Exhibit 4.4


 


EXECUTION VERSION


 




 


 





SECURITY AGREEMENT


 


dated as of


 


November 3, 2006


 


among


 


ENCORE MEDICAL FINANCE LLC,

as Borrower


 


ENCORE MEDICAL HOLDINGS LLC,

as Holdings


 


CERTAIN SUBSIDIARIES OF HOLDINGS

IDENTIFIED HEREIN,


 


and


 


BANK OF AMERICA, N.A.,

as Collateral Agent


 




 





 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 1.01

  	
  Credit Agreement

  	
  1

  
	
  SECTION 1.02

  	
  Other Defined Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  Pledge of
  Securities

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01

  	
  Pledge

  	
  3

  
	
  SECTION 2.02

  	
  Delivery of the Pledged Collateral

  	
  4

  
	
  SECTION 2.03

  	
  Representations, Warranties and Covenants

  	
  4

  
	
  SECTION 2.04

  	
  Certification of Limited Liability Company and Limited Partnership
  Interests

  	
  5

  
	
  SECTION 2.05

  	
  Registration in Nominee Name; Denominations

  	
  6

  
	
  SECTION 2.06

  	
  Voting Rights; Dividends and Interest

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  Security
  Interests in Personal Property

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01

  	
  Security Interest

  	
  8

  
	
  SECTION 3.02

  	
  Representations and Warranties

  	
  9

  
	
  SECTION 3.03

  	
  Covenants

  	
  11

  
	
  SECTION 3.04

  	
  Other Actions

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01

  	
  Remedies Upon Default

  	
  14

  
	
  SECTION 4.02

  	
  Application of Proceeds

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  Indemnity,
  Subrogation and Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.01

  	
  Indemnity

  	
  16

  
	
  SECTION 5.02

  	
  Contribution and Subrogation

  	
  16

  
	
  SECTION 5.03

  	
  Subordination

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.01

  	
  Notices

  	
  17

  
	
  SECTION 6.02

  	
  Waivers; Amendment

  	
  17

  
	
  SECTION 6.03

  	
  Collateral Agent’s Fees and Expenses

  	
  18

  



 


i

















 


	
  SECTION 6.04

  	
  Successors and Assigns

  	
  18

  
	
  SECTION 6.05

  	
  Survival of Agreement

  	
  19

  
	
  SECTION 6.06

  	
  Counterparts; Effectiveness; Several Agreement

  	
  19

  
	
  SECTION 6.07

  	
  Severability

  	
  19

  
	
  SECTION 6.08

  	
  Right of Set-Off

  	
  19

  
	
  SECTION 6.09

  	
  Governing Law; Jurisdiction; Consent to Service of Process

  	
  20

  
	
  SECTION 6.10

  	
  WAIVER OF JURY TRIAL

  	
  21

  
	
  SECTION 6.11

  	
  Headings

  	
  21

  
	
  SECTION 6.12

  	
  Security Interest Absolute

  	
  21

  
	
  SECTION 6.13

  	
  Termination or Release

  	
  21

  
	
  SECTION 6.14

  	
  Additional Restricted Subsidiaries

  	
  22

  
	
  SECTION 6.15

  	
  Collateral Agent Appointed Attorney-in-Fact

  	
  23

  
	
  SECTION 6.16

  	
  General Authority of the Collateral Agent

  	
  23

  



 


	
  Schedules

  	
   

  
	
   

  	
   

  
	
  Schedule I

  	
  Subsidiary
  Parties

  
	
  Schedule II

  	
  Pledged Equity;
  Pledged Debt

  
	
  Schedule III

  	
  Commercial Tort
  Claims

  
	
   

  	
   

  
	
  Exhibits

  	
   

  
	
   

  	
   

  
	
  Exhibit I

  	
  Form of Security
  Agreement Supplement

  
	
  Exhibit II

  	
  Form of
  Perfection Certificate

  
	
  Exhibit III

  	
  Form of Consent
  to Assignment of Letter of Credit Rights

  



 


ii

















 


SECURITY AGREEMENT
dated as of November 3, 2006 among ENCORE MEDICAL HOLDINGS LLC (“Holdings”), ENCORE MEDICAL FINANCE LLC (the “Borrower”), the Subsidiaries of Holdings from time to time
party hereto and BANK OF AMERICA, N.A., as Collateral Agent for the Secured
Parties (as defined below).


 


Reference is made
to the Credit Agreement dated as of November 3, 2006 (as amended, supplemented
or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, Holdings, BANK OF AMERICA, N.A., as
Administrative Agent, Swing Line Lender and an L/C Issuer, BANC OF AMERICA
SECURITIES LLC, as Arranger and Book Runner, CREDIT SUISSE SECURITIES (USA)
LLC, as Arranger, Book Runner and as Syndication Agent, and GENERAL ELECTRIC
CAPITAL CORPORATION, as Documentation Agent, and each lender from time to time
party thereto (collectively, the “Lenders” and
individually, a “Lender”).  The Lenders have agreed to extend credit to
the Borrower subject to the terms and conditions set forth in the Credit
Agreement.  The Grantors may receive,
directly or indirectly, a portion of the proceeds of the Loans under the Credit
Agreement and will derive substantial direct and indirect benefits from the
transactions contemplated by the Credit Agreement.  It is a condition precedent to the making of
Loans and the issuance of Letters of Credit by the Lenders under the Credit
Agreement and the entry by any Lender or Affiliate of a Lender in its capacity
as a provider of cash management services into Cash Management Obligations and
Hedge Banks into Secured Hedge Agreements from time to time that the Grantors
shall have executed and delivered this Agreement.  Holdings and the Subsidiary Parties are
affiliates of the Borrower, will derive substantial benefits from the extension
of credit to the Borrower pursuant to the Credit Agreement and are willing to
execute and deliver this Agreement in order to induce the Lenders to extend
such credit.  Accordingly, the parties
hereto agree as follows:


 


ARTICLE I



Definitions


 


SECTION 1.01       Credit Agreement.


 


(a)           Capitalized terms
used in this Agreement and not otherwise defined herein have the meanings
specified in the Credit Agreement.  All
terms defined in the New York UCC (as defined herein) and not defined in this
Agreement have the meanings specified therein; the term “instrument” shall have
the meaning specified in Article 9 of the New York UCC.


 


(b)           The rules of
construction specified in Article I of the Credit Agreement also apply to this
Agreement.


 


SECTION 1.02       Other Defined Terms.  As used in this Agreement, the following
terms have the meanings specified below:


 


“Account Debtor” means any Person who is or who may become
obligated to any Grantor under, with respect to or on account of an Account.


 


“Accounts” has the meaning specified in Article 9 of the New
York UCC.


 

















 


“Agreement” means this Security Agreement.


 


“Article 9 Collateral” has the meaning assigned to such term
in Section 3.01(a).


 


“Claiming Party” has the meaning assigned to such term in
Section 5.02.


 


“Collateral” means the Article 9 Collateral and the Pledged
Collateral.


 


“Contributing Party” has the meaning assigned to such term in
Section 5.02.


 


“Credit Agreement” has the meaning assigned to such term in
the preliminary statement of this Agreement.


 


“General Intangibles” has the meaning specified in Article 9
of the New York UCC and includes corporate or other business records,
indemnification claims, contract rights (including rights under leases, whether
entered into as lessor or lessee, Swap Contracts and other agreements),
goodwill, registrations, franchises, tax refund claims and any letter of
credit, guarantee, claim, security interest or other security held by or
granted to any Grantor, as the case may be, to secure payment by an Account
Debtor of any of the Accounts; provided
that General Intangibles shall not include any intellectual property and
related assets subject to the Intellectual Property Security Agreement.


 


“Grantor” means each of Holdings, the Borrower and each
Subsidiary Party that is a Domestic Subsidiary and not an Unrestricted
Subsidiary or an Excluded Subsidiary.


 


“New York UCC” means the Uniform Commercial Code as from time
to time in effect in the State of New York.


 


“Obligations” has the meaning assigned to such term in the
Credit Agreement.


 


“Perfection Certificate” means a certificate substantially in
the form of Exhibit II, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by the chief financial
officer and the chief legal officer of the Borrower.


 


“Pledged Collateral” has the meaning assigned to such term in
Section 2.01.


 


“Pledged Debt” has the meaning assigned to such term in
Section 2.01.


 


“Pledged Equity” has the meaning assigned to such term in
Section 2.01.


 


“Pledged Securities” means any promissory notes, stock
certificates or other securities now or hereafter included in the Pledged
Collateral, including all certificates, instruments or other documents
representing or evidencing any Pledged Collateral.


 


“Secured Parties” means, collectively, the Administrative
Agent, the Collateral Agent, the Lenders, the Hedge Banks, the Cash Management
Banks, the Supplemental Administrative Agent and each co-agent or sub-agent
appointed by the Administrative Agent from time to time pursuant to Section 9.01(c)
of the Credit Agreement.


 


2

















 


“Security Agreement Supplement” means an instrument in the
form of Exhibit I hereto.


 


“Security Interest” has the meaning assigned to such term in
Section 3.01(a).


 


“Subsidiary Parties” means (a) the Restricted Subsidiaries identified
on Schedule I and (b) each other Restricted Subsidiary that becomes a party to
this Agreement as a Subsidiary Party after the Closing Date.


