DJO Incorporated

1
CONFIDENTIAL
DJO Incorporated
Les Cross Chief Executive Officer
Black R0 G0 B0 Gray R215 G216
B218 Blue R208 G221 B237 Red R197 G18 B48
2
DJO at a Glance

• Leading global orthopedic rehab company
• Sales approaching 1 billion 5,000 employees
  in over 15 countries
• HQ in Vista, CA Serves over 70 countries
• Owned by the Blackstone Group

International
Chattanooga
Empi / Regeneration
DonJoy / ProCare / Aircast
Surgical Implants
Soft Goods
Shoulder
3
DJO History
Acquired Bone Growth Stimulation (from
Orthologic)
Acquired Superior Medical Equipment
Acquired Ortho Soft Goods Div. (from Encore)
Merger with ReAble / Blackstone
DJO founded in Carlsbad, CA
Leveraged buyout led by Chase Capital Partners
1978
1999
2000
2001
2007
2002
2003
2004
2005
2006
Acquisition of Depuy soft goods business
DJO IPO
Acquired Cold Therapy Product Line (from Durakold)
Acquired Axmed
Acquired Aircast
4
DJO-ReAble Transaction Overview
Financing markets significantly constrained
4/18-4/19 Board of directors meeting to review
and evaluate strategic alternatives
6/4 Blackstone and ReAble submitted written
offer of 48.00 to 50.00 per share
10/27 11/7 Launch and price financing
April
May
June
July
Aug
Sept
Oct
Nov
Dec
5/17 Credit Suisse presents ideas on strategic
alternatives
7/16 Transaction announced at 50.25 per share
50 day go-shop period for DJO to pursue other
offers
10/9 Merger proxy filed
11/20 Merger transaction closes
5/29 DJO meets with representatives of Blackstone
11/6 Special shareholders meeting
5
DJO Future
Near-term opportunities
Longer-term opportunities
Operational execution
Selectively pursue MA
Public offering

• Top-line growth
• Cross-selling and category expansion
• Introduction of new products and growth of
  underdeveloped categories
• Leverage international footprint and direct
  presence in select countries
• Cost reduction
• COGS procurement, manufacturing practices and
  operations footprint
• Operating expenses leaner overhead, economies
  of scale

• Bolster product offering in select segments
• Enhance distribution network
• Expand product offering
• Limited by financing flexibility
• Focused on current operating objectives

• Opportunity to improve financial flexibility
• Currently operating as publicly traded company
  given high yield bonds

6
MA Market Update

• Materials for Discussion

These materials may not be used or relied upon
for any purpose other than as specifically
contemplated by a written agreement with Credit
Suisse.
7
MA has become the alternative
Private Market Option (MA) vs. Public Market
Option (IPO)
Source Thomson Financial Securities Data Company
as of March 31, 2008.
6
8
The equity markets have been challenging in the
midst of economic uncertainty
Monthly supply and demand
(Net Flow in billions)
Source Dealogic (ex overallotment), ICI, mutual
fund flow estimates by AMG data. As of 05/09/08.
7
9
Equity new issue market
U.S. Initial Public Offerings, 1996-2008 YTD
Amount Raised (BN)
Number of IPOs
Source Dealogic. As of 3/31/08.
8
10
High correlation between MA activity and stock
market performance
Total US MA volume ( in billions)
(1)
YTD
Source Thomson Financial Securities Data
Company Note Based on US target and completed
deals. (1) Dollar volume annualized as of 3/31/08.
9
11
2007 was a record year for MA activity
Total US MA volume ( in billions)
Down 74 from peak Enron and WorldCom bankruptcies
Down 51 from peak (1) Sale of Bear Stearns
Down 66 from peak Drexel bankruptcy
YTD
Source Thomson Financial Securities Data
Company, Inc. Note Based on US target and
completed deals. As of 3/31/08. (1) Based on
annualized 2008 data.
On an annualized basis, 2008 may fall short of
2005 values
10
12
Private equity has been a key MA driver over the
past few years
US private equity MA volume as a of total US
MA volume
YTD
Source Thomson Financial Securities Data
Company, Inc. Note Based on US target and
completed deals. As of 3/31/08.
This confluence of events created an environment
in which financial sponsors had become
increasingly aggressive acquirors
11
13
Conditions have changed
Then (January 2005 July 2007)



Environment conducive to transactions
Robustcapitals markets
Financial sponsors
Hedge funds and activist shareholders
Robust MA activity
Now (August 2007 Present)



