KINETIC CONCEPTS, INC
8023 Vantage Drive
SAN ANTONIO, TEXAS 78230
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1996
To the Shareholders of Kinetic Concepts, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Kinetic Concepts, Inc. (the "Company") will be
held in the Cancun and Cozumel Rooms of the Embassy Suites Hotel,
7750 Briaridge, San Antonio, Texas on Tuesday, May 14, 1996 at
9:00 a.m., local time, for the purpose of considering and acting
upon the following matters:
(1) The election of six directors of the Company to serve until
the next annual meeting of shareholders and until their
successors are elected and qualified;
(2) The approval of the appointment of the firm of KPMG Peat
Marwick LLP as the independent public accountants of the
Company for the 1996 fiscal year; and
(3) The transaction of such other business as may lawfully come
before the meeting or any adjournment thereof.
The record date for the meeting has been fixed at March 26,
1996. Only shareholders of record at the close of business on
that date will be entitled to vote at the meeting or any
adjournment thereof. You are cordially invited to attend the
meeting. Shareholders wishing to attend the meeting should bring
proper identification and evidence of their ownership of shares
of the Company's Common Stock to the meeting.
Shareholders who do not expect to attend the meeting in
person are urged to sign the enclosed proxy and return it
promptly to the First National Bank of Boston, Proxy Department,
P.O. Box 1628, Boston, Massachusetts 02105-1628. A return
envelope is enclosed for that purpose.
KINETIC CONCEPTS, INC.
/s/ DENNIS E. NOLL
--------------------------
Dennis E. Noll, Secretary
Dated: March 28, 1996
PLEASE COMPLETE THE ENCLOSED PROXY AND MAIL IT PROMPTLY
KINETIC CONCEPTS, INC.
8023 Vantage Drive
San Antonio, Texas 78230
_________________________________________
PROXY STATEMENT
_________________________________________
The accompanying proxy is solicited by the Board of
Directors of Kinetic Concepts, Inc., a Texas corporation (the
"Company"), to be voted at the Annual Meeting of Shareholders to
be held on May 14, 1996, and at any adjournment thereof. The
Company will bear the cost of the solicitation. It is expected
that the solicitation of proxies will be made by mail. This
Proxy Statement and accompanying form of proxy are being mailed
or given to security holders on or about April 3, 1996.
Only holders of record of common stock, par value $.001
("Common Stock"), of the Company at the close of business on
March 26, 1996 shall be entitled to vote at the Annual Meeting.
There were 44,404,888 shares of Common Stock issued and
outstanding on the record date. Each share of Common Stock is
entitled to one vote. As of February 1, 1996, to the knowledge
of the Company, no holder of record owned more than five percent
of the outstanding shares of Common Stock, except James R.
Leininger, M.D., whose business address is 8023 Vantage Drive,
San Antonio, Texas 78230, and who owns of record 22,402,181
shares (50.5%) of the issued and outstanding shares of Common
Stock and Wellington Management Company, whose business address
is 75 State Street, Boston Massachusetts 02109, and who owns of
record 2,634,300 shares (5.94%) of the issued and outstanding
shares of Common Stock. Any shareholder giving a proxy has the
power to revoke the same at any time prior to its use by giving
notice in person or in writing to the Secretary of the Company.
Votes cast by proxy or in person at the Annual Meeting will
be tabulated by the inspectors of election appointed for the
meeting. A quorum for transaction of business at the Annual
Meeting requires representation, in person or by proxy, of a
majority of the issued and outstanding shares of Common Stock.
The inspectors of election will treat abstentions and broker non-
votes as shares that are present for purposes of determining the
presence of a quorum for transaction of business at the meeting.
A quorum with respect to any matter to be voted on at the Annual
Meeting requires representation, in person or by proxy, of a
majority of the issued and outstanding shares of Common Stock
entitled to vote on that matter. With respect to any matter
submitted to the shareholders for a vote, abstentions will be
treated as present and entitled to vote for purposes of
determining both the presence of a quorum with respect to that
matter and the approval of that matter. If a broker indicates on
a proxy that it does not have the discretionary authority as to
certain shares to vote on a particular matter, those shares will
not be considered as present and entitled to vote with respect to
that matter for purposes of determining the presence of a quorum
with respect to that matter or the approval of that matter.
ELECTION OF DIRECTORS
Six (6) directors, constituting the entire Board of
Directors, are to be elected at the Annual Meeting. Each
director will hold office until the next Annual Meeting and until
his successor is duly elected and qualified. The proxies named
in the accompanying proxy, who have been designated by the Board
of Directors, intend to vote for the following nominees for
election as directors, unless otherwise directed. The vote of a
plurality of the shares of Common Stock present at the Annual
Meeting and entitled to vote thereon will be necessary to elect
the directors listed below. Abstentions and broker non-votes
will not be included in the vote totals and thus will not affect
the outcome of the vote. All of the nominees are currently
directors of the Company.