 


ARTICLE II



Pledge of Securities


 


SECTION 2.01       Pledge.  As security for the payment or performance,
as the case may be, in full of the Obligations, including the Guaranties, each
Grantor hereby assigns and pledges to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Parties, a security interest in, all of such Grantor’s right, title and
interest in, to and under (i) all Equity Interests held by it and listed on
Schedule II and any other Equity Interests obtained in the future by such
Grantor and the certificates representing all such Equity Interests (the “Pledged Equity”); provided
that the Pledged Equity shall not include (A) more than 65% of the issued and
outstanding voting Equity Interests of any Foreign Subsidiary, (B) Equity
Interests of Unrestricted Subsidiaries, (C) Equity Interests of any Subsidiary
of a Foreign Subsidiary, (D) Equity Interests of any Subsidiary acquired
pursuant to a Permitted Acquisition financed with Indebtedness incurred
pursuant to Section 7.03(g) of the Credit Agreement if such Equity Interests
serve as security for such Indebtedness or if the terms of such Indebtedness
prohibit the creation of any other lien on such Equity Interests, (E) Equity
Interests of any Person that is not a direct or indirect, wholly owned
Subsidiary of the Borrower, (F) Equity Interests of any Subsidiary with respect
to which the Administrative Agent has confirmed in writing to the Borrower its
determination that the costs or other consequences (including adverse tax
consequences) of providing a pledge of its Equity Interests is excessive in
view of the benefits to be obtained by the Secured Parties and (G) subject to
Section 3.03(i), Equity Interests held by Encore Medical, L.P. in Encore
Orthopedics FSC Limited; (ii)(A) the promissory notes and instruments
evidencing indebtedness owned by it and listed opposite the name of such
Grantor on Schedule II, and (B) the promissory notes and any other instruments
evidencing indebtedness obtained in the future by such Grantor (the “Pledged Debt”); (iii) all other property that may be delivered
to and held by the Collateral Agent pursuant to the terms of this Section 2.01;
(iv) subject to Section 2.06, 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,
and all other Proceeds received in respect of, the securities referred to in
clauses (i) and (ii) above; (v) subject to Section 2.06, all rights and
privileges of such Grantor with respect to the securities and other property
referred to in clauses (i), (ii), (iii) and (iv) above; and (vi) all Proceeds
of any of the foregoing (the items referred to in clauses (i) through (vi)
above being collectively referred to as the “Pledged
Collateral”).


 


TO HAVE AND TO
HOLD the Pledged Collateral, together with all right, title, interest, powers,
privileges and preferences pertaining or incidental thereto, unto the
Collateral


 


3

















 


Agent,
its successors and assigns, for the benefit of the Secured Parties, forever,
subject, however, to the terms, covenants and conditions hereinafter set forth.


 


SECTION 2.02       Delivery of the Pledged Collateral.


 


(a)           Each Grantor agrees
promptly to deliver or cause to be delivered to the Collateral Agent, for the
benefit of the Secured Parties, any and all Pledged Securities (other than any
uncertificated securities, but only for so long as such securities remain
uncertificated) to the extent such Pledged Securities, in the case of promissory
notes or other instruments evidencing Indebtedness, are required to be
delivered pursuant to paragraph (b) of this Section 2.02.


 


(b)           Each Grantor will
cause any Indebtedness for borrowed money having an aggregate principal amount
in excess of $2,000,000 owed to such Grantor by any Person pursuant to any
obligation to be evidenced by a duly executed promissory note that is pledged
and delivered to the Collateral Agent, for the benefit of the Secured Parties,
pursuant to the terms hereof.


 


(c)           Upon delivery to the
Collateral Agent, (i) any Pledged Securities shall be accompanied by stock or
note powers duly executed in blank or other instruments of transfer reasonably
satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (ii) all other
property comprising part of the Pledged Collateral shall be accompanied by
proper instruments of assignment duly executed by the applicable Grantor 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, which
schedule shall be attached hereto as Schedule II and made a part hereof; provided that failure to attach any such
schedule hereto shall not affect the validity of such pledge of such Pledged
Securities.  Each schedule so delivered
shall supplement any prior schedules so delivered.


 


SECTION 2.03       Representations, Warranties and
Covenants.  Holdings and the Borrower
jointly and severally represent, warrant and covenant, as to themselves and the
other Grantors, to and with the Collateral Agent, for the benefit of the
Secured Parties, that:


 


(a)           Schedule II
correctly sets forth the percentage of the issued and outstanding units of each
class of the Equity Interests of the issuer thereof represented by the Pledged
Equity and includes all Equity Interests, promissory notes and instruments required
to be pledged hereunder in order to satisfy the Collateral and Guaranty
Requirement;


 


(b)           the Pledged Equity
and Pledged Debt (solely with respect to Pledged Debt issued by a Person other
than Holdings or a subsidiary of Holdings, to the best of Holdings’ and the
Borrower’s knowledge) have been duly and validly authorized and issued by the
issuers thereof and (i) in the case of Pledged Equity (other than Pledged
Equity consisting of limited liability company interests or partnership
interests, which cannot be fully paid or nonassessable), are fully paid and
nonassessable and (ii) in the case of Pledged Debt (solely with respect to
Pledged Debt issued by a Person other than


 


4

















 


Holdings or a
subsidiary of Holdings, to the best of Holdings’ and the Borrower’s knowledge),
are legal, valid and binding obligations of the issuers thereof;


 


(c)           except for the
security interests granted hereunder, each of the Grantors (i) is and, subject
to any transfers made in compliance with the Credit Agreement, will continue to
be the direct owner, beneficially and of record, of the Pledged Securities
indicated on Schedule II as owned by such Grantors, (ii) holds the same free
and clear of all Liens, other than (A) Liens created by the Collateral
Documents and (B) Liens expressly permitted pursuant to Section 7.01 of the
Credit Agreement, (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 Pledged Collateral, other than (A) Liens created by the Collateral
Documents and (B) Liens expressly permitted pursuant to Section 7.01 of the
Credit Agreement, and (iv) will defend its title or interest thereto or therein
against any and all Liens (other than the Liens permitted pursuant to this
Section 2.03(c)), however arising, of all Persons whomsoever;


 


(d)           except for
restrictions and limitations imposed by the Loan Documents, securities laws
generally, or with respect to limited liability companies, limited liability
company laws and except as described in the Perfection Certificate, the Pledged
Collateral is and will continue to be freely transferable and assignable, and
none of the Pledged Collateral is or will be subject to any option, right of
first refusal, shareholders agreement, charter or by-law provisions or contractual
restriction of any nature that might prohibit, impair, delay or otherwise
affect in any manner material and adverse to the Secured Parties the pledge of
such Pledged Collateral hereunder, the sale or disposition thereof pursuant
hereto or the exercise by the Collateral Agent of rights and remedies
hereunder;


 


(e)           each of the Grantors
has the power and authority to pledge the Pledged Collateral pledged by it
hereunder in the manner hereby done or contemplated;


 


(f)            no consent or
approval of any Governmental Authority, any securities exchange or any other
Person was or is necessary to the validity of the pledge effected hereby (other
than such as have been obtained and are in full force and effect);


 


(g)           by virtue of the
execution and delivery by the Grantors of this Agreement, when any Pledged
Securities are delivered to the Collateral Agent in accordance with this
Agreement, the Collateral Agent will obtain a legal, valid and perfected lien
upon and security interest in such Pledged Securities as security for the
payment and performance of the Obligations; and


 


(h)           the pledge effected
hereby is effective to vest in the Collateral Agent, for the benefit of the
Secured Parties, the rights of the Collateral Agent in the Pledged Collateral
as set forth herein.


 


SECTION 2.04       Certification of Limited Liability
Company and Limited Partnership Interests. Any equity interest in any
limited liability company or limited partnership controlled by any Grantor and
pledged under Section 2.01 shall either (i) be represented by a


 


5

















 


certificate, shall be a “security” within the meaning of Article 8 of
the UCC and shall be delivered to the Collateral Agent or (b) not have elected
to be treated as a “security” within the meaning of Article 8 of the UCC and
shall not be represented by a certificate.


 


SECTION 2.05       Registration in Nominee Name;
Denominations.  If an Event of
Default shall occur and be continuing and the Collateral Agent shall give the
Borrower notice of its intent to exercise such rights, (a) 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
applicable Grantor, endorsed or assigned in blank or in favor of the Collateral
Agent, and each Grantor 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 Grantor and (b) the Collateral Agent shall have
the right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement.


 


SECTION 2.06       Voting Rights; Dividends and Interest.


 


(a)           Unless and until an
Event of Default shall have occurred and be continuing and the Collateral Agent
shall have notified the Borrower that the rights of the Grantors under this
Section 2.06 are being suspended:


 


(i)            Each Grantor shall
be entitled to exercise any and all voting 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
that such rights and powers shall not be exercised in any manner that could
materially and adversely affect the rights inuring to a holder of any Pledged
Securities or the rights and remedies of any of the Collateral Agent or the
other Secured Parties under this Agreement, 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 Grantor, or cause to be executed and
delivered to each Grantor, all such proxies, powers of attorney and other
instruments as each Grantor may reasonably request for the purpose of enabling
such Grantor to exercise the voting and/or consensual rights and powers it is
entitled to exercise pursuant to subparagraph (i) above.


