Document:

Exhibit 4.6

 

EXECUTION VERSION

 

 

 

GUARANTY

 

dated as of

 

November 3, 2006

 

among

 

ENCORE MEDICAL HOLDINGS LLC,

 

as Holdings,

 

and

 

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

  
	
   

  	
   

  	
   

  
	
  Guaranty

  
	
   

  	
   

  	
   

  
	
  SECTION 2.01. Guaranty

  	
   

  	
  2

  
	
  SECTION 2.02. Guaranty of Payment

  	
   

  	
  3

  
	
  SECTION 2.03. No Limitations

  	
   

  	
  3

  
	
  SECTION 2.04. Reinstatement

  	
   

  	
  4

  
	
  SECTION 2.05. Agreement To Pay; Subrogation

  	
   

  	
  4

  
	
  SECTION 2.06. Information

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  
	
  Indemnity, Subrogation and Subordination

  
	
   

  	
   

  	
   

  
	
  SECTION 3.01. Indemnity and Subrogation

  	
   

  	
  4

  
	
  SECTION 3.02. Contribution and Subrogation

  	
   

  	
  4

  
	
  SECTION 3.03. Subordination

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  
	
  Miscellaneous

  
	
   

  	
   

  	
   

  
	
  SECTION 4.01. Notices

  	
   

  	
  6

  
	
  SECTION 4.02. Waivers; Amendment

  	
   

  	
  6

  
	
  SECTION 4.03. Collateral Agent’s Fees and Expenses;
  Indemnification

  	
   

  	
  7

  
	
  SECTION 4.04. Successors and Assigns

  	
   

  	
  7

  
	
  SECTION 4.05. Survival of Agreement

  	
   

  	
  7

  
	
  SECTION 4.06. Counterparts; Effectiveness; Several
  Agreement

  	
   

  	
  8

  
	
  SECTION 4.07. Severability

  	
   

  	
  8

  
	
  SECTION 4.08. Right of Set-Off

  	
   

  	
  8

  
	
  SECTION 4.09. Governing Law; Jurisdiction; Consent
  to Service of Process

  	
   

  	
  9

  
	
  SECTION 4.10. WAIVER OF JURY TRIAL

  	
   

  	
  9

  
	
  SECTION 4.11. Headings

  	
   

  	
  9

  
	
  SECTION 4.12. Security Interest Absolute

  	
   

  	
  10

  
	
  SECTION 4.13. Termination or Release

  	
   

  	
  10

  
	
  SECTION 4.14. Additional Restricted Subsidiaries

  	
   

  	
  11

  

 

i

 

	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule I         Subsidiary
  Parties

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit I             Form
  of Guaranty Supplement

  	
   

  	
   

  

 

ii

 

GUARANTY
dated as of November 3, 2006 among ENCORE MEDICAL HOLDINGS LLC (“Holdings”), the Subsidiaries of Holdings from time to time
party hereto and BANK OF AMERICA, N.A., as Collateral Agent.

 

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 ENCORE MEDICAL FINANCE LLC (“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 Syndication Agent, and
GENERAL ELECTRIC CAPITAL CORPORATION, as Documentation Agent. The Lenders have
agreed to extend credit to the Borrower subject to the terms and conditions set
forth in the Credit Agreement. The Guarantors 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 Guarantors
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.

 

(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:

 

“Agreement” means this Guaranty.

 

“Bankruptcy Law” has the meaning assigned to such term in
Section 2.01.

 

“Claiming Party” has the meaning assigned to such term in
Section 3.02.

 

“Collateral Agent” means Bank of America, N.A, in its
capacity as collateral agent under any of the Loan Documents, or any successor
collateral agent.

 

 

“Contributing Party” has the meaning assigned to such term in
Section 3.02.

 

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

 

“Guarantor” means Holdings and each Subsidiary Party.

 

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

 

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

 

“Subordinated Obligations” has the meaning assigned to such
term in Section 3.03.

 

“Subsidiary Parties” means (a) those 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

 

Guaranty

 

SECTION 2.01. Guaranty.

 

(a)           Each Guarantor
unconditionally guarantees, jointly with the other Guarantors and severally, as
a primary obligor and not merely as a surety, the due and punctual payment and
performance of the Obligations. Each of the Guarantors further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice to
or further assent from it, and that it will remain bound upon its guarantee
notwithstanding any extension or renewal of any Obligation. Each of the
Guarantors waives presentment to, demand of payment from and protest to the
Borrower or any other Loan Party of any of the Obligations, and also waives
notice of acceptance of its guarantee and notice of protest for nonpayment.

