Document:

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                                                                    EXHIBIT 4.11

                      [KILPATRICK STOCKTON LLP LETTERHEAD]

April 24, 2002

VIA ELECTRONIC TRANSMISSION

David De Busschere
Sedgwick Detert Moran & Arnold
One Embarcadero Center
16th Floor
San Francisco 94111

              Re: Revised Agreement - Medicare Settlement Payment Obligations

Dear David:

         As you know, we have reached a revised Medicare Settlement Agreement
(the "MSA") with the United States Department of Justice on behalf of the
Department of Health and Human Services ("HHS") (collectively the "United
States") concerning the United States' claims for reimbursement of medical items
and services furnished to Medicare beneficiaries in connection with the
voluntary recall of certain lots Sulzer Orthopedics Inc.'s ("SOUS") Inter-Op(TM)
Acetabular Shell and Reprocessed Inter-Op Shells (collectively "Inter-Op
Shells"). It is our view that the MSA provides substantial benefits to SOUS and
the individuals affected by the Inter-Op Shells, including full releases to
Winterthur International America Insurance Company, Winterthur Swiss Insurance
Company and XL Winterthur International Insurance Switzerland and their
affiliates and subsidiaries as more fully set forth in the MSA ("Winterthur")
for certain claims which may be brought by the United States against SOUS and/or
Winterthur under various statutory provisions including those arising under the
Medicare Secondary Payer laws and related regulations, 42 U.S.C. Section
1395y(b)(2)-(3) & 42 C.F.R. Sections 411.20-411.37. The MSA also provides a
funding mechanism to ensure that Medicare beneficiaries receive timely and
appropriate medical care in connection with the Inter-Op Shells.

         As a result, we are writing to memorialize Winterthur's agreement
("Letter Agreement") with regard to the payment obligations SOUS will undertake
in connection with the MSA. Any capitalized terms used in this Letter Agreement,
and not defined herein, are hereby given the meaning attributed in the MSA. This
revised Letter Agreement supercedes and replaces the agreement between SOUS and
Winterthur dated March 8, 2002.

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David De Busschere
May 14, 2002
Page 2

         In consideration of the promises and covenants herein and for other
valid consideration, the receipt and sufficiency of which are hereby
acknowledged, SOUS and Winterthur agree as follows:

         1. Winterthur represents that it provides liability insurance coverage
to SOUS under the April 1, 2000 - March 30, 2001 insurance policies (the
"Policies") as more fully set forth on Attachment A for the costs and expenses
due and owing under the MSA. Winterthur formerly agreed in principle to the
payment terms described below, but reserved the right to review the final
agreement. A copy of the MSA is attached hereto as Attachment B. Winterthur
agrees that it has had the opportunity to review the MSA before execution of the
MSA or this Letter Agreement and has been provided with any other documents
necessary for its review of the MSA.

         2. Winterthur understands and agrees that the MSA confers a substantial
benefit to SOUS by providing significantly lower liability than SOUS might
otherwise be subject to and that the MSA includes releases for both SOUS,
Winterthur, and Sulzer AG.

         3. Pursuant to Article IV of the MSA, Winterthur understands that SOUS
must wire or cause to be paid, within thirty (30) days following SOUS'
submission of the Initial Medicare List or any Supplemental Medicare List, an
amount equal to the total number of Covered Medicare Beneficiaries on the
Initial or Supplemental Medicare List times the applicable Per-Beneficiary Cap,
less any offsets, deductions or credits set forth in the MSA. Winterthur further
understands that in the event payment is not received within thirty (30) days
after submission of the Initial or Supplemental Medicare List, that the United
States may assess interest at the rate of the current applicable interest rate
pursuant to 45 C.F.R. Section 30.13(a) per annum from the date of default until
paid in full or the United States may declare SOUS to be in breach and terminate
the MSA. In the event the United States' terminates the MSA for failure to make
timely payment, the United States may file suit against SOUS or otherwise seek
payment from SOUS for any Covered Medicare Beneficiaries for whom SOUS has not
fulfilled its payment obligations and that, in such instance, the United States'
right of recovery would not be limited to the Per-Beneficiary Caps set forth in
the MSA.

         4. Winterthur understands and agrees that time is of the essence with
regard to any payment obligations due to the United States under the MSA and,
SOUS acknowledges and agrees that it must provide sufficient notice to
Winterthur such that Winterthur may arrange for funds, including through any
policies of reinsurance to which it may be entitled to pursue, so that it may
make timely payment obligations under the MSA. SOUS (1) shall provide Winterthur
with a copy of any Inter-Op Revision List furnished to the United States in
accordance with the MSA within five (5) days of furnishing such list to the
United States; (2) shall provide Winterthur with an estimate of the anticipated
Medicare payment which may be due to the United States based upon the Covered
Medicare Beneficiaries times the applicable Per-Beneficiary Cap that applies to
each Covered Medicare beneficiary within five (5) days of

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David De Busschere
May 14, 2002
Page 3

receipt of any Proposed Initial or Proposed Supplemental Medicare List submitted
by CMS to SOUS; and (3) on or before the submission of the Initial or any
Supplemental Medicare List to the United States (from which final payment is
based), SOUS shall notify Winterthur of what it believes to be the final amount
of payment that must be made to the United States for the Covered Medicare
Beneficiaries associated with such list. Unless Winterthur disputes SOUS'
calculation of payment that is due to the United States, Winterthur shall either
(1) wire the applicable payment directly to the United States directly within
thirty (30) days of receipt of the Initial Medicare or Supplemental Medicare
List; or, at Winterthur's sole discretion, (2) wire the applicable payment
directly to SOUS, or its designee, within fourteen (14) days of receipt of the
Initial Medicare or Supplemental Medicare List.

         5. Winterthur shall have the right to have SOUS exercise its options
under Article VI of the MSA to obtain either a statistical sample or 100% claims
review of amounts paid by the United States to furnish Medicare Covered Items
and Service provided that, the results of such reports shall have no impact on
the amounts to be paid under this Letter Agreement unless it can be demonstrated
that the United States has failed to fulfill its obligations under the MSA. In
the event Winterthur desires a claims report pursuant to Article VI of the MSA,
Winterthur shall submit a written request to SOUS. Winterthur understands that
the provisions in Article VI of the MSA shall apply to the release of such
claims report(s) by the United States.

         6. This Letter Agreement shall be subject to execution of the MSA in
the form as set forth in Attachment B and shall further be subject to the
required Judicial Approval set forth in Article VII. In the event Judicial
Approval cannot be obtained in accordance with the MSA, this Letter Agreement
including any payment obligations hereunder shall be null and void. SOUS may not
waive the requirement to seek Judicial Approval set forth in Article VII of the
MSA without the prior written consent of Winterthur.

         7. In the event SOUS' obligations under the Medicare Settlement
Agreement are avoided for any reason, including, but not limited to, through the
exercise of a trustee's avoidance powers under the Bankruptcy Code, this Letter
Agreement including any payment obligations hereunder shall be null and void.

         8. Winterthur's obligation to fund any payments under the MSA shall not
exceed the available, uneroded and unexhausted aggregate limits of SOUS'
insurance coverage under such Policies and shall exist only to the extent such
Policies have not been exhausted in connection with claims or expenses
attributable to the Policies which have been paid on or before any payment
obligation is due to the United States under the MSA. Any and all decisions
between Winterthur and SOUS as to exhaustion shall limit Winterthur's
obligations under this Letter Agreement. Any amounts which Winterthur
contributes to the Class Action Settlement Trust under the Policies shall be
counted for purposes of determining exhaustion even if such amounts have not
been distributed to Class Members or other claimants by the Trustee. For
purposes of this Letter Agreement, the Class Action Settlement refers to that
settlement agreement dated

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David De Busschere
May 14, 2002
Page 4

March 13, 2002, relating to the claims consolidated in the United States
District Court for the Northern District of Ohio, Eastern Division, and styled
In Re Sulzer Hip Prosthesis and Knee Prosthesis Liability Litigation (MDL No.
1401).