 


(iii)          Each Grantor shall
be entitled to receive and retain any and all dividends, interest, principal
and other distributions paid on or distributed in respect of the Pledged
Securities to the extent and only to the extent that such dividends, interest,
principal and other distributions are permitted by, and otherwise paid or
distributed in accordance with, the terms and conditions of the Credit
Agreement, the other Loan Documents and applicable Laws; provided that any noncash dividends, interest, principal or
other distributions that would constitute Pledged Equity or Pledged Debt,
whether resulting from a subdivision, combination or reclassification of the
outstanding 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,


 


6

















 


shall be and
become part of the Pledged Collateral, and, if received by any Grantor, shall
not be commingled by such Grantor 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 Collateral Agent and the Secured Parties and shall be forthwith
delivered to the Collateral Agent in the same form as so received (with any
necessary endorsement reasonably requested by the Collateral Agent).


 


(b)           Upon the occurrence
and during the continuance of an Event of Default, after the Collateral Agent
shall have notified the Borrower of the suspension of the rights of the
Grantors under paragraph (a)(iii) of this Section 2.06, then all rights of any
Grantor to dividends, interest, principal or other distributions that such
Grantor is authorized to receive pursuant to paragraph (a)(iii) of this Section
2.06 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, interest, principal or other
distributions.  All dividends, interest,
principal or other distributions received by any Grantor contrary to the
provisions of this Section 2.06 shall be held in trust for the benefit of the
Collateral Agent, shall be segregated from other property or funds of such
Grantor and shall be forthwith delivered to the Collateral Agent upon demand in
the same form as so received (with any necessary endorsement reasonably
requested by the Collateral Agent).  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 4.02.  After
all Events of Default have been cured or waived, the Collateral Agent shall
promptly repay to each Grantor (without interest) all dividends, interest,
principal or other distributions that such Grantor would otherwise be permitted
to retain pursuant to the terms of paragraph (a)(iii) of this Section 2.06 and
that remain in such account.


 


(c)           Upon the occurrence
and during the continuance of an Event of Default, after the Collateral Agent
shall have notified the Borrower of the suspension of the rights of the
Grantors under paragraph (a)(i) of this Section 2.06, then all rights of any
Grantor to exercise the voting and consensual rights and powers it is entitled
to exercise pursuant to paragraph (a)(i) of this Section 2.06, and the
obligations of the Collateral Agent under paragraph (a)(ii) of this Section
2.06, 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 exercise such voting and consensual rights and powers; provided that, unless otherwise directed
by the Required Lenders, the Collateral Agent shall have the right from time to
time following and during the continuance of an Event of Default to permit the
Grantors to exercise such rights.  After
all Events of Default have been cured or waived, each Grantor shall have the
exclusive right to exercise the voting and/or consensual rights and powers that
such Grantor would otherwise be entitled to exercise pursuant to the terms of
paragraph (a)(i) of this Section 2.06.


 


(d)           Any notice given by
the Collateral Agent to the Borrower suspending the rights of the Grantors
under paragraph (a) of this Section 2.06 (i) shall be given in writing, (ii)
may be given with respect to one or more of the Grantors at the same or
different times and (iii) may suspend the rights of the Grantors under
paragraph (a)(i) or paragraph (a)(iii) of this Section 2.06 in part without
suspending all such rights (as specified by the Collateral Agent in its sole
and absolute discretion) and without waiving or otherwise affecting the
Collateral Agent’s rights


 


7

















 


to give additional
notices from time to time suspending other rights so long as an Event of
Default has occurred and is continuing.


 


ARTICLE III



Security Interests in Personal Property


 


SECTION 3.01       Security Interest.


 


(a)           As security for the
payment or performance, as the case may be, in full of the Obligations,
including the Guaranties, each Grantor hereby assigns and pledges to the
Collateral Agent, its successors and assigns, for the benefit of the Secured
Parties, and hereby grants to the Collateral Agent, its successors and assigns,
for the benefit of the Secured Parties, a security interest (the “Security Interest”) in all right, title or
interest in or to any and all of the following assets and properties now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest
(collectively, the “Article 9 Collateral”):


 


(i)            all property;


 


(ii)           all Accounts;


 


(iii)          all Chattel Paper;


 


(iv)          all Commercial Tort
Claims described on Schedule III from time to time;


 


(v)           all Deposit
Accounts;


 


(vi)          all Documents;


 


(vii)         all Equipment;


 


(viii)        all General
Intangibles;


 


(ix)           all Instruments;


 


(x)            all Inventory;


 


(xi)           all Investment
Property;


 


(xii)          all books and
records pertaining to the Article 9 Collateral; and


 


(xiii)         to the extent not
otherwise included, all Proceeds and products of any and all of the foregoing
and all supporting obligations, collateral security and guarantees given by any
Person with respect to any of the foregoing;


 


provided
that notwithstanding anything to the contrary in this Agreement, this Agreement
shall not constitute a grant of a security interest in (A) motor vehicles the
perfection of a security interest in which is excluded from the Uniform
Commercial Code in the relevant jurisdiction, (B)


 


8

















 


any Equity
Interests in any Unrestricted Subsidiary or any Equity Interests of any
Subsidiary acquired pursuant to a Permitted Acquisition financed with
Indebtedness incurred pursuant to Section 7.03(g) of the Credit Agreement if
such Equity Interests serve as security for such Indebtedness or if the terms
of such Indebtedness prohibit the creation of any other lien on such Equity Interests,
(C) more than 65% of the issued and outstanding voting Equity Interests of any
Foreign Subsidiary or any Equity Interests of any Subsidiary of a Foreign
Subsidiary, (D) any asset with respect to which the Administrative Agent has
confirmed in writing to the Borrower its determination that the costs or other
consequences (including adverse tax consequences) of providing a security
interest in such asset is excessive in view of the benefits to be obtained by
the Secured Parties, or (E) any General Intangible, Investment Property or
other rights of a Grantor arising under any contract, lease, instrument,
license or other document if (but only to the extent that) the grant of a
security interest therein would (x) constitute a violation of a valid and enforceable
restriction in respect of such General Intangible, Investment Property or other
such rights in favor of a third party or under any law, regulation, permit,
order or decree of any Governmental Authority, unless and until all required
consents shall have been obtained (for the avoidance of doubt, the restrictions
described herein shall not include negative pledges or similar undertakings in
favor of a lender or other financial counterparty) or (y) expressly give any
other party in respect of any such contract, lease, instrument, license or
other document, the right to terminate its obligations thereunder; provided, however, that the limitation set forth in clause
(E) above shall not affect, limit, restrict or impair the grant by a Grantor of
a security interest pursuant to this Agreement in any such Collateral to the
extent that an otherwise applicable prohibition or restriction on such grant is
rendered ineffective by any applicable law, including the Uniform Commercial
Code.  Each Grantor shall, if requested
to do so by the Administrative Agent, use commercially reasonable efforts to
obtain any such required consent that is reasonably obtainable with respect to
Collateral which the Administrative Agent reasonably determines to be material.


 


(b)           Each Grantor hereby
irrevocably authorizes the Collateral Agent for the benefit of the Secured
Parties at any time and from time to time to file in any relevant jurisdiction
any initial financing statements (including fixture filings) with respect to
the Article 9 Collateral or any part thereof and amendments thereto that (i)
indicate the Collateral as all assets of such Grantor or words of similar
effect as being of an equal or lesser scope or with greater detail, and (ii)
contain the information required by Article 9 of the Uniform Commercial Code or
the analogous legislation of each applicable jurisdiction for the filing of any
financing statement or amendment, including (A) whether such Grantor is an
organization, the type of organization and any organizational identification
number issued to such Grantor and (B) in the case of a financing statement
filed as a fixture filing, a sufficient description of the real property to
which such Article 9 Collateral relates. 
Each Grantor agrees to provide such information to the Collateral Agent
promptly upon request.


 


(c)           The Security
Interest is granted as security only and shall not subject the Collateral Agent
or any other Secured Party to, or in any way alter or modify, any obligation or
liability of any Grantor with respect to or arising out of the Article 9
Collateral.


 


SECTION 3.02       Representations and Warranties.  Holdings and the Borrower jointly and
severally represent and warrant, as to themselves and the other Grantors, to
the Collateral Agent and the Secured Parties that:


 


9

















 


(a)           Each Grantor has
good and valid rights in and title to the Article 9 Collateral with respect to
which it has purported to grant a Security Interest hereunder and has full
power and authority to grant to the Collateral Agent the Security Interest in
such Article 9 Collateral pursuant hereto and to execute, deliver and perform
its obligations in accordance with the terms of this Agreement, without the
consent or approval of any other Person other than any consent or approval that
has been obtained.


 


(b)           The Perfection
Certificate has been duly prepared, completed and executed and the information
set forth therein, including the exact legal name of each Grantor, is correct
and complete in all material respects as of the Closing Date.  The UCC financing statements (including
fixture filings, as applicable) or other appropriate filings, recordings or
registrations prepared by the Collateral Agent based upon the information
provided to the Collateral Agent in the Perfection Certificate for filing in
each governmental, municipal or other office specified in Schedule 2 to the
Perfection Certificate (or specified by notice from the applicable Borrower to
the Collateral Agent after the Closing Date in the case of filings, recordings
or registrations required by Section 6.11 of the Credit Agreement), are all the
filings, recordings and registrations that are necessary to establish a legal,
valid and perfected security interest in favor of the Collateral Agent (for the
benefit of the Secured Parties) in respect of all Article 9 Collateral in which
the Security Interest may be perfected by filing, recording or registration in
the United States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the
filing of continuation statements and as may be required with respect to
property of the Grantors of the types described in clauses (1), (2) and (3) of
Section 9-311(a) of the UCC, which may not be perfected by such filing.