 

(b)           Each Guarantor, and by
its acceptance of this Agreement, the Collateral Agent and each other Secured
Party, hereby confirms that it is the intention of all such Persons that this
Agreement and the Obligations of each Guarantor hereunder not constitute a
fraudulent transfer or conveyance for purposes of Bankruptcy Law (as
hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Agreement and the Obligations of each Guarantor hereunder.
To effectuate the foregoing intention, the Collateral Agent, the other Secured
Parties and the Guarantors hereby irrevocably agree that the Obligations of
each Guarantor under this Agreement at any time shall be limited to the maximum
amount as will result in the Obligations of such Guarantor under this Agreement
not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means any proceeding of the
type referred to in Section 8.01(f) of the Credit Agreement or Title 11, U.S.
Code, or any similar foreign, federal or state law for the relief of debtors.

 

2

 

SECTION 2.02. Guaranty
of Payment. Each of the Guarantors further agrees that its guarantee
hereunder constitutes a guarantee of payment when due and not of collection,
and waives any right to require that any resort be had by the Collateral Agent
or any other Secured Party to any security held for the payment of the
Obligations, or to any balance of any deposit account or credit on the books of
the Collateral Agent or any other Secured Party in favor of the Borrower or any
other Person.

 

SECTION 2.03. No
Limitations.

 

(a)           Except for termination
of a Guarantor’s obligations hereunder as expressly provided in Section 4.13,
the obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any defense or set-off, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations, or otherwise. Any and all payments made by the Guarantor under or
in respect of this Agreement or any other Loan Document shall be made, in
accordance with Section 3.01 of the Credit Agreement. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by (i) the failure of the
Collateral Agent or any other Secured Party to assert any claim or demand or to
enforce any right or remedy under the provisions of any Loan Document or
otherwise; (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Loan Document or any other
agreement, including with respect to any other Guarantor under this Agreement;
(iii) the release of any security held by the Collateral Agent or any other
Secured Party for the Obligations; (iv) any default, failure or delay, willful
or otherwise, in the performance of the Obligations; or (v) any other act or
omission that may or might in any manner or to any extent vary the risk of any
Guarantor or otherwise operate as a discharge of any Guarantor as a matter of
law or equity (other than the indefeasible payment in full in cash of all the
Obligations). Each Guarantor expressly authorizes the Secured Parties to take
and hold security for the payment and performance of the Obligations, to
exchange, waive or release any or all such security (with or without
consideration), to enforce or apply such security and direct the order and
manner of any sale thereof in their sole discretion or to release or substitute
any one or more other guarantors or obligors upon or in respect of the
Obligations, all without affecting the obligations of any Guarantor hereunder.

 

(b)           To the fullest extent
permitted by applicable law, each Guarantor waives any defense based on or
arising out of any defense of the Borrower or any other Loan Party or the
unenforceability of the Obligations, or any part thereof from any cause, or the
cessation from any cause of the liability of the Borrower or any other Loan
Party, other than the indefeasible payment in full in cash of all the Obligations.
The Collateral Agent and the other Secured Parties may in accordance with the
terms of the Collateral Documents, at their election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales,
accept an assignment of any such security in lieu of foreclosure, compromise or
adjust any part of the Obligations, make any other accommodation with the
Borrower or any other Loan Party or exercise any other right or remedy
available to them against the Borrower or any other Loan Party, without
affecting or impairing in any way the liability of any Guarantor hereunder
except to the extent the Obligations have been fully and indefeasibly paid in
full in cash. To the fullest extent permitted by applicable law, each Guarantor
waives any defense arising out of any such

 

3

 

election even though such election operates,
pursuant to applicable law, to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of such Guarantor against
the Borrower or any other Loan Party, as the case may be, or any security.

 

SECTION 2.04. Reinstatement.
Each of the Guarantors agrees that its guarantee hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation, is rescinded or must otherwise be restored by
the Collateral Agent or any other Secured Party upon the bankruptcy or
reorganization of the Borrower, any other Loan Party or otherwise.

 

SECTION 2.05. Agreement
To Pay; Subrogation. In furtherance of the foregoing and not in limitation
of any other right that the Collateral Agent or any other Secured Party has at
law or in equity against any Guarantor by virtue hereof, upon the failure of the
Borrower or any other Loan Party to pay any Obligation when and as the same
shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, each Guarantor hereby promises to and will forthwith
pay, or cause to be paid, to the Collateral Agent for distribution to the
Secured Parties in cash the amount of such unpaid Obligation. Upon payment by
any Guarantor of any sums to the Collateral Agent as provided above, all rights
of such Guarantor against the Borrower or any other Loan Party arising as a
result thereof by way of right of subrogation, contribution, reimbursement,
indemnity or otherwise shall in all respects be subject to Article III.