         9. In connection with this Letter Agreement, any notices or other
communications required or permitted shall be in writing and deemed given and
received if delivered in person, by overnight delivery service, by first-class
United States mail, postage prepaid and certified, or by facsimile. Any such
notice shall be deemed given as of the date of the receipt and shall be
delivered to the parties as follows:

SOUS:       Sulzer Orthopedics Inc.
            9900 Spectrum Drive
            Austin, TX 78717
            Attention: David Floyd, President
            Facsimile: 512.432.9305

            with copies to:

            Barry Alexander
            Kilpatrick Stockton LLP
            3737 Glenwood Avenue
            Raleigh, NC 27612
            Facsimile: 919.510.6105

            Sulzer Medica USA Inc.
            3 East Greenway Plaza
            Suite 1600
            Houston, TX 77046
            Attention:  General Counsel
            Facsimile:  713.561.6380

Winterthur:
            Dr. Hans Nigg
            Chief Claims Officer
            XL Winterthur International
            Gruezefeldstrasse 41
            PO Box 286,
            CH-8401 Winterthur, Switzerland

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David De Busschere
May 14, 2002
Page 5

            with copies to:

            David DeBusschere
            Sedgwick Detert Moran & Arnold
            One Embarcadero Center
            16th Floor
            San Francisco 94111
            Facsimile:  415.781.2635

         10. In the event any one or more of the provisions contained in this
Letter Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Letter Agreement. All other
provisions shall be valid, legal, and enforceable as if the invalid, illegal, or
unenforceable provision had never been included in this Letter Agreement. SOUS
and Winterthur enter into this Letter Agreement freely and voluntarily after
having consulted counsel with regard to the legal significance of the Letter
Agreement.

         11. This Letter Agreement, along with the Policies, shall constitute
the entire agreement of the parties relating to Winterthur's obligations with
respect to the Agreement, and shall not be changed, modified, amended, extended,
terminated, waived, discharged or added to without the express written consent
of counsel on behalf of SOUS and Winterthur. This Letter Agreement, along with
the Policies, contains the entire understanding of the parties and supersedes
all prior or contemporaneous understandings, agreements, negotiations,
discussions, and draft agreements between the parties on or with respect to the
issues addressed herein, unless expressly referenced or incorporated herein.

         12. This Letter Agreement is limited to the funding obligations under
the MSA and does not address or resolve any other claims that SOUS has or may
have against Winterthur in connection with the Policy or any other policies of
insurance which have been issued by Winterthur.

         13. In the case of any Refund which may be issued by the United States
to SOUS as set forth in Article IV.C of the MSA which is attributable to amounts
previously paid or funded by Winterthur, SOUS shall remit such refund payment
directly to Winterthur or the Settlement Trust, if required by such terms of the
Class Action Settlement or any subsequent agreement between Winterthur and SOUS,
within fifteen (15) days of receipt.

         14. SOUS may not assign nor transfer the Policies nor any rights under
the Policies to the United States or any division, agency or department thereof.

         15. This Letter Agreement is for the sole benefit of SOUS and
Winterthur and no other party or entity including, but not limited to the United
States, shall be a third-party beneficiary to this Letter Agreement or the
rights, duties and obligations set forth herein.

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David De Busschere
May 14, 2002
Page 6

         16. Nothing in this Letter Agreement or the MSA shall be deemed to
change the status or Winterthur or its Policies with respect to jurisdiction, or
lack thereof, in the courts of the United States or any State of the United
States.

         Provided that this Letter Agreement accurately reflects our agreements
in connection with the MSA, please have a duly authorized individual sign below,
returning the original signed copy to my attention. Thank you for your
consideration in this matter.

                                   Sincerely,

                                   /s/ BARRY D. ALEXANDER

                                   Barry D. Alexander

Enclosures

IN WITNESS WHEREOF, the parties have caused this Letter Agreement to be executed
by their duly authorized representatives to be effective as of the date executed
by the party to be charged.

XL WINTERTHUR INTERNATIONAL INSURANCE SWITZERLAND

By: /s/ HANS NIGG
    ----------------------------------------------

Typed Name: Hans Nigg
           ---------------------------------------

Title: Chief Claims Officer
      --------------------------------------------

SULZER ORTHOPEDICS INC.

By: /s/ DAVID FLOYD
   -----------------------------------------------

Typed Name:                David Floyd
           ---------------------------------------

Title:                     President
      --------------------------------------------<PAGE>
                                                                    EXHIBIT 4.12

                           MEMORANDUM OF UNDERSTANDING

1. Those private settling health plans, identified below, ("Settling Health
Plans") have made objections to the original class action settlement agreement
and/or claims against Sulzer entities, identified below, ("Sulzer") for payment
of the medical expenses of Sulzer hip and knee revision surgeries ("Covered
Revision Surgeries"). Covered Revision Surgeries, as used herein, has the same
meaning as given in the Class Action Settlement in the United States District
Court for the Northern District of Ohio, Eastern Division (the "Court"), and
styled In re: Sulzer Hip Prosthesis and Knee Prosthesis Liability Litigation
(MDL No. 1401) ("Class Action Settlement"). Any capitalized terms not defined
herein shall have the same meaning as given in the Class Action Settlement.

2. Sulzer has committed $60 Million Dollars to resolution of these subrogation
claims, the United States' Medicare claims and medical expense claims of
Uninsured Affected Product Recipients. The term "uninsured medical expenses"
does not include co-pays and deductibles for insured class members which must be
satisfied by the class member directly.

3. Sulzer is in the process of settling Medicare's claims of subrogation related
to hip revision surgeries including surgeries in connection with reprocessed
shells (the "Medicare Settlement Agreement"). Sulzer has not reached an
agreement with the United States regarding Medicare's claims of subrogation in
connection with knee revision surgeries at this time. Counsel for the Settling
Health Plans have agreed to recommend resolution of their claims as outlined
below, and on similar time frame, if practicable, as Medicare. Those health
plans that accept and execute a definitive settlement agreement with Sulzer will
be deemed "Settling Health Plans."

4. Subject to the provisions in Paragraph 19 below, within forty-five (45) days
after execution of this MOU, Sulzer, by and through its undersigned legal
counsel, will provide the Settling Health Plans' legal counsel with certain
information from Sulzer's Records regarding any Covered Revision Surgeries
performed to date, with the format (data cartridges, CD roms, computer
print-outs or an Excel type spreadsheet) and fields of this information to be
agreed upon between Sulzer and the Settling Health Plans' legal counsel.
Specifically, Sulzer agrees to provide the following information from its
Records (1) patient's name; (2) gender; (3) date of birth; (4) home address(es);
(5) social security numbers of the patient and the insured, if different as in
the case of a spouse; (6) Covered Revision Surgery Date; (7) name, address, and
telephone number of the surgeon who performed the Covered Revision Surgery; (8)
name, address and phone number of the hospital where the Covered Revision
Surgery was performed (the "Sulzer Revision List"). Sulzer is under no
affirmative obligation to obtain any information required under this Paragraph
from any Affected Product Recipients or any other source that it does not have
in its Records. For purposes of this MOU, Sulzer's "Records" shall include any
records in the possession of Sulzer, its consultants or agents.

5. Sulzer, by and through its undersigned legal counsel, will provide the
Settling Health Plans updates to the Sulzer Revision List every six months in
the format and with the data elements set forth in Paragraph 4 above, with the
last such report being delivered on or before December 31, 2004. The Settling
Health Plans shall respond to each supplemental Revision List with a
supplemental Revision Report pursuant to the terms as set forth in Paragraph 7.
Sulzer shall respond to such supplemental Revision Reports pursuant to the terms
as set forth in Paragraphs 8, 9 and 10.

6. The Settling Health Plans agree to maintain the confidentiality of all Sulzer
Revision Lists, subject to an agreed upon protective order to be entered into
between these parties and enforceable by contempt in the Court. Sulzer will have
no obligation to deliver the Sulzer Revision List to any Settling Health Plan
until this protective order has been entered by the Court. The Settling Health
Plans and Sulzer recognize the highly confidential nature of certain information
on the Sulzer Revision Lists and Sulzer Revision Reports, and agree to the
jurisdiction of the Court for enforcement of sanctions for breach of
confidentiality pursuant to the terms of the protective order to be entered in
this matter, and pursuant to the civil and criminal sanctions for the release of
individually identifiable health information established under the Health
Insurance Portability and Accountability Act of 1996 ("HIPAA") and any
regulations adopted pursuant thereto. In the event the Sulzer Revision List is
released, the Settling Health Plans shall be liable to Sulzer for any and all
sanctions and remedies which the Court may impose for violation of

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such order. In the event the Sulzer Revision Report is released, Sulzer shall be
liable to the Settling Health Plans for any and all sanctions and remedies which
the Court may impose for violation of such order.