Business Experience of Directors and Nominees
- ---------------------------------------------
Certain information concerning the members of the Board of
Directors and the nominees is set forth as follows:
James R. Leininger, M.D., age 51, is the founder of the
Company and has served as Chairman of the Board of Directors
since 1976. From January 1990 to November 1994, Dr. Leininger
served as President and Chief Executive Officer of the Company.
From 1975 until October 1986, Dr. Leininger was also the Chairman
of the Emergency Department of the Baptist Hospital System in
San Antonio, Texas.
Raymond R. Hannigan, age 56, joined the Company as its
President and Chief Executive Officer in November 1994 and has
served as a Director of the Company since 1994. From January
1991 to November 1994, Mr. Hannigan was the President of the
International Division of Sterling Winthrop Consumer Health Group
(a pharmaceutical company with operations in over 40 countries),
a wholly-owned subsidiary of the Eastman Kodak Company. From May
1989 to January 1991, Mr. Hannigan was the President of Sterling
Drug International.
Peter A. Leininger, M.D., age 53, joined the Company as its
Vice President, Medical in 1978, became Chief Administrative
Officer and Senior Vice President of the Company in January 1994
and was named Executive Vice President in September 1995. Dr.
Peter Leininger became a member of the Company's Board of
Directors in 1980. Prior to 1978, Dr. Peter Leininger maintained
a private medical practice and functioned as the southeast
regional distributor for the Company's products. Peter A.
Leininger, M.D. is the brother of James R. Leininger, M.D.
Sam A. Brooks, age 57, has served as a Director of the
Company since 1987. Mr. Brooks also serves on the Board of
Directors of Nationwide Health Properties, Inc. (a real estate
investment trust), Quorum Health Group, Inc. (a hospital
management company) and PhyCor, Inc. (a physician management
company), each of which has securities registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Mr. Brooks has served as the Chairman of the Board of National
Imaging Affiliates, Inc. (an operator of magnetic resonance
imaging centers) since 1992 and President of MedCare Investment
Corp. (the general partner of a medical venture capital fund)
since April 1991. From 1986 to October 1989, he was President of
Nationwide Health Properties, Inc. and prior to 1986, Mr. Brooks
served as Executive Vice President and Chief Financial Officer of
Hospital Corporation of America (a hospital management company).
Frank A. Ehmann, age 62, has served as a Director of the
Company since 1987. He is also a member of the Board of
Directors of Genderm Inc. (a pharmaceutical company), SPX
Corporation (a machinery manufacturer), American Health Corp.,
Inc. (a diabetes treatment provider) and AHA Investment Funds,
Inc. (an investment advisory company), each of which has
securities registered under the Exchange Act. Mr. Ehmann was
President and Chief Operating Officer of United Stationers, Inc.
(an office products company) from March 1986 to October 1989.
Prior to December 1985, Mr. Ehmann was an Executive Vice
President and Co-Chief Operating Officer of Baxter Travenol
Laboratories, Inc. (a medical products company).
Bernhard T. Mittemeyer, M.D., age 65, has served as a
Director of the Company since 1987. Dr. Mittemeyer has served as
Executive Vice President and Provost of the Texas Tech University
Health Science Center since 1986. Dr. Mittemeyer also served as
Interim Dean of the Texas Tech School of Medicine from November
1988 until August 1990. From March 1985 until October 1986, Dr.
Mittemeyer served as the Senior Vice President and Corporate
Medical Director of Whittaker Health Services (a health
maintenance organization). Prior to March 1985, Dr. Mittemeyer
served for 28 years as a career officer in the United States Army
which culminated in his service as the Surgeon General of the
United States Army from October 1981 to February 1985.
Information Concerning Directors
- --------------------------------
None of the directors, nominees for director or the
executive officers of the Company has a family relationship with
any of the other directors, nominees for director or executive
officers except James R. Leininger, M.D. and Peter A. Leininger,
M.D., who are brothers. None of the nominees is a director of
any other company which has a class of securities registered
under, or is required to file reports under, the Exchange Act or
of any company registered under the Investment Company Act of
1940, except for the directorships held by Messrs. Brooks and
Ehmann which are noted above.
Director Compensation
- ---------------------
Each director of the Company, other than James R. Leininger,
M.D., Peter A. Leininger, M.D. and Raymond R. Hannigan, received
compensation for serving as a director during 1995. Each outside
director receives $24,000 per annum for serving as a member of
the Board of Directors and is reimbursed for the expenses
incurred by him as a result of his membership on the Board of
Directors. Under the 1988 Eligible Directors Stock Option Plan,
outside directors receive a stock option covering 24,000 shares
of Common Stock upon becoming a member of the Board of Directors
and an option covering 2,500 shares on each anniversary of
becoming a director. The exercise price of all options so
granted is equal to the fair market value of Common Stock at the
close of business on the day immediately prior to the date of
grant.