 

SECTION 2.06. Information.
Each Guarantor assumes all responsibility for being and keeping itself informed
of the Borrower’s and each other Loan Party’s financial condition and assets,
and of all other circumstances bearing upon the risk of nonpayment of the
Obligations, and the nature, scope and extent of the risks that such Guarantor
assumes and incurs hereunder, and agrees that none of the Collateral Agent or
the other Secured Parties will have any duty to advise such Guarantor of
information known to it or any of them regarding such circumstances or risks.

 

ARTICLE III

 

Indemnity, Subrogation and
Subordination

 

SECTION 3.01. Indemnity
and Subrogation. In addition to all such rights of indemnity and
subrogation as the Guarantors may have under applicable law (but subject to
Section 3.03), the Borrower agrees that in the event a payment of an obligation
shall be made by any Guarantor under this Agreement, the Borrower shall
indemnify such Guarantor for the full amount of such payment and such Guarantor
shall be subrogated to the rights of the Person to whom such payment shall have
been made to the extent of such payment.

 

SECTION 3.02. Contribution
and Subrogation. Each Subsidiary Party (a “Contributing Party”) agrees (subject to Section 3.03) that, in
the event a payment shall be made by any other Subsidiary Party hereunder in
respect of any Obligation and such other Subsidiary Party (the “Claiming Party”) shall not have been fully
indemnified by the Borrower as provided in Section 3.01, the Contributing Party
shall indemnify the Claiming Party in an amount equal to the amount of such payment,
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

 

4

 

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 Guarantor becoming a party
hereto pursuant to Section 4.14, the date of the Guaranty Supplement hereto
executed and delivered by such Guarantor). Any Contributing Party making any
payment to a Claiming Party pursuant to this Section 3.02 shall be subrogated
to the rights of such Claiming Party to the extent of such payment.

 

SECTION 3.03. Subordination.

 

(a)           Notwithstanding any
provision of this Agreement to the contrary, all rights of the Guarantors under
Sections 3.01 and 3.02 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 the Borrower or any Guarantor to make the payments required by Sections
3.01 and 3.02 (or any other payments required under applicable law or
otherwise) shall in any respect limit the obligations and liabilities of any
Guarantor with respect to its obligations hereunder, and each Guarantor shall
remain liable for the full amount of the obligations of such Guarantor
hereunder.

 

(b)           Each Guarantor 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.

 

(c)           Each Guarantor hereby
subordinates any and all debts, liabilities and other obligations owed to such
Guarantor by each other Loan Party in respect of any payment by any Guarantor
under this Agreement (the “Subordinated
Obligations”) to the Obligations to the extent and in the manner
hereinafter set forth in this Section 3.03:

 

(d)           Prohibited Payments,
Etc. Except during the continuance of an Event of Default and after notice
from the Collateral Agent, each Guarantor may receive regularly scheduled
payments from any other Loan Party on account of the Subordinated Obligations. After
the occurrence and during the continuance of any Event of Default and after
notice from the Collateral Agent, however, unless the Collateral Agent
otherwise agrees, no Guarantor shall demand, accept or take any action to
collect any payment on account of the Subordinated Obligations.

 

(e)           Prior Payment of
Obligations. In any proceeding under any Bankruptcy Law relating to any
other Loan Party, each Guarantor agrees that the Secured Parties shall be
entitled to receive payment in full in cash of all Obligations before such
Guarantor receives payment of any Subordinated Obligations.

 

(f)            Turn-Over. After
the occurrence and during the continuance of any Event of Default, each
Guarantor shall, if the Collateral Agent so requests, collect, enforce and
receive payments on account of the Subordinated Obligations as trustee for the
Secured Parties and deliver such payments to the Collateral Agent on account of
the Obligations, together with any necessary endorsements or other instruments
of transfer, but without reducing or affecting in any manner the liability of
such Guarantor under the other provisions of this Agreement.

 

5

 

(g)           Collateral Agent
Authorization. After the occurrence and during the continuance of any Event
of Default and after notice, the Collateral Agent is authorized and empowered
(but without any obligation to so do), in its discretion, (i) in the name of
each Guarantor, to collect and enforce, and to submit claims in respect of,
Subordinated Obligations and to apply any amounts received thereon to the
Obligations, and (ii) to require each Guarantor (A) to collect and enforce, and
to submit claims in respect of, Subordinated Obligations and (B) to pay any
amounts received on such obligations to the Collateral Agent for application to
the Obligations.