7. No later than sixty (60) days after receipt of the Sulzer Revision List or
any supplemental Revision List, the Settling Health Plans will provide a written
report to Sulzer, by and through its undersigned counsel of record, which
identifies the number of Affected Product Recipients for whom the Settling
Health Plans have paid for Covered Revision Surgeries (the "Revision Report").
The Revision Report furnished by the Settling Health Plans shall include the
following basic information: (1) name of Affected Product Recipient; and (2)
whether the Setting Health Plan is a Primary or Secondary Payor (as defined
below) for the Affected Product Recipient. Where the Settling Health Plan is the
Affected Product Recipient's Primary Payor, the Settling Health Plan shall
provide a certification that it has paid the medical costs incurred in
connection with the Affected Product Recipient's Covered Revision Surgery,
including the hospital where the Covered Revision Surgery was performed and the
orthopedic surgeon who performed the Covered Revision Surgery. Where Settling
Health Plan is the Affected Product Recipient's Secondary Payor, the Settling
Health Plan shall provide a certification that it has paid the medical costs
incurred in connection with the Affected Product Recipient's Covered Revision
Surgery, and certify as to the amounts paid. Upon request by Sulzer, the
following additional information necessary to verify the amount of payment that
may be eligible under this MOU will be provided by the Settling Health Plans:
(1) the date of any payments made by the Settling Health Plan; (2) the name of
the provider that received payment from the Settling Health Plan; (3) the
amounts paid by the Settling Health Plan on behalf of such Affected Product
Recipient; and (4) the medical item(s) or service(s) furnished to such
individual. If requested, this information may be provided in summary form
(e.g., by spreadsheet or summary chart) and/or may include copies of any
remittance advice documents associated with the Affected Product Recipient's
Covered Revision Surgery.

8. Within forty-five (45) days of its receipt of the Revision Report or any
supplemental Revision Report, Sulzer will respond to the counsel for the
Settling Health Plans. If Sulzer denies any claim(s) for identified Covered
Revisions Surgeries or disputes any other information supplied by a Settling
Health Plan including the plan's status as a Primary Payor or the amounts
incurred by any Secondary Payor, it will do so no later than forty-five (45)
days from its receipt of the Revision Report, unless an extension of time is
agreed to between the parties. If no response is received within 45 days by a
Settling Health Plan, Sulzer will be deemed to have accepted the claim(s)
submitted by a Settling Health Plan on the Revision Report. As for all denials,
if any, the parties will attempt in good faith to resolve the dispute. In the
event the parties are unsuccessful, they will agree to submit the dispute to the
Court. If Sulzer does not dispute or deny the claim, the Revision Report and any
supplemental Revision Reports will be binding on the Trustee of the Sulzer
Settlement Trust as Sulzer's payment instructions pursuant to this MOU as
supplemented and formalized by the Settling Health Plans' Settlement Agreement
as provided by the Subrogation SubFund terms of the Class Action Settlement.

9. For each Affected Product Recipient identified on the Revision Report or
supplemental Revision Report (which is not contested by Sulzer) in which the
Settling Health Plan was the Primary Payor as of the date of the Covered
Revision Surgery, Sulzer will pay $15,000. "Primary Payor" means all cases in
which neither the Medicare Program nor any other health insurer is the Affected
Product Recipient's primary health insurer. This payment will be made as
designated by the Settling Health Plan's legal counsel no later than sixty (60)
days after Sulzer's receipt of the Revision Report. As to those claims where
there is no dispute, the Revision Report or supplemental Revision Report will
serve as Sulzer's payment instructions to the Trustee pursuant to a Sulzer
approved third party payor settlement as provided in the Class Action
Settlement.

10. For each Affected Product Recipient identified on the Revision Report or
supplemental Revision Report (which is not contested by Sulzer) in which the
Settling Health Plan was the Secondary Payor as of the date of the Covered
Revision Surgery, Sulzer will pay the LESSER of $5,000 or the actual costs
incurred by the Settling Health Plan in connection with the Covered Revision
Surgery. "Secondary Payor" means all cases in which the Affected Product
Recipient has another responsible payor including, but not limited to, the
Medicare Program or any other third-party payor, that made primary payment in
connection with the Affected Product Recipient's Covered Revision Surgery. This
payment will be made as designated by the Settling Health Plan's legal counsel
no later than sixty (60) days after Sulzer's receipt of the Revision Report. As
to those claims where there is no dispute, the

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Revision Report and any supplemental Revision Report will serve as Sulzer's
payment instructions to the Trustee pursuant to a Sulzer approved third party
payor settlement as provided in the Class Action Settlement.

11. The parties understand and agree that, notwithstanding the payment
obligations set forth above, in no event will the sum total of all payments
under this MOU, Sulzer's obligations to Medicare, Uninsured Affected Product
Recipients, and/or any other third party payor claims exceed $60 Million
Dollars.

12. The above payments to the Settling Health Plans for Covered Revision
Surgeries will be paid out of the Initial Insurance Proceeds and Second Year
Policies. Once tendered, these funds will be held by the Sulzer Settlement Trust
in an interest bearing account. To the extent claims are properly payable under
the terms of this MOU, payment for any Covered Revision Surgeries on the
Revision Report or any supplemental Revision Report delivered by a Settling
Health Plan will be made by the Trustee in accordance with the time frames set
forth above but in no event earlier than sixty (60) days after the Initial
Insurance Proceeds Delivery Date, as defined in the Class Action Settlement. The
initial Revision Report payment will be made by the Trustee on a rolling basis
to groups of Settling Health Plans represented by undersigned attorneys of
record. All other payments for Affected Product Recipients on any supplemental
Sulzer Revision Lists will be made on a quarterly basis by the Trustee upon
submission of a supplemental Revision Report in response to a supplemental
Revision List as provided in Paragraph 5 above.

13. The releases to be provided by the Settling Health Plans in exchange for
these payments will release all claims, whether for reimbursement, subrogation,
or otherwise, the Settling Health Plans have now or may have in the future
related to or arising from the Affected Products covered under the Class Action
Settlement including any Covered Revision Surgeries and all related medical
items and services, as against class members, and as against Sulzer, including
future claims for costs of Covered Revision Surgeries, claims for medical
monitoring care of any Affected Product Recipients who have not undergone an
Covered Revision Surgery, and claims for costs of the original Sulzer Affected
Product, if any. Provided that, in the event a Settling Health Plan does not
identify any Affected Product Recipients from the Sulzer Revision List or any
supplemental Sulzer Revision List for whom it is a Primary or Secondary Payor,
no release will be given by that Settling Health Plan to Sulzer or any other
party at that time. Notwithstanding, upon receipt of the Sulzer Revision List,
the Settling Health Plan will have agreed to the terms of this MOU so that if it
were to incur any costs for an Covered Revision Surgery in the future (claims
for an Affected Product Recipient incurred on or after the delivery date of the
Sulzer Revision List to a Settling Health Plan), the terms and conditions of
this MOU would apply including the payment provisions and data elements set
forth herein. Settling Health Plans retain all rights against any Affected
Product Recipients that exercise their Opt-Out rights under the Class Action.
Accordingly, no payments will be made under this MOU to Settling Health Plans
for any opt-outs and Sulzer agrees to identify opt-outs to the Settling Health
Plans. The comprehensive release provisions will be included in the definitive
Settlement Agreement to be executed between the parties pursuant to Paragraph
19.

14. Settling Health Plans will cooperate with Sulzer and participate through
counsel in notification of and approval by the Court of this MOU, to the extent
the Court requires such an approval, with this notification to occur at the same
time as Medicare, if practicable.

15. Sulzer and the Settling Health Plans agree to cooperate in verification of
the Sulzer Revision List, any supplemental Revision Lists, the Revision Report,
and any supplemental Revision Reports as contemplated by this MOU. Counsel for
the Settling Health Plans agree to provide Sulzer, on request, with verification
of any representations on the Sulzer Revision Report and any supplemental
Revision Reports.

16. Sulzer and the Settling Health Plans agree to cooperate in notification to
the Trustee of these payments and this MOU and subsequent implementation of the
final settlement agreement.