Board of Directors' Meetings and Committees
- -------------------------------------------
During 1995, the Board of Directors held four (4) meetings.
Each of the directors attended over seventy-five percent of the
total number of meetings of the Board of Directors and the total
number of meetings held by all committees of the Board on which
he served.
The Board of Directors has an Audit Committee consisting of
Sam A. Brooks, Chairman, Frank A. Ehmann and Bernhard T.
Mittemeyer, M.D. The Audit Committee met three (3) times during
1995. The Audit Committee recommends the appointment of the
Company's independent auditors, confers with the auditors and
with management concerning the scope of the annual audit and
reviews the audit procedures and internal accounting controls of
the Company and its subsidiaries.
The Board of Directors has a Compensation Committee
consisting of Sam A. Brooks, Bernhard T. Mittemeyer, M.D. and
Frank A. Ehmann, Chairman. The Compensation Committee met three
(3) times in 1995. The functions of the Compensation Committee
are to review and establish the compensation of officers and
other management personnel.
The Board of Directors has a Stock Option Committee (the
"Stock Option Committee"), which administers the 1987 Kinetic
Concepts, Inc. Key Contributor Stock Option Plan (the "Key
Contributor Plan"), consisting of Sam A. Brooks, Bernhard T.
Mittemeyer, M.D., Chairman and Frank A. Ehmann. The Stock Option
Committee met once in 1995.
The Board of Directors has a Nominating Committee consisting
of James R. Leininger, M.D., Chairman, Sam A. Brooks, Frank A.
Ehmann and Peter A. Leininger, M.D. The Nominating Committee did
not meet in 1995. The Nominating Committee makes recommendations
to the Board on the selection of candidates as nominees for
election as members of the Company's Board of Directors. In
recommending Board candidates, the Nominating Committee seeks
individuals of proven judgment and competence who are outstanding
in their chosen field of endeavor and considers such factors as
anticipated participation in Board activities, education, special
talents and personal attributes. Shareholders who wish to suggest
qualified candidates should write to the Secretary of the Company
at 8023 Vantage Drive, San Antonio, Texas 78230, stating in
detail the qualifications of such persons for consideration by
the Nominating Committee.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Bernard T. Mittemeyer, M.D., Sam A. Brooks and Frank A.
Ehmann are the members of the Company's Compensation Committee.
James R. Leininger, M.D., the Chairman of the Board, was a member
of the Compensation Committee in 1995. Dr. Leininger did not
participate in any deliberations of the Compensation Committee
concerning his compensation or the compensation of his brother,
Peter A. Leininger, M.D. Mr. Brooks is President of MedCare
Investment Corp. and Chairman of National Imaging Affiliates,
Inc. Dr. James R. Leininger serves on the Board of Directors of
both companies, neither of which has a compensation committee.
SECURITIES HOLDINGS OF PRINCIPAL SHAREHOLDERS,
DIRECTORS AND OFFICERS
Based upon information received upon request from the
persons concerned, each person known to be the beneficial owner
of more than five percent of the Company's outstanding common
stock, each director, nominee for director, named executive
officer (as defined on page 8 hereof) and all directors and
executive officers of the Company as a group, owned beneficially
as of February 1, 1996, the number and percentage of outstanding
shares of Common Stock of the Company indicated in the following
table:
<TABLE>
<CAPTION> Shares of Common
Stock Beneficially
owned as of Percent
Names of Individuals February 1,1996 (1) of Class
- -------------------- ------------------- --------
<S> <C> <C>
James R.Leininger, M.D. 22,925,878 51.70%
(2)(3)(4)(5)(6)
8023 Vantage Drive
San Antonio, TX 78230
Wellington Management Company (7) 2,634,300 5.93%
75 State Street
Boston, Massachusetts 02109
Peter A. Leininger, M.D. 1,483,708 3.34%
(5)(6)(8)
Raymond R. Hannigan (9) 582,400 1.31%
Sam A. Brooks (3)(10) 174,000 *
Frank A. Ehmann (10) 25,000 *
Bernhard T. Mittemeyer, M.D. (10) 25,200 *
Bianca A. Rhodes (11) 69,576 *
Daniel R. Puchek (11) 40,699 *
All directors and executive
officiers as a group
(16 persons) (12) 23,836,130 53.05%
_________________
* Less than one (1%) percent
</TABLE>
(1) Except as otherwise indicated in the following notes, the
persons named in the table directly own the number of shares
indicated in the table and have the sole voting power and
investment power with respect to all of such shares.
Shares beneficially owned include options exercisable prior
to April 2, 1996.
(2) The shares shown for Dr. James R. Leininger include
beneficial ownership of 27,572 shares of Common Stock held
by Dr. Leininger as trustee for the children of Peter A.