 


(c)           The Security
Interest constitutes (i) a legal and valid security interest in all the Article
9 Collateral securing the payment and performance of the Obligations and (ii)
subject to the filings described in Section 3.02(b), a perfected security
interest in all Article 9 Collateral in which a security interest may be perfected
by filing, recording or registering a financing statement or analogous document
in the United States (or any political subdivision thereof) and its territories
and possessions pursuant to the Uniform Commercial Code in the relevant
jurisdiction.  The Security Interest is
and shall be prior to any other Lien on any of the Article 9 Collateral, other
than (i) any nonconsensual Lien that is expressly permitted pursuant to Section
7.01 of the Credit Agreement and has priority as a matter of law and (ii) Liens
expressly permitted pursuant to Section 7.01 of the Credit Agreement.


 


(d)           The Article 9
Collateral is owned by the Grantors free and clear of any Lien, except for
Liens expressly permitted pursuant to Section 7.01 of the Credit
Agreement.  None of the Grantors has
filed or consented to the filing of (i) any financing statement or analogous
document under the New York UCC or any other applicable laws covering any
Article 9 Collateral or (ii) any assignment in which any Grantor assigns any
Article 9 Collateral or any security agreement or similar instrument covering
any Article 9 Collateral with any foreign governmental, municipal or other
office, which financing statement or analogous document, assignment, security
agreement or similar instrument


 


10

















 


is still in
effect, except, in each case, for Liens expressly permitted pursuant to Section
7.01 of the Credit Agreement.


 


(e)           All Commercial Tort
Claims of each Grantor in existence on the date of this Agreement (or on the
date upon which such Grantor becomes a party to this Agreement) are described
on Schedule III hereto.


 


SECTION 3.03       Covenants.


 


(a)           The Borrower agrees
promptly to notify the Collateral Agent in writing of any change (i) in legal
name of any Grantor, (ii) in the identity or type of organization or corporate
structure of any Grantor, or (iii) in the jurisdiction of organization of any
Grantor, in each case, within 10 days of such change.


 


(b)           Each Grantor shall,
at its own expense, take any and all commercially reasonable actions necessary
to defend title to the Article 9 Collateral against all Persons and to defend
the Security Interest of the Collateral Agent in the Article 9 Collateral and
the priority thereof against any Lien not expressly permitted pursuant to
Section 7.01 of the Credit Agreement.


 


(c)           Each year, at the
time of delivery of annual financial statements with respect to the preceding
fiscal year pursuant to Section 6.01 of the Credit Agreement, the Borrower
shall deliver to the Collateral Agent a certificate executed by the chief
financial officer and the chief legal officer of the Borrower setting forth the
information required pursuant to Schedules 1(a), 1(c), 1(e), 1(f), 2(b), 7(a)
and 7(b) of the Perfection Certificate or confirming that there has been no
change in such information since the date of such certificate or the date of
the most recent certificate delivered pursuant to this Section 3.03(c).


 


(d)           The Borrower agrees,
on its own behalf and on behalf of each other Grantor, at its own expense, to
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or therewith. 
If any amount payable under or in connection with any of the Article 9
Collateral that is in excess of $2,000,000 shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be promptly
pledged and delivered to the Collateral Agent, for the benefit of the Secured
Parties, duly endorsed in a manner reasonably satisfactory to the Collateral
Agent.


 


(e)           At its option, the
Collateral Agent may discharge past due taxes, assessments, charges, fees,
Liens, security interests or other encumbrances at any time levied or placed on
the Article 9 Collateral and not permitted pursuant to Section 7.01 of the
Credit Agreement, and may pay for the maintenance and preservation of the
Article 9 Collateral to the extent any Grantor fails to do so as required by
the Credit Agreement or this Agreement and within a reasonable period of time
after the Collateral Agent has requested that it do so, and each


 


11

















 


Grantor jointly and
severally agrees to reimburse the Collateral Agent within 10 days after demand
for any payment made or any reasonable expense incurred by the Collateral Agent
pursuant to the foregoing authorization. 
Nothing in this paragraph shall be interpreted as excusing any Grantor
from the performance of, or imposing any obligation on the Collateral Agent or
any Secured Party to cure or perform, any covenants or other promises of any
Grantor with respect to taxes, assessments, charges, fees, Liens, security
interests or other encumbrances and maintenance as set forth herein, in the
other Loan Documents.


 


(f)            If at any time any
Grantor shall take a security interest in any property of an Account Debtor or
any other Person, the value of which is in excess of $2,000,000, to secure
payment and performance of an Account, such Grantor shall promptly assign such
security interest to the Collateral Agent for the benefit of the Secured Parties.  Such assignment need not be filed of public
record unless necessary to continue the perfected status of the security
interest against creditors of and transferees from the Account Debtor or other
Person granting the security interest.


 


(g)           Each Grantor (rather
than the Collateral Agent or any Secured Party) shall remain liable (as between
itself and any relevant counterparty) to observe and perform all the conditions
and obligations to be observed and performed by it under each contract,
agreement or instrument relating to the Article 9 Collateral, all in accordance
with the terms and conditions thereof, and each Grantor jointly and severally
agrees to indemnify and hold harmless the Collateral Agent and the Secured
Parties from and against any and all liability for such performance.


 


(h)           If any Grantor shall
at any time hold or acquire a Commercial Tort Claim with a value in excess of $2,000,000,
such Grantor shall promptly notify the Collateral Agent in writing signed by
such Grantor of the brief details thereof and grant to the Collateral Agent a
security interest therein and in the Proceeds thereof, all upon the terms of
this Agreement pursuant to a document in form and substance reasonably
satisfactory to the Collateral Agent.


 


(i)            (A) On or prior to
a date that is 120 days after the Closing Date, or such later date as the
Collateral Agent may reasonably determine, after any request for extension by
the Borrower, the Collateral Agent shall receive share certificates for Encore
Orthopedics FSC Limited, together with stock powers duly executed in blank or
other instruments of transfer reasonably satisfactory to the Collateral Agent
and such other instruments and documents as the Collateral Agent may reasonably
request if such Subsidiary has not been liquidated or dissolved by such date;
and (B) on or prior to a date that is 30 days after the Closing Date, or such
later date as the Collateral Agent may reasonably determine, after any requests
for extension by the Borrower, the Collateral Agent shall receive a schedule
certified by a Responsible Officer of the Borrower, setting forth the names and
addresses of all persons and entities other than each Loan Party, such as
lessees, consignees, warehousemen or purchasers of chattel paper, which have
possession or are intended to have possession of any of the Collateral with a
book value in excess of $500,000, including instruments, chattel paper,
inventory or equipment.


 


SECTION 3.04       Other Actions.  In order to further insure the attachment,
perfection and priority of, and the ability of the Collateral Agent to enforce,
the Security Interest,


 


12

















 


each Grantor agrees, in each case at such Grantor’s own expense, to
take the following actions with respect to the following Article 9 Collateral:


 


(a)           Instruments.  If any Grantor shall at any time hold or
acquire any Instruments constituting Collateral and evidencing an amount in
excess of $2,000,000, such Grantor shall forthwith endorse, assign and deliver
the same to the Collateral Agent for the benefit of the Secured Parties,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Collateral Agent may from time to time reasonably request.


 


(b)           Investment Property.  Except to the extent otherwise provided in
Article II, if any Grantor shall at any time hold or acquire any certificated
securities, such Grantor shall forthwith endorse, assign and deliver the same
to the Collateral Agent for the benefit of the Secured Parties, accompanied by
such instruments of transfer or assignment duly executed in blank as the
Collateral Agent may from time to time reasonably request.  If any securities now or hereafter acquired
by any Grantor are uncertificated and are issued to such Grantor or its nominee
directly by the issuer thereof, upon the Collateral Agent’s request and
following the occurrence of an Event of Default such Grantor shall promptly
notify the Collateral Agent thereof and, at the Collateral Agent’s reasonable
request, pursuant to an agreement in form and substance reasonably satisfactory
to the Collateral Agent, either (i) cause the issuer to agree to comply with
instructions from the Collateral Agent as to such securities, without further
consent of any Grantor or such nominee, or (ii) arrange for the Collateral
Agent to become the registered owner of the securities.  If any securities, whether certificated or
uncertificated, or other investment property are held by any Grantor or its
nominee through a securities intermediary or commodity intermediary, upon the
Collateral Agent’s request and following the occurrence of an Event of Default,
such Grantor shall immediately notify the Collateral Agent thereof and at the
Collateral Agent’s request and option, pursuant to an agreement in form and
substance reasonably satisfactory to the Collateral Agent shall either (i)
cause such securities intermediary or (as the case may be) commodity
intermediary to agree to comply with entitlement orders or other instructions
from the Collateral Agent to such securities intermediary as to such security
entitlements, or (as the case may be) to apply any value distributed on account
of any commodity contract as directed by the Collateral Agent to such commodity
intermediary, in each case without further consent of any Grantor or such
nominee, or (ii) in the case of financial assets or other Investment Property
held through a securities intermediary, arrange for the Collateral Agent to
become the entitlement holder with respect to such Investment Property, with the
Grantor being permitted, only with the consent of the Collateral Agent, to
exercise rights to withdraw or otherwise deal with such Investment
Property.  The Collateral Agent agrees
with each of the Grantors that the Collateral Agent shall not give any such
entitlement orders or instructions or directions to any such issuer, securities
intermediary or commodity intermediary, and shall not withhold its consent to
the exercise of any withdrawal or dealing rights by any Grantor, unless an
Event of Default has occurred and is continuing.  The provisions of this paragraph shall not
apply to any financial assets credited to a securities account for which the
Collateral Agent is the securities intermediary.