17. In the event Sulzer agrees to pay any other third party payor, including any
state or federal government agency, an amount more than $15,000 per Primary
Payor per Covered Revision Surgery or $5,000 per Secondary Payor per Covered
Revision Surgery, Sulzer agrees to pay the Settling Health Plans an amount equal
to the difference times each Sulzer revision paid to the Settling Health Plans
(hereinafter this clause shall be known as the

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"most favored nations clause" or "MFN"). To implement this Paragraph, Sulzer
will provide undersigned counsel with a copy of all settlement agreements, if
any, it may enter into with third party payors. The amounts paid by Sulzer to
any third-party payor as a result of any judgment rendered against Sulzer and/or
an opt-out, shall not trigger the MFN provisions under this Paragraph.

18. This MOU and the final settlement agreement to implement it are confidential
between the parties signatory hereto; provided, (1) on reasonable request, the
Settling Health Plans will agree to permit Sulzer to release the terms of the
same, and (2) nothing contained herein shall be construed to prohibit Sulzer
from settling with any other health plan not a party to this MOU.

19. This MOU is subject to the approval of the Settling Health Plans, the
respective Boards of Directors of Sulzer, class counsel, and the Sulzer
Settlement Trustee. The terms and conditions of this MOU shall be memorialized
into a definitive settlement agreement within thirty (30) days following
execution of this MOU. The definitive settlement agreement shall be executed on
behalf of counsel by each Settling Health Plan. Regardless of the health plans
identified below, the terms and conditions in this MOU, shall only apply to
those Settling Health Plans that execute the definitive settlement agreement
with Sulzer. Neither Sulzer nor a Settling Health Plan shall have any obligation
or liability of any nature whatsoever to the other under this MOU unless or
until a final settlement agreement is executed by Sulzer and that Settling
Health Plans. In the event that the parties fail to execute a definitive
settlement agreement within this time period, the terms and conditions in this
MOU shall be null and void. In such instance, the Settling Health Plans will
have ten (10) days from the date on which the Settling Health Plans receive
written notice from Sulzer that the MOU will not be finalized to file their
objections to the Class Action Settlement. Sulzer and class counsel will not
file any objections based on timeliness to the Settling Health Plans' motion to
the Court for leave to file such objections.

/s/ RICHARD F. SCRUGGS                     DATED 4/30/02
------------------------------                  ------------------------
RICHARD F. SCRUGGS
COUNSEL FOR SULZER

/s/ R. ERIC KENNEDY                        DATED 5/2/02
------------------------------                  -------------------------
R. ERIC KENNEDY
CLASS COUNSEL ON BEHALF OF
CLASS REPRESENTATIVES IN RE
SULZER HIP PROSTHESIS AND
KNEE PROSTHESIS LIABILITY
LITIGATION

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/s/ KIMBERLY R. WEST                          DATED 4/24/02
-----------------------------------------           -------------------------
Kimberly R. West
WALLACE, JORDAN, RATLIFF & BRANDT, L.L.C.
P.O. Box 530910
Birmingham, Alabama 35253
Telephone: (205) 870-0555
Fax: (205) 871-7534

COUNSEL FOR THE BLUES PLANS:

BlueCross BlueShield of Alabama
BlueCross BlueShield of Florida, Inc.
BlueCross BlueShield of Massachusetts, Inc.
BlueCross BlueShield of Michigan
BlueCross BlueShield of Minnesota
BlueCross and BlueShield of North Carolina
Empire BlueCross Blue Shield
Trigon Insurance Company d/b/a Trigon BlueCross BlueShield of HealthKeepers
Physicians' Services, Inc. d/b/a BlueShield of California

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/s/ MICHAEL A. LEE                     DATED 4/30/02
------------------------------               -------------------------
Michael A. Lee
SUSMAN GODFREY, LLP.
1000 Louisiana, Suite 5100
Houston, Texas 77002
Telephone: (713) 653-7806
Facsimile: (713) 654-3376

COUNSEL FOR:

Health Care Service Corporation, a Mutual Legal Reserve Company
(d/b/a BlueCross BlueShield of Texas, BlueCross BlueShield of Illinois,
and BlueCross BlueShield of New Mexico)
Humana Health Plan of Texas, Inc.
Humana Insurance Company
Humana Medical Plan, Inc.
Humana Health Plan of Ohio, Inc.
Humana Health Insurance Company of Florida, Inc.
Humana Health Plan, Inc.
Humana Health Insurance Company of Nevada, Inc.
Humana Wisconsin Health Organization Insurance Corporation
Humana HMO Texas, Inc.
Humana HealthChicago, Inc.
Humana HealthChicago Insurance Company
Humana Kansas City, Inc.
Humana Employers Health Plan of Georgia
Humana Health Plans of Puerto Rico, Inc.
Humana Insurance of Puerto Rico, Inc.
Foundation Health, a Florida Health Plan, Inc.
Beacon Health Plan, Inc.
Doctors Health Plan, Inc.
Healthplansoutheast, Inc.
Vista Insurance Plan, Inc.

                                       6
<PAGE>

/s/ MICHAEL J. LAFFEY                  DATED 4/26/02
------------------------------               -------------------------
Michael J. Laffey
Michael J. Laffey and Associates
210 Mary Street
Carnegie, PA 15106
Telephone: (412) 429-7079
Fax: (412) 429-7078

COUNSEL FOR:
Independence Blue Cross and its subsidiaries
BlueCross BlueShield New Jersey
Blue Cross Western New York
Highmark, Inc.
Horizon BlueCross BlueShield of New Jersey
Health Plus PHSP, Inc.
HealthNow NY d/b/a Blue Cross Blue Shield of New York and Albany

                                       7
<PAGE>

                                        DATED
------------------------------               -------------------------
Mark D. Fischer
RAWLINGS & ASSOCIATES PLLC
1700 One Waterfront Plaza
325 West Main Street
P.O. Box 740027
Louisville, KY 40201-7427
(502) 587-1279

------------------------------
John Gregory Murphy
6555 Parkins Road
Suite 200
Baton Rouge, Louisiana 70808
(225) 767-7151

COUNSEL FOR BLUECROSS BLUESHIELD OF LOUISIANA

                                       8
<PAGE>

                                        DATED
------------------------------               -------------------------
Mark D. Fischer
RAWLINGS & ASSOCIATES PLLC
1700 One Waterfront Plaza
325 West Main Street
P.O. Box 740027
Louisville, KY 40201-7427
(502) 587-1279

COUNSEL FOR:

Alta Health & Life Insurance Company
Anthem Insurance Companies, Inc.
Anthem Blue Cross Blue Shield of Colorado
Anthem Blue Cross Blue Shield of Connecticut
Anthem Blue Cross Blue Shield of Indiana
Anthem Blue Cross Blue Shield of Kentucky
Anthem Blue Cross Blue Shield of Maine
Anthem Blue Cross Blue Shield of Nevada
Anthem Blue Cross Blue Shield of New Hampshire
Anthem Blue Cross Blue Shield of Ohio
Arkansas BlueCross BlueShield, a Mutual Insurance Company
AvMed
BlueCross BlueShield Government-wide Service Benefit Plan
BlueCross BlueShield of Delaware
BlueCross BlueShield of Georgia
BlueCross BlueShield of Kansas City
BlueCross BlueShield of Louisiana
BlueCross BlueShield of Nebraska
BlueCross BlueShield of Oklahoma
BlueCross BlueShield of Tennessee
BlueCross BlueShield of Vermont
BlueCross of California
Blue Cross of Idaho Health Service, Inc.
Blue Cross Life & Health Insurance Company
Capital Blue Cross
Central Benefits Mutual Insurance Company
Conseco Companies