Leininger, M.D. Dr. Leininger disclaims beneficial
ownership of the aforesaid shares. The shares shown also
include an aggregate of 1,886,500 shares with respect to
which Dr. Leininger has granted stock options to certain
persons, approximately 1,737,248 of which are currently
exercisable.
(3) The board of directors of Children's Covenant Foundation,
Inc., which consists of Dr. James R. Leininger, Cecelia A.
Leininger (Dr. James R. Leininger's wife), Sam A. Brooks and
Dan A. Brooks, has voting and dispositive power over the
shares of Common Stock owned by this charitable foundation.
The shares shown for Dr. James R. Leininger and Sam A.
Brooks include the 40,000 shares of Common Stock owned by
Children's Covenant Foundation, Inc. Dr. Leininger and Sam
A. Brooks disclaim beneficial ownership of the aforesaid
shares.
(4) The board of directors of Covenant Foundation, Inc., which
consists of Dr. James R. Leininger, Cecelia A. Leininger and
Charles A. Staffel has voting and dispositive power over the
shares of Common Stock owned by this charitable foundation.
The shares shown for Dr. James R. Leininger include the
388,500 shares of Common Stock owned by Covenant Foundation,
Inc. Dr. Leininger disclaims beneficial ownership of the
aforesaid shares.
(5) The board of directors of Kinetic Concepts Foundation, which
consists of Dr. James R. Leininger, Cecelia A. Leininger,
Dr. Peter A. Leininger and Thomas W. Lyles, Jr., has voting
and dispositive power over the shares of Common Stock owned
by this charitable foundation. The shares shown for Dr.
James R. Leininger and Dr. Peter A. Leininger include the
60,125 shares of Common Stock owned by Kinetic Concepts
Foundation. Dr. James R. Leininger and Dr. Peter A.
Leininger disclaim beneficial ownership of the aforesaid
shares.
(6) The board of directors of The PAL Foundation, which consists
of Dr. James R. Leininger, Dr. Peter A. Leininger, Dr. John
H. Leininger and Daniel E. Leininger, has voting and
dispositive power over the shares of Common Stock owned by
this charitable foundation. The shares shown for Dr. James
R. Leininger and Dr. Peter A. Leininger include the 7,500
shares of Common Stock owned by The PAL Foundation. Dr.
James R. Leininger and Dr. Peter A. Leininger each disclaim
beneficial ownership of the aforesaid shares.
(7) The shares shown for Wellington Management Company ("WMC")
are owned by various investment advisory clients of WMC.
According to a filing which it has made with the Securities
and Exchange Commission, WMC is deemed to be a beneficial
owner of such shares by virtue of the direct or indirect
investment and/or voting discretion it possesses.
(8) The shares shown for Dr. Peter A. Leininger include
beneficial ownership of 153,459 shares of Common Stock held
by Dr. Leininger as trustee for the children of Dr. James R.
Leininger, 17,000 shares of Common Stock held by Dr.
Leininger as trustee for the children of John H. Leininger
and 20,000 shares held by Dr. Leininger as trustee for the
children of Daniel E. Leininger. Dr. Leininger disclaims
beneficial ownership of the aforesaid shares. The shares
shown also include 1,200,000 shares of Common Stock which he
has the right to acquire upon the exercise of a stock option
granted to him by James R. Leininger, M.D., and 25,624
shares of Common Stock that Dr. Leininger has the right to
acquire under stock options granted by the Company which are
exercisable prior to April 2, 1996.
(9) The shares shown for Mr. Hannigan include 396,500 shares of
Common Stock which he has the right to acquire upon the
exercise of a stock option granted to him by Dr. James R.
Leininger. The shares shown also include 142,400 shares of
Common Stock that Mr. Hannigan has the right to acquire
under stock options granted by the Company which are
exercisable prior to April 2, 1996.
(10) The shares shown for Messrs. Brooks, Ehmann and Mittemeyer
include 105,000, 20,000 and 20,000 shares of Common Stock,
respectively, which they have the right to acquire under
stock options granted by the Company which are exercisable
prior to April 2, 1996. Mr. Ehmann's stock options are held
in the name of The Frank Ehmann Trust.
(11) The shares shown for Ms. Rhodes and Mr. Puchek include
64,576 and 36,099 shares of Common Stock, respectively,
which such persons have the right to acquire under stock
options granted by the Company which are exercisable prior
to April 2, 1996.
(12) The shares shown include 584,593 shares of Common Stock
which the directors and executive officers have the right to
acquire under stock options granted by the Company which are
exercisable prior to April 2, 1996. With respect to the
1,596,500 shares of Common Stock which certain directors
and officers have the right to acquire under currently
exercisable stock options granted by Dr. James R. Leininger
and shares of Common Stock owned by charitable foundations
of which Dr. James R. Leininger and either Peter A.