 


13

















 


(c)           Commercial
Tort Claims.  If any Grantor
shall at any time after the date of this Agreement acquire a Commercial Tort
Claim in an amount (taking the greater of the aggregate claimed damages
thereunder or the reasonably estimated value thereof) of $2,000,000 or more,
such Grantor shall promptly notify the Collateral Agent thereof in a writing
signed by such Grantor and provide supplements to Schedule III describing the
details thereof and shall grant to the Collateral Agent a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement.


 


(d)           Letter of
Credit Rights.  If any Grantor
is at any time a beneficiary under a letter of credit with a stated amount of
$2,000,000 or more, the proceeds of which have not otherwise been previously
perfected as a Supporting Obligation of such Grantor by the filing of a UCC
Financing Statement described in Section 3.02(b), such Grantor shall promptly
notify the Collateral Agent thereof and, at the request of the Collateral
Agent, such Grantor shall, pursuant to an agreement substantially similar to
the form of Consent to Assignment of Letter of Credit Rights attached hereto as
Exhibit III or otherwise in form and substance reasonably satisfactory to the
Collateral Agent, use its commercially reasonable efforts to (i) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to the Collateral Agent of the proceeds of any drawing under such
letter of credit or (ii) arrange for the Collateral Agent to become the transferee
beneficiary of such letter of credit, with the Collateral Agent agreeing, in
each case, that the proceeds of any drawing under the letter of credit are to
be applied as provided in this Agreement after the occurrence and during the
continuance of an Event of Default.


 


ARTICLE IV



Remedies


 


SECTION 4.01       Remedies Upon Default.  Upon the occurrence and during the
continuance of an Event of Default, it is agreed that the Collateral Agent
shall have the right to exercise any and all rights afforded to a secured party
with respect to the Obligations under the Uniform Commercial Code or other
applicable law and also may (i) require each Grantor to, and each Grantor
agrees that it will at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place and time to be
designated by the Collateral Agent that is reasonably convenient to both
parties; (ii) occupy any premises owned or, to the extent lawful and permitted,
leased by any of the Grantors where the Collateral or any part thereof is
assembled or located for a reasonable period in order to effectuate its rights
and remedies hereunder or under law, without obligation to such Grantor in
respect of such occupation; provided
that the Collateral Agent shall provide the applicable Grantor with notice
thereof prior to or promptly after such occupancy; (iii) exercise any and all
rights and remedies of any of the Grantors under or in connection with the
Collateral, or otherwise in respect of the Collateral; provided that the Collateral Agent shall
provide the applicable Grantor with notice thereof prior to or promptly after
such exercise; and (iv) subject to the mandatory requirements of applicable law
and the notice requirements described below, sell or otherwise dispose of all
or any part of the Collateral securing the Obligations at a 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 Agent shall
be authorized at any such sale of securities (if it


 


14

















 


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 sale of Collateral
shall hold the property sold absolutely, free from any claim or right on the
part of any Grantor, and each Grantor hereby waives (to the extent permitted by
law) all rights of redemption, stay and appraisal which such Grantor 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 the applicable Grantors 10 days’ written notice (which each
Grantor agrees is reasonable notice within the meaning of Section 9-611 of the
New York UCC or its equivalent in other jurisdictions) of the Collateral Agent’s
intention to make any sale of 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 (if any) 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 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
law, private) sale made pursuant to this Agreement, any Secured Party may bid
for or purchase, free (to the extent permitted by law) from any right of
redemption, stay, valuation or appraisal on the part of any Grantor (all said
rights being also hereby waived and released to the extent permitted by law),
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 such Secured Party
from any Grantor as a credit against the purchase price, and such Secured Party
may, upon compliance with the terms of sale, hold, retain and dispose of such
property without further accountability to any Grantor therefor.  For purposes hereof, a written agreement to
purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall 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 this Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court
or courts having competent


 


15

















 


jurisdiction
or pursuant to a proceeding by a court appointed receiver.  Any sale pursuant to the provisions of this
Section 4.01 shall be deemed to conform to the commercially reasonable
standards as provided in Section 9-610(b) of the New York UCC or its equivalent
in other jurisdictions.


 


SECTION 4.02       Application of Proceeds.


 


(a)           The Collateral Agent
shall apply the proceeds of any collection or sale of Collateral, including any
Collateral consisting of cash, in accordance with Section 8.04 of the Credit
Agreement as of the Closing Date.


 


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 Collateral by the Collateral
Agent (including pursuant to a power of sale granted by statute or under a
judicial proceeding), the receipt of 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.


 


(b)           In making the
determinations and allocations required by this Section 4.02, the Collateral
Agent may conclusively rely upon information supplied by the Administrative
Agent as to the amounts of unpaid principal and interest and other amounts
outstanding with respect to the Obligations, and the Collateral Agent shall
have no liability to any of the Secured Parties for actions taken in reliance
on such information; provided
that nothing in this sentence shall prevent any Grantor from contesting any
amounts claimed by any Secured Party in any information so supplied.  All distributions made by the Collateral
Agent pursuant to this Section 4.02 shall be (subject to any decree of any
court of competent jurisdiction) final (absent manifest error), and the
Collateral Agent shall have no duty to inquire as to the application by the
Administrative Agent of any amounts distributed to it.


 


ARTICLE V



Indemnity, Subrogation and Subordination


 


SECTION 5.01       Indemnity.  In addition to all such rights of indemnity
and subrogation as the Grantors may have under applicable law (but subject to
Section 5.03), each Borrower agrees that, in the event any assets of any
Grantor shall be sold pursuant to this Agreement or any other Collateral
Document to satisfy in whole or in part an Obligation owed to any Secured
Party, the relevant Borrower shall indemnify such Grantor in an amount equal to
the greater of the book value or the fair market value of the assets so sold.


 


SECTION 5.02       Contribution and Subrogation.  Each Subsidiary Party (a “Contributing Party”) agrees (subject to Section 5.03) that,
in the event assets of any other Subsidiary Party shall be sold pursuant to any
Collateral Document to satisfy any Obligation owed to any Secured Party, and
such other Subsidiary Party (the “Claiming Party”)
shall not have been fully indemnified by the relevant Borrower as provided in
Section 5.01, the


 


16

















 


Contributing Party shall indemnify the Claiming Party in an amount
equal to the greater of the book value or the fair market value of such assets,
in each case multiplied by a fraction of which the numerator shall be the net
worth of the Contributing Party on the date hereof and the denominator shall be
the aggregate net worth of all the Contributing Parties together with the net
worth of the Claiming Party on the date hereof (or, in the case of any Grantor
becoming a party hereto pursuant to Section 6.14, the date of the Security
Agreement Supplement hereto executed and delivered by such Grantor).  Any Contributing Party making any payment to
a Claiming Party pursuant to this Section 5.02 shall be subrogated to the
rights of such Claiming Party to the extent of such payment.


 


SECTION 5.03       Subordination.


 


(a)           Notwithstanding any
provision of this Agreement to the contrary, all rights of the Grantors under
Sections 5.01 and 5.02 and all other rights of indemnity, contribution or
subrogation under applicable law or otherwise shall be fully subordinated to
the indefeasible payment in full in cash of the Obligations.  No failure on the part of any Borrower or any
Grantor to make the payments required by Sections 5.01 and 5.02 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of any Grantor with respect to its obligations
hereunder, and each Grantor shall remain liable for the full amount of the
obligations of such Grantor hereunder.


 


(b)           Each Grantor hereby
agrees that upon the occurrence and during the continuance of an Event of
Default and after notice from the Collateral Agent all Indebtedness owed by it
to any Subsidiary shall be fully subordinated to the indefeasible payment in
full in cash of the Obligations.


 


ARTICLE VI



Miscellaneous


 


SECTION 6.01       Notices.  All communications and notices hereunder
shall (except as otherwise expressly permitted herein) be in writing and given
as provided in Section 10.02 of the Credit Agreement.  All communications and notices hereunder to
any Subsidiary Party shall be given to it in care of the Borrower as provided
in Section 10.02 of the Credit Agreement.


 


SECTION 6.02       Waivers; Amendment.


 


(a)           No failure or delay
by the Collateral Agent, any L/C Issuer or any Lender in exercising any right
or power hereunder or under any other Loan Document 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, the L/C Issuers and the Lenders hereunder and 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 provision of this Agreement or consent to any departure
by any Loan Party therefrom shall in any event be effective unless the same
shall be permitted by


 


17

















 


paragraph (b) of
this Section 6.02, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Collateral
Agent, any Lender or any L/C Issuer may have had notice or knowledge of such
Default at the time.  No notice or demand
on any Loan Party in any case shall entitle any Loan Party 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 an agreement or agreements in writing entered into by the
Collateral Agent and the Loan Party or Loan Parties with respect to which such
waiver, amendment or modification is to apply, subject to any consent required
in accordance with Section 10.01 of the Credit Agreement.


 


SECTION 6.03       Collateral Agent’s Fees and Expenses.


 


(a)           The parties hereto
agree that the Collateral Agent shall be entitled to reimbursement of its
expenses incurred hereunder as provided in Section 10.04 of the Credit
Agreement.