                                        9
<PAGE>

Conseco Medical Insurance Company
Washington National Insurance Company
Pioneer Life Insurance Company
Bankers Life and Casualty Company
DakotaCare
EPIC Life Ins. Co.
Federated Mutual Insurance Company
FORTIS Ins. Co.
General Electric Group Life Insurance Company
G. E. Group Administrators
Geisinger Health Plan
Golden Rule Ins. Co.
Government Employee Hospital Association (GEHA)
Great-West Life & Annuity Insurance Company
Group Health Cooperative of Puget Sound
Group Health Incorporated
The Guardian Life Ins. Co. of America
Health Insurance Plan of Greater New York
Health Net
Health Partners, Inc.
HIP Health Plan of Florida
KPS Health Plans
Lifeguard, Inc.
Lifeguard Life Ins. Co.
Maxicare
Medical Benefits Mutual Life Ins. Co.
Medical Benefits Administrators, Inc.
Medical Mutual of Ohio
Medical Mutual Services, LLC
Mid-Atlantic Medical Services, Inc.
Mountain State Blue Cross Blue Shield
Mutual of Omaha
MVP Health Plan
National Health Ins. Co.
New England Financial
Noridian Mutual Insurance Company d/b/a Blue Cross Blue Shield of North
Dakota
One Health Plan of Alaska

                                       10
<PAGE>

One Health Plan of California
One Health Plan of Illinois
One Health Plan of Colorado
One Health Plan of Texas
One Health Plan of Georgia
One Health Plan of Massachusetts
One Health Plan of Indiana
One Health Plan of Ohio
One Health Plan of Washington
One Health Plan of Oregon
One Health Plan of Tennessee
One Health Plan of Florida
One Health Plan of New Jersey
One Health Plan of Arizona
One Health Plan of New Hampshire
One Health Plan of North Carolina
One Health Plan of South Carolina
One Health Plan of Kansas/Missouri
One Health Plan of Maine
One Health Plan of New York
One Health Plan of Nevada
One Health Plan of Michigan
One Health Plan of Minnesota
One Health Plan of Pennsylvania
One Health Plan of Virginia
One Health Plan of Wisconsin
One Health Plan of Wyoming
Oxford Health Plans
PacifiCare Health Systems
Pacific Life Ins. Co. and affiliates
Phoenix American Life
Phoenix Home Life Mutual Insurance
Phoenix Group Services
Priority Health, Inc.
Regence BlueCross BlueShield of Oregon
Regence BlueCross BlueShield of Utah
Regence BlueShield
Regence BlueShield of Idaho

                                       11
<PAGE>

Tufts Health Plan
Unicare Life & Health Insurance Company
Unicare Health Plans of the Midwest, Inc.
Unicare Health Insurance Company of the Midwest, Inc.
United Healthcare, Inc.
Vytra Health Plans Long Island, Inc.
Vytra Health Services, Inc.
The Wellness Plan
Wisconsin Physicians Service Insurance Corp.

(collectively known as Health Benefit Plans, AHBPs).

                                       12
<PAGE>

                                        DATED
------------------------------               -------------------------
James L. Johnson
THE JOHNSON LAW FIRM
6500 Greenville Avenue
Suite 345, LB 30
Dallas, Texas 75206
Telephone: (214) 363-1629
Facsimile: (214) 363-9173

COUNSEL FOR THE CIGNA PLANS:

CIGNA HealthCare of Arizona, Inc.
CIGNA HealthCare of California, Inc.
CIGNA HealthCare of Colorado, Inc.
CIGNA HealthCare of  Connecticut, Inc.
CIGNA HealthCare of Delaware, Inc.
CIGNA HealthCare of Florida, Inc.
CIGNA HealthCare of Georgia, Inc.
CIGNA HealthCare of Illinois, Inc.
CIGNA HealthCare of Louisiana, Inc.
CIGNA HealthCare of Massachusetts, Inc.
CIGNA HealthCare of Mid-Atlantic, Inc.
CIGNA HealthCare of New Jersey, Inc.
CIGNA HealthCare of New York, Inc.
CIGNA HealthCare of Ohio, Inc.
CIGNA HealthCare of Oklahoma, Inc.
CIGNA HealthCare of Pennsylvania, Inc.
CIGNA HealthCare of St. Louis, Inc.
CIGNA HealthCare of Tennessee, Inc.
CIGNA HealthCare of Texas, Inc.
CIGNA HealthCare of Utah, Inc.
CIGNA HealthCare of Virginia, Inc.
Connecticut General Life Insurance Company
CIGNA Healthcare of Arkansas, Inc.
CIGNA HealthCare Preferred of Arkansas, Inc.
CIGNA HealthCare of New York, Inc.

                                       13
<PAGE>

CIGNA HealthCare of Indiana, Inc.
CIGNA Insurance Group, Inc.
CIGNA Insurance Services, Inc.
CIGNA HealthCare of Kentucky, Inc.
CIGNA HealthCare of Maine, Inc.
CIGNA HealthCare Preferred of Maine, Inc.
CIGNA HealthCare of New Hampshire, Inc.
CIGNA HealthCare of North Carolina Administrators, Inc.
CIGNA HealthCare of North Carolina, Inc.
CIGNA HealthCare Preferred of Ohio, Inc.
CIGNA HealthCare Preferred of New Hampshire, Inc.
CIGNA HealthCare Preferred of New York, Inc.
CIGNA HealthCare of South Carolina, Inc.
CIGNA HealthCare Preferred of Tennessee, Inc.
Lovelace Health Systems, Inc.

                                       14
<PAGE>

                                    Exhibit A

                           Trustee Security Agreement

                 SULZER ORTHOPEDICS INC. AND AFFILIATED ENTITIES
                               SECURITY AGREEMENT

         This Security Agreement (the "Agreement") is dated as of August 30,
2001, by and among Sulzer Orthopedics Inc., a Delaware corporation ("SOUS"), and
affiliated entities, including Sulzer Medica Ltd., a limited company organized
under the laws of Switzerland ("SML"); the other direct and indirect
subsidiaries of SML listed on the signature pages hereto (the "Subsidiaries" and
collectively with SML and SOUS, the "Grantors"); and the interim Trustee named
on the signature pages hereof (the "Trustee") (collectively, the "Security
Parties"), pursuant to that certain Class Action Settlement Agreement, dated as
of August 15, 2001, as amended and restated as of August 23, 2001, among SML and
SOUS, on behalf of themselves and the other Released Parties thereunder, and
Class Counsel on behalf of the Class Representatives (together with all Exhibits
and Annexes attached thereto, as amended from time to time, the "Settlement
Agreement") relating to the claims consolidated in the United States District
Court for the Northern District of Ohio, Eastern Division, and styled In Re
InterOp Hip Prosthesis Products Liability Litigation (MDL No. 1401).

                             PRELIMINARY STATEMENTS

         A. The Grantors and the Trustee have entered into a Trust Agreement
dated as of August 30, 2001 (such Trust Agreement as the same may be amended or
modified from time to time, including amendments and restatements thereof in its
entirety, being hereinafter referred to as the "Trust Agreement"), pursuant to
which the Trustee has agreed, subject to certain terms and conditions, to
receive, hold, and invest funds in accordance with, and subject to, the
provisions of the Settlement Agreement, to issue payments and disburse funds as
provided in the Settlement Agreement and to take all such other actions as
contemplated by the Settlement Agreement for the benefit of the Beneficiaries;

         B. As a condition to entering into the Settlement Agreement, the
Beneficiaries have required, among other things, that each Grantor grant to the
Trustee for the benefit of the Beneficiaries a lien on and security interest in
the assets of such Grantor described herein subject to the terms and conditions
hereof; and

         C. Each Grantor will benefit, directly or indirectly, from the
resolution of claims effected by the Settlement Agreement.

         NOW, THEREFORE, for and in consideration of the execution and delivery
by Class Counsel on behalf of the Class Representatives of the Settlement
Agreement and the Trustee of the Trust Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the Security Parties
hereby agree as follows:

         Section 1. Terms defined in the Trust Agreement and Settlement
Agreement. All capitalized terms used herein without definition shall have the
same meanings herein as such terms have in the Trust Agreement or the Settlement
Agreement, as applicable. The term "Grantor" and "Grantors" as used herein shall
mean and include the Grantors collectively and

<PAGE>

also each individually, with all grants, representations, warranties and
covenants of and by the Grantors, or any of them, herein contained to constitute
joint and several grants, representations, warranties and covenants of and by
the Grantors; provided, however, that unless the context in which the same is
used shall otherwise require, any grant, representation, warranty or covenant
contained herein related to the Collateral shall be made by each Grantor only
with respect to the Collateral owned by it or represented by such Grantor as
owned by it.