 

ARTICLE IV

 

Miscellaneous

 

SECTION 4.01. 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 Holdings or any
Subsidiary Party shall be given to it in care of the Borrower as provided in
Section 10.02 of the Credit Agreement.

 

SECTION 4.02. 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 paragraph (b) of this Section 4.02, 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.

 

6

 

SECTION 4.03. Collateral
Agent’s Fees and Expenses; Indemnification.

 

(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 Guarantors
agree 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 Attorneys Costs 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
agreements or instruments contemplated hereby, 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 losses,
claims, damages, liabilities or related expenses resulted from the gross
negligence or wilful 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 4.03
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
4.03 shall be payable within 10 days of written demand therefor.

 

SECTION 4.04. 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 of any Guarantor or the Collateral Agent that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
and assigns.

 

SECTION 4.05. 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.

 

7

 

SECTION 4.06. 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”) 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 (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 4.07. 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 uneforceability 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 4.08. 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 is authorized at any time and from time to time,
without prior notice to the Borrower or any other Loan Party, any such notice
being waived by the Borrower and each Loan Party 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 to or
for the credit or the account of the respective Loan Parties against any and
all obligations owing to such Lender and its Affiliates hereunder, now or
hereafter existing, irrespective of whether or not such Lender or Affiliate
shall have made demand under this Agreement 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 agrees promptly to notify
the Borrower and the Collateral Agent after any such set off and application
made by such Lender; provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this Section 4.08 are
in addition to other rights and remedies (including other rights of setoff)
that the Collateral Agent and such Lender may have.

 

8

 

SECTION 4.09. Governing
Law; Jurisdiction; Consent to Service of Process.

 

(a)           This Agreement shall be
governed by and construed in accordance with 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 City and of the United States District Court for
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 Guarantor, 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 4.09. 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 4.01. Nothing in this Agreement or any other Loan Document
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.

 

SECTION 4.10. 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 4.10.

 

SECTION 4.11. 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

 

9

 

are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.

 

SECTION 4.12. Security
Interest Absolute. All rights of the Collateral Agent hereunder and all
obligations of each Guarantor 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,
any other agreement or instrument, (c) any release or amendment or waiver of or
consent under or departure from any guarantee 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 Guarantor in respect of the
Obligations or this Agreement.

 

SECTION 4.13. Termination
or Release.

 

(a)           This Agreement and the
Guaranties made herein shall terminate with respect to all Obligations when all
the outstanding Obligations have been indefeasibly paid in full (other than
Obligations under any Secured Hedge Agreement, Cash Management Obligations and
contingent indemnification obligations not then due and payable) 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 termination of the Commitments) 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 upon the
consummation of any transaction permitted by the Credit Agreement as a result
of which such Subsidiary Party ceases to be a 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)           In connection with any
termination or release pursuant to paragraphs (a) or (b), the Collateral Agent
shall execute and deliver to any Guarantor, at such Guarantor’s expense, all
documents that such Guarantor shall reasonably request to evidence such
termination or release. Any execution and delivery of documents pursuant to
this Section 4.13 shall be without recourse to or warranty by the Collateral
Agent.

 

(d)           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
acknowledge and agree that (i) the guaranties 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 guaranties granted

 

10

 

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 a Guarantor effected in the manner permitted by this Agreement shall
not require the consent of any Hedge Bank or Cash Management Bank.

 

SECTION 4.14. 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 Guaranty 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.

 

11

 

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

 

 

	
   

  	
  ENCORE MEDICAL HOLDINGS LLC,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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:

  
	
   

  
	
   

  
	
   

  	
  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:

  
	
   

  
	
   

  
	
   

  	
  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

  

 

 

IN
WITNESS WHEREOF, for the purposes of Section 3.01, the undersigned has executed
this Guaranty as of the date first written above.

 

 

	
   

  	
  ENCORE MEDICAL FINANCE LLC,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry Zimmerman

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Schedule I

 

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.

  

 

 

Exhibit I to the

Guaranty

 

SUPPLEMENT
NO.     dated as of [•], to the
Guaranty dated as of November 3, 2006 among ENCORE MEDICAL HOLDINGS LLC (“Holdings”), the Subsidiaries of Holdings from time to time
party hereto and BANK OF AMERICA, N.A., as Collateral Agent.