Leininger or Sam A. Brooks are directors, such shares are
only counted once for the purpose of determining the shares
beneficially owned by all directors and executive officers
as a group. See footnotes 2, 3, 5, 6, 8 and 9 above.
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or
to be paid by the Company or its subsidiaries, as well as certain
other compensation paid or accrued, during the fiscal years
indicated, to the Chief Executive Officer of the Company during
fiscal 1995 (the "CEO") and the four highest paid executive
officers of the Company other than the CEO (collectively the
"named executive officers") for such period in all capacities in
which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual -----------
Name and Compensation Other Securities All
Principal -------------- Annual Underlying Other
Position Year Salary Bonus Compensation(1) Options Compensation (2)
---- ------ ------ ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Leininger,M.D. 1995 $150,000 $103,350 $1079
Chairman of the Board 1994 150,000 150,000 1112
1993 150,000 9,142 1635
Raymond R. Hannigan, 1995 250,000 172,500 $39,204 12,000 1836
Chief Executive 1994 33,173 23,777 1,000,000(3)
Officer & President
Peter A. Leininger,M.D. 1995 165,436 85,554 37,717 8,000 1585
Director and Executive 1994 151,352 115,000 11,520(4) 1621
Vice President 1993 153,000 8,204 5,000 2255
Bianca A. Rhodes, 1995 184,000 105,984 83,000(3) 556
Chief Financial 1994 165,958 133,000 7,440 530
Officer & Senior 1993 87,665 25,000 100,000 38
Daniel R. Puchek, 1995 172,500 103,500 8,000 749
President, KCI New 1994 128,625 140,000 37,765(4) 1176
Technologies, Inc. 1993 125,000 120,178 4,000 1817
</TABLE>
(1) The column entitled "Other Annual Compensation" includes
$26,849 paid to Mr. Hannigan in 1995 for reimbursement of
relocation expenses and a personal benefit of $30,417
received by Dr. Peter A. Leininger for certain
transportation expenses. Except with respect to personal
benefits received by Mr. Hannigan and Dr. Peter Leininger in
fiscal 1995, the personal benefits provided to each of the
named executive officers under various Company programs did
not exceed 10% of the individual's combined salary and bonus
for the year.
(2) The "All Other Compensation" column includes the Company's
contribution to the Company's Employee Stock Ownership Plan
of $495 for Dr. James R. Leininger, Dr. Peter A. Leininger
and Mr. Puchek which was credited in 1995, a Company
contribution of $375 to the Company's 401(K) plan for Dr.
Peter Leininger and Ms. Rhodes and a premium for term life
insurance in an amount which ranged from $181 to $1836
depending on the age of the executive officer.
(3) The referenced stock options for Mr. Hannigan and Ms. Rhodes
include stock options covering 440,000 and 75,000 shares of
Common Stock, respectively, granted to them by Dr. James R.
Leininger, M.D.
(4) The stock options granted to Messrs. Leininger and Puchek in
1994 included stock options covering 4,080 and 26,965 shares
of Common Stock, respectively, which were granted pursuant
to a repricing plan. The table does not reflect the
cancellation of stock options covering 6,200 and 38,800
shares of Common Stock, respectively, in connection with the
repricing plan.
Employment Arrangement
- ----------------------
Effective November 14, 1994, Raymond R. Hannigan agreed to
serve as President and Chief Executive Officer of the Company
with an annual salary of $250,000 and the right to participate in
the Company's Incentive Bonus Plan with an annual target bonus of
$125,000. Upon commencement of his employment, Mr. Hannigan also
received a non-qualified option to purchase 560,000 shares of
Common Stock at an exercise price of $4.50 per share, which was
the fair market value on the date he agreed to serve in such
capacities. In addition to other benefits, the Company and Mr.
Hannigan agreed that in the event that Mr. Hannigan's employment
is terminated for any reason other than malfeasance or acts of
moral turpitude, he will receive as severance an amount equal to
one year's salary and auto allowance.
Executive Committee Stock Ownership Policy
- ------------------------------------------
On October 27, 1995, the Board of Directors adopted the
Kinetic Concepts Executive Committee Stock Ownership Policy (the
"Policy"). The purpose of the Policy is to ensure that the
Company's senior management has a significant direct economic
interest in the Company. The Policy requires that Executive
Committee members acquire Common Stock with a fair market value
at least equal to their base salary within four years. Members
of the Executive Committee who are also members of the Company's
Board of Directors are required to obtain Common Stock with a
fair market value at least equal to twice their base salary.
Members of the Executive Committee are credited for a Common
Stock purchase under the Policy based upon the closing price of
the Common Stock and their base salary as of the last day of the
month in which the purchase was made. The current members of the
Executive Committee are the Company's President, Executive Vice
President, Senior Vice Presidents, Vice President of
Manufacturing and the Presidents and General Manager of the
Company's four divisions. The Policy was effective January 1,
1996.