           Section 2. Grant of Security Interest in the Collateral; Obligations
Secured. (a) Each Grantor hereby grants to the Trustee for the benefit of the
Beneficiaries a lien on and security interest in, and acknowledges and agrees
that the Trustee has and shall continue to have for the benefit of the
Beneficiaries a continuing lien on and security interest in, all right, title
and interest of each Grantor, whether now owned or existing or hereafter
created, acquired or arising, in and to all assets of each Grantor, including
all of the following:

                  (a) Accounts;

                  (b) Chattel Paper;

                  (c) Instruments (including Promissory Notes);

                  (d) Documents;

                  (e) General Intangibles (including Payment Intangibles,
         Software and Intellectual Property);

                  (f) Letter-of-Credit Rights;

                  (g) Supporting Obligations;

                  (h) Deposit Accounts;

                  (i) Investment Property (including certificated and
         uncertificated Securities, Securities Accounts, Security Entitlements,
         Commodity Accounts, and Commodity Contracts);

                  (j) Inventory;

                  (k) Real Property;

                  (l) Equipment (including all software, whether or not the same
         constitutes embedded software, used in the operation thereof);

                  (m) Fixtures;

                                      -2-
<PAGE>

                  (n) All rights to merchandise and other Goods (including
         rights to returned or repossessed Goods and rights of stoppage in
         transit) which is represented by, arises from, or relates to any of the
         foregoing;

                  (o) All personal property and interests in personal property
         of any Grantor of any kind or description now held by the Trustee or
         the Beneficiaries or at any time hereafter transferred or delivered to,
         or coming into the possession, custody, or control of, the Trustee or
         the Beneficiaries, or any Trustee or affiliate of the Trustee or the
         Beneficiaries, whether expressly as collateral security or for any
         other purpose (whether for safekeeping, custody, collection or
         otherwise), and all dividends and distributions on or other rights in
         connection with any such property;

                  (p) All supporting evidence and documents relating to any of
         the above-described property, including, without limitation, computer
         programs, disks, tapes and related electronic data processing media,
         and all rights of any Grantor to retrieve the same from third parties,
         written applications, credit information, account cards, payment
         records, correspondence, delivery and installation certificates,
         invoice copies, delivery receipts, notes, and other evidences of
         indebtedness, insurance certificates and the like, together with all
         books of account, ledgers, and cabinets in which the same are reflected
         or maintained;

                  (q) All Accessions and additions to, and substitutions and
         replacements of, any and all of the foregoing; and

                  (r) All Proceeds and products of the foregoing, and all
         insurance of the foregoing and proceeds thereof;

all of the foregoing being herein sometimes referred to as the "Collateral",
provided that "Collateral" shall not include (i) with respect to any Grantor,
any General Intangible, Intellectual Property or Investment Property to the
extent the grant by such Grantor of a security interest pursuant to this
Agreement in its rights under such General Intangible, Investment Property or
Intellectual Property, as the case may be, is prohibited or restricted by such
General Intangible, Investment Property or Intellectual Property, as the case
may be, and the consent of applicable Persons has not been obtained, provided
that the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in any
Receivable or any money or other amounts due or to become due under any such
General Intangible, Investment Property or intellectual property as the case may
be, to the extent provided in Section 9-406 of the UCC on the date hereof or
(ii) 974,074 shares of common stock, no par value, or security entitlements with
respect thereof, of Thoratec Corporation, a California corporation. All terms
which are used in this Agreement which are defined in the Uniform Commercial
Code of the State of New York as in effect from time to time ("UCC") shall have
the same meanings herein as such terms are defined in the UCC, unless this
Agreement shall otherwise specifically provide. For purposes of this Agreement,
the term "Receivables" means all rights to the payment of a monetary obligation,
whether or not earned by performance, and whether evidenced by an Account,
Chattel Paper, Instrument, General Intangible, or otherwise.

                                      -3-
<PAGE>

                  (b) This Agreement is made and given to secure, and shall
secure, the prompt payment and performance when due of (i) any and all
indebtedness, obligations and liabilities of the Grantors, and of any of them
individually, to the Settlement Trust for the purpose of making distributions to
the Beneficiaries, under or in connection with or evidenced by the Settlement
Agreement or the Trust Agreement (and whether arising before or after the filing
of a petition in bankruptcy and including all interest accrued after the
petition date), due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (ii) any and all
expenses and charges, legal or otherwise, suffered or incurred pursuant to and
in accordance with Article 5 and Section 13.2(c) of the Settlement Agreement and
Sections 3.04 and 3.05 of the Trust Agreement (all of the indebtedness,
obligations, liabilities, expenses and charges described above being hereinafter
referred to as the "Obligations"). NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO
THE CONTRARY, THE RIGHT OF RECOVERY AGAINST ANY GRANTOR UNDER THIS AGREEMENT
SHALL NOT EXCEED $1.00 LESS THAN THE LOWEST AMOUNT WHICH WOULD RENDER SUCH
GRANTOR'S OBLIGATIONS UNDER THIS AGREEMENT VOID OR VOIDABLE UNDER APPLICABLE
LAW, INCLUDING FRAUDULENT CONVEYANCE LAW.

         Section 3. Credit Facility and Trustee Prior Liens. The liens and
security interest granted herein shall be junior and subordinate to any lien or
security interest that has been or shall be granted by Grantor to a financial or
other lending institution or institutions (the "Credit Facility Liens") for the
purposes of securing Grantor's obligations under the Credit Facility; provided,
that the terms of the Credit Facility shall be subject to the prior approval by
Class Counsel (such approval not to be unreasonably withheld). Notwithstanding
the foregoing, as security for the Trustee's rights to receive compensation for
its services, reimbursement for its expenses and to indemnification hereunder,
the Trustee shall have a lien prior to all other persons (other than the Credit
Facility Liens, as to which the Trustee shall have a pari passu lien) upon all
Collateral subject to this Agreement. During definitive documentation of such
Credit Facility, the Trustee shall enter into such agreements and documents as
reasonably necessary, including without limitation an intercreditor agreement
agreeing that the Obligations under the Settlement Agreement and Liens created
by this Agreement shall be subordinated to the obligations and Liens securing
such obligations under the Credit Facility. Concurrently with or prior to the
execution and delivery of this Agreement, the Grantors shall execute and deliver
pursuant to the terms of this Agreement (i) financing statements (on UCC-1 or
such successor or other applicable form) necessary to perfect a security
interest in the Secured Assets that constitute personal property under
applicable law and (ii) mortgages and deeds of trust necessary to perfect a
security interest in the Secured Assets that constitute real property or
fixtures under applicable law, in each case to the extent necessary or permitted
under the applicable jurisdiction governing such Secured Assets. Pursuant to the
terms of this Agreement, the Trustee and/or the Grantors shall file and/or
record (or cause to be filed and/or recorded) such financing statements,
mortgages and deeds of trust as are necessary to perfect the Settlement Trust's
security interest in the Secured Assets.

         Section 4. Event of Default.

                  (a) If the Grantors fail to make a payment to the Settlement
Trust (i) an amount totaling at least $25 million (not including Insurance
Proceeds) on the due date of any Annual Payment Amount pursuant to Section
2.9(d) of the Settlement Agreement or (ii) after the

                                      -4-
<PAGE>

termination of the Grantors' obligation to deliver the Annual Payment Amount, an
amount equal to any quarterly payment (not to exceed $12.5 million) required by
Section 2.9(g) of the Settlement Agreement, and such payment is not made within
six months of the due date of such Annual Payment Amount or quarterly payment,
as applicable, then such event shall constitute an Event of Default.