 

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 ENCORE MEDICAL FINANCE LLC (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 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 Guaranty referred to therein.

 

C.            The Guarantors have
entered into the Guaranty in order to induce the Lenders to make Loans and the
L/C Issuers to issue Letters of Credit. Section 4.14 of the Guaranty provides
that additional Restricted Subsidiaries of the Borrower may become Subsidiary
Parties under the Guaranty 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 Guaranty 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 4.14 of the Guaranty, the New Subsidiary by its
signature below becomes a Subsidiary Party (and accordingly, becomes a Guarantor
under the Guaranty 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 Guaranty applicable to it as a Subsidiary Party
and Guarantor thereunder and (b) represents and warrants that the
representations and warranties made by it as a Guarantor thereunder are true
and correct on and as of the date hereof. Each reference to a “Guarantor” in
the Security Agreement shall be deemed to include the New Subsidiary. The
Guaranty 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 a “TIF”) shall
be as effective as delivery of a manually signed counterpart of this
Supplement.

 

SECTION
4. Except as expressly supplemented hereby, the Guaranty shall remain in full
force and effect.

 

SECTION 5.
THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.

 

SECTION
6. 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 Guaranty 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
7. All communications and notices hereunder shall be in writing and given as
provided in Section 4.01 of the Guaranty.

 

SECTION
8. 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.

 

2

 

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

 

	
   

  	
  [NAME OF NEW SUBSIDIARY],

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  as Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

3Exhibit 10.1

 

ENCORE
MEDICAL CORPORATION

2006 STOCK INCENTIVE PLAN

 

1.                                       Purpose
of the Plan

 

The purpose of the Plan (as defined below) is
to aid the Company (as defined below) and its Affiliates (as defined below) in
recruiting and retaining key employees, directors or consultants of outstanding
ability and to motivate such employees, directors or consultants to exert their
best efforts on behalf of the Company and its Affiliates by providing
incentives through the granting of Awards (as defined below). The Company
expects that it will benefit from the added interest which such key employees,
directors or consultants will have in the welfare of the Company as a result of
their proprietary interest in the Company’s success.

 

2.                                       Definitions

 

The following capitalized terms used in the
Plan have the respective meanings set forth in this Section:

 

(a) Affiliate:  With respect to any Person, any other Person,
directly or indirectly, controlling, controlled by or under common control with
such Person or any other Person designated by the Committee in which any Person
has an interest.

 

(b) Award:  Any Option or Other Stock-Based Award granted
pursuant to the Plan.

 

(c) Award
Agreement:  Any written agreement,
contract, or other instrument or document evidencing any Award, which may, but
need not, be executed or acknowledged by a Participant.

 

(d) Blackstone:  Each of Blackstone Capital Partners V L.P., a
Cayman Islands limited partnership, Blackstone Family Investment Partnership V
L.P., a Cayman Islands limited partnership, Blackstone Family Investment
Partnership V-A L.P., a Cayman Islands limited partnership, Blackstone
Participation Partnership V L.P., a Cayman Islands limited partnership and each
of their respective Affiliates.

 

(e) Board:  The Board of Directors of the Company.

 

(f) Change
in Control:  (i) the sale or
disposition, in one or a series of related transactions, of all or
substantially all of the assets of the Company to any “person” or “group” (as
such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
other than a sale or disposition where Blackstone retains all or substantially
all of the assets of the Company, or (ii) any person or group, other than
Blackstone, is or becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the
total voting power of the voting stock of the Company, including by way of
merger, consolidation or otherwise (other than an offering of stock to the
general public through a registration statement filed with the Securities and
Exchange Commission or pursuant to which Blackstone retains more than fifty
percent (50%) of the total voting power of the voting stock of the Company); or
(iii) the approval by the stockholders of the Company of a plan of complete
liquidation of the Company.

 

 

 

(g) Code:  The Internal Revenue Code of 1986, as
amended, or any successor thereto.

 

(h) Committee:  A committee of the Board designated by the
Board.

 

(i) Company:  Encore Medical Corporation, a Delaware
corporation.

 

(j) Effective
Date:  The date the Board adopts the
Plan.

 

(k) Employment:
(i) a Participant’s employment if the Participant is an employee of the Company
or any of its Affiliates, (ii) a Participant’s services as a consultant, if the
Participant is a consultant to the Company or any of its Affiliates and (iii) a
Participant’s services as a non-employee director, if the Participant is a
non-employee member of the Board or the board of directors of an Affiliate;
provided however that unless otherwise determined by the Committee, a change in
a Participant’s status from employee to non-employee (other than a director of
the Company or an Affiliate) shall constitute a termination of employment
hereunder.

