities to the Company as security for the due and punctual payment and
performance of the Obligors' obligations under each of the Notes and the
Existing Pledge Agreement. This Agreement shall amend and restate the Existing
Pledge Agreement in its entirety as and pursuant to this Agreement.

              ACCORDINGLY, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:


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       SECTION 1. PLEDGE.

              The Pledgor hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Securities as security for the
prompt and complete payment when due of the unpaid principal and of interest on
each of the Notes.

       SECTION 2. DELIVERY OF PLEDGED SECURITIES.

              The Obligors confirm that certificates representing the Initial
Pledged Securities, together with duly executed forms of assignment sufficient
to transfer title thereto to the Company, have previously been delivered to the
Company.

              Upon the execution of this Agreement, the Pledgor shall deliver to
the Company the certificates representing the Additional Pledged Securities,
together with duly executed forms of assignment sufficient to transfer title
thereto to the Company.

       SECTION 3. VOTING RIGHTS; CASH DISTRIBUTIONS.

              Notwithstanding anything to the contrary contained herein, during
the term of this Agreement until such time as there exists a default in the
payment of principal or interest on any of the Notes or any other default under
any of the Notes, the Pledgor shall be entitled to all voting rights with
respect to the Pledged Securities and shall be entitled to receive all cash
distributions paid in respect of the Pledged Securities. Upon the occurrence of
and during the continuance of any such default, the Company shall retain all
such cash distributions payable on the Pledged Securities as additional security
hereunder.

       SECTION 4. STOCK DIVIDENDS; DISTRIBUTIONS ETC.

              If, while this Agreement is in effect, the Pledgor becomes
entitled to receive or receives any securities or other property in addition to,
in substitution of, or in exchange for any of the Pledged Securities (whether as
a distribution in connection with any recapitalization, reorganization or
reclassification, distributions or otherwise), the Pledgor shall accept such
securities or other property on behalf of and for the benefit of the Company as
additional security for the Obligors' obligations under the Notes and shall
promptly deliver such additional security to the Company together with duly
executed forms of assignment, and such additional security shall be deemed to be
part of the Pledged Securities hereunder.

       SECTION 5. DEFAULT.

              If the Obligors default in the payment of the principal or
interest under any of the Notes as it becomes due (whether upon demand,
acceleration or otherwise) or any other event of default under any of the Notes
occurs and has not been remedied within the 10 day period provided in Section
3(a)(i) of such Note (including the bankruptcy or insolvency of either Obligor)
(each such occurrence shall be deemed a "Default"), the Company may exercise any
and all of the rights, powers and remedies of an owner of the Pledged Securities
(including the right to vote the shares and receive dividends and distributions
with respect to such shares) and shall have and may exercise without demand any
and all the rights and remedies granted to a secured party upon default under
the Uniform Commercial Code of the State of New York or


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otherwise available to the Company under applicable law. Without limiting the
foregoing, if a Default occurs, the Company is authorized to sell, assign and
deliver at its discretion, from time to time, all or any part of the Pledged
Securities at any private sale or public auction, on not less than ten days
written notice to the Obligors, at such price or prices and upon such terms as
the Company may deem advisable. Neither Obligor shall have any right to redeem
the Pledged Securities after any such sale or assignment. At any such sale or
auction, the Company or any other holder of Units of the Company may bid for,
and become the purchaser of, the whole or any part of the Pledged Securities
offered for sale. In case of any such sale, after deducting the costs,
attorneys' fees and other expenses of sale and delivery, the remaining proceeds
of such sale shall be applied to the principal of and accrued interest on each
Note; provided, however, that after payment in full of the indebtedness
evidenced by each Note, the balance of the proceeds of sale then remaining shall
be paid to the Pledgor and the Pledgor shall be entitled to the return of any of
the Pledged Securities remaining in the hands of the Company. The Obligors shall
be liable for any deficiency if the remaining proceeds are insufficient to pay
the indebtedness under each Note in full, including the fees of any attorneys
employed by the Company to collect such deficiency.

       SECTION 6. COSTS AND ATTORNEYS' FEES.

              All costs and expenses, including reasonable attorneys' fees,
incurred in exercising any right, power or remedy conferred by this Agreement or
in the enforcement thereof, shall become part of the indebtedness secured
hereunder and shall be paid by the Obligors or repaid from the proceeds of the
sale of the Pledged Securities hereunder.

       SECTION 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SECURITIES.

              Upon payment in full of the indebtedness evidenced by each Note,
the Company shall surrender the Pledged Securities to the Pledgor together with
all forms of assignment.

       SECTION 8. FURTHER ASSURANCES.

              Each Obligor agrees that at any time and from time to time upon
the written request of the Company, such Obligor will execute and deliver such
further documents and do such further acts and things as the Company may
reasonably request in order to effect the purposes of this Agreement.

       SECTION 9. SEVERABILITY.

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

       SECTION 10. NO WAIVER; CUMULATIVE REMEDIES.

              The Company shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in


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<PAGE>   4

writing, signed by the Company, and then only to the extent therein set forth. A
waiver by the Company of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the Company would
otherwise have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.

       SECTION 11. WAIVERS, AMENDMENTS; APPLICABLE LAW.

              None of the terms or provisions of this Agreement may be waived,
altered, modified or amended except by an instrument in writing, duly executed
by the parties hereto. This Agreement and all obligations of the Obligors
hereunder shall together with the rights and remedies of the Company hereunder,
inure to the benefit of the Company and its successors and assigns. This
Agreement and the rights and obligations hereunder shall be governed by, and
construed in accordance with, the laws of the State of New York.

       SECTION 12. ENTIRE AGREEMENT.

              This Agreement amends and restates the Existing Pledge Agreement
in its entirety, and this Agreement contains the sole and entire agreement among
the Company and the Obligors with respect to the subject matter hereof and
thereof and supersedes all prior or contemporaneous arrangements or
understandings with respect hereto or thereto.

                                   * * * * *


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<PAGE>   5

              IN WITNESS WHEREOF, this Third Amended and Restated Pledge
Agreement has been executed as of the date first above written.


                                        /s/ LESLIE H. CROSS
                                        ----------------------------------------
                                        LESLIE H. CROSS


                                        LESLIE H. CROSS & DEBORAH L. CROSS
                                        FAMILY TRUST



                                        By: /s/ LESLIE H. CROSS
                                           -------------------------------------
                                           Name: LESLIE H. CROSS
                                           Title: CEO/PRESIDENT


                                        DONJOY, L.L.C.


                                        By: /s/ LESLIE H. CROSS
                                           -------------------------------------
                                           Name: LESLIE H. CROSS
                                           Title: CEO/PRESIDENT



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