                  (b) Upon the occurrence and during the continuation of any
Event of Default (as to which the Claims Administrator shall notify the Trustee
in writing), the Trustee shall have, in addition to all other rights provided
herein or by law, the rights and remedies of a secured party under the UCC
(regardless of whether the UCC is the law of the jurisdiction where the rights
or remedies are asserted and regardless of whether the UCC applies to the
affected Collateral), and further the Trustee may, without demand and, to the
extent permitted by applicable law, without advertisement, notice, hearing or
process of law, all of which each Grantor hereby waives to the extent permitted
by applicable law, at any time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, at any securities exchange or
broker's board or at the Trustee's office or elsewhere, for cash, upon credit or
otherwise, at such prices and upon such terms as the Trustee deems advisable, in
its sole discretion, based on written instructions from the Claims
Administrator. Upon the occurrence and during the continuation of any Event of
Default, in addition to any other right or remedies set forth herein or by
applicable law, the Trustee may by written demand direct any securities
intermediary, commodities intermediary, or other financial intermediary at any
time holding any Investment Property, or any issuer thereof, to deliver such
Collateral, or any part thereof, to the Trustee and/or liquidate such
Collateral, or any part thereof, and deliver the proceeds thereof to the
Trustee. If any of the Collateral constitutes restricted securities within the
meaning of any applicable securities laws, any disposition thereof in compliance
with such laws shall not render the disposition commercially unreasonable. In
the exercise of any such remedies, the Trustee may sell the Collateral as a unit
even though the sales price thereof may be in excess of the amount remaining
unpaid on the Obligations. Also, if less than all the Collateral is sold, the
Trustee shall have no duty to marshal or apportion the part of the Collateral so
sold as between the Grantors, or any of them, but may sell and deliver any or
all of the Collateral without regard to which of the Grantors are the owners
thereof. Any requirement of reasonable notice shall be met if such notice is
personally served on or mailed, postage prepaid, to the Grantors in accordance
with Section 14.8 of the Settlement Agreement at least 10 days before the time
of sale or other event giving rise to the requirement of such notice; provided,
however, no notification need be given to a Grantor if such Grantor has signed,
after an Event of Default hereunder has occurred, a statement renouncing any
right to notification of sale or other intended disposition. The Trustee may be
the purchaser at any such sale. Each Grantor hereby waives all of its rights of
redemption from any such sale. The Trustee may postpone or cause the
postponement of the sale of all or any portion of the Collateral by announcement
at the time and place of such sale, and such sale may, without further notice,
be made at the time and place to which the sale was postponed or the Trustee may
further postpone such sale by announcement made at such time and place. In the
event any of the Collateral shall constitute restricted securities within the
meaning of any applicable securities laws, any disposition thereof in compliance
with such laws shall not render the disposition commercially unreasonable. The
Trustee has no obligation to prepare the Collateral for sale. The Trustee may
sell or otherwise dispose of the Collateral without giving any warranties as to
the Collateral or any part thereof,

                                      -5-
<PAGE>

including disclaimers of any warranties of title or the like, and the Grantors
acknowledge and agree that the absence of such warranties shall not render the
disposition commercially unreasonable.

                  (c) The powers conferred upon the Trustee hereunder are solely
to protect its interest in the Collateral and shall not impose on it any duties
to exercise such powers. The Trustee shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession or control if the Collateral is accorded treatment substantially
equivalent to that which the Trustee accords its own property, it being
understood, however, that the Trustee shall have no responsibility for (i)
ascertaining or taking any action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relating to any Collateral, whether or not
the Trustee has or is deemed to have knowledge of such matters, (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral, (iii) initiating any action to protect the Collateral or any part
thereof against the possibility of a decline in market value or (iv) insuring
(or monitoring the insurance status as to) the Collateral. This Agreement
constitutes an assignment of rights only and not an assignment of any duties or
obligations of the Grantors in any way related to the Collateral, and the
Trustee shall have no duty or obligation to discharge any such duty or
obligation. Neither the Trustee, nor any party acting as attorney or other agent
for the Trustee, shall be liable hereunder for any acts or omissions or for any
error of judgment or mistake of fact or law other than such person's gross
negligence or willful misconduct.

                  (d) Without in any way limiting the foregoing, each Grantor
hereby grants to the Trustee for the benefit of the Beneficiaries a royalty-free
non-exclusive irrevocable license and right to use all of such Grantor's
patents, patent applications, patent licenses, trademarks, trademark
registrations, trademark licenses, trade names, trade styles, and similar
intangibles in connection with any foreclosure or other realization by the
Trustee on all or any part of the Collateral to the extent permitted by this
Agreement, law or the applicable license or other intellectual property
agreement. The license and right granted the Trustee hereby shall be without any
royalty or fee or charge whatsoever.

                  (e) If the Trustee has liquidated the Collateral (less any
Collateral constituting reserves estimated to be needed to reimburse the Trustee
for its expenses as provided herein), and such liquidated Collateral is
insufficient to satisfy all claims, then the Trustee shall apply to the Court
for instructions relating thereto.

         Section 5. Continuing Agreement. This Agreement shall be a continuing
agreement in every respect and shall remain in full force and effect until the
satisfaction of all of the Grantors' payment Obligations under the Settlement
Agreement. Upon such termination of this Agreement, the Trustee shall, upon the
request and at the expense of the Grantors, forthwith release its security
interest hereunder in accordance with the terms of Section 7 hereof.

         Section 6. Primary Security; Obligations Absolute. The lien and
security interest herein created and provided for stand as direct and primary
security for the Obligations of the Grantors arising under or otherwise relating
to the Settlement Agreement and the Trust Agreement, as well as for any of the
other obligations secured hereby. No application of any

                                      -6-
<PAGE>

sums received by the Trustee or the Beneficiaries in respect of the Collateral
or any disposition thereof to the reduction of the Obligations or any part
thereof shall in any manner entitle any Grantor to any right, title or interest
in or to the obligations or any collateral or security therefor, whether by
subrogation or otherwise, unless and until all Obligations have been fully paid
and satisfied and the Settlement Agreement and the Trust Agreement have expired
or otherwise terminated. Each Grantor acknowledges that the lien and security
interest hereby created and provided are absolute and unconditional and shall
not in any manner be affected or impaired by any acts of omissions whatsoever of
the Trustee or the Beneficiaries, and without limiting the generality of the
foregoing, the lien and security interest hereof shall not be impaired by any
acceptance by the Beneficiaries or any other holder of any obligations of any
other security for or guarantors upon any of the obligations or by any failure,
neglect or omission on the part of the Trustee or the Beneficiaries to realize
upon or protect any of the obligations or any collateral or security therefor
(including, without limitation, impairment of collateral or failure to perfect
security interest in collateral). The lien and security interest hereof shall
not in any manner be impaired or affected by (and the Trustee, without notice to
anyone, is hereby authorized to make from time to time) any sale, pledge,
surrender, compromise, settlement, release, renewal, extension, indulgence,
alteration, substitution, exchange, change in, modification or disposition of
any of the obligations or of any collateral or security therefor, or of any
guaranty thereof, or of any instrument or agreement setting forth the terms and
conditions pertaining to any of the foregoing. In order to realize hereon and to
exercise the rights granted the Trustee or the Beneficiaries hereunder and under
applicable law, there shall be no obligation on the part of the Trustee or the
Beneficiaries at any time to first resort for payment to the Grantors or to any
guaranty of the obligations or any portion thereof or to resort to any other
collateral, security, property, liens or any other rights or remedies
whatsoever, and the Trustee or the Beneficiaries shall have the right to enforce
this Agreement against any Grantor or any of its Collateral irrespective of
whether or not other proceedings or steps seeking resort to or realization upon
or from any of the foregoing are pending.

         Section 7. Release of Collateral.

                  (a) Upon the satisfaction of all of the Grantors' payment
obligations under the Settlement Agreement, this Agreement shall terminate and
the Collateral shall be released. Upon the written request of the Grantors
(accompanied with appropriate documentation or other evidence reasonably
satisfactory to the Trustee) or upon the direction of the Court, the Trustee, on
behalf of the Trust, shall execute, file and/or record such termination
instruments (including without limitation, UCC-3s or other evidence of release
of a lien or mortgage as applicable) as may be necessary to release all liens on
Collateral hereunder.

                  (b) In the event that Final Judicial Approval is not obtained
or if the Settlement Agreement is terminated in accordance with Article 10
thereunder, the Trustee, on behalf of the Trust, shall execute, file and/or
record such termination instruments (including without limitation, UCC-3s or
other evidence of release of a lien or mortgage as applicable) as may be
necessary to release all liens on Collateral hereunder, and this Agreement shall
terminate and be of no force and effect.

                                      -7-
<PAGE>

                  (c) In the event that the Grantors sell assets for business
purposes or for the purposes of satisfying its payment obligations under the
Settlement Agreement, the Trustee, on behalf of the Trust, shall execute and
deliver such termination instruments (including without limitation, UCC-3s or
other evidence of release of a lien or mortgage as applicable) as may be
necessary to release all liens on Collateral hereunder subject to sale under
such agreements.