 

(l) Exchange
Act:  The Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder, or any
successor statute thereto.

 

(m) Fair
Market Value:  On a given date, (a)
if there is a public market for the Shares on such date, the average of the
high and low closing bid prices of the Shares on such stock exchange on which
the Shares are principally trading on the date in question, or, if there were
no sales on such date, on the closest preceding date on which there were sales
of Shares or (ii) if there is no public market for the Shares on such date, the
fair market value of the Shares as determined in good faith by the Board and in
a manner consistent with Section 409A of the Code.

 

(n) Option:  A stock option granted pursuant to Section 6
of the Plan.

 

(o) Option
Price:  The purchase price per Share
of an Option, as determined pursuant to Section 6(a) of the Plan.

 

(p) Other
Stock-Based Award:  Any award granted
under Section 7 of the Plan.

 

(q) Participant:  An employee, director or consultant of the
Company or its Affiliates who is selected by the Committee to participate in
the Plan.

 

(r) Person:  Any individual, firm, corporation,
partnership, limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental body or other
entity of any kind.

 

(s) Plan:  Encore Medical Corporation 2006 Stock
Incentive Plan.

 

(t) Shares:  Shares of common stock of the Company.

 

(u) Subsidiary:  A subsidiary corporation, as defined in
Section 424(f) of the Code.

 

2

 

3.                                       Shares
Subject to the Plan

 

The total number of Shares which may be
issued under the Plan is 100,000, subject to adjustment pursuant to Section 8
of the Plan. The Shares may consist, in whole or in part, of unissued Shares or
treasury Shares. The issuance of Shares or the payment of cash upon the
exercise of an Award shall reduce the total number of Shares available under
the Plan, as applicable. Shares which are subject to Awards (or portion
thereof) that terminate or lapse may be granted again under the Plan.

 

4.                                       Administration

 

(a) The Plan
shall be administered by the Committee, which may delegate its duties and
powers in whole or in part as it determines; provided, however,
that the Board may, in its sole discretion, take any action designated to the
Committee under this Plan as it may deem necessary.

 

(b) The Committee shall have the full power
and authority to make, and establish the terms and conditions of, any Award to
any person eligible to be a Participant, consistent with the provisions of the
Plan and to waive any such terms and conditions at any time (including, without
limitation, accelerating or waiving any vesting conditions). Awards may, in the
discretion of the Committee, be made under the Plan in assumption of, or in
substitution for, outstanding awards previously granted by the Company or its
Affiliates or a company acquired by the Company or with which the Company
combines; provided, that such Awards shall contain terms and conditions no less
favorable to the Participant than the terms and conditions of such outstanding
awards. The number of Shares underlying such substitute awards shall be counted
against the aggregate number of Shares available for Awards under the Plan.

 

(c) The Committee is authorized to interpret
the Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, and to make any other determinations that it deems necessary or
desirable for the administration of the Plan, and may delegate such authority,
as it deems appropriate. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent the Committee deems necessary or desirable. Any decision of the
Committee in the interpretation and administration of the Plan, as described
herein, shall lie within its sole and absolute discretion and shall be final,
conclusive and binding on all parties concerned (including, but not limited to,
Participants and their beneficiaries or successors).

 

(d) The Committee shall require payment of
any amount it may determine to be necessary to withhold for federal, state,
local, or other taxes as a result of the exercise, grant or vesting of an Award.
Unless the Committee specifies otherwise in a Participant’s Award Agreement,
the Participant may elect to pay a portion or all of such withholding taxes by
having Shares withheld by the Company with a Fair Market Value equal to the
minimum statutory withholding rate from any Shares that would have otherwise
been received by the Participant in connection with (i) the exercise of an
Option or (ii) the delivery of Shares pursuant to an Other Stock-Based
Award.

 

3

 

5.                                       Limitations

 

No Awards may be granted under the Plan after
the tenth anniversary of the Effective Date, but Awards theretofore granted may
extend beyond that date.

 

6.                                       Options

 

Options granted under the Plan shall be
nonstatutory stock options and evidenced by the related Award Agreements, and
shall be subject to the following terms and conditions as well as the terms and
conditions set forth in the applicable Award Agreement:

 

(a) Option Price. The Option Price
shall be determined by the Committee, but shall not be less than 100% of the
Fair Market Value of the Shares on the date an Option is granted.