The Executive Committee members may obtain Common Stock by
making open market purchases or by exercising existing vested
stock options. In order to assist the Executive Committee
members in making such purchases, the Company will loan Executive
Committee members sufficient funds to purchase such Common Stock.
These loans will have a term of five years, bear interest at the
applicable federal rate determined by the Internal Revenue
Service and require yearly principal and interest payments.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information
concerning options granted during fiscal 1995 to the named
executive officers:
<TABLE>
<CAPTION>
Individual Grants
----------------- Potential
% Realizable
of Total Value at Assumed
Number of Options Annual Rates of
Securities Granted to Stock Price Appre.
Underlying Employees for Option Term
Name Options in Fiscal Exercise Expiration ----------------
Granted (1) Year (2) Price Date 5%(4) 10%(4)
---------- -------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
James R. -0- -0- -0- -0- -0- -0-
Leininger
Raymond R. 2,000 1.38% $6.750 5/15/05 $50,940 $129,092
Hannigan
Peter A. 8,000 0.92% $6.750 5/15/05 $33,960 $86,061
Leininger
Bianca A. Rhodes 8,000 0.92% $6.750 5/15/05 $33,960 $86,061
75,000(5) $9.125 8/23/00
Daniel R. Puchek 8,000 0.92% $6.750 5/15/05 $33,960 $86,061
</TABLE>
(1) Except as otherwise noted, the options vest and become
exercisable in twenty percent (20%) increments on May 15 of
each year after the date of grant. The options are not
transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations
order.
(2) The percentages set forth in this column do not include or
take into account the stock option granted to Ms. Rhodes by
Dr. Leininger. See footnote 6.
(3) The exercise price of all options granted by the Company in
1995 was equal to the fair market value of the Common Stock
at the close of business on the day of the grant.
(4) The information in these columns illustrates the value that
might be realized upon the exercise of the options granted
during fiscal 1995 assuming the specified compound rates of
appreciation of Common Stock over the term of the options.
The potential realizable value set forth in the columns of
the foregoing table do not take into account certain
provisions of the options providing for termination of an
option following termination of employment,
nontransferability or vesting requirements.
(5) Dr. James R. Leininger granted Ms. Rhodes an option to
purchase 75,000 shares of Common Stock on August 1, 1995.
This option vests and becomes exercisable in one-third
increments on each of the first three anniversaries of the
date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION VALUE
The following table sets forth certain information
concerning the options exercised by each named executive officer
during fiscal 1995 and the number and value of the options held
by the named executive officers at the end of the fiscal year
ended December 31, 1995:
<TABLE>
<CAPTION> Number of
Securities Value of
Underlying Unexcerised
Unexcerised In-the-Money
Shares Acquired Value Options at Options at
on Exercise Realized FY-End FY-End(1)
-------------- -------- ---------- -----------
Excercisable/ Excerisable/
Unexercisable Unexercisable
------------- -------------
<S> <C> <C> <C> <C>
James R. Leininger,M.D. 0 0 0 0
Raymond R. Hannigan 43,500 $60,248 538,900/ $3,544,690
(2) 429,600 $3,200,400
Peter A. Leininger, 9,300 $36,038 25,624 $184,134
M.D. 16,596 $108,851
Bianca A. Rhodes (3) 0 0 64,576 $500,574
125,864 $598,111
Daniel R. Puchek 7,200 $9,425 36,099 $269,993
26,206 $184,385
___________________
</TABLE>
(1) The values are calculated by subtracting the exercise price
from the fair market value of the underlying stock as of
December 31, 1995 (based on a closing price of $12.00 per
share on December 29, 1995).
(2) Dr. James R. Leininger granted Mr. Hannigan an option in
fiscal 1994 to purchase 440,000 shares of Common Stock at a
purchase price of $5.74 per share. Mr. Hannigan purchased
43,500 of the shares of Common Stock subject to such option
during fiscal 1995. The remaining portion of the option to
purchase 396,500 shares of Common Stock is currently
exercisable and included herein.
(3) The options shown for Ms. Rhodes include an option to
acquire 75,000 shares of Common Stock at a purchase price of
$9.125 per share granted to Ms. Rhodes by Dr. James R.
Leininger, none of which is currently exercisable.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(Kinetic Concepts, Inc., Standard & Poors 500,
Standard & Poors Medical Products & Supplies)
The following graph shows a five year comparison of
cumulative total returns for the Company, the Standard & Poors
500 Composite Index and the Standard and Poors Medical Products &
Supplies Index for the five year period ending December 31, 1995:
1990 1991 1992 1993 1994 1995
Kinetic Concepts, $100 $241 $294 $121 $206 $365
Inc.