         Section 8. Miscellaneous.

                  (a) The rights and responsibilities of the Trustee under this
Agreement shall be subject to the terms of the Trust Agreement and the
Settlement Agreement, including without limitation, Article III of the Trust
Agreement and the Trustee's right to indemnification thereunder. In furtherance
of the foregoing, the Security Parties acknowledge that Trustee has not made an
independent determination as to the nature of the perfection of the security
interests covered by this Agreement, and thus has no duty to determine whether
filings relating to perfection of security interests are complete and accurate
and shall not be responsible for the adequacy of the Collateral or the
perfection of the security interests therein. The terms of this Agreement shall
be binding on and inure to the benefit of any successor Trustee appointed in
accordance with the terms of the Trust Agreement.

                  (b) This Agreement cannot be changed or terminated orally.
This Agreement shall create a continuing lien on and security interest in the
Collateral and shall be binding upon each Grantor, its successors and assigns
and shall inure, together with the rights and remedies of the Trustee hereunder,
to the benefit of the Trustee and its successors and permitted assigns;
provided, however, that no Grantor may assign its rights or delegate its duties
hereunder without the Trustee's prior written consent.

                  (c) All communications provided for herein shall be in
writing, except as otherwise specifically provided for hereinabove, and shall be
deemed to have been given or made, if to any Grantor when given to Sulzer in
accordance with Section 14.8 of the Settlement Agreement, or if to the Trustee,
when given to the Trustee in accordance with Section 6.05 of the Trust
Agreement.

                  (d) No Beneficiary (or affiliate of any Beneficiary) shall
have the right to institute any suit, action or proceeding in equity or at law
for the foreclosure or other realization upon any Collateral subject to this
Agreement or for the execution of any trust or power hereof or for the
appointment of a receiver, or for the enforcement of any other remedy under or
upon this Agreement; it being understood and intended that no one or more of the
Beneficiaries (or their affiliates) shall have any right in any manner
whatsoever to affect, disturb or prejudice the lien and security interest of
this Agreement by its or their action or to enforce any right hereunder, and
that all proceedings at law or in equity shall be instituted, had and maintained
by the Trustee in the manner herein provided for the benefit of the
Beneficiaries.

                  (e) In the event that any provision hereof shall be deemed to
be invalid or unenforceable by reason of the operation of any law or by reason
of the interpretation placed thereon by any court, this Agreement shall be
construed as not containing such provision, but

                                      -8-
<PAGE>

only as to such jurisdictions where such law or interpretation is operative, and
the invalidity or unenforceability of such provision shall not affect the
validity of any remaining provisions hereof, and any and all other provisions
hereof which are otherwise lawful and valid shall remain in full force and
effect. Without limiting the generality of the foregoing, in the event that this
Agreement shall be deemed to be invalid or otherwise unenforceable with respect
to any Grantor, such invalidity or unenforceability shall not affect the
validity of this Agreement with respect to the other Grantors.

                  (f) In the event the Trustee shall at any time in its
discretion permit a substitution of Grantors hereunder or a party shall wish to
become a Grantor hereunder, such substituted or additional Grantor shall, become
a party hereto and be bound by all the terms and conditions hereof to the same
extent as though such Grantor had originally executed this Agreement and, in the
case of a substitution, in lieu of the Grantor being replaced. No such
substitution shall be effective absent the written consent of the Trustee nor
shall it in any manner affect the obligations of the other Grantors hereunder.

                  (g) This Agreement shall be deemed to have been made in the
State of New York and shall be governed by, and construed in accordance with,
the laws of the State of New York. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning of any provision hereof.

                  (h) Each Grantor and, by accepting the benefits of this
Agreement, the Trustee and each Beneficiary hereby submits to the exclusive
jurisdiction of the United States District Court for the Northern District of
Ohio, Eastern Division, for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. Each Grantor
and, by accepting the benefits of this Agreement, each Beneficiary irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. The Trustee consents to be subject to the
jurisdiction of the Court in any action relating to this Agreement. EACH GRANTOR
AND, BY ACCEPTING THE BENEFITS OF THIS AGREEMENT, THE TRUSTEE AND EACH
BENEFICIARY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

                  (i) Except as otherwise specifically provided herein, nothing
in this Agreement, express or implied, confers on any person, other than the
parties hereto and their successors and assigns hereunder, any benefit or any
legal or equitable right, remedy, or claim under this Agreement.

                  (j) Copies of all documents, notices, statements, reports,
projections, motions, or similar documents provided to any Security Party under
this Agreement shall be provided on a confidential basis and shall be kept
confidential by all other such Security Parties unless such information is
otherwise publicly available or as otherwise required by law or judicial or
administrative process. Such confidential information provided under this
Agreement can be used in any proceeding in the Court or any applicable appellate
court provided the

                                      -9-
<PAGE>

Security Party using such information takes reasonable steps to protect the
confidential nature of the information.

                  (k) This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterpart signature
pages, each constituting an original, but all together one and the same
agreement.

                           [SIGNATURE PAGES TO FOLLOW]

                                      -10-
<PAGE>

         IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered as of the date first above written.

                                        SULZER MEDICA LTD.

                                        By: /s/ Stephan Rietiker
                                          --------------------------------------
                                        Name:  Stephan Rietiker
                                        Title: President & CEO

                                        SULZER ORTHOPEDICS INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER ORTHOPEDICS LTD.

                                        By: /s/ Richard Fritschi
                                          --------------------------------------
                                        Name:  Richard Fritschi
                                        Title: President

                                        SULZER MEDICA USA HOLDING COMPANY

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

<PAGE>

                                        SULZER MEDICA USA INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER BIOLOGICS INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER CARBOMEDICS CANADA INC.

                                        By: /s/ Terry L. Marlatt
                                          --------------------------------------
                                        Name:  Terry L. Marlatt
                                        Title: Director

                                        SULZER CARBOMEDICS INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER CARBOMEDICS INTERNATIONAL
                                        HOLDING CO.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

<PAGE>

                                        SULZER CARBOMEDICS UK LTD.

                                        By: /s/ Terry L. Marlatt
                                          --------------------------------------
                                        Name:  Terry L. Marlatt
                                        Title: Director

                                        SULZER CARDIOVASCULAR AG

                                        By: /s/ Terry L. Marlatt
                                          --------------------------------------
                                        Name:  Terry L. Marlatt
                                        Title: Director

                                        SULZER CARDIOVASCULAR INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER CARDIOVASCULAR SA

                                        By: /s/ Terry L. Marlatt
                                          --------------------------------------
                                        Name:  Terry L. Marlatt
                                        Title: Director

                                        SULZER DENTAL CORP.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

<PAGE>

                                        SULZER DENTAL GMBH

                                        By: /s/ Steven B. Hanson
                                          --------------------------------------
                                        Name:  Steven B. Hanson
                                        Title: Managing Director

                                        SULZER DENTAL INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER DENTAL LTD.

                                        By: /s/ Steven E. Hanson
                                          --------------------------------------
                                        Name:  Steven E. Hanson
                                        Title: Director

                                        SULZER DENTAL SARL

                                        By: /s/ Christophe Lizot
                                          --------------------------------------
                                        Name:  Christophe Lizot
                                        Title: Gerant

                                        SULZER INTRATHERAPEUTICS INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

<PAGE>

                                        SULZER MEDICA CANADA INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER MEDICA INTERNATIONAL FSC INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: President

                                        SULZER MITROFLOW CORP.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER ORTHOPEDICS CANADA INC.

                                        By: /s/ Jeffrey L. Frizell
                                          --------------------------------------
                                        Name:  Jeffrey L. Frizell
                                        Title: Treasurer

                                        SULZER SPINE-TECH INC.

                                        By:  /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

<PAGE>

                                        SULZER SPINE-TECH SURGICAL INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                                        SULZER VASCUTEK USA INC.

                                        By: /s/ Richard J. May
                                          --------------------------------------
                                        Name:  Richard J. May
                                        Title: Treasurer

                      Accepted and agreed to as of the date first above written.

                            /s/ Eric Kennedy
                            ----------------------------------------------------
                            R. Eric Kennedy, as interim Trustee on behalf of the
                               Sulzer Settlement Trust

                     (SIGNATURE PAGE TO SECURITY AGREEMENT)

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