 

(b) Exercisability. Options granted
under the Plan shall be exercisable at such time and upon such terms and
conditions as may be determined by the Committee, but in no event shall an
Option be exercisable more than ten years after the date it is granted.

 

(c) Exercise of Options. Except as
otherwise provided in the Plan or in an Award Agreement, an Option may be
exercised for all, or from time to time any part, of the Shares for which it is
then exercisable. For purposes of this Section 6, the exercise date of an
Option shall be the date a notice of exercise is received by the Company,
together with payment (or to the extent permitted by applicable law, provision
for payment) of the full purchase price in accordance with this Section 6(c). The
purchase price for the Shares as to which an Option is exercised shall be paid
to the Company as designated by the Committee, pursuant to one or more of the
following methods: (i) in cash, or its equivalent (e.g., by check), (ii) in
Shares having a Fair Market Value equal to the aggregate Option Price for the
Shares being purchased to the Company; provided that such Shares have
been held by the Participant for no less than six months (or such other period
as established from time to time by the Committee or generally accepted
accounting principles); (iii) partly in cash and partly in such Shares; (iv) if
there is a public market for the Shares at such time, subject to compliance
with laws, and Company policies, through delivery of irrevocable instructions
to a broker to sell the Shares otherwise deliverable upon the exercise of the
Option and to deliver upon the date of exercise to the Company an amount equal
to the aggregate Option Price for the shares being purchased; (v) cashless
exercise or (vi) such other method as approved by the Committee. Except as set
forth in a separate agreement between a Participant and the Company, no
Participant shall have any rights to dividends or other rights of a stockholder
with respect to Shares subject to an Option until the Participant has given
written notice of exercise of the Option, paid in full for such Shares and, if
applicable, has satisfied any other conditions imposed by the Committee
pursuant to the Plan.

 

(d) Attestation. Wherever in this Plan
or any Award Agreement a Participant is permitted to pay the Option Price or
taxes relating to the exercise of an Option by delivering Shares, the
Participant may, subject to procedures satisfactory to the Committee, satisfy
such delivery requirement by presenting proof of beneficial ownership of such
Shares, in which case the Company shall treat the Option as exercised without
further payment and shall withhold such number of Shares from the Shares
acquired by the exercise of the Option.

 

4

 

7.                                       Other
Stock-Based Awards.

 

The Committee, in its sole discretion, may
grant the right to purchase Shares, Awards of Shares, Awards of restricted
Shares, Awards of phantom stock units and other Awards that are valued in whole
or in part by reference to, or are otherwise based on the Fair Market Value of,
Shares (“Other Stock-Based Awards”). Such Other Stock-Based Awards shall be in
such form, and dependent on such conditions, as the Committee shall determine,
including, without limitation, the right to receive one or more Shares (or the
equivalent cash value of such Shares) upon the completion of a specified period
of service, the occurrence of an event and/or the attainment of performance
objectives. Other Stock-Based Awards may be granted alone or in addition to any
other Awards granted under the Plan. Subject to the provisions of the Plan, the
Committee shall determine: (a) the number of Shares to be awarded under (or
otherwise related to) such Other Stock-Based Awards; (b) whether such Other
Stock-Based Awards shall be settled in cash, Shares or a combination of cash
and Shares; and (c) all other terms and conditions of such Other Stock-Based
Awards (including, without limitation, the vesting provisions thereof and
provisions ensuring that all Shares so awarded and issued shall be fully paid
and non-assessable).

 

8.                                       Adjustments
Upon Certain Events

 

Notwithstanding any other provisions in the
Plan to the contrary, the following provisions shall apply to all Awards
granted under the Plan:

 

(a) Generally. In the event of any
change in the outstanding Shares after the Effective Date by reason of any
Share dividend or split, reorganization, recapitalization, merger,
consolidation, spin-off, combination or transaction or exchange of Shares or
other corporate exchange, or any distribution to shareholders of Shares other
than regular cash dividends or any transaction similar to the foregoing or the
issuance of equity (or rights to acquire equity) for consideration less than
Fair Market Value, the Committee shall, without liability to any person, make
such substitution or adjustment, if any, as it deems to be equitable, as to
(i) the number or kind of Shares or other securities issued or reserved
for issuance pursuant to the Plan or pursuant to outstanding Awards,
(ii) the Option Price and/or (iii) any other affected terms of such
Awards.