S&P 500 $100 $130 $140 $154 $156 $213
S&P Medical $100 $161 $136 $102 $118 $197
Products
The total cumulative return on investment (change in the year
end stock price plus reinvested dividends) for each of the
periods for the Company, the Standard & Poors 500 Composite Index
and the Standard and Poors Medical Products & Supplies Index is
based on the stock price or composite index on January 1, 1990
and each year thereafter. The comparison assumes that $100 was
invested in the Common Stock and in each of the two indices on
January 1, 1990 and that all dividends were reinvested.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
- -------
The members of the Company's Compensation Committee are Frank
A. Ehmann, Chairman, Sam A. Brooks and Bernhard T. Mittemeyer,
M.D. Dr. James R. Leininger was a member of the Compensation
Committee during 1995 but resigned on December 31, 1995. The
members of the Compensation Committee are also the only members
of the Stock Option Committee. In determining the compensation
to be paid to the Company's executive officers in 1995, the
Compensation Committee employed compensation policies designed to
reward the Company's executive officers and other key employees
for creating value for the Company. The key components of
executive compensation are (i) base salary, (ii) cash bonus
awards under the Company's Management Incentive Program (the "MIP
Plan"), and (iii) stock options granted under the 1987 Kinetic
Concepts, Inc. Key Contributor Stock Option Plan.
The base salaries of the Company's executive officers were
recommended by the Company's Chief Executive Officer to the
Compensation Committee for its review and approval. The factors
considered by the Chief Executive Officer and the Compensation
Committee in establishing base salary levels for executive
officers were essentially subjective. Specific factors which
were considered included the individual's level of responsibility
and performance, the financial performance of the Company and the
executive officer's department or division (with an emphasis on a
comparison of actual and budgeted revenue and operating earnings
for operating divisions and actual and budgeted expenses for
departments) and a comparison of base salaries of similar
positions within the Company. Specific weights were not assigned
to these factors and the performance of the Common Stock was not
directly considered in establishing base salaries for the
Company's executive officers.
Chief Executive Officer
- -----------------------
Mr. Hannigan's base salary was established in November of
1994 when he was recruited to join the Company and was based upon
the recommendation of the executive search firm employed by the
Company. Mr. Hannigan's compensation package was negotiated with
Mr. Hannigan by Dr. James R. Leininger and approved by the
Compensation Committee. Although the Compensation Committee did
not conduct a comparative survey, it believes that Mr. Hannigan's
base salary and compensation package are competitive with the
salaries and compensation packages paid to other chief executive
officers of corporations with similar revenue and operations.
Mr. Hannigan received a bonus in 1995 based upon the Company's
performance under the MIP Plan.
Bonuses
- -------
All of the Company's executive officers were eligible to
receive cash bonuses under the MIP Plan in 1995. Approximately
241 of the Company's key employees were eligible to receive
bonuses under the MIP Plan in 1995. The objectives of the MIP
Plan are to: (i) focus attention and effort on those activities
which are critical to the Company's success, (ii) provide a means
for encouraging individual participation in the development of
goals and objectives and the discussion of progress towards those
goals and objectives each year, (iii) reward team success as well
as individual achievement, and (iv) provide greater motivation to
those individuals who have a material impact on sales, costs and
profits.
Under the MIP Plan, bonuses are based on a target award for
each participant which is established as a percentage of the base
salary of the participant as of January 1st of each year. The
target awards are established at 40% of base salary for executive
officers other than Mr. Hannigan and Dr. Leininger whose target
awards are set at 50% of their base salaries. The amount of the
target award which a participant actually receives is based upon
both the executive's individual performance and the performance
of the Company and/or the executive's division as follows:
Corporate Division Individual
Performance Performance Performance
----------- ----------- -----------
Corporate Executives 80% -0- 20%
Division Executives 20% 65% 15%
Corporate and division performance are analyzed in terms of
achieving the Company's revenue, net operating income and cash
flow goals for the year. For purposes of the formula used in the
MIP Plan, the revenue component is weighted at 20%, the net
operating income component is weighted at 40% and the cash flow
component is weighted at 40%. Individual performance is based
upon the achievement of mutually agreed to management objectives
established for each executive officer.
The percentage of a target award actually received depends
upon the percentage achievement of overall target performance.
For example, if a participant achieves 100% of target performance
he will receive 100% of his target reward. However, in the event
that a participant achieves only 90% of target performance, he
will only receive 20% of the target award. In the event that an
individual achieves 110% or more of target performance, he will
receive 150% of his target award.
Stock Options
- -------------
Stock options are granted to executive officers on an annual
basis. The Stock Option Committee relies upon senior
management's recommendations in awarding stock options to
executive officers and employees and in determining the size of
such awards. Such recommendations and the Stock Option
Committee's decisions are typically based upon salary grade
level, length of service and performance of the executive officer
or employee in the prior year. In addition, special grants are
awarded during the year to recognize outstanding performance,
eliminate perceived inequities and reward individuals for
increases in responsibility. Previously granted options are
considered by senior management in making recommendations to the
Stock Option Committee with respect to stock options to be
granted to executive officers.