 


(b)           Without limitation
of its indemnification obligations under the other Loan Documents, the Borrower
agrees to indemnify the Collateral Agent and the other Indemnitees (as defined
in Section 10.05 of the Credit Agreement) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including the reasonable fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of, the execution, delivery
or performance of this Agreement or any claim, litigation, investigation or
proceeding relating to any of the foregoing agreement or instrument
contemplated hereby, or to the Collateral, 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
liabilities, obligations, losses, damages, penalties, claims, demands, actions,
judgments, suits, costs, expenses or disbursements resulted from the gross
negligence or willful misconduct of such Indemnitee or of any Affiliate,
director, officer, employee, counsel, agent or attorney-in-fact of such
Indemnitee.


 


(c)           Any such amounts
payable as provided hereunder shall be additional Obligations secured hereby
and by the other Collateral Documents. 
The provisions of this Section 6.03 shall remain operative and in full
force and effect regardless of the termination of this Agreement or any other
Loan Document, 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 6.03 shall be payable within 10 days of written demand therefor.


 


SECTION 6.04       Successors and Assigns.  Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the permitted
successors and assigns of such party; and all covenants, promises and
agreements by or on behalf


 


18

















 


of any Grantor or the Collateral Agent that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
and assigns.


 


SECTION 6.05       Survival of Agreement.  All covenants, agreements, representations
and warranties made by the Loan Parties in the Loan Documents 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 Lenders and shall survive the execution and delivery of
the Loan Documents and the making of any Loans and issuance of any Letters of
Credit, regardless of any investigation made by any Lender or on its behalf and
notwithstanding that the Collateral Agent, any L/C Issuer or any Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended under the Credit Agreement, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under any
Loan Document is outstanding and unpaid or any Letter of Credit is outstanding
and so long as the Commitments have not expired or terminated.


 


SECTION 6.06       Counterparts; Effectiveness; Several
Agreement.  This Agreement may be
executed in counterparts, each of which shall constitute an original but all of
which when taken together shall constitute a single contract.  Delivery of an executed signature page to
this Agreement by facsimile transmission or other electronic transmission
(i.e., a “PDF” or “TIF”) a shall be as effective as delivery of a manually
signed counterpart of this Agreement. 
This Agreement shall become effective as to any Loan Party when a
counterpart hereof executed on behalf of such Loan Party 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 Loan Party and the Collateral Agent and their respective permitted
successors and assigns, and shall inure to the benefit of such Loan Party, the
Collateral Agent and the other Secured Parties and their respective successors
and assigns, except that no Loan Party shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the Credit Agreement.  This Agreement shall be construed as a
separate agreement with respect to each Loan Party and may be amended,
modified, supplemented, waived or released with respect to any Loan Party
without the approval of any other Loan Party and without affecting the obligations
of any other Loan Party hereunder.


 


SECTION 6.07       Severability.  Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate 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 6.08       Right of Set-Off.  In addition to any rights and remedies of the
Lenders provided by Law, upon the occurrence and during the continuance of any
Event of Default, each Lender and its Affiliates and each L/C Issuer and its
Affiliates is authorized at any time and from time to time, without prior
notice to the Borrower or any other Loan Party, any


 


19

















 


such notice being waived by the Borrower (on its own behalf and on
behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted
by applicable Law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
Indebtedness at any time owing by, such Lender and its Affiliates or such L/C
Issuer and its Affiliates, as the case may be, to or for the credit or the
account of the respective Loan Parties and their Subsidiaries against any and
all Obligations owing to such Lender and its Affiliates or such L/C Issuer and
its Affiliates hereunder or under any other Loan Document, now or hereafter
existing, irrespective of whether or not such Agent or such Lender or Affiliate
shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured or denominated in a
currency different from that of the applicable deposit or Indebtedness.  Each Lender and L/C Issuer agrees promptly to
notify the Borrower and the Administrative Agent after any such set off and
application made by such Lender or L/C Issuer, as the case may be; provided,
that the failure to give such notice shall not affect the validity of such
setoff and application.  The rights of
the Administrative Agent, each Lender and each L/C Issuer under this Section
6.08 are in addition to other rights and remedies (including other rights of
setoff) that the Administrative Agent, such Lender and such L/C Issuer may
have.


 


SECTION 6.09       Governing Law; Jurisdiction; Consent
to Service of Process.


 


(a)           This Agreement shall
be construed in accordance with and governed by the law of the State of New
York.


 


(b)           Each of the Loan
Parties hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court of the State of
New York sitting in New York County and of the United States District Court of
the Southern District of New York, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or any
other Loan Document, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
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 or any other Loan Document shall affect any
right that the Collateral Agent, any L/C Issuer or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against any Grantor or its properties in the courts of any
jurisdiction.


 


(c)           Each of the Loan
Parties hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which 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 any other Loan Document in any court referred to
in paragraph (b) of this Section 6.09. 
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.


 


(d)           Each party to this
Agreement irrevocably consents to service of process in the manner provided for
notices in Section 6.01.  Nothing in this
Agreement or any other Loan


 


20

















 


Document will affect
the right of any party to this Agreement to serve process in any other manner
permitted by law.


 


SECTION 6.10       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 ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  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 INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.10.


 


SECTION 6.11       Headings.  Article and Section headings and the Table of
Contents 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 6.12       Security Interest Absolute.  All rights of the Collateral Agent hereunder,
the Security Interest, the grant of a security interest in the Pledged
Collateral and all obligations of each Grantor 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, (c) any exchange, release or
non-perfection of any Lien on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, any
Grantor in respect of the Obligations or this Agreement.


 


SECTION 6.13       Termination or Release.


 


(a)           This Agreement, the
Security Interest and all other security interests granted hereby shall
terminate with respect to all Obligations (other than (x) obligations under
Secured Hedge Agreements not yet due and payable, (y) Cash Management
Obligations not yet due and payable and (z) contingent indemnification
obligations not yet accrued and payable) when all the outstanding Obligations
have been indefeasibly paid in full and the Lenders have no further commitment
to lend under the Credit Agreement, the L/C Obligations have been reduced to
zero (unless the L/C Obligations shall have been collateralized on terms and
conditions reasonably satisfactory to the relevant L/C Issuer following the
termination of the Commitments)


 


21

















 


and the L/C Issuers
have no further obligations to issue Letters of Credit under the Credit
Agreement.


 


(b)           A Subsidiary Party
shall automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Subsidiary Party shall be automatically
released upon the consummation of any transaction permitted by the Credit
Agreement as a result of which such Subsidiary Party ceases to be a Subsidiary
or is designated as an Unrestricted Subsidiary of the Borrower; provided that the Required Lenders shall
have consented to such transaction (to the extent required by the Credit
Agreement) and the terms of such consent did not provide otherwise.


 


(c)           Upon any sale or
other transfer by any Grantor of any Collateral (other than any transfer to
another Guarantor) that is permitted under the Credit Agreement, or upon the
effectiveness of any written consent to the release of the security interest
granted hereby in any Collateral pursuant to Section 10.01 of the Credit
Agreement, the security interest in such Collateral shall be automatically
released.


 


(d)           In connection with
any termination or release pursuant to paragraph (a), (b) or (c) of this
Section 6.13, the Collateral Agent shall execute and deliver to any Grantor, at
such Grantor’s expense, all documents that such Grantor shall reasonably
request to evidence such termination or release.  Any execution and delivery of documents
pursuant to this Section 6.13 shall be without recourse to or warranty by the
Collateral Agent.


 


(e)           Notwithstanding
anything to contrary set forth in this Agreement, each Cash Management Bank and
each Hedge Bank by the acceptance of the benefits under this Agreement hereby
acknowledges and agrees that (i) the Security Interests granted under this
Agreement of the Obligations of any Loan Party and its Subsidiaries under any
Secured Hedge Agreement and the Cash Management Obligations shall be
automatically released upon termination of the Commitments and payment in full
of all other Obligations, in each case, unless the Obligations under the
Secured Hedge Agreement or the Cash Management Obligations are due and payable
at such time (it being understood and agreed that this Agreement and the
Security Interests granted herein shall survive solely as to such due and
payable Obligations and until such time as such due and payable Obligations
have been paid in full)  and (ii) any
release of Collateral or of a Grantor, as the case may be, effected in the
manner permitted by this Agreement shall not require the consent of any Hedge
Bank or Cash Management Bank.


 


SECTION 6.14       Additional Restricted Subsidiaries.  Pursuant to Section 6.11 of the Credit
Agreement, certain Restricted Subsidiaries of the Loan Parties that were not in
existence or not Restricted Subsidiaries on the date of the Credit Agreement
are required to enter in this Agreement as Subsidiary Parties upon becoming
Restricted Subsidiaries.  Upon execution
and delivery by the Collateral Agent and a Restricted Subsidiary of a Security
Agreement Supplement, such Restricted Subsidiary shall become a Subsidiary
Party hereunder with the same force and effect as if originally named as a
Subsidiary Party herein.  The execution
and delivery of any such instrument shall not require the consent of any other
Loan Party hereunder.  The rights and
obligations of each Loan Party hereunder shall remain in full force and effect
notwithstanding the addition of any new Loan Party as a party to this
Agreement.