 

(b) Change in Control. In the event of
a Change of Control after the Effective Date, the Committee may, in its sole
discretion, provide for the (i) termination of an Award upon the consummation
of the Change of Control, but only if such Award has vested and been paid out
or the Participant has been permitted to exercise the Option in full for a
period of not less than 15 days prior to the Change of Control, (ii)
acceleration of all or any portion of an Award, (iii) payment of an amount (in
cash or, in the discretion of the Committee, in the form of consideration paid
to shareholders of the Company in connection with such Change of Control) in
exchange for the cancellation of an Award, which, in the case of Options, shall
equal the excess, if any, of the Fair Market Value of the Shares subject to
such Options over the aggregate Option Price or grant price of such Option, and/or
(iv) issuance of substitute Awards that will substantially preserve the
otherwise applicable terms of any affected Awards previously granted hereunder.

 

(c) To the extent that any equity securities
of any member of the Company’s controlled group become publicly-traded, at such
time all Options shall be exchanged, in a manner consistent with Sections 409A
and 424 of the Code, for options with the same intrinsic value in the 

 

5

 

publicly-traded
entity, and all Shares shall be exchanged for shares of common stock with the
same aggregate value of the publicly-traded entity. Following such conversion,
all references in this Plan and in any Award Agreement to the “Company” shall
be deemed to refer to the publicly-traded entity.

 

9.                                       No
Right to Employment or Awards

 

The granting of an Award under the Plan shall
impose no obligation on the Company or any of its Affiliates to continue the
Employment of a Participant and shall not lessen or affect the Company’s or its
Affiliates’ rights to terminate the Employment of such Participant. No
Participant or other Person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of Participants or holders
or beneficiaries of Awards. The terms and conditions of Awards and the
Committee’s determinations and interpretations with respect thereto need not be
the same with respect to each Participant (whether or not such Participants are
similarly situated).

 

10.                                 Successors
and Assigns

 

The Plan shall be binding on all successors
and assigns of the Company and a Participant, including without limitation, the
estate of such Participant and the executor, administrator or trustee of such
estate, or any receiver or trustee in bankruptcy or representative of the
Participant’s creditors.

 

11.                                 Nontransferability
of Awards

 

Unless otherwise determined by the Committee,
an Award shall not be transferable or assignable by the Participant other than
by will or by the laws of descent and distribution. An Award exercisable after
the death of a Participant may be exercised by the legatees, personal
representatives or distributees of the Participant. Notwithstanding anything
here in to the contrary, a Participant may transfer or assign all or any part
of an Award to “family members” (as defined in the General Instructions to Form
S-8 of the Securities Act of 1933) or trusts, partnerships or similar entities
for the benefit of such family members, for estate planning purposes or in
connection with the disposition of Participant’s estate.

 

12.                                 Awards
Subject to the Plan.

 

In the event of a conflict between any term
or provision contained in the Plan and a term or provision in any Award
Agreement, the applicable terms and provisions of the Plan will govern and prevail.

 

13.                                 Severability.

 

If any provision of the Plan or any Award is,
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it cannot
be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of 

 

6

 

the Plan or
the Award, such provision shall be stricken as to such jurisdiction, Person or
Award and the remainder of the Plan and any such Award shall remain in full
force and effect.

 

14.                                 Amendments
or Termination

 

(a) Amendments or Termination of the Plan.
The Committee may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made, without the written consent of a
Participant, if such action would diminish any of the rights of the Participant
under any Award theretofore granted to such Participant under the Plan; provided,
however, that the Committee may amend the Plan in such manner as it
deems necessary to comply with the Code or other applicable laws.

 

(b) Amendments to Awards. The
Committee may waive any conditions or rights under, amend any terms of, or
alter, suspend, discontinue, cancel or terminate, any Award theretofore
granted, prospectively or retroactively; provided that no waiver,
amendment, alteration, suspension, discontinuation, cancellation or termination
shall impair the rights of any Participant or any holder or beneficiary of any
Award theretofore granted without the prior written consent of the affected
Participant, holder or beneficiary.

 

15.                                 Other
Benefit Plans

 

All Awards shall
constitute a special incentive payment to the Participant and shall not be
taken into account in computing the amount of salary or compensation of the
Participant for the purpose of determining any benefits under any pension,
retirement, profit-sharing, bonus, life insurance or other benefit plan of the
Company or under any agreement between the Company and the Participant, unless
such plan or agreement specifically provides otherwise.

 

16.                                 Choice
of Law

 

The Plan shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to
conflicts of laws.

 

17.                                 Effectiveness
of the Plan

 

The Plan shall be effective as of the
Effective Date.

 

7

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