Environment conducive to transactions
Robust capitals markets
Financial sponsors
Hedge funds and activist shareholders
Steady MA activity
12
14
How much capacity do tech strategic players have
to acquire?
Median leverage
Debt / LTM EBITDA
Source Factset. Note Based on median statistics
from over 800 technology companies.
13
15
14
16
CREDIT SUISSE SECURITIES (USA) LLC Eleven Madison
Avenue New York, NY 10010-3629 212 325
2000 www.credit-suisse.com
15
17
Market Developments in the Private Capital Market
Houlihan Lokey www.hlhz.com U.S. 800.788.5300
Europe 44 (0)20.7839.3355 Hong Kong
852.3551.2300 Japan 81.3.4577.6000
Los Angeles ? New York ? Chicago ? San Francisco
? Washington D.C. ? Minneapolis ? Dallas ?
Atlanta ? London ? Paris ? Frankfurt ? Tokyo ?
Hong Kong
18
The year starts poorly, as expected
Pushing up spreads further. . .
Supply is lacking
Combined repayments, CLO issuance and Prime fund
inflows
Discounted spread of SP/LSTA index loans
Single B
BB

• Headlines
• Leveraged loan volume goes off a cliff. During
  the first quarter, leveraged loan volume tumbled
  to a 4.5-year low of 45 billion from 78 billion
  during the final three months of 2007 and from a
  near-record 186 billion during the same period a
  year earlier. In the institutional segment, the
  drop was more severe still to a 4.5-year low of
  26 billion from 57 billion during the fourth
  quarter and 139 billion during the first three
  months of 2007
• Goodbye go-go. Second-lien volume was down 87
  to a 5-year low of 1.5 billion in the fist
  quarter. Covenant-lites, meanwhile, were absent.
• LBO activity scarce. PE firms completed just 20
  billion of new LBOs in the 1Q, down from 125
  billion in the fourth quarter and 87 billion
  during the first three months of last year. As
  this suggests, the average LBO price tag fell to
  a 4-year low of 962 million during the first
  quarter from last years record high of 2.1
  billion.
• Returns plunge. Between January 1 and March 21,
  the index generated a 6.47 loss, making the
  first quarter the worst ever for the loan market.
  The prior low point was a negative 1.23 return
  during the third quarter of last year.
• Defaults rise. The lagging 12-month default rate
  by number of loans pushed to a 2-year high of
  1.83 at the end of March, from an all-time low
  of 0.26 at yearend. Because the defaults were
  concentrated among smaller loans, the default
  rate by principal amount didnt climb as high to
  a 16-month high of 1.07 on March 31 from 0.24
  at yearend.
• Among the scant good news of the first quarter,
  arrangers reduced the calendar to about 120
  billion (or 105 billion if Clear Channel
  disappears) from 156 billion at yearend

crushing new issue activity
Source SP LCD.
19
Current State of the Lending Market

• Market Changes
• Beginning in the third quarter of 2007 the senior
  lending market experienced a significant
  tightening in terms of availability of capital
  and credit standards
• Due to these factors, transactions above 200
  million have been increasingly difficult to
  arrange as lenders are reluctant to underwrite
  and assume the risks of a hung deal
• Transactions below 200 million and particularly
  below 100 million are seeing less difficulty in
  closing as banks have assumed a more active role
  in the market and the willingness to underwrite
  and if necessary to club a deal is greater
• Companies with cash flow less than 10 million
  will find greater difficulty in attracting a cash
  flow based structure particularly if the use of
  proceeds is non-organic (acquisition related or
  dividend recap)

20
Current State of the Lending Market

• Changes in Participants
• Regional banks have assumed a more active role in
  both the leveraged and non-leveraged lending
  market as pricing and structures have become more
  attractive
• Hedge funds continue to be active but because of
  a decline in absolute rates by nearly 300 basis
  points since January and higher relative values
  available in the secondary market, they have
  become less active in the senior secured market
• The number of active lenders is contracting due
  to consolidation, downsized operations, and
  tightened liquidity
• The market dislocation is not having the same
  impact on borrowers whose needs are principally
  related to working capital needs or capital
  expansion provided credit quality is acceptable
• The junior capital market continues to have a
  healthy appetite with mezzanine funds displacing
  second lien funds and Private Equity groups
  holding significant liquidity. The number of
  private equity groups willing to consider
  minority investments is increasing