 


22

















 


SECTION 6.15       Collateral Agent Appointed
Attorney-in-Fact.  Each Grantor irrevocably
makes, constitutes and hereby appoints the Collateral Agent (and all officers,
employees or agents designated by the Collateral Agent) as such Grantor’s true
and lawful agent (and attorney-in-fact) of such Grantor 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 at any time after and during the
continuance of an Event of Default, which appointment is irrevocable and
coupled with an interest.  Without
limiting the generality of the foregoing, the Collateral Agent shall have the
right, upon the occurrence and during the continuance of an Event of Default
and notice by the Collateral Agent to the Borrower of its intent to exercise
such rights, with full power of substitution either in the Collateral Agent’s
name or in the name of such Grantor (a) to receive, endorse, assign and/or
deliver any and all notes, acceptances, checks, drafts, money orders or other
evidences of payment relating to the Collateral or any part thereof; (b) to
demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any Grantor
on any invoice or bill of lading relating to any of the Collateral; (d) to send
verifications of Accounts Receivable to any Account Debtor; (e) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any
of the Collateral or to enforce any rights in respect of any Collateral; (f) to
settle, compromise, compound, adjust or defend any actions, suits or
proceedings relating to all or any of the Collateral; (g) to notify, or to require
any Grantor to notify, Account Debtors to make payment directly to the
Collateral Agent; (h) to make, settle and adjust claims in respect of Article 9
Collateral under policies of insurance, endorsing the name of such Grantor on
any check, draft, instrument or other item of payment for the proceeds of such
policies of insurance, (i) to make all determinations and decisions with
respect thereto and (j) to obtain or maintain the policies of insurance
required by Section 6.07 of the Credit Agreement or paying any premium in whole
or in part relating thereto; and (k) to use, sell, assign, transfer, pledge,
make any agreement with respect to or otherwise deal with all or any of the
Collateral, and to do all other acts and things necessary to carry out the purposes
of this Agreement, as fully and completely as though the Collateral Agent were
the absolute owner of the Collateral for all purposes; provided 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 Grantor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct or that of any of their
Affiliates, directors, officers, employees, counsel, agents or
attorneys-in-fact.  All sums disbursed by
the Collateral Agent in connection with this paragraph, including reasonable
attorneys’ fees, court costs, expenses and other charges relating thereto,
shall be payable, within 10 days of demand, by the Grantors to the Collateral
Agent and shall be additional Obligations secured hereby.


 


SECTION 6.16       General Authority of the Collateral
Agent.  By acceptance of the benefits
of this Agreement and any other Collateral Documents, each Secured Party (whether
or not a signatory hereto) shall be deemed irrevocably (a) to consent to the
appointment of the


 


23

















 


Collateral Agent as its agent hereunder and under such other Collateral
Documents, (b) to confirm that the Collateral Agent shall have the authority to
act as the exclusive agent of such Secured Party for the enforcement of any
provisions of this Agreement and such other Collateral Documents against any
Grantor, the exercise of remedies hereunder or thereunder and the giving or
withholding of any consent or approval hereunder or thereunder relating to any
Collateral or any Grantor’s obligations with respect thereto, (c) to agree that
it shall not take any action to enforce any provisions of this Agreement or any
other Collateral Document against any Grantor, to exercise any remedy hereunder
or thereunder or to give any consents or approvals hereunder or thereunder
except as expressly provided in this Agreement or any other Collateral Document
and (d) to agree to be bound by the terms of this Agreement and any other
Collateral Documents.


 


24














 


IN WITNESS
WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.


 


	
   

  	
  ENCORE MEDICAL FINANCE LLC,

  
	
   

  	
  as the Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE MEDICAL HOLDINGS LLC,

  
	
   

  	
  as Holdings

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL LLC,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL FINANCE CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL IHC, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


25

















 


	
   

  	
  ENCORE
  MEDICAL, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ENCORE MEDICAL
  GP, INC.,

  
	
   

  	
   

  	
  its general
  partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL PARTNERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL ASSET CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENCORE
  MEDICAL GP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPI,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPI
  CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


26

















 


	
   

  	
  EMPI
  SALES CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMPEX
  TECHNOLOGIES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SPECTRABRACE,
  LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Zimmerman

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A.,

  
	
   

  	
  as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alysa Trakas

  
	
   

  	
   

  	
  Name: Alysa Trakas

  
	
   

  	
   

  	
  Title: Vice President

  



 


27

















 


Schedule I to

the Security Agreement


 


SUBSIDIARY PARTIES


 


Encore Medical LLC


Encore Medical Finance Corp.


Encore Medical IHC, Inc.


Encore Medical, L.P.


Encore Medical Partners, Inc.


Encore Medical Asset Corporation


Encore Medical GP, Inc.


Empi, Inc.


Empi Corp.


Empi Sales Corp.


Compex Technologies, LLC


SpectraBrace, Ltd.


 


I-1

















 


Schedule II to

the Security Agreement


 


EQUITY INTERESTS


 


	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered

  Owner

  	
   

  	
  Number and

  Class of

  Equity Interest

  	
   

  	
  Percentage

  of Equity Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


PROMISSORY NOTES
AND INSTRUMENTS


 




	
  Issuer

  	
   

  	
  Principal  Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


II-1

















 


Schedule III to

the Security Agreement


 


COMMERCIAL TORT
CLAIMS


 


III-1

















 


Exhibit I to the

Security Agreement


 


SUPPLEMENT NO.           
dated as of [  ], to the Security
Agreement dated as of November 3, 2006 (as amended, supplemented or
otherwise modified from time to time, the “Security Agreement”)
among ENCORE MEDICAL HOLDINGS LLC (“Holdings”), ENCORE
MEDICAL FINANCE LLC (the “Borrower”), the
Subsidiaries of Holdings from time to time party thereto, and BANK OF AMERICA,
N.A., as Collateral Agent for the Secured Parties.


 


A.            Reference is made to the Credit Agreement dated as of November 3,
2006 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower,
Holdings, BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and
an L/C Issuer, each lender from time to time party thereto (collectively, the “Lenders” and individually, a “Lender”), BANC OF AMERICA SECURITIES LLC,
as Arranger and Book Runner, CREDIT SUISSE SECURITIES (USA) LLC, as Arranger,
Book Runner and as Syndication Agent, and GENERAL ELECTRIC CAPITAL CORPORATION,
as Documentation Agent.


 


B.            Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement
and the Security Agreement referred to therein.


 


C.            The Grantors have entered into the Security Agreement in
order to induce the Lenders to make Loans and the L/C Issuers to issue Letters
of Credit.  Section 6.14 of the Security
Agreement provides that additional Restricted Subsidiaries of the Borrower may
become Subsidiary Parties under the Security Agreement by execution and
delivery of an instrument in the form of this Supplement.  The undersigned Restricted Subsidiary (the “New Subsidiary”) is executing this
Supplement in accordance with the requirements of the Credit Agreement to
become a Subsidiary Party under the Security Agreement in order to induce the
Lenders to make additional Loans and the L/C Issuers to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.


 


Accordingly, the
Collateral Agent and the New Subsidiary agree as follows:


 


SECTION
1.  In accordance with Section 6.14 of
the Collateral Agreement, the New Subsidiary by its signature below becomes a
Subsidiary Party (and accordingly, becomes a Grantor) and Grantor under the
Security Agreement with the same force and effect as if originally named
therein as a Subsidiary Party and the New Subsidiary hereby (a) agrees to all
the terms and provisions of the Security Agreement applicable to it as a
Subsidiary Party and Grantor thereunder and (b) represents and warrants that
the representations and warranties made by it as a Grantor thereunder are true
and correct on and as of the date hereof. 
In furtherance of the foregoing, the New Subsidiary, as security for the
payment and performance in full of the Obligations 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 Subsidiary’s right, title and interest in and to the
Collateral (as defined in the Security Agreement) of the New Subsidiary.  Each reference to a “Grantor”
in the Security


 


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Agreement shall be
deemed to include the New Subsidiary. 
The Security Agreement is hereby incorporated herein by reference.


 


SECTION
2.  The New Subsidiary 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 (and by different parties hereto on different 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 a counterpart of this Supplement that
bears the signature of the New Subsidiary, and the Collateral Agent has
executed a counterpart hereof.  Delivery
of an executed signature page to this Supplement by facsimile transmission or
other electronic transmission (i.e., a “PDF” or “TIF”) shall be as effective as
delivery of a manually signed counterpart of this Supplement.


 


SECTION
4.  The New Subsidiary hereby represents
and warrants that set forth under its signature hereto is the true and correct
legal name of the New Subsidiary, its jurisdiction of formation and the
location of its chief executive office.


 


SECTION
5.  Except as expressly supplemented
hereby, the Security 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, the validity, legality and enforceability of the
remaining provisions contained herein and in the Security Agreement 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 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 6.01 of the
Security Agreement.


 


SECTION
9.  The New Subsidiary 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.


 


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IN WITNESS
WHEREOF, the New Subsidiary and the Collateral Agent have duly executed this
Supplement to the Security Agreement as of the day and year first above
written.


 


	
   

  	
  [NAME OF NEW
  SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Jurisdiction of
  Formation:

  
	
   

  	
  Address of Chief
  Executive Office:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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Schedule I

to the Supplement No      to the

Security Agreement


 


LOCATION OF
COLLATERAL


 




	
  Description

  	
   

  	
  Location

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  






 


EQUITY INTERESTS


 


	
  Issuer

  	
   

  	
  Number of

  Certificate

  	
   

  	
  Registered 

  Owner

  	
   

  	
  Number and

  Class of

  Equity Interests

  	
   

  	
  Percentage

  of Equity Interests

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


PROMISSORY NOTES
AND INSTRUMENTS


 


	
  Issuer

  	
   

  	
  Principal

  Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


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Exhibit II to the

Security Agreement


 


FORM OF

PERFECTION CERTIFICATE


 


Reference is made
to the Credit Agreement dated as of November 3, 2006 (the “Credit Agreement”) among ENCORE MEDICAL FINANCE, LLC (the “Borrower”), ENCORE MEDICAL HOLDINGS, LLC (“Holdings”), BANK OF AMERICA, N.A., as Administrative Agent,
Swing-Line Lender and an L/C Issuer, each Lender from time to time party
thereto, BANC OF AMERICA SECURITIES LLC, as Arranger and Book Runner, CREDIT
SUISSE SECURITIES (USA) LLC, as Arranger, Book Runner and Syndication Agent,
and GENERAL ELECTRIC CAPITAL CORPORATION, as Documentation Agent.  Capitalized terms used but not defined herein
have the meanings assigned in the Credit Agreement or the Security Agreement or
Guaranty referred to therein, as applicable.