Tax Limitations
- ---------------
The federal tax laws have been amended to limit the deduction
a publicly-held company is allowed for compensation paid in tax
years beginning on or after January 1, 1994 to the chief
executive officer and to the four most highly compensated
executive officers other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered
executive, other than performance-based compensation, cannot be
deducted. In order to constitute performance-based compensation
for purposes of the new tax law, the performance measures must be
approved by the shareholders. The Compensation Committee will
consider ways to maximize the deductibility of executive
compensation, while retaining the discretion the Compensation
Committee deems necessary to compensate executive officers in a
manner commensurate with performance and the competitive
environment for executive talent.
FRANK A. EHMANN
JAMES R. LEININGER, M.D.
BERNHARD T. MITTEMEYER, M.D.
APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of KPMG Peat
Marwick LLP to audit the financial statements of the Company and
its subsidiaries for the 1996 fiscal year. Representatives of
KPMG Peat Marwick LLP are expected to be present at the Annual
Meeting of Shareholders. They will have an opportunity to make a
statement if they desire to do so and are expected to be
available to respond to appropriate questions.
Approval of the appointment of auditors is not a matter which
is required to be submitted to a vote of shareholders, but the
Board of Directors considers it appropriate for the shareholders
to express or withhold their approval of the appointment. If
shareholder approval should be withheld, the Board of Directors
would consider an alternative appointment for the succeeding
fiscal year. The Board of Directors recommends that the
shareholders vote "FOR" Item No. 2 approving the appointment of
auditors. A majority of the shares present and entitled to vote
thereon is required for approval. Abstentions have the same
effect as a vote against the proposals. Broker non-votes will
not be included in the vote totals and will not affect the
outcome of the vote on this proposal.
TIMELINESS OF CERTAIN SEC FILINGS
During the fiscal year ended December 31, 1995, Bianca A.
Rhodes was late in filing a Form 4 with the Securities and
Exchange Commission. Prior to December 31, 1995, Dr. James R.
Leininger granted options to seven persons and failed to file a
Form 4 or Form 5 reporting such grants.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders intended to be presented at the
1997 Annual Meeting must be received in writing by the Company at
its principal executive offices not later than November 30, 1996.
The Company's principal executive offices are located at 8023
Vantage Drive, San Antonio, Texas 78230.
OTHER MATTERS
No business other than the matters set forth in this Proxy
Statement is expected to come before the meeting, but should any
other matters requiring a vote of shareholders arise, including a
question of adjourning the meeting, the persons named in the
accompanying proxy will vote thereon according to their best
judgment in the interests of the Company. If any of the nominees
for the office of director withdraw or otherwise become
unavailable for reasons not presently known, the persons named as
proxies may vote for another person in his place in what they
consider the best interests of the Company.
Upon the written request of any person whose proxy is
solicited hereunder, the Company will furnish without charge to
such person a copy of its annual report filed with the Securities
and Exchange Commission on Form 10-K, including financial
statements and schedules thereto, for the 1995 fiscal year. Such
written request is to be directed to the attention of Dennis E.
Noll, Secretary, Kinetic Concepts, Inc., 8023 Vantage Drive, P.O.
Box 659508, San Antonio, Texas 78265-9508.
KINETIC CONCEPTS, INC.
/s/ DENNIS E. NOLL
-----------------------
Dennis E. Noll,
Secretary
Dated: March 28, 1996
KINETIC CONCEPTS, INC.
P 8023 Vantage Drive
R San Antonio, Texas 78230
O
X This Proxy is Solicited on Behalf of the Board of Directors
Y
The undersigned hereby appoints James R. Leininger, M.D.,
Bianca A. Rhodes and Dennis E. Noll, and each of them, as
Proxies, each with the power to appoint his or her substitute,
and hereby authorizes him or her to represent and to vote, as
designated on the reverse side, all the shares of common stock of
Kinetic Concepts, Inc. held of record by the undersigned on March
26, 1996 at the Annual Meeting of Shareholders to be held on May
14, 1996, or any adjournment thereof, with all powers which the
undersigned would possess if personally present.
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement of Kinetic Concepts,
Inc. dated April 3, 1996.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE SIDE
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction
is made, this proxy will be voted "FOR" Proposals 1 and 2.
X Please mark vote as
in this example.
1. ELECTION OF DIRECTORS
Nominees: Sam A. Brooks, Frank A. Ehmann, Raymond R.
Hannigan, James R. Leininger, M.D., Peter A. Leininger, M.D.
and Bernhard T. Mittemeyer, M.D.
FOR all nominees WITHHELD from all nominees
For, except vote withheld from the following:
__________________________________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP
as the independent public accountants of the corporation
for the 1996 fiscal year.
FOR AGAINST ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
Please sign exactly as name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Signature: __________________________ Date:____________
Signature: __________________________ Date:____________