21
Current State of the Lending Market

• Changes in Pricing, Structure, Collateral and Use
  of Proceeds
• The impact of credit tightening in the middle
  market is a decrease in leverage by 0.5x-1.5x ,
  an increase in pricing by 100-150 basis points
  and upfront fees by 100 basis points and the
  institution of LIBOR floors
• Lenders still have an appetite for acquisition
  financing, particularly if sponsor supported, but
  they will insist on a balanced capital structure
  and be very cautious on add-backs. Dividend
  recaps (particularly non-sponsored) are virtually
  non-existent
• Due to the changing mix of lenders, amortization
  has increased, which will further impact leverage
  capacity. Term Loan Bs, which had required
  nominal amortization (1 p/yr), have been
  replaced with loans requiring initial
  amortization of 5 increasing over time to 10-15
• Cash flow sweeps, which had been normally set at
  50 of annual excess cash flow, have been stepped
  up to 75 and in certain cases payable on a
  semi-annual basis
• Deals requiring an underwriting should expect
  pricing flex of at least 75 basis points and
  structure flex that may require more junior
  capital
• Asset based lending has rebounded strongly with
  cash flow leverage multiples coming down and
  companies beginning to struggle. While
  potentially limiting in terms of leverage,
  pricing remains attractive at libor2-2.50
• Second lien lending has contracted dramatically
  and been replaced by mezzanine as the junior
  capital of choice. Pricing and structure has
  remained consistent with previous with the
  exception of greater demands for call protection
  and warrant sweeteners

22
As Leverage Declined
Note For years 1987-1996, breakouts of
first-lien debt second-lien debt were not
available, therefore the lower portion of the
column reflects Bank Debt/EBITDA and top reflects
all Non Bank Debt/EBITDA
Criteria Pre-1996 L250 and Higher 1996 to
Date L225 and Higher Media Loans Excluded
There were too few deals in 1991 to form a
meaningful sample
Source SP LCD.
23
Pricing Increased
Assumes upfront fee is amortized evenly over an
assumed three-year life Upfront fee includes
original issue discount
Source SP LCD.
24
And Payment Defaults Rose
Source Standard and Poors LCD and SP/LSTA
Leveraged Loan Index
25
Who is Doing What in the Capital Markets

• Because of liquidity, lower cost of funds and
  performing loan portfolios, commercial banks have
  become more active participants in the lending
  market (increased market share on new deals from
  5.8 in 2007 to 14.9 in Q1 2008). In the
  institutional market, banks bought 27.9 of new
  deals in the first quarter of 2008 versus 1.9 in
  the first half of 2007
• While active, hedge funds have wrestled with the
  relative value argument and as such have targeted
  higher yields (10-12) for first lien paper than
  would normally be the case. This has resulted in
  a significant pull back 21.5 of new deals in
  Q108 versus 51 in the second half of 2007
• CLOs, which had been significant buyers of
  leveraged loans (upwards of 70 by some
  estimates) have now dropped from 63 in the first
  half of 2007 to 40 in Q108
• BDCs (Business Development Corporations) have
  been restricted as stocks have been trading below
  book value, making it impractical to tap the
  equity markets, resulting in liquidity
  limitations
• Due to the significant drop in LIBOR, second lien
  funds and hedge funds have had little appetite
  for second lien loans due to low yields resulting
  in volume declining to 1.4 billion in Q1 2008
• Mezzanine funds have become very active due to
  the decline in appetite for second lien loans and
  the more patient aspect of subordinated debt
  longer term, less restrictive covenants and
  bullet maturity. While pricing has remained
  fairly consistent with the recent past (14-19),
  more funds are requiring warrants and instituting
  call protection
• Private Equity groups continue to have
  significant liquidity and the drop-off in MA
  activity has led to more competition on fewer
  deals. Because of the tightened credit markets,
  some equity funds are financing transactions with
  all equity and plan to refinance later when the
  market stabilizes

26
A Changing Lender Landscape
Non-banks
Banks
Excludes all left and right agent commitments
(including administrative, syndication and
documentation agent as well as arranger) For
1Q08, All Deals includes block sales like TXU
while New Deals include only deals launched and
structured this year
Source SP LCD.
27
Average Equity Contribution to Leveraged Buyouts
1987 1Q08
Equity includes common equity and preferred stock
as well as holding company debt and seller note
proceeds downstreamed to the operating company as
common equity Rollover Equity prior to 1996 is
not available There were too few deals in 1991
to form a meaningful sample.
Source SP LCD.
28
1Q08 New-Issue Loan Volume by Broad Industry
Volume 45 Billion
Volume 26 Billion
Note These numbers comprise U.S. dollar
denominated loans.
Source SP LCD.
29
1Q08 New-Issue Loan Volume by Purpose
Volume 26 Billion total MA (acquisition
LBO) 68
Volume 45 Billion total MA (acquisition
LBO) 66
Note These numbers comprise U.S. dollar
denominated loans.
Source SP LCD.