 


The undersigned,
the Chief Financial Officer and the Chief Legal Officer, respectively, of the
Borrower, hereby certify to the Administrative Agent and each other Secured
Party as follows:


 


1.             Names.  (a)  The
exact legal name of each Loan Party, as such name appears in its respective
certificate of incorporation or formation, is as follows:


 


(b)  Set forth in Schedule 1 is each other legal
name, to our knowledge, each Loan Party has had in the past five years,
together with the date of the relevant change:


 


(c)  Except as set forth in Schedule 1 hereto, to
our knowledge, no Loan Party has changed its identity or corporate structure in
any way within the past five years. 
Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature or
jurisdiction of organization.  If any
such change has occurred, include in Schedule 1 the information required by
Sections 1 and 2 of this certificate as to each acquiree or constituent party
to a merger or consolidation to the extent such information is available to the
Borrower.


 


(d)  To our knowledge, Schedule 1 sets forth a
list of all other names (including trade names or similar appellations) used by
each Loan Party or any of its divisions or other business units in connection
with the conduct of its business or the ownership of its properties at any time
during the past five years:


 


(e)  Set forth below is the Organizational
Identification Number, if any, issued by the jurisdiction of formation of each
Loan Party that is a registered organization:


 


(f)  Set forth below is the Federal Taxpayer
Identification Number of each Loan Party:


 


2.             Current Locations.  (a)  The
chief executive office of each Loan Party is located at the address set forth
opposite its name below:


 


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(b)  The jurisdiction of formation of each Loan
Party that is a registered organization is set forth opposite its name below:


 


3.             Unusual Transactions.  To our knowledge, all Accounts have been
originated by the applicable Loan Party and all Inventory has been acquired by
the applicable Loan Party in the ordinary course of business (other than
Accounts acquired in connection with a business acquisition).


 


4.             Schedule of Filings.  Attached hereto as Schedule 4 is a schedule
setting forth the proper Uniform Commercial Code filing office in the
jurisdiction in which each Loan Party is located and, to the extent any of the
Collateral is comprised of fixtures, in the proper local jurisdiction, in each
case as set forth with respect to such Loan Party in Section 2 hereof.


 


5.             Stock Ownership and other Equity
Interests.  Attached hereto as
Schedule 5 is a true and correct list of all the issued and outstanding Equity
Interests of the Borrower and each Subsidiary and the record and beneficial
owners of such Equity Interests.


 


6.             Debt Instruments.  Attached hereto as Schedule 6 is a true and
correct list of all promissory notes and other evidence of Indebtedness held by
Holdings, the Borrower and each other Loan Party having a principal amount in
excess of $2,000,000 that are required to be pledged under the Security
Agreement, including all intercompany notes between Loan Parties.


 


7.             Intellectual Property.  (a)  Attached
hereto as Schedule 7(A) in proper form for filing with the United States Patent
and Trademark Office is a schedule setting forth, to our knowledge, all of each
Loan Party’s: (i) Patents and Patent Applications, including the name of the
registered owner, type, and registration or application number of each Patent
and Patent Application owned by any Loan Party; and (ii) Trademarks and
Trademark Applications, including the name of the registered owner, and the
registration or application number of each Trademark and Trademark application
owned by any Loan Party.


 


(b)  Attached hereto as Schedule 7(B) in proper
form for filing with the United States Copyright Office is a schedule setting
forth, to our knowledge, all of each Loan Party’s Copyrights, including the
name of the registered owner, title, and the registration number of each
Copyright owned by any Loan Party.


 


II-2

















 


Schedule
1


 


	
  Loan Party

  	
   

  	
  Each Legal Name

  in Past Five Years

  (with date of relevant

  change

  	
   

  	
  Changes in Identity or

  Corporate Structure in Past

  Five Years (including

  Mergers, Consolidations

  and Acquisitions, and any

  change in form, nature or

  jurisdiction)

  	
   

  	
  List of all other Names

  (including Trade Names)

  in Past Five Years

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-3

















 


Schedule
4


 


	
  Loan Parties

  	
   

  	
  Filing Location

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


II-4

















 


Schedule
5


 


	
  Entity

  	
   

  	
  Jurisdiction of

  Incorporation

  or Formation

  	
   

  	
  Issued and

  Outstanding

  Equity

  Interests

  	
   

  	
  Owner(s)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-5

















 


Schedule
6


 


	
  Lender

  	
   

  	
  Issuer

  	
   

  	
  Principal Amount

  	
   

  	
  Date of Note

  	
   

  	
  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-6

















 


Schedule 7(A)(i)


 


Trademarks and Trademark
Applications


 


	
  Trademark

  	
   

  	
  Country

  	
   

  	
  Reg. No./Date

  	
   

  	
  App. No./File

  	
   

  	
  Owner

  	
   

  	
  Status

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-7

















 


Schedule
7(A)(ii)


 


Patents and Published
Pending Patent Applications


 


	
  Country

  	
   

  	
  Application or

  Publication No.

  	
   

  	
  Title

  	
   

  	
  Owner of Record

  	
   

  	
  Date Filed/

  Date Issued

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-8

















 


Schedule 7(B)


 


Copyrights


 


	
  Subject

  	
   

  	
  Country

  	
   

  	
  Date Issued

  	
   

  	
  Reg. Number

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


II-9

















 


IN WITNESS
WHEREOF, the undersigned have duly executed this certificate as of the date
first set above.


 


	
   

  	
  ENCORE MEDICAL FINANCE
  LLC,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  



 


Perfection Certificate


 

















 


Exhibit III to the

Security Agreement


 


FORM OF CONSENT TO
ASSIGNMENT OF LETTER OF CREDIT RIGHTS


 


To:          Bank of America, N.A., as Collateral
Agent


 


[                                        ]


[                                        ]


[                                        ]


 


 


[INSERT NAME OF BENEFICIARY], as Beneficiary


[                                        ]


[                                        ]


[                                        ]


 


We refer to the
[INSERT ALL IDENTIFYING INFORMATION WITH RESPECT TO RELEVANT LETTER OF CREDIT]
(as it may be amended, supplemented or otherwise modified from time to time,
the “Letter of Credit”)[, a true copy of
which is attached hereto].  The Letter of
Credit has been established in favor of [INSERT NAME OF BENEFICIARY], as
beneficiary (the “Beneficiary”),
and we are the [issuing bank (the “Issuing Bank”)][nominated
person (the “Nominated Person”)] required to
give value thereunder pursuant to one [or more] drawing[s] upon the
satisfaction of the conditions stated in the Letter of Credit.  The liability of the [Issuing Bank][Nominated
Person] for action or omissions under the Letter of Credit is governed by the
laws of [INSERT RELEVANT JURISDICTION], as chosen by agreement in the Letter of
Credit.  [To the best knowledge of the
undersigned,] the signatories to this consent letter are the only persons
obligated to give value under the Letter of Credit.


 


We hereby confirm
that there is no term in the Letter of Credit or other restriction which
prohibits, restricts or requires any person’s consent to the Beneficiary’s
assignment of or creation of a security interest in the rights to payment or
performance under the Letter of Credit. 
We hereby consent to and acknowledge the assignment by the Beneficiary
of all proceeds of and rights to payment and performance under the Letter of
Credit in favor of [                ],
as collateral agent (the “Collateral Agent”)
pursuant to the Security Agreement dated as of [                ],
200   executed by the Beneficiary [and other parties thereto], as
Grantor, in favor of the Collateral Agent, as such agreement may be amended,
amended and restated, supplemented or otherwise modified from time to time (the
“Security Agreement”).


 


We hereby agree to
pay, irrespective of, and without deduction for, any counterclaim, defense,
recoupment or set-off, all proceeds of the Letter of Credit that would
otherwise be paid to the Beneficiary directly to the Collateral Agent to the
following account:


 


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[                                        ]


[                                        ]


[                                        ]


[                                        ]


 


We hereby confirm
and agree that the Letter of Credit is, and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects and that the
Collateral Agent shall have no liability or obligation under or with respect to
the Letter of Credit or any document related thereto as a result of this consent
letter, the Security Agreement or otherwise.


 


This consent
letter may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute but one and
the same consent letter.  Delivery of an
executed counterpart of a signature page to this consent letter by facsimile
transmission or other electronic transmission (i.e. “PDF” or “TIF”) shall be
effective as delivery of an original executed counterpart of this consent
letter.


 


This consent
letter shall be governed by, and construed in accordance with, the laws of the
State of New York.


 


	
   

  	
  [NAME OF ISSUING BANK]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF NOMINATED
  PERSON]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


III-2

















 


	
  The above is
  acknowledged and agreed to:

  	
   

  
	
   

  	
   

  
	
  [NAME OF
  GRANTOR/BENEFICIARY]

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address for
  Notices:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					